francine: the trade war goes south, president trump slaps mexico with 5% tariffs, market sink. -- markets sink. earth --etaliatory rare earth tariffs kick in tonight. and what a $1 billion loss. uber loses the most of any publicly traded company, but shares rise as uber says they will cut further. ♪ welcome to "bloomberg: surveillance."

these are your markets, seeing some pressure on the stocks europe 600. the mexican peso, because of what we are seeing trump say and do about mexico, is one to watch. we are also looking at s&p futures down 1%. if you look at the asian trading session, it was down significantly. and as the hours went by, they recuperated the u.s. 10 year yield is the one we have been watching and will continue to watch. it is a good indication of how the markets are taking the trade concern. , withoutar german bond a doubt, the story of the last two years.

we talk markets with andrew wilson from goldman sachs. a little later, we talk markets and trade, and this afternoon, we talk to the minneapolis french president. first, let's get to first word news. if the federal reserve sees mounting risks, they are ready to ease monetary policy. that is according to the banks of vice chairman. -- he said the u.s. is in a quote very good place. >> we are tuned to the potential risks. and if we saw a downside risk to the outlook, that would be a factor that could call for a more accommodative policy. that is definitely something in the risk management area. earhe italian deputy from one an online vote,

despite a stinging defeat in last week's european election. the poll strengthens the leader some of his own lawmakers seeing the parties vote cut in half. turkey is exiting its first recession in a decade. , but from a at 1.3% year earlier, it still dropped. continued recovery hinges on the prospects for the lira. next month, a controversial rerun of istanbul elections is keeping the market on edge. north korea executed at the top negotiator involved in its february summit with donald trump, according to a south korean newspaper. it says the man who led negotiations was executed in march along with four other officials. 's top aide is reportedly doing top labor -- hard labor.

quoteank is settling a anti-dad lawsuit, paying millions to a male employee, saying the leave policy was biased against furthers -- fathers. jpmorgan says it's policy was always intended to be gender-neutral. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thanks so much. the mexican has slumped as donald trump valid to impose a 5% tariff. standd the move would until the country stops immigrants from entering the country. mexico's trade negotiators says the threat is extremely serious. >> i am not saying we will keep our arms crossed until june 10. that is the date. we will not keep our arms

crossed until that day to see if he was serious or not. but i do trust this is something not meant to be enacted, because it would be very grave. francine: on the second front of donald trump's trade war, china is due to impose retaliatory tariffs on america at midnight, beijing time. they have moved to restrict rare earth imports to the u.s. -- exports to the u.s.. let's get more with our economics correspondent. what does the mexico news mean for the world economy? is a germanic escalation in the global trade war story, francine -- dramatic escalation in the global trade war story, francine. mexico is at the heart of the regional supply chain, and in particular, auto companies. it will certainly have a ricochet affect. but the -- effect.

but the bigger takeaway is the second round effect. is the idea that this world is headed into a difficult time with protectionism and fear. once the tariffs are on, it will be hard to take them off, and what does it say for the u.s.-china trade talks? i think everyone watching the news is concluding that it is a clear risk for the world economy. francine: you have a great understanding of what is going on in china, being based their. -- there. are the chinese authorities ready to go full in? are they ready to play hardball? certainly, we know the rhetoric has been increased harshly through state media, the mouthpieces for the party. we know that our own colleagues have reported that they have the option of restricting rare earth supplies.

they supply 80% of these minerals to the u.s., the point being that it is china's way of signaling they do have some options up their sleeve. human if they have tried similar actions against japan, though it -- even if they have tried similar actions against japan, though it did not work out. the talks have not shown much signs of progress, trump himself saying he is not in a hurry to make a deal. optimism for some kind of breakthrough is fading. canstors are waiting to see it get back on track months after that. enda, thanks for joining us, our chief economics correspondent in hong kong. us is our guest from goldman sachs which has $1.5

trillion under supervision. great to see you, especially on these days when markets are trying to figure out how to interpret policy. the markets be worried the trump administration is no weaponizing the economy? rhetoric, and we are seeing this play out in treasury markets, what we are seeing is rhetoric being geared up. it was first directed a china overnight. there is a question if this is a strategy by trump to get democrats to improve the current -- mca deal.l but it is something trump is doing and is gaining broad support within the u.s.. the markets almost expects the trade situation will not be resolved quickly, but this

escalation, it is worrying for markets. you highlighted earlier where bund yields are, we are close to all-time lows. it is pretty remarkable. is going the fact he after mexico, does it make it less likely he does a deal with china? andrew: it is hard to judge. he feels he is on the front foot and feels he can be more forceful. does that play across the china? i am not sure, but i can tell you they are not in the mood to do a deal quickly. markets are taking that on board. francine: our markets taking it on board? -- are markets taking it on board? in a worst-case scenario trade war, what does it mean for equities? it definitely isn't shaving off growth.

in our forecasts for china, we took it down on the back of trade escalation. if we go to 25% tariffs on all trade, that could be another .3 , .4 off theimilarly u.s. and the same off global gdp. ,hen you are looking at yields they're starting to factor in much slower growth. francine: half the people we speak to think treasuries will be around 2.15, 2.75 for 10 year. others say it will go to 2. what would that take? andrew: we would need to see the labor market slow, today we will have payrolls and the labor market has been strong. if we have some slowing of that. or the inflation numbers, we have expectation numbers coming out this afternoon. the fed will be reluctant to

endorse this move unless you see a rollover of the labor markets or inflation coming lower. it is interesting the market is pricing in cuts. at some point, they have to resist that. francine: are treasuries and government bonds telling us we are in a recessionary environment? in the past, the bond markets have always been right. not every single time, and it depends on which part of the curve you look at. francine: yeah. andrew: it depends on which part, but it is telling you the world is slowing and there are no inflationary pressures. whether that is enough for the fed to cut is another question. francine: we have a great markets live blog you can see, -- c called mliv . the question is how much will equities fall on the tariff

announcements? andrew: i claim to be an equities expert, but you look at the amount of trade, this does have implications for the u.s. auto market. whether this threat is real or not, it remains to see -- be seen. francine: andrew, thanks so much. andrew from goldman sachs stays with us. uber, up, we talk about reporting one of the largest quarterly losses of any public company. can it get costs under control? we talk over a little bit later -- uber a little bit later. this is bloomberg. ♪

>> our first obligation and highest loyalty is to the american citizen. than ever, our way of

thinking and our actions have to be multilateral. >> we need to deter any aggressor and thrash any foe. >> we do not always act on our first impulses, even when there is pressure. >> no longer will we sacrifice america's interest to any foreign power. we don't do that anymore. >> protectionism and trade conflict jeopardized free international trade, and thus, the very foundation of our prosperity. >> we are reawakening american pride, american confidence, and american greatness. walls of ignorance and narrowmindedness, for nothing has to stay as it is. that was the german chancellor angela merkel merkel speaking at harvard's

commencement address and president trump speaking to air force academy graduates. let's get more thoughts from andrew from goldman sachs. in chargell, you are of portfolios and giving a direction to the market. but i feel like we are always talking politics. how difficult is it to have visibility on the world economy given the split just highlighted? we have become more political analysts van economists or central bank watchers. -- van economists -- than economists or central bank watchers. you have to weigh the impact of these politics on business confidence, and then how is the central bank going to react? so you can analyze it through the implications, the hardest bit is the somewhat erratic nature of this.

, so you out via tweets feel as the you're constantly reacting. that is the challenging part of investing at the moment. these things are pretty hard to foresee and they have significant implications. francine: are we too optimistic or pessimistic about europe? germany is at the forefront of trump's wrath when it comes to surplus and we have a strange euro area with different countries at different speeds. andrew: putting aside just the trade issues, the political dynamics within europe are changing. we saw that within the elections. we have seen a pretty significant slowdown, the pmi in germany down to 44. we are used to a world where germany is the powerhouse of european growth and that is no longer the case. our view is that european growth is ok, if modest. hard nothat makes it

just for mario draghi, but also his successor, to try and set a course. it is hard to find a reason to increase interest rates, yet we are sitting here with negative rates and bund yields across the curve. francine: what does that tell us? andrew: it is how do we get out of the japan a vacation -- ja panification of europe? if japan is the playbook, it is hard to get out of that. francine: thank you, coming back, we'll talk more to andrew. coming up, as the feds vice chair opens the door to rate cuts, how does neel kashkari feel about it? we speak to the minneapolis fed president at 1:30 p.m. london time. don't miss it, this is bloomberg. ♪

francine: this is "bloomberg: surveillance." the fed a chair says the central bank is prepared to cut rates if they see mounting risks to u.s. growth. despite that he says the economy is in a good place. >> we are attuned to potential risks to the outlook. we saw a potential risk, that would be a factor that would call for more accommodative policy. that is something in the risk management area we would think that. francine: still with us, andrew from goldman sachs.

we talked extensively about the treasury yield. another way to look at it is to think about the averages. itre thinking about what would take for it to go to 2%. but if it does, what happens afterwards? how do you look at it? andrew: i would put less weight on the psychological. you have to look at why has it gotten to 2%. you could argue the rally is a combination of slow down in activity. around the at pmi's world, they are slowing. so it is just a reflection of activity. it is also a combination of trade tensions. but as he was saying, they are prepared to move. you have got to give them some reason to cut rates. you would need some justification. does it deserve to be here, or

is it just more uncertainty? you can say, well, the underlying conditions have not changed. what has got us to that level? if you have had a marked slowdown in activity, inflation or unemployment, we have not seen that in a longtime, maybe you could get below that. francine: we spend so much time talking about the trade war and central banks, but i asked you what your clients ask you. what do you tell them? andrew: particularly european clients are looking at these anomalies. the u.s. is a high-yield, you think how many europeans would love to get over 2%. it is really how do we get returns in this low, negative yield environment? i think we are seeing more diversification out of europe,

going into emerging markets. --re is a liquidity illiquidty problem out there. those are what have people thinking, how do i get good returns? francine: periphery yields could be good. andrew: they could be significant, but i would say there is still a great deal of concern over the long-term situation in italy. we are not buying a lot of peripheral yields investors are still wary of italy. they are looking outside of the eurozone, interestingly, at the u.s.. francine: is there anything to be done with the u.k.? andrew: there is just too much political uncertainty. the continental europeans, they are on the sidelines, certainly nobody is rushing in. and it's not even like the markets are reacting, gilt yields are below 10%, they don't

look attractive in their own right. too much uncertainty. we need to know who the prime minister will be and the nature of what that negotiation could even look like. it is likely to be someone at the harder and of the brexit spectrum -- end of the brexit spectrum. it is better to stand on the sidelines until we get some clarity. francine: andrew wilson at goldman sachs, thanks so much. coming up, the european commission once italy over its that load -- debt load. we speak with the chief financial executive coming up. this is bloomberg. ♪

the trade war goes

south, president trump slapping tariffs. asian prepares a plan to restrict exports of rare metals in the u.s.. uber reports one of the largest quarterly losses in a public company. it will cut costs further. good morning everyone. good afternoon if you're watching from asia. this is bloomberg surveillance. let's get straight to your stock movers with dani burger. dani: what a way to end the month. it trumps threat of new tariffs on mexico moving stocks and similar fashions. especially those exposed to mexico. 30% of bbva revenue comes from mexico. that's even more than spain, so no surprise we see shares slump. the threat of supply-chain

interruptions. fiat chrysler dropping. is the worst may for autos on record. flirting with all-time lows, hurting profit margins. toncine: let's get straight the bloomberg first word news with viviana hurtado. the border conflict between the u.s. and mexico, president trump vowing to impose a 5% tariff on mexican goods until it stops in the current entering illegally. the duties will take effect on june 10. if the white house doesn't think the issue is being resolved.

inflation pressures ease. since taking office in march, cutting the benchmark rates by 25 basis points. >> we will be looking at the data and looking at how fast inflation's give you the capacity. >> citing the southeast asian nations and strong fiscal policy. this upgrade will be a boost to the nation's president. to bolster growth and invest in infrastructure. delivering a rebuke to president commencementto the address at 2019, urging them to act with integrity and self-control.

listed the policy areas she clashed with trump without using him by name. she called on students to tear down walls. they rose to their feet. 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. francine: the european commission has given italy until today to explain its plans after russell says it hasn't made progress to comply with the eu debt rules. the deputy has won the backing of 80% of activists in an online vote despite the party's defeat in the european elections. and we heard from the bank of the -- ourng that next guest spent years as a chief executive with sales of 2.8 billion euros with

operations in health care, media, and the automotive sectors. thank you so much for joining us on surveillance. you have both hats on, a businessman and an asset manager. talk about italy. what is the mood like? we have headlines about this fight with europe and france. investment in the mood, is it changing? >> it is concerning. suchntry that has set -- deep structural issues like italy can't afford to fight. they can't afford not to be credible internally and externally. q1.ad the numbers for gdp is flat. byis your on your declining 0.1% which is the first time it has happened since 2013. when you have more than 130% jet

-- that to gdp, growth is an obligation. francine: we have two parties that look at things differently in an uneasy coalition. but what does it mean for how the markets should be looking at a?back oh -- at -- looking at it? bit concerninga that we had general elections a year and a half ago. since then, we have a new government. elections in the government has not really done a issues.ttack those and they fight. .very day, they fight this is the impression they have given. and this is not conducive for

investors to invest. francine: the market has always kept check on italian politics. do you think that is still the case echo rodolfo: i think it is -- still the case? rodolfo: i think it is. when you have bet that you have to roll over every year as italy does, it is not a question of fighting with the european union or some other country in europe. it is the bond market. you need to get the backing of the bond market. sometimes, italian politicians postulate as though they are enemies trying to force the italian citizens into doing that. but that is reality. what do your clients ask? is it about returns and yields? and if you look at the yield space, italian yields have a

very attractive return. rodolfo: i agree. what we are trying to do is create a specialized niche group. it continues to be bifurcated between the very large players asset management and using technology and scale. you have booted players specialize in investment opportunities. -- in niche investment opportunities. we think there is a great opportunity in playing the intermediation of the credit space in europe which is happening. we have a bunch of strategies focused on that. we think there is a growing for a for investors

sustainable type of investment strategy. huge team in the liquid space. rodolfo: our guest stays with us. global stocks lose $4 trillion in value this month. should investors blame new worries or just the old ones? we will discuss that. and guzzling gas. the ride-hailing company reporting that loss. this is bloomberg. ♪

bloombergthis is surveillance. i'm francine lacqua in london. let's get straight to the bloomberg business flash with viviana hurtado. hsbc considering eliminating hundreds of investment banking jobs. we have learned a chief executive john flint is pressuring the top managers to cut costs. at least 500 jobs could go between global banking and markets. the reductions are expected to begin mid june. is repairing major job changes in london. offering voluntary redundancy to about 500 directors and managing directors. that is roughly a quarter of the workforce in the city. financial firms have been expanding abroad. now many are in cost-cutting mode. lng agreeing to sell the insurance business for nearly

250 million pounds. it includes payments over three years. they say proceeds from the sale will be reinvested in the financial services warm -- firm core business. breaking news out of mike pompeo who is in germany at the moment. he says germany should take action against china. it is unclear if he is talking about huawei technology. the former united states army officer talking right now in berlin. we will continue following that speech to see if he's talking about some of the chinese technology used in europe. mike pompeo saying that germany should take action against china. we will continue following that very closely.

we were talking about angela merkel and her commencement speech where she was talking about tearing down walls, not building them up. at the same time, president trump was giving a commencement speech to u.s. army cadets. and the rhetoric was very different. iran must ratify the treaty's immediately. so little give a close eye on what mr. pompeo is saying. thoughts from my guest who spent 18 years as ceo of italy's chair group spending health care, media, and the automotive sector. what makes you worry about the world right now. we talk about trade and terrorists. if the world is becoming more meanented, what does it for markets and businesses?

>> it is concerning because the think the trade discussions are uncharted territory. know how that is going to play out. it is very dangerous when you start those processes. you don't really know in advance how it will finish. my concern is that the u.s. and are big powers. they represent big economies. the risk at the end of the day in europe will be the weaker link. most fromffer the those discussions and that uncertainty. what does it mean for your businesses and the way that s?u view the market we talked about supply chains. including sustainability agendas, does it have achieved

-- a change on what it looks -- on what it looks like? rodolfo: think about the old automotive industry in which we operate. companies and lawmakers have been living and lawmakers have been living in uncertainty about what would happen. this is an important manufacturing country. it produces a few million vehicles a year. there are suppliers that feed into that supply chain. it creates a lot of uncertainty. we talk a lotne: about driverless car's. do we need to start talking about it there is a tech company? >> a lot is going on in that space. the next industry will just change profoundly because of technology and how consumers are the attitude toward that

product. francine: health care is the last one to be disrupted. is that something you look at? yes.fo: we actually had a thematic approach an hour effort designing products. one of the products that we .aunched three years ago it will stay for us. and the economies from a and wephic standpoint, believe it is changing some markets. creating new opportunities and

new business models. we will integrate that and having a debit -- a dedicated team that looks at those opportunities is interesting. francine: what is the mood of chief executives right now? less out there? though -- isat there less capex out there? rodolfo: i don't have the less.sion that is i think the issue is just managing be uncertainty. but overall, when you look at the work. -- at the world, the world is a pre-distinct one. growth is decent. monetary policy that is

making it very easy to source capital from other countries. be able ton is to manage the rapidly changing technological environment which is potentially disrupting many businesses. i think this is the biggest concern when i talk to the chief executive. you need to try to anticipate that. francine: well asset managers be disrupted because of ai? rodolfo: to a certain extent, they have already been disrupted by the growth. it has become a huge part of the market. it is growing fast in europe and i think it will continue to grow. the use of technology in asset management will increase. i am not a believer in fully automated systems where machines will have judgment. but i think machines can be a very powerful tool.

and they can increase the ability of asset managers. francine: thank you so much for coming in and giving me a little bit of your time. in the meantime, mike pompeo is still talking in berlin. will continue monitoring those headlines. some say it is down to the trade war. what about the old adage, sell away and go away -- sell today and go away. this is bloomberg. ♪

economics, finance, politics. this is bloomberg surveillance. equities may still show a green number for 2019. but for many investors, may was a month where markets woke up to a world from a flurry of trade related tweets to risk steeped in financial markets.

here with the month is dani burger. dani: it is pretty emblematic of all of may. the old adage of sell in may and go away only works for investors that sold equities at the start of the month. , globally,reet stocks have their first negative month of this year. u.s. stocks fell more than 5% compared to an average over the last two decades of .25%. so where did investors go? see investors fleeing to sovereign bonds. it was their most since 2016. new zealand fell to new lows and we are seeing bunds ft. worth new lows -- flirt with new lows as well. you -- the yen continues to fluctuate. investors have to adjust to an outlook that has been far more

ambiguous for the chinese currency. reign supreme,id but where do we go from here? u.s., we saw gdp that was better than expected. the question for investors really is that we sold in may, but when do we come back? francine: a great look at the markets with dani burger and what happened last month. uber has reported a quarterly loss of over $1 billion, the largest of any public company and more than rival lift -- lyft. they also laid out a plan to bring costs down. welcome mat from bloomberg intelligence. losing a billion dollars is a big deal. >> it is pretty much what they said was a deal. but you will see that they are investing heavily in investing

in the platform. they are also going into new areas. so there is a lot of investment going into the business. the really big question for investors is, can they make a contribution margin from the ridesharing platform? hints anda few actually improved the rest of 2019. i think that drove the shares up with those encouraging comments particularly ridesharing and that platform as well. what about uber eats? they have been incentivizing drivers and riders to build the brand. and they have been doing that because let's had become into the markets. had been coming into the market. is going fromyft

price-based competition to brand building. so that is helpful for margins. francine: thank you so much. on bloombergmarter about these ridesharing companies. you're still getting breaking news mike pompeo who is just giving a news conference in berlin. he is saying that security challenges is wider than huaw ei. he's talking to his german counterpart but also urging germany to talk tough on china. mike pompeo saying that they can share information on a network that we don't trust. we have plenty more on china, mike pompeo, and markets. this is bloomberg. ♪

the trade war goes

south. the mexican peso slumps as president trump slaps the nation with 5% tariffs that could rise further in october. markets sink. beijing prepares a plan to restrict exporting metals to the u.s. and uber reports one of the largest quarterly losses of any public company. but shares rise as the company says it will cut cost further. good morning, everyone. a good afternoon if you're watching from asia. tom and francine from london and new york. treasuries is one thing we are looking for and also looking at a little bit of an impact and not what happens to the german bund and the impact on concerns looking at a recessionary environment. when it gets to this, you triangulate to a few peers of relationships. the german ten-year yield is a benchmark.

reunification, it is extraordinary to see this record low. given the negative yield, the cruciate -- the cliche is uncharted territory. we never had negative yields. what does it mean? deutsche bank at any moment will print a five euro handle which, in the equity world is a lot different than a six handle. that is one example and we have yen strength as well. let me do this. we are doing this in real time. welcome to live television right now. it is the two-year yield in the united states which is, again, another benchmark away from the more distant ten-year. cares more about the 10 year right now. we're near a 199 spot there.

going to do this in real time, francine, and bring up the same three-day chart. bank, they look a lot the same. is onne: mr. member this the back of president trump saying the u.s. will impose 5% tariffs on goods entering the country from mexico. it is part of a wider market movement. is europe becoming like japan? an indication that we're becoming more japanified. tom: for the global audience, lastmport of the tweet night by the president was truly unprecedented. and it leads us to great uncertainties, francine, just this morning. time, it.m. american is early in the morning and i what the news flow out of washington will be at 9:00 a.m..

how does lawrence kudlow respond to this? it seems like pompeo is still talking. he was just saying that germany needs to act tough on china. we will get back to a news flow. let's get back to bloomberg first word news with sebastian. >> president trump threatening to use tariffs as a weapon in the fight over migration. he vowed to impose a 5% tariff on mexican goods until the country stops the surge of immigrants coming into the u.s. illegally. the move could jeopardize the new north american trade agreement. they called the tariffs a misuse .f authority angela merkel took aim at president trump's policies at a speech at a harvard graduation. and she did it without mentioning the president's name. they should tear down the walls of ignorance.

and turkey has its first recession in a decade. lendingurt by increased by state run banks. turkey is dealing with inflation stuck at around 20%. buyingis interested in boost from t-mobile and sprint. according to reuters, they could use the wireless network for at least six years. the sec recommends the merger be approved under certain conditions, and one of them is that the company sells boost. the ride-hailing service posted a billion dollar loss in the first quarter. uber also posted preliminary results. it is the first financial reports and's going public. 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.

this is bloomberg. i will get to the data check. it would have a wonderful guest today to synthesize all that is going on. it is simple. equities are -28. a doubt correction is about 1000 points below here. the curve steepening is really important given the new lower yields. oil is south big-time. $55 on american oil. the two-year yield, we are their. for a 199 put is even moreed jaw-dropping with yen finally moving with a vengeance. risk off, stronger yen. francine: i have a similar data check. tom: i'm glad you put the peso there. francine: the equity market is

interesting because it fell off shop -- sharply lower. i am looking at the mexican peso goinge the front has them since december and it is having a direct impact on peso. 10% higher, 19.02. president trump vows to impose a 5% tariff on goods from the nation. he said the move would stand until the country stops immigrants from coming to the country. joining us are a couple of guests. thank you. we is one of the first time are seeing president trump and the trump administration weaponizing the economy to do with foreign policy?

-- to deal with foreign policy? it is not entirely fair. >> this the first time we have seen trump use the threat of tennis -- of tariffs. a lot of the uncertainty lucy in markets is how far could this go . accomplish in the domestic or international policy priorities? there are a lot of things we don't know, but if the trump administration is fighting mexico, does it mean that the hope that we would get a deal between the u.s. and china at the g20 is evaporating? lookok at how china might at this and say, the u.s. and mexico just did a trade deal. and now the threat of tariffs is coming on top of that. if you are china, why would i do a deal with trump if he will slap tariffs at random?

charm, as you know, every closet and every secret economic net and cranny of the government in washington. who is going to push back against the president today? there is no gary cohn in the white house. mary -- maybe larry kudlow can get the courage to go free trade. who will you be watching in the next six hours? >> chuck grassley has come out and said he is against this particular step to threaten mexico with tariffs. i think you have to look elsewhere in the administration. people like steve mnuchin. the trade doves are getting trampled on by the folks who on tradep to go hard negotiations.

francine: we are thrilled to bring you andrew out of brown university, a mathematical -- i know morgan stanley has to write everything up. let's make you look like a genius. morning?e do this >> trade is one of three interlocking problems the market has. the first is that the u.s.-china trade piece is hard to solve. with it is hard to solve current price levels and i think that brendan makes a great point that if you are looking at these new tariffs on mexico, a country where you had a trade deal with the u.s., how does that impact your incentive to play ball, so to speak. my colleagues have been talking of breakingsigns

down or weakening. the yield curve is inverting. our model that morgan stanley has started to turn down. strategicother bigger problem the market faces. a 199 candle on the two-year yield. that is after the comments from yesterday. i also want to ask about treasuries. we will get back to the fed. we're not talking about 10 year yield that 2%. would you fight the bond market at this point? >> i think the bond market is telling us that there is a problem with growth. the signals are very consistent with the problem in growth. think markets like credit are interpreting that as hope and that will mean the fed will be dovish.

decide on anhad to environment that is weak growth, the fed is cutting. usually, the market has done a lot worse. brendan murray, thank you so much. spearheading all of the trade coverage in particular as we see the morning in washington. they will continue synthesizing in the moment. the german ten-year and the u.s. two-year as well. features right now, -28. you don't know why, but here we are. neel kashkari on lower rates. it is his federal reserve. this is bloomberg. ♪

>> this is bloomberg surveillance and your bloomberg business flash. business leaders at barclays are gaining loopholes and tax laws. theyberg has learned that are the remnants of a controversial division shuttered years ago. they generate profit by lowering taxes on dividends. this is about 10% of barclays stock trading revenue. preparing big cuts for the london operation, mitsubishi is offering buyouts to about 500 directors. it is roughly a quarter of its workforce in london. they make up for slow growth at home and they are in cost-cutting mode. the shares of gap plunged after sales declined. ofturns the potential appeal

a discount chain. the turnaround doesn't appear imminent. they are down in the low single digits. thank you so much. i appreciate it. we are going to dive right now into what is stronger. let me bring up the two-year yield. 5:01 a.m. wall street time. i want to go all caps kill us on you. i want to do that with your mathematics. let's assume the president is oblivious to calculus. what are the accelerated tendencies right now that you are watching? >> i think it really is this tension between a rate market which is increasingly confident not just that the fed will cut

rates, but that the fed will cut rates significantly. what thes ray much accelerating down momentum shows. very recent comments from the federal reserve that they see the outlook or rate is relatively balanced and an unemployment rate that is still very low. core u.s. cpi at 2.1. and financial conditions in the u.s. that are still very easy. used ar, the fed tightening of financial conditions for that big change in policy. this is another potential risk to the market. the fed is about to jump in. and a number of hurdles to it. tom: let's cut to the chase. let's go to the chart and bring up the money question that everybody wants to know. this is a wirp function.

this is what vice-chairman clear that -- did i miss speak? middle of may, we are now near 100% likelihood of a rate cut out to january of next year. the fed is fighting that with all of their might. does it change what chairman powell must do? >> this is the difficulty. the fed as medically that they want to be data dependent. doin, the fed is free to whatever it wants to do is it feels the risks are not reflected in some of that incoming data and it certainly would be free to cut. at financial conditions, they have been tightening some. they are nowhere near as tight as they were at the turn of the year when they executed a big change in policy. and you look at the big pieces

of data for the fed like the unemployment rate and the rate of inflation. kind ofthose things are healthy still. inflation has dipped down a little bit on the core pce but ticked up a little bit on core cpi. payroll numbers can be very important for that debate. i think the fed is in a pretty tough position here given the markets priced in 100% probability close to a cut. francine: is it the market getting ahead of itself echo >> that is some of the issue here -- of itself? >> that is some of the issue here. there is weakening data outside of the employment market and it is fairly kind of convinced that you are going to see this policy response. the fed is operating under a somewhat different rubric. and we also need to remember that sometimes policy members do not react as quickly and as fast as markets like.

even if they do get to that same end result. up, the italian head of budget committee and really and advisor, one of the antihero voices -- anti-euro voices. we will talk to him next. this is bloomberg. ♪

francine: good morning and welcome back to bloomberg -- tom: good morning and welcome

back to bloomberg surveillance. sterling for the second time pricing under a 126 handle. the president considers travel and will be able to do a better deal inherent with a 125. francine, i will point out the u.s. to year with a 199 print showing the angst out there this morning. francine: we will talk about moves in fixed income. and over shares have edged up and extended trade. the largestmongst in any public company with the plan to bring down cost. back onns to cut customer promotions and will reign in marketing expenses. bloomberg opinion covering tech and morgan stanley, still with us. this will be a $20 voucher to buy some of the things on uber eats.

>> it's not even that. any they are deciding in given day, quite often, they are discounted. if you are in a city like san francisco, you open google maps and you can see the two prices next to each other. lift.t time i will use they will be cutting some of those efforts and we will really see how sticky they are in the business. whether they do have the kind of loyalty to use it or if this will cost me 20 bucks and i will use public transport for five. what is your take on if investors by this. >> i really don't know. what investors do, it is foolish of me to suggest otherwise. it is still delivering colossal growth.

nextdon't want to miss the google. and this might be it. i remain unconvinced that they have a sustainable business model down the line. the lx web bs meter is known worldwide across the tech sector. what was the tone of the management? level?s the arrogance what was the humility level with first contact yesterday? the one thing that you have to say about the management team, they are more characterized by humility than the previous bunch. it is a positive in the sense that it will give investors a certain amount of clarity on what the underlying business is and how sustainable it is. when they talk about being in a spending phase, how long is that going to continue? will they be able to grow without it? tom: alex, we have to cut it short on the markets.

on uber. a fascinating distinction yesterday. we will drive forward in this conversation. we are thrilled to bring you david kirkpatrick. we will do the uber affect. but we have a good update. you want to talk to mr. kurt hat trick about -- kirkpatrick as well.wei the german ten-year yield, and the euro remarkably stable. -263 as well. the two year yield with a 199 print moments ago, the 10 year yield is stunning and stronger. stay with us across all of bloomberg. more data checks. is bloomberg. ♪ -- this is bloomberg. ♪ the latest innovation from xfinity

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it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. ♪ francine: this is bloomberg and francine," tom from london and new york. the markets are falling off.

yesterday in asia because of what the u.s. president said. the vix is up 2.9%. the mexican peso got shaken up quite a bit. 2.16%.. 10 year yield we have a full round up of your markets and focus on the german btp's.nd italian let's get to the bloomberg first word news. sebastian: president trump is escalating the fight with mexico over the border, saying he will impose a 5% tariff on products imported from mexico unless it stops the flow of illegal immigration, and could rise to as much as 25%. many manufactured items across the border several times while being assembled. china prepared a plan to restrict imports of rare earth to the u.s. if the trade war

gets worse. they would use their stronghold in a targeted way to hurt the u.s. economy. china produces 80% of rare earths. north korea and kim jong-un took hearth -- harsh measures after the summit with president trump and executed ads former top other.o the u.s. and for crude is backing a call by alexandria anacostia 4to's -- perhaps a chance for some bipartisan cooperation. 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 sebastian salek and this is bloomberg. tom: thank you so much for that update. breaking news out of china, the app back -- backdrop is the

chain space on huawei and there are other issues on rare earth. china will set up unreliable entities list off of state radio , and another headline says china to target foreign firms that cut supplies to china. many american firms supplied to huawei. what i would mention is the debate on huawei has changed. in the interviews we have had in the last 48 hours, those that read and speak mandarin are heated over the effect of huawei in beijing, and that is not captured in the western zeitgeist. francine: we will get back to that, because it is hugely significant. when you look at heated debates, the one surrounding italy and the commission is also heated. commission said

italy has not made sufficient progress toward complying with the debt rules. won 80% of support from the five-star movement. , a member of the league elected to the european parliament by his party. -- he is one of the -- thank you so much for joining us. let me cut to the chase and talk to you about a possible parallel currency to the euro. could this be government policy in the future? wanted to be as much collaborative as we can with the european union, but we wanted to

make understand that there are sensible policies. had a reallywe sharp problem of growth. economic indicators are nice because we have a primary surplus, a trade surplus, so we are better off than many other european countries. growth is probably the number one problem of italy. in order to spur growth, it is impossible to propose a consolidation on the raise of .axes or something like this , italy isunderstand in the region of 10% higher as a percentage of gdp higher than

the average of oecd countries. thanitaly needs other sharp reform in order to boost competitivedeo -- video -- francine: this is something bondholders do not like. do you think that government policy will be dictated by the markets and by btp's, which are telling you it is almost looking like an increase, or will it be dictated by what you think and what mr. matteo sal vini thinks is right? claudio: this is a pretty hot debate regarding the reasons market towardsd a high interest rate. in any other situation, it

should be not a matter of discussion because in the rest of the world, there is no point in betting against sovereign debt, for example in japan, or in the u.s. it is not something anyone could do. leadschitecture of europe to these kind of unpleasant situations. in danger of speculation, today there is the new tariffs and these impact the bond market. it is not something that should happen. we are planning to set up a bigger conference in order to situations solved. it is not exactly reasonable.

think thedo you coalition between the five-star movement and -- well collapse? what will it take to pull the plug? claudio: we are a coalition based on the contract because you may remember, we were not went into election as a formed alliance. we sort of found a way to make this, as long as we are able to carry on with the reforms set up in the contract. tom: we are thrilled to have you with us today, particularly after ambrose evans pritchard wrote you up in the telegraph yesterday. it is 531 miles from milan to paris. france has a far more deficient

financial structure than italy. when will germany get off your back and put the house in order in more troubled countries like france? claudio: we are not asking for any kind of guarantee beyond what happened. i would like to remember that most of the european banks collapsed in 2008 and have been rescued by the state. this has not been the case of everly. -- italy. the amount of state support that we put in our banking system is probably the smallest. questionme ask you a and it is a delicate question. when you support the italian banks coming to the rescue of commerzbank or deutsche bank? if it isit depends fair trade on the basis of the

convenience of the bank. i would support that a bank -- if you're christian leads to say -- -- question leads to say -- if it puts the bank on the shoulders of the savers, i would say no. there is always a supervisor. if the supervision fails, ,robably at is the supervisor not the savers that in good faith put their money into a bank. we have seen and you have seen in the u.s., in 2008 when things started going bad, the baling simply makes things worse. when washington mutual started to fail, the only thing that was

sensible to do was to put the fire out. idea -- that is not sensible. francine: let me ask you about btp's. i have a chart looking at the spreads between greek and italian 10 year yields. the more important one is the five-year btp, now yields 25 basis points more than the five-year greek yield. what does that tell you? claudio: it is incredible because we all remember that italy 10 billion because we were part of the funds.package via , they are taking

technicalities off the bonds. they are not without any kind of control of the rates by the central bank, are free to float to the speculation of the day. it is something that should be sought because italy is not greece, with all due respect. creatord you, we are a of half of europe because we portugal, islands to the tune of 60 billion. nevertheless, when the quantitative easing stopped, the bond market eased without any kind of regulation that should be put in place, a scheme, in

order to put it in the bond market. francine: thank you so much. we hope to host you soon in london. that is one of the main advisors to the deputy prime minister. italy, thespeak on markets around the move. weaker,drop is sterling and stronger, futures down -35 downn stronger, futures -35. we will look at this chart later. ♪

>> we are attuned to potential risks to the outlook and if we saw in downside risk to the

outlook, then that would be a factor that could call for a more accommodative policy. that is something in the risk-management area we would think about. tom: richard clarida to with a precise speech yesterday. i was taken by the acuity of his speech and the difference hearing from vice chairman fisher. the markets are on the move and deteriorated in the last 20 minutes. we are thrilled to bring you worldwide andrew sheets, who synthesizes this in a wonderful way. i want to go to what it means for our viewers and listeners. this is the 10 year yield which is plunging, and then we take away the cleveland cpi which you know is somewhat like dallas trim, chairman powell's favorite level, and the yield has disappeared.

real yield is gone. what i find remarkable is the real yield of the 10 year cleveland is lower than the lehman low. how much stress is there in the system for vice chairman clari da? andrew: this highlights a big challenge the fed is facing. you have a bond market highlighting very low real yields, a yield curve increasingly inverting. things you usually get around times of severe stress or signs the bond market is really worried about the economic cycle , and yet the incoming data, the u.s. unemployment is at a 40 2.1.low, core cpi is at make it difficult for the fed to react aggressively, compounded by the fact that the market expectation is for the fed to react aggressively. this is a difficult place to be, and there is a risk for some

asset classes like credit that are counting on an aggressive fed response. tom: bring up this chart, the two year yield. this shows the accelerant, first and second of -- second to rake it ebbs -- derivatives. what is so important as this is a curve showing acceleration on a log chart. that says to me instability. guys, how much instability does morgan stanley have on a friday morning? andrew: this highlights it is not just trade. we had new trade headlines this morning and that does not help, but in the background -- and my colleague has been focused on this -- you see signs that the u.s. cycle is under stress. earnings growth is decelerating,

pmi's are declining, durable goods orders were weak. a number of factors that also suggest a quite late cycle environment, our own team cycle model has turned from expansion to downturn, phase usually associated with much worse forward-looking turns. all the reason to take the bond market seriously that this is not a panic on trade. there is another layer of serious issue going on. francine: a bloomberg story yesterday suggesting what trade does is accelerate the troubles of the economy to come. does it change the scenario or just the timeline? andrew: where trade is fascinating is that it was a legitimate surprise. we felt we read the same story since the beginning of the year, the two sides were close and a deal was just over the horizon, and it breaks down.

that was a surprise to investors and companies. when companies were setting their year ahead guidance, they were not expecting this to happen. if we think about the real effects on trade, we will be watching guidance for second-quarter earnings closely, because we think that creates a risk. earnings for 2019 need to come down because companies were not expecting the increased uncertainty in the environment. once they reflect that, there estimates will be too high. francine: coming up, we speak to neel kashkari, president of the federal reserve bank of minneapolis. that interview coming up at 8:30 a.m. new york. this is bloomberg. ♪

♪ this is bloomberg "surveillance." investors are unhappy with mark zuckerberg walking away from the shareholder meeting without anything to show for it. they presented eight proposals and he rejected all of them. he has majority control of

facebook. some analysts are skeptical that fiat chrysler can make its promises about its proposed lt.ger with renau despite years of belt-tightening , -- disney is likely to have a hedge on -- hit on its hands in california and is looking forward to future retractions. they plan to do more with our blockbuster marvel superheroes. they will create character theme parks in california and paris. francine: thank you so much with the fall roundup of the news out today. let's get back to your markets conversation. andrew sheets is still with us. we talked about the fed and europe and btp's. as an investor who wants returns , to get a little bit of investment on my money, what

should people look at? andrew: it is a hard backdrop. we are facing a difficult seasonal time for markets, facing headline noise from trade , facing some of these broader concerning cycle signals. the overall message is at is not a great time to be taking a lot of risk. for people looking for returns, there are a couple of places we have been looking. japan,ket is negative on who has some interesting idiosyncratic factors going on. it is trading at 12 times forward earnings and economists see a 50/50 chance of a hike delayed, which is a catalyst. space hard debt currency as better than -- and a high carry with u.s. fixed income provided a bigger touch bit of pickup over treasuries.

francine: how do you choose the emerging markets? i was reminded nine or 12 months ago, president trump today tweet that sent rounds flying. are there any emerging markets that are immune to that? andrew: the debt currency space is probably in a better place. the trade will move the dial less on a debt story than an equity story. we are positive india, brazil, and indonesia. tom: i want to show a chart we have dried to get to and we have done a lot of work -- tried to get to and we have done a lot of work on bonds and commodities and currencies. on the stock market, we have corrective phases in february and the ugly october, and we are getting there more than rapidly.

do i reallocate today or wait for mike wilson's next note? andrew: you wait for mike. 500 sixet for the s&p months from now is 2750 so you have to get below that target. then it will make sense to allocate to the u.s. again. francine: andrew sheets -- tom: andrew sheets will give us perspective in the next hour. our team is working overtime on these moving markets. let's look at the data as we begin another hour of bloomberg "surveillance." yields to record lows. this is bloomberg. ♪

♪ late evening, the president bleeds his trade war to the

border war. the markets adjust with a vengeance, yen strengthens. gap is down. mexico is not china. mexico is bigger and it is next-door. how will the global system adjust deutsche bank's shares to bring forward the real yield -- shares? ringing forward the real yield. 2019 is the "right" investment year. a billion here, a billion there. visuals ofe with the the chancellor of germany outgoing and the secretary of state of the united states bearing messages, mr. pompeo. why is mr. pompeo speaking with chancellor merkel? francine: we finished a press briefing of mike pompeo in

berlin with the german foreign minister, and he has migrated to this news conference with the german chancellor. moments ago, he was saying that germany should lead in taking action against china. the visual of this is quite incredible. angela merkel yesterday giving that commencement speech late last night germany time to harvard, which is saying we have to take barriers down. with her experience of the berlin wall, i know students were riled up which meant she got a standing ovation. in parallel, president trump giving a commencement speech, very different, at the u.s. air force. tom: it is an extraordinary morning. equities, bonds, currencies, commodities, futures have deteriorated in the last hour, -35 on s&p.

to 24,895. down i have a correction in the dow. oil is south, to say the least. the vix out near 20. ,he two year yield breaches 2% 10 year yield is stunning, and the yen is stronger. you are looking at mexican peso. francine: i am looking at peso slumping as the u.s. looks to curb migrant flows from mexico, tumbled some 3%. treasury yields dipping to the first 20 month highs, the yen with a bit of movement. look at fix. when we started it -- vix. since we8% higher started the show. right now with our first

word news in london, sebastian salek. sebastian: president trump threatening to use tariffs as a weapon and the fight over migration, vowing to impose a 5% tariff on mexican goods until they stop the surge of immigrants. the tariffs could rise as high as 25% and could jeopardize the north american trade agreement. china appears to be on the verge of striking back at the u.s. for blacklisting huawei. beijing will establish a list of so-called unreliable entities business.e turkey has entered its first recession in a decade. it was helped by increased lending by state run banks. they are dealing with inflation stuck around 20% and that has

not been helped by the lira's decline. amazon reportedly interested in buying boost from t-mobile and splint -- sprint. the head of the fcc recommended the merger bacon -- approved provisions, one of them selling boost. 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 sebastian salek and this is bloomberg. tom: on any normal day, the strength of our guests is what keeps bloomberg "surveillance" going. in london, andrew sheets is with us for morgan stanley, and we are thrilled to bring in someone more attached to the american businessman, james glassman of j.p. morgan chase, with decades of experience on the pulse of america.

to begin, i want to go to the chartres i -- chart i have shown all morning, log two-year. we have extraordinary acceleration down in a lower yield. how does chairman powell react to the second derivative and the first derivative of these interest rates? jim: this is all about the fear and the trade tensions. the best thing for the fed is to keep a cool head and sit on the sidelines and keep saying what they are saying. the fundamentals of the economy are good. six months ago, the market was down 20% and the fed raised rates and we had a decent first quarter. there is little the fed can do to calm the nerves. the best thing to do is to keep focused on the economic -- tom: the arch theme of our iserview with john williams

the measure of business confidence. what is the state of american business confidence after you visited california? jim: businesses understand the volatility and understand what the issues are about with this trade issue. they are seeing new markets across asia where economies have grown 6% to 7%. they understand what the future looks like with those opportunities, so they are nervous with trade tensions but optimistic about the fundamental backdrop of the u.s. economy and the outlook for global economies. francine: shut the markets be more pessimistic about the outlook? andrew: from a market perspective, you have these three overlapping problems. a tariff and trade issue that is not going away and does not seem closer to resolution. in the background, a number of signs the market is increasingly

worried about the state of the u.s. cycle and increasing pricing, increasing the odds of a recession down the road if we look at the inverted yield curve. third, some of this tension around the fed whereby a number of measures the fed traditionally looks at, the unemployment rate and inflation the fed should stay put, but the market would like the fed to cut. i think you could have segments of the market disappointed with the lack of action. francine: like what? andrew: corporate credit has outperformed on this expectation that the fed will move in and provide support. when you see environments when the data is deteriorating and credit -- the fed is cutting, credit tends to do quite poorly. tom: i want to go to you, and this is off the great work that jim glassman has given us. yesterday.maki

bring up the chart. impossible at 6% unemployment that we would ever go below 4% unemployment. dean maki and a select other group said maybe we will. we are a fully employed america. why are we seeing these market gyrations if things are so darn good? andrew: i would take that chart and flip it. tom: you cannot do that right now. do you have the flip button? francine: i do, but i am not using it yet. andrew: generally speaking from the perspective of markets, the best time to buy is when the unemployment rate is high and the best time to sell is when it has dropped. as investors ideally in the business of buying cheap assets

and assets are cheap when people are fearful and people are usually fearful when unemployment is high. the jobs market is very healthy, but from a signal for future investment returns, usually that is a bad signal. tom: i know you want to step in. make america great again, the president gets a massive victory lap with a fully employed america and yet with these low yields, retirees are hammered. have you ever seen this? jim: know, it is unusual. the market, when you get to full employment the market worries about downturns because history tells us we do not stay there more than a year to. the trigger -- a year or two. the trigger that causes these problems are inflation problems or financial imbalances, not around. this moment is unique in history.

if you show the picture for the e.u. and japan, pull it up together, it is amazing. unemployment in the e.u. is lower than it has been since the monetary union was formed, japan at the lowest level in ages, so we are going through this despite the worries about growth. the market is fully valued and we are getting carried away with trade issues. there are some fundamental issues behind the trade. we are worrying about intellectual property rights. there are legitimate complaints. i don't think this changes the outlook of the global economy because we are trying to get china to go by the rules we all run by. francine: if you look at the japanification of europe, and it is one of the charts we show quite a lot on bloomberg, but there are fundamental differences. andrew: i think there are, and it is a question of what is in

the price. at 10 year german bunds are -20 basis points this morning, hitting an all-time low. you have a corporate sector in europe that is not nearly as bankingas japan, a sector that has slowly increased capital, and some of the recent pmi data in europe has been better. i still think the long-term growth picture in europe is challenged but we should not write it off to japanification. tom: explained to me the chronic effect of negative interest rates on the e.u. financial system. you are at morgan stanley. james gorman was with us 24 hours ago talking about systemic risk. as the negative interest rate experiment failed? andrew: this is a potentially good moment where academic theory and practicality maybe

disagree. academic theory as saying as you decreased interest rates, it eases financial conditions, and you can make an argument that once you go below zero you tighten financial conditions because you make the operating environment more difficult for banks which makes them less profitable, gives them less margin of safety and makes them less likely to lend. there are positive offsets because we have lower borrowing rates generally, but negative interest rates have shown there are a lot of problems associated with them once you go through the 0% level, and the fed acknowledge that. tom: andrew sheets, beautifully explained. thank you so much for joining us today. squirming,n is here turning northwestern purple over the effective negative interest rates. we will do a lot more on data check.

there is a lot going on, and part of it will be conversation with fed officials. kashkari of minneapolis is simply different, in the 8:00 hour. dow futures -282. this is bloomberg. ♪

♪ sebastian: this is bloomberg "surveillance." making barclays are millions of dollars gaining loopholes and tax law. the remnants of a controversial division shuttered years ago are generating trade deals by lowering dividends, and may be

responsible for about 10% of barclays stock training revenue -- trading revenue. cb she is offering 500 buyouts for directors and managing directors. japanese banks expended abroad to make up for slower growth at home and they are in cost-cutting mode. uber plans to cut back on promotions writers like so much. -- riders like so much. it was their first financial report since going public. tom: thank you so much. we have such good guests, i want to race through this, -33 on s&p nearing dow futures -300, oil south. to 20. down to 20 -- out the two year yield with a 1.98 handle. francine: i have a very similar

data check. havens are rising on trade threats escalating. i am looking at peso because we saw a huge move on the mexican currency as soon as trump tweeted on tariffs, and the vix gained. tom: an extraordinary market day. james glassman is with us of j.p. morgan, expert on the american labor economy, and someone expert on the labor gig economy and uber is david kirkpatrick. affect." "the facebook is uber amazon? no, they are not. tom: they told investors they would be. david: gamble private investors made was that wrubel will become

uberazon like entity, -- will become an amazon like entity. over funding a company which allows them to gain huge market share and percent -- gain a perception of inevitability. they may not be a real business. tom: a money question you did address, if you have private silicon valley types and they see cfaf 18 seaweed nsy cfae -- teensy wee language -- david: not in the case of facebook. uber has reformed itself somewhat. they have a more limiting structure promoting shares than they do now. the impulse and silicon valley has been to give founders unlimited power. i think because the private

investors benefited so much from energies thater these very aggressive founders created to generate a perception of massive market potential. some people are better at this than others. elon musk is probably the best out of it. mark zuckerberg lucked out because he hired sheryl sandberg but because he had control once the ads were flowing in, he was in great shape. francine: we are hearing that the uber story will be more attractive after a year. why do you disagree? david: i don't really see where the long-term growth of profit comes from in the case of uber. which isin a business a very undifferentiated product with enormous competition, and

at the moment they are losing money on every ride. until they can change that, they will not have a much more attractive business. at the moment, competition is diminishing and that means prices are going up for riders, which means it may be less attractive because price has been a big part of the appeal. tom: we will continue this discussion on uber and the modern technology. coming up, markets on the move but there is still a lot of business. the chief financial officer of dell, tom sweet. this is bloomberg. ♪

♪ tom: bloomberg "surveillance" worldwide. what you need to do with your money this weekend, given what we have seen. of j.p. morgan chase, we have a chart linking our economics. we have to take a few precious moments and continue with david kurt patrick -- david kirkpatrick. andnt to go back to we work community adjusted ebit the -- ebitda. do you trust the accounting of these firms on their balance

sheets? do you trust their goodwill and intangibles? david: i don't see how you can trust a phrase like community adjusted ebitda. it is such an expedient form of accounting, i don't know, magic. tom: you codified their rulebook. you reported it. work, why do they have a different playbook? david: investors have allowed them to do so and softbank has allowed them to do it in large part. the quality of capital softbank injected into the private market has distorted the way these companies think about what their job is. they sort of think their job is to grow regardless of the financial consequences. francine: who is the next

facebook? you put it perfectly at the start, investments -- investors worry they are missing a facebook opportunity. bethere a company that could like facebook in 10 years? david: i cannot pull it out now. if i was guessing where we would find a company that is the next facebook, it is probably in health care. that is where we are seeing technology change the economy the most in the long term that has not been identified. tom: thank you so much, david kirkpatrick- david on the uber affect. andrew sheets stays with us. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ tom: good morning, everyone. underne lacqua in and 1.26 sterling london.

i am tom keene in new york. viviana hurtado will join us with trade upward. dive to anwe want to expert who can get away from the , damien sasso. we have been doing data checks, but there are the internals. full faith and credit yields here, high yield here, and they both move at the same time. what are you watching for in full faith and credit u.s. paper versus corporate credit? damien: the things we are looking at our corporate dm bonds are proving to be more of a safe haven then sovereign counterparts, and spreads converge to the sovereign. tom: we have to do sophisticated

math. the sovereign em is going up and their carpets are doing better. -- corporate's are doing better. a lot are selling off more rapidly, and corporate bonds are not included in those etf's so they are proving to be more of a safe haven. localher area is em currency low yield or's, -- yielders, they live up to their state -- safe haven status. francine: i remember the random moved significantly. what emerging market is most vulnerable to a presidential tweet? damien: you are making an interesting point. the rand and mexican peso have thereme off as much is colombian or chilean

counterparts. some of the markets performing well, india because it is not so immersed in these supply chains, that is one area we are looking at closely. tom: did you see how he got the calculus in? the calculus is simple. he is telling me chairman powell is central banker to the world. jim: and the u.s. economy is the anchor. tom: are we de-anchoring? jim: i don't think so. i think the u.s. economy will remain an important anchor. that is creating a lot of tension. francine: what is being misunderstood by the markets now? i don't know if they are overly pessimistic or optimistic. jim: when the market is fully priced, you will be nervous about issues like trade. when the economies are flying at

their cruising altitude, they can handle downdraft. tom: come on, it is a grand marketsolf between your and his. damien: let me put on my american hat. as it in our best interest for the fed making interests? i would argue probably not. what the u.s. re-converging with more developed markets, that might not be a bad thing in the long term. tom: gentlemen, thank you so much. at -34, some stability dow futures -284. francine: the president escalating that fight with mexico over the border and will impose a 5% tariff unless it stops the flow of illegal

immigration. duties could rise to as much as 25%. this seems to be the first time the president is actually trying to do foreign policy. this is not about negotiating, not about trade. it is using economic sanctions or whatever you want to call them to get foreign policy changed. viviana: that is causing a lot of heartburn in washington. this is because certainly as far as congress is concerned, they feel completely cut out of this trade policy, foreign policy by tweet. they are feeling very cut out in a way specifically that they feel they are partners with the president on this. tom: everybody catching up on this last night, absolutely extraordinary to see what we saw last evening. we have seen the market reaction. what will you look at when

washington begins its day-to-day? viviana: it is really interesting, because there are two lenses by which washington is going to look at this. one has to do with the republican side, how is it that economic gains that have come on the president's watch, how is it that this kind of aggressive push by the president could make those gains evaporate? all of this will be looked out through the lens of the upcoming 20 presidential election. tom: viviana hurtado, thank you so much. right now, we want to go to someone grizzled in republican politics and advice and strategy. william hoagland is the bipartisan policy senior vice president, but that rarely describes his experience in washington.

i would suggest you have never seen an evening like last evening. place in historical contest -- context how far the president is from his party. william: it is amazing how overnight, the tweets and recommendations he has put forth on mexico and tariffs, this is amazing. i have never seen anything like this in my life. what is so complicated and does not make sense to me -- i think jerilyn -- chairman grassley will look at this and say, weren't we trying to pass the trade agreement with mexico and canada? this undermines that effort the president was trying to achieve. to goill hoagland, i want to someone that jim glassman know so well, robert gordon. professor gordon wrote an exceptional book, really talking

about a changed america over 100 years ago. president trump and all are dealing with that. if we effect these tariffs and trade wars, what does it do to the fabric of political america? i think we have got some technical difficulties with washington. who knows who cut in their -- in there to take audio away from bill hoagland. the shocks to the system are immense and you have given us an optimistic tone. jim: i think the thing to remember, in the background there is growing tension between how the chinese do business and how everybody else does business. this forces everyone to get more in the same page. tom: we all read our spence from yale university. they are going to wait out this

president and use the example, rare earths. their number one thing is just to wait for a moment, right? i think the chinese must realize this is going to be a future source of tension if they cannot figure out how to resolve it. i think it was in their interest . a lot of what is being asked is helpful for them. i thought a couple weeks ago we were close to a deal. what was the problem? i think we need to make some concession too. we need some face-saving way out of here. i don't think this is a move into isolationism, tearing up the global script. we are trying to get everyone on the same page and it is creating uncertainty because of the way it is being done. i don't think it changes the fundamental path, and we are so fortunate because most of us have gotten back to low levels of unemployment. inflation is not the issue that

everybody thought it would be. that gives central banks the ability to be easing if they need to be, to be careful. inflation problems usually trigger new downturns, and that is not on the horizon. francine: if you look at the extra tariffs on mexico, it marries the two signature issues president trump as, immigration and trade. is this a reelection campaign? i don't know, because it is not in our interest to create all this turmoil. i think we will see quick negotiation over this mexican issue. what net be cheaper if we could figure out what are the economic problems in cell charla america? focusing on their -- central america? focusing on their problems might solve the immigration issue. i think there is a limit to how much you can push this kind of

thing if it creates turmoil heading into the 2020 election. i think it is a lot more helpful if you are thinking about the president's game plan if you have uncertainty cleared out, the issue with china, the nafta 2.0, canada, mexico, and the border. francine: let's go back to washington. is this a simple campaign reelection 2020 ploy? bill: i do. if this continues on, we will see a lot of hurt. there is a lot of collateral damage in a war and trade wars, nobody wins. we are starting to see that happen. particularly for somebody who grew up in the midwest and the family farm is still out there, we are starting to see some real hurt. soybean futures are the lowest in 10 years. does not matter that we had a wet spring and have not been

able to plant anything. this is the heartland where trump got his votes. i know, you are going to say. tom: your heartland senators are missing in action. what do you need from the old guard? companys pat robertson stand up and start screaming? bill: i think i am looking at senator grassley standing up and starting to take a hard stance. theare absolutely correct, republicans have been hanging back and should not be. the closer we get to 2020, this will become a real issue if it hangs on. i think the collateral damage is starting to hit hard. tom: we thank all of you for being with us this morning, coverage of this historic announcement of the president on twitter and all the ramifications of the market. this morning, what a

conversation, and different from what it would have been 24 hours ago. neel kashkari of minneapolis in the 8:00 hour. stay with us with more data checks. this is bloomberg. ♪

♪ tom: bloomberg "surveillance," an extraordinary day. i don't think we spent any time on brexit. we failed. we will be in london next week, a lot to talk about including a presumed visit with prime minister johnson -- he is not yet prime minister. francine: last time he was here 12 months ago, at the time he said boris johnson would be a great prime minister. as we look at the leadership

breaks, you wonder what he will say this time. tom: william hoagland in --hington, james glassman in what do you need from your washington and your republicans and democratic party leadership to get back to any semblance of the humility we learned out of world war ii? bill: what a question. leadershiphave some on both ends of pennsylvania avenue, and we are lacking that leadership. as a republican, on the issues of trade and the economy, we are not getting the best advice or the president is not getting the best advice or following it. congress has to step up to the ball and start to take on some responsibility, as they tried to do in terms of the wall. i think there is a real

opportunity here to try to find some solutions. we are not there at all right now. tom: we all had to read on mercantilism in school. how mercantile is the united states of america? have gotthing is, you to ask what is this all about? legitimate issues about intellectual property, that it is a question of whether the tactics are working. there are serious tensions building between the way china does business and the way the rest of us do business. this comes from the -- with the territory when you have valid pain economies that are emerging. i do not think this is a drift to mercantilism. i think it is more a way to try to figure out how to get people to abide by the same rules. tom: what is that? jim: maybe something good comes

out of it at the end of the day. francine: your thoughts on that? from anfficult to gauge international audience, how much traction this is getting, whether the means to an end justify it. bill: i don't disagree. asre are some serious issues it relates to the trade issues concerning intellectual property. there are major concerns. china has been growing in this area and taking on. i keep coming back to the bottom line that in any kind of a trade war people get hurt. time, thankout of you for joining us, william hoagland and jim glassman as well. we will be covering this across all of our platforms this morning, exceptional market -- standardhas deviations of the linkage of

trade and the border wall of mexico. this is bloomberg. ♪

♪ trade war morning,

francine lacqua in london, tom keene in new york. we will be together in london on monday. francine: cannot wait. tom: it is a weekend. what do you do with your money? a columnist at bloomberg opinion has a podcast that does better than good, and the bravest woman at bloomberg, gina martin adams. you are acclaimed worldwide for avoiding the phrase "go to cash." are you going to cash yet? gina: not yet. thattainties have emerged cause us to question the durability of the u.s. economic outlook. the flight to bonds has been tremendous. you have a number of yield curve inversions. our models are suggesting the same thing they did, defensive strategies within the equity

market because there seems to be a likelihood for continued economic expansion. tom: i love doing single best chart. the collapse of february a year ago, the collapse of october, and then i measure a correction which is roughly dow 24,000. we are nowhere near a correction, but the vector is moving in that direction. how do you focus midway to a correction? barry: there are two things. the first and most obvious for long-term investors is maintaining a fully diversified portfolio, have exposure to different asset classes in different parts of the world so when one sect really starts to get ugly, at least other sectors tend to hold up better. bewareer issue is simply of the risk factors that are out

they are how continuing to either rise or fall. what we have seen in this very long expansion that dates back to the end of the financial crisis and the end of the recession, i think it is july or august, this becomes the longest expansion in history, beating the 1990's expansion. we continue to see risk factors go up and that is causing volatility. whether it is the inverted yield curve partly caused by the fed or the self-inflicted wound of trade war, it is an increase and it tells why you need to have a broad diversified portfolio. riskine: is the biggest factor politics? are the markets good at modeling politics? especially when we have a binary outcome. there are not shades of gray,

either a trade deal will be cut with china or it won't. it is hard to see how markets can figure out which way that will go. what this most recent tariff announcement on mexico related to emigrants does is we just put grants does as we just put to bed the usmca and the ink is not dry, and the president threatens a new set of tariffs in two weeks unrelated to that. if you are the leadership in china, you have to step back and say why the hell would we sign a deal with this guy? his word is meaningless. previous agreements do not matter. will we sign something and a week later he will wake up unhappy and impose new tariffs? the reason you see this market

reaction is not because of the tariffs on mexico, it is because it just made a china deal that much less likely. francine: how does this change the behavior of chief executives? gina: it is the same story over the last month. it amplifies the uncertainty, and the real risk is not necessarily the risk to margins or inflation presented by another 5% tariff, or expanding the tariffs on goods and outputs -- out -- goods and imports. ceos generally feel hamstrung with respect to their investment . you need confidence in the economic outlook and stability of policy to make justifiable investments with your funds. ceos this year have shown a tendency to pulling back on investment, and that is the most dangerous component. change givencks

these moments? buyhares go down, do they back more shares? gina: not usually. usually buybacks just chase share prices higher. that is the reality. they are contingent upon earnings growth and this is a good point. if your outlook for earnings growth shifts materially negative and you do not see a light at the end of the tunnel, buybacks will slow. i do not think that is necessarily the case right now. tom: thank you. monday, london. francine lacqua, tom keene, president trump. this is bloomberg. ♪

♪ china for retaliation.

the country will set up an unreliable entities list as they strike back at the u.s. for its huawei ban. president trump threatens higher tariffs on all imports from mexico unless the country fixes illegal immigration to the u.s. as trade morphs into a foreign policy weapon. and the great collapse of bond yields. yields hit a record low in a brutal month for equities that started and ended with trade war's. david: welcome to "bloomberg daybreak" on this friday, may 31. just a short time ago, we had this announcement about unreliable entities that china says it will make a list of. it is suggested that it will be done if it overall damages the interests of chinese companies. it is an retaliation of huawei, in all likelihood. u.s. and you have the mexico, using tariffs as foreign