muilenburg speaks at the air show in paris. central banks do no harm. --officials had to officials head to central. and administration officials downplay any results from president trump and president xi meeting at the g20 as market volatility picks up. david: welcome to "bloomberg daybreak." in hong kong, carrie lam pulled back. they still had a lot of people out. demonstrators say it was 2 million people. alix: it feels like maybe over the weekend, it grew to a larger issue than just the bill. now it is about carrie lam's resignation.

i do want to point out an interesting fact about income inequality in hong kong. apparently 20% of the population below the poverty line live in caged homes, basically a compartment made from wire mesh. david: i think of it as a fairly affluent place. i did not know that. alix: housing costs has been pushed up so high, so it is bigger than maybe just the extradition bill would imply. david: it is far from over. alix: the pictures are just unbelievable. david: in the meantime, pfizer is going to buy a commercial biopharmaceutical firm. they will pay about $10.6 billion in stock. the total enterprise value is about $11.4 billion. alix: in the markets, equity markets pre-much going nowhere on this monday. markets risk -- pretty much going nowhere on

this monday. a lot of risk coming in. a mixed euro-dollar in the g10 space. yields up by about three basis points, but still really range bound. crude getting hit yet again, despite unbelievable headlines about iran ramping up uranium enrichment and breaching the deal. david: we are going to come back to that story. in the meantime, let's look at the morning brief. today the paris air show begins in central portugal. wednesday, the federal reserve announced the latest fomc decision, and chair powell will have a press conference. on thursday, the bank of japan and bank of england announced their latest decisions. friday, u.s. pmi's and existing home sales. in the meantime, right now let's do the bloomberg first take. we are joined by marty schenker and gina martin adams.

let's start with that paris air show. it is a bit different. normally it is just selling thing. this time we have dennis muilenburg having to persuade people that his planes are safe. we have airbus out with a 100 aircraft deal with a leasing company. marty: it is much different than it has been in years past, when it has been transactional. but boeing is selling. they are selling the pitch that their planes are safe, and that is something permeating everything that is going on in paris today. alix: fairpoint, but also it is interesting to see the type of jets being sold. the smaller ones, single aisle. the airlines have the inventory they want. i feel like that is an undercurrent here. the order flow had been for the very multinational large jets, and that had stimulated growth in the sector, and now it

is transitioning. maybe it is consistent with where we are in the economic cycle. are you going to spend extraordinary amounts of money at this stage in the cycle with all the question marks coming? this is coming off a very strong levels last year. interest rates are generally moving higher. all of that helps set the stage for a central-bank bonanza this week. we have the central meeting coming this week, the fed and the boj, then you have boe. it looks like the market will not be able to take any strong positions before the fed, but how are we right now? gina: in a very rapid one-week move in june, we went back to neutral. obviously may was a very risk off month, one of the worst we've had in a long time, as exposure,pared back

would completely risk off with respect to trade. in june we saw the market roar back because of the potential for the fed support. it does put a lot of pressure on policy as the next potential catalyst for markets. will it be a fed support move week? i don't think equity markets are expecting that, but they would like to see confirmation it is coming in july. that could be a big question mark here. and then, there's outstanding trade issues. no one is expecting a miracle by the end of the week, yet there is this drag on overall sentiment growth. david: let's go exactly to that, the g20 and what is expected on trade. we have yet another white house official saying go to expect too much. that is what wilbur ross said to us. "i think we will have a deal with china, but we won't have a -- out of theina

g20." we don't even know that president xi will meet with president trump. marty: there has been no confirmation from the chinese. i think the optics of not meeting with donald trump and japan would be very bad. but how any times have we been saying in the last month, don't get your expectations up over g20? now it seems like the administration, in response to some of the comments the president himself has made, is trying to scale back expectations. these two leaders are not going to reach an agreement in japan. what they can do is kickstart the talks again, and that is something to watch for. alix: if xi jinping will physically actually be there. a headline just crossed that he is going to make a state visit to north korea june 20 and 21. how does that set the stage? marty: it is up in the air whether or not he will attend, but i do think that is not attendance would send a shockwave through the markets if

there is not going to be any conversation between china and trump in japan at that meeting. david: what are the equity markets expecting now? let's suppose they meet or don't meet, but only agree they will keep talking. that's it. will markets be disappointed, or do they expect that at this point? gina: they generally expect no major change. however, the offset they are expecting is a monetary policy month. the next if you get the double-barreled disappointment, the equity market is going to show that through elevated volatility. i do think that there is a lot of uncertainty with respect to where fourth quarter, first quarter 2020 earnings are headed. the longer this drags on, the worse expectations are going to have to get for recovery come up which is part of what is embedded in stock prices right now. it is something of our about

later into the summer months -- it is something i worry about later into the summer months. for now, it is really about if we don't get any sort of policy improvement on the trade side, it is ok because we are probably going to get a fed cut. that is the big hand off right now, and that is the big question mark equity markets are trading on. marty: there's also the issue of these tariffs that president trump has promised to impose at the end of june if they don't reach some sort of agreement with china. that is also hanging over the market. alix: i'd hum of companies -- alix: a ton of companies are in d.c. trying to persuade the president not to. thank you. for the trucks we used and more, go to gdp terminal -- go to gtv on your terminal. coming up, more on the hong kong protests and hedging geopolitical risk. we will talk with ian harnett, absolute strategy research she strategist. this is bloomberg -- research

chief strategist. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." a takeover in big pharma today. array.has agreed to buy the deal has a total enterprise value of about $11.4 billion. that price represents a 62% premium to array's close on friday. deutsche bank may exit its u.s. equities business. bloomberg learning that is all part of a broader overhaul to be announced next month. the bank could hold up to $56 billion of risk-weighted assets.

ubs still feeling the aftershocks from its chief economist's use of the phrase "chinese big." the chinese railway construction deciding against bond sale.or a alix: i find that story to be totally fascinating in that, regardless of the motivation behind paul donovan's move, it really highlights the lack of cohesiveness between china and western countries in terms of how they even talk and talk to each other. david: is it just the absolutely wrong time and place right now because of tensions, or just an --stration of the law of the lost in translation between cultures and like witches? -- and languages? alix: a bloomberg opinion columnist wrote a really creepy on this. you could say that the response -- a really great piece on this.

you could say that the response is heavy-handed, but a couple other banks got kicked out of different countries in emerging markets. this is the way it is, guys. david: it is really tough. that bond was not that material to ubs, but the question is what comes next. they really want to make inroads. -- jdgan morgan stanley morgan and morgan stanley. david: let's stay in hong kong now. hong kong saw another massive day of protests in the streets yesterday, even as carrie lam said she would suspend consideration of her controversial extradition law. ms. lam: we have no intention to set a deadline, and will promise to report to and consult members

of the legislative council panel on security before we decide on a next step forward. david: joining us by telephone , former hong kong exchanges and clearing chairman. thank you for joining us. give us a sense of how you interpret what is going on in hong kong right now. would back offs after she backed off the statute, but protests continued yesterday. ron: i think it is not surprising because there was a theof public anger about whole thing. i think in part it was due to lack of understanding, and on the part of the government, a .ack of adequate discussion can be quiteills technical, so i think that for

people to actually appreciate what was being proposed, you needed to really sit down and explain it to them. over the past few months, since february when the bill came up, the government has been talking ,o a lot of professional bodies as well as a lot of commercial organizations like the american chamber of commerce. over the past three or four months, they have made ,mendments to the proposal listing the seriousness of the crimes to a minimum of seven where you canment actually extradite someone out of hong kong. david: you mentioned the commercial enterprises. give us a sense of what the possible longer term effects

could be on hong kong, both the stock exchange as a clearing center for offshore remember -- offshorering and be -- hub.nbi and a financial we had to start doing our own extradition agreements with other countries, and right now we have them with about 20, including the u.s. and u.k., canada, australia, south africa, finland, germany, and so forth. that work carries on. i think any sort of money center or any commercial center, or any law-abiding community, would have extradition agreements with countries outside of their own home. david: fairpoint. ron: i think if we don't have

it, that could be an issue. david: ok, fair point. really helpful to have you with us today. alix: joining us now onset, ian harnett, absolute strategy research chief strategist. more unrest could continue. what do you do? ian: you just have to recognize that policy uncertainty keeps risk premium high. this is one of the reasons why we still want to be very cautious on markets. hong kong is the third worst-performing market in dollar terms of the last month, of the 68 we monitor. asia is the weakest region because it is tied up with both the trade war, the tech war, and now this political uncertainty as well. bring us the binary risks in the market. bank of america had a great note out earlier this week that talked about if the fed cuts and if it doesn't, if trade gets settled but there is no fed cut,

a deal at g20 but the fed is dovish. are we looking at this binary world? ian: i love the idea of this binary world. i've heard people talking about you have an overlay or of behavioral finance on talk. it is not different this time. economic growth is slowing. . there isn't a binary outcome. growth is slowing. you there is ang very simple choice investors have to make it moment. are equities giving you the right message, or are bonds giving you the right message? our belief is that bonds always tell you the right message. alix: ian harnett will be sticking with us. david: coming up, boeing's focus at this year's paris air show is to regain the trust of its customers. bloomberg interviewed ceo dennis muilenburg. dennis: with the updates we are making on the max, it will be one of the safest airplanes ever to fly. ♪

♪ david: the paris air show is underway today, and boeing has a somewhat different task this year. it is trying to reassure customers that existing boeing 737 max planes will return to service safely. our colleague guy johnson talked with boeing ceo dennis muilenburg. dennis: first thing is we are very focused on safety. that is the tone for the entire show. we are making good, solid progress on bringing the max backup, working for the certifications in relation flights this week. we hope to schedule the flight test, the certification flight shortly, and get the airplanes back up in the air. all of this is being done through the lens of safety, and we will take whatever time is necessary to make sure the airplane is safe. guy: 2019? 2020? dennis: it is something we expect to happen for the end of this year, but i don't want to give a specific timetable.

we want to take the time necessary to make the planes safe. guy: are regulators going deeper than you anticipated? is this a more thorough examination of the aircraft? dennis: it is a very thorough examination, and we expect that, and in fact encourage it. we are working with all of the regulators. about two weeks ago, the faa hosted a multi-regulator forum in dallas. we are working with the bodies around the world, and it is important we do this in a thorough and disciplined way. -- are theit regulators going further in then you have expected initially? dennis: i think we are going even deeper than normal, and that is good. we encourage that. we are looking at every dimension of the max, the software update, but not only the airplane itself. also the training and education materials, and he had to head certification progress. dennis: are the regulators -- guy: are the regulators all in

the same place? dennis: i see growing convergence between the regulators. a lot of detailed work on the certification, and we are encouraged other collaboration between the regulators, and we are seeing growing convergence between them. guy: do using the aircraft will fly first in the u.s. and then europe, or at the same time? dennis: i know there's an opportunity to do it together. we are going to support whatever the regulators want to do in terms of bringing the airplane back. betweenthere a gap where the faa is and the others? dennis: i think there is still work to do, but the trend is that they are converging. i think that alignment will just add strength to the regulators. if i look around the world, i see convergence across the entire group. i am encouraged by that process. our focus is to remain steadily on safety. alix: that was boeing ceo

dennis muilenburg. ian harnett of absolute strategy research is still with us. how do you look at boeing? ian: one of the interesting thing we seen from boeing and airbus is the ceos have said to investors they believe their industry is no longer a cyclical business. we believe the end of a long investment cycle is one of the most dangerous things investors can believe, and ceos can believe, because if we get economic growth slowing and we are seeing those recession risk indicators increasing in the united states, that actually puts aerospace at the heart of the downturn. historically they have been a cyclical sector. david: aerospace has a substantial proponent from the government, defense spending. does that change it a bit? ian: one hopes so, but what you fear is that that spending is there when economic growth is strong and revenues are high, but as you go into a slow down,

the ability to carry through those orders actually becomes much tougher indeed. david: how sensitive is it to trade? we had china threatened not to buy boeing aircraft. ian: some of the key growth for both airbus and boeing has been in the china expansion. the long run projections they have for that chinese expansion, i think a chinese slow down and chinese trade deals are going to this industry. alix: which raises the question, what leads what? is it the micro or the macro? how do you understand it? ian: i am a top-down strategist, so it has got to be the macro. every industry believes they are immune to these things, and they are not. we saw this in 2006, 2007 with people saying they were no longer cyclical. david: are there pressures that pie?row the side of the

those who are more likely to travel? david: absolutely, but when you look at some of the books boeing and airbus have come of the ability to carry through with those and not have a buildup of inventory, that is where you get the pressure coming through. alix: that is a small plane, not the big one. ian harnett of absolute research strategy will be sticking with us. don't miss airbus ceo guillaume faury, coming up today at 11:30 a.m. coming up, president trump wants credit for all of the economy's performance, but will it help carry him to a second term? meansn what that next. this is bloomberg. ♪ g. ♪

♪ alix: this is "bloomberg daybreak." happy monday, everybody. no real movement in any market you look at. s&p futures up by just two.

european stocks do nothing. the dollar is really mixed in the g10 space. you have a little bit of selling in europe, like into german ten-year bund yields, just -24 basis points. i guess better than the -27 record we saw last week. yields up about three points. the real head scratcher is crude, off by 1%. the headlines from iran to it is a bin salman, little terrifying, and let crude is totally immune to it right now. david: that must be a demand issue because supply seems to be in question. they must be thinking demand is even worse. alix: and how do you factor geopolitical risk? david: now let's find it was is going on outside the business world. we turn to viviana hurtado, who is here with first word news. viviana: for the first time, iran may break a land mark agreement that was meant to keep it from developing a nuclear bomb.

the islamic republic says it will exceed agreed-upon limits on its inventory of enriched uranium. last month iran said it would start withdrawing from the agreement in 60 days unless europe through it an economic lifeline -- europe threw it an economic lifeline. the u.s. withdrawing from the deal a year ago. in hong kong, hundreds of thousands to mistreated a bill that would allow extradition to china for the first time. chief executive carrie lam apologizing and shelving the bill, but protesters want her to resign. all of this putting pressure on china to either compromise on the protesters' demands or risk further unrest. the trade war between the u.s. and china has intel reviewing its global supply chain. bloomberg speaking to the ceo in tel aviv. >> tariffs started last year. with our manufacturing and assembly operations, we have

been working to mitigate the impact of tariffs by looking at more effective ways for the movement of goods around the world so that our products won't be more expensive at point of sales. viviana: 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. , ian with us on set harnett of absolute research strategy. if you can revamp your supply chain -- we heard from apple suppliers, who might be able to do that -- can you do it? dennis: it takes time --ian: it takes time to do this. ofh has been the engine growth, so it is about this tech war. it is about getting companies to think about where their tech supply is coming from. is it going to be china? is it going to be america? that is going to be a big battle

over the next two to five years. david: and if overall demand is coming down, it doesn't matter what you do to the supply chain. ian: but what we also know is this makes things more expensive. it damages demand and increases costs. of absolutearnett strategy research will be staying with us. president trump tweeted over the weekend that he should be credited with creating "one of the best economies in the history of our country." here with his is michael mckee. michael: the president is presiding over the one of the best economies we have had, but does that mean he gets credit? does that mean he gets reelected? that is a problem political scientists will debate between now and november of 2020. here are some of the data we are looking at. the growth rate for the economy has been strong. it has picked up in recent quarters because of the tax cut. but when you put it in perspective and look at it over a store -- over a historical

period of time, this is one of the weakest periods we have seen. we came off of the greatest recession since the great depression, and it took a long time to rebuild from that, which may not have anything to do with donald trump. the feelings of the voters are going to matter. do they really feel this is a strong economy? one of the president's arguments is that the unemployment rate is near record lows, and that is true. but if you look at the chart, president obama saw the unemployment rate fall further faster than donald trump. the president has been in office a much shorter time than barack obama was, so could it keep going? it is possible. some fed officials think we could get down to 3.5% or possibly 3%. you can say that the president has had a stronger recovery in didtwo years then obama come about obama was coming off the great recession. here is where the spending came

for donald trump mostly in government spending. remember the big spending bill for defense. , business, and households still very weak. alix: i love that breakdown. over the weekend, president trump tweeted, "the trump economy is setting records and has a long way to go. however, if anyone but me takes over in 2020, they were be -- there will be a market crash the likes of which has not been seen. keep america great." michael mckee and ian harnett are still with us. hyperbole aside, is he actually right? dennis: clearly the economy has done well, and it has done well look up to global economies, but what we are seeing now is that the recession risk indicates the start of a pickup. something is happening here, and

the danger for investors is if you believe it is different this time, normally those are the foremost -- normally those are the four most expensive words. david: about 40% of the country think to gets -- of the country thanks he gets credit on the economy. true that think it is it matters to people on election day, but there's the keyword. on election day. we have a long time between now and then. i would like to mention the st. louis blues won the stanley cup on wednesday. on thursday morning, the first article came out saying who is going to win the next one. this is way too early. [laughter] we will have a stanley cup

winner again before we have an election. alix: if you come inside to bloomberg, this is one of my favorite charts, the 10 year breakeven expectations for u.s., germany and japan. we have so much central banks coming out, particularly chair powell on wednesday. what you do with this? dennis: economic growth globally is decelerating --ian: economic growth globally is decelerating. policymakers will have to respond. remember, you get the monetary policy you deserve. if the fed decides to hold off cutting rates, the bond market will take that further. in the past when you have seen recession risks rise, you've basis points,00 treasury yields down 200 basis points down from their peak, and the yield curve steepen 150 basis points. the only way i can reconcile

those numbers from where we are starting is that the 10 goes to 150, and fed funds goes back to zero. that is what the market is telling at the current time. david: with the president like to see that as a practical matter? what does that mean for the economy on election day? michael: that would suggest terrible news in the economy. if the fed cuts too much too fast, then you have a market reaction of, what do they know that we don't now. is a double-edged sword for the president come up a part of this is a problem his created -- part of this is a problem the president created with the trade wars. david: thank you both very much for being with us. coming up, deutsche bank tries to separate the good from the bad. the bank's overhaul plans are part of today's wall street beat. that's next. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." coming up in the next hour, republican represented michael mccaul -- republican representative michael mccaul of texas. ♪ a record number of candidates registered to take the cfa exam over the weekend, with 250 thousand people from around the world sitting down to answer questions just to pass level one in a three-part exam. here for more background on the exam is taylor riggs. last year you passed. taylor: i did.

i still have ptsd rn memorial day, but i actually -- ptsd around memorial day, but i actually got to go outside and enjoy it this year. it is a rite of passage for people in our industry. it is a grueling six hour exam. you can do it in three years if you study hard enough. i needed, like, eight months to study. most people only need six. alix: and you were getting up at 2:00 a.m. to read for tom keene. taylor: and the pass rates are low, 40% to 50%. -- and we can do it brought a sample question for you, so here we go. you can actually go on their website and get a sample question. flowsomputing the cash for a capital project, which of the following is least likely to

be included? a, b or c. are tax effects, financing costs, or opportunity costs? which is leak likely -- which is least likely to be included? alix: david: i would say -- alix: i would say opportunity costs. taylor: i think it is b, financing costs. that is just a sample. alix: so close. taylor: and congrats to everyone who got it down. certainly a grueling process, but well worth it if you can do it. david: so you not only took the cfa, you are also going to business school. taylor: yeah, why not? alix: people -- david: people really want to go to business school badly. taylor: there's always the debate if you should do a cfa exam or business school. david: so you decided to do both. taylor: yeah, just to keep up

with you guys. and you can debate the cost and the amount of debt. we talk a lot about student loans and student debt, getting an mba certainly more expensive than the cfa. you can do the cfa for under to get or try employers to support you. david: i am just impressed by the pass rate. taylor: they make it pretty exclusive. they have to fail people to make sure it is a exclusive achievement. alix: thank you. we really appreciate it. deutsche bank considering exiting u.s. equities. the german lender said to be setting up a bad bank, as zinc to bind down unwanted assets. goldman sachs embraces its

status as a pce giant, consolidating activities and beefing up merchant banking. , a new wealth management firm is set to debut in the next few weeks with the focus on billion iran spread hours. david: why not ash on billionaire entrepreneurs -- on billionaire entrepreneurs. david: joining us now is sonali basak. alix: who is also getting her business degree. david: let's talk about deutsche bank. they are finally making their big move. we are going to get this thing past us. they are going to create a bad bank. sonali: the bad bank still exists after they make it, and there are still bad assets left even after they create the bad bank. the first morning we have woken up and seen a lot of news coming out of deutsche bank. another restructuring element is

significant cuts to its equities division, which lost $750 million last year. this is going to be challenging. david: right here in new york they are talking about cutting back trading substantially. sonali: this does seem to be deeper than what we have seen the last few years. they have to do something drastic to turn around these operations. alix: someone can say it took you this long, but they had to get some cash and trim liabilities in order to even do this. that's part of the story. sonali: it takes a lot of time to clean up these assets that have been bleeding for many years. alix: because you don't need the cash flow anymore for those assets. sonali: right. the equities decision is a much hairier story because there are a lot of people who still wanted to keep it as a global player, so there international clients get some equities trading

expertise in the u.s., the biggest and most important market, so cutting it is still up for debate, but it is half as much as they generated for fixed income. alix: the second story is goldman sachs becoming a private equity giant. sonali: what we've learned is how big this unit might be, at 100 seville -- at a hundred $40 billion asset, which would make $140 billiona asset, which would make it the fourth biggest. david: what took them so long? they weresed operating separately, and now they are going to put them together. why now? sonali: some of them will stay desperate come about most of it, private equity, debt, these will all be brought under one house. this will be a lot more streamlined. $250: the third story is

million in monaco. alix: how more stereotypical can you get? think about being a hedge fund and bringing into billion dollars on day one. $2 billion on day one. a lot of people are rushing to this industry, and like the investment bankers that split off from the banks, a lot of people in monaco are doing what people in the u.s. are doing. even, we arena seeing people do fairly well on their own for fundraising. alix: you don't have to be the super, super wealthy, but maybe like $1 billion. david: i think it is a perfect coincidence that there is no income tax in monaco. it is just a coincidence. sonali: that's why it is so fancy. david: many thanks to

bloomberg's sonali basak. coming up, secretary of state mike pompeo says the u.s. will take all necessary actions to protect the straits of hormuz. that is coming up next in what i'm watching. this is bloomberg. sec. pompeo: the united states is going to take all actions necessary, diplomatic and otherwise, to achieve that outcome. ♪

♪ david: here's what i'm watching, iran. secretary of state mike pompeo said the u.s. would take all to avoidcessary conflict in the gulf. we welcome now the former middle east policy advisor to the office of terrorist financing and financial crimes. thank you so much for joining us. address the question of this increasing production of the low enriched uranium.

how ominous is that? guest: sure. good morning. thanks for having me. low-grade uranium, which is what the iranians threatened to increase and have today announced they will be pursuing more of, is what is used for nuclear plant purposes. importantly, what the iranians also announced today is that limit ond exceed the enrichment, which means that if they surpassed that limit, which they didn't say they would come of it it is very likely given the threats today, you enter the had a gory -- you enter the category of high enriched uranium coaches what is used to develop a nuclear weapon. have: on the one hand, you the nuclear aspect of this commode is really the reason this all got started with the deal president obama struck. on the other hand, you have this threat to shipping in the region.

do you have any doubt in your mind? hagar: i have no doubt in my mind, and the reason for that is because i was a national security professional for 12 years in the government. with thosery closely intelligence officers, military officers, and civil servants who would be the one analyzing that intelligence and data, and allowing the leadership to release it. furthermore, the releasing of data like that and intelligence is usually not the only piece of intelligence that gives the u.s. reason to believe something. there are usually multiple pieces. it just depends what they can release to the public without revealing sources and methods. for me, it is no question, given the u.s. putting out there that iran was behind the attacks. from an intelligence perspective, it makes sense, but also, it really comes out of the iranian playbook, and it makes iran -- makes

sense given iran's threats. they threatened to close the straits of hormuz. it doesn't surprise me that they would pursuing a cap on commercial vessels -- pursue an attack on commercial vessels. david: if it is a ron, -- if it is iran, is it likely it will continue? do you expect it will continue as long as the united states continues to ratchet up pressure? hagar: yes, i expect both sides to ratchet up their actions. iran will continue pursuing these types of attacks as a message and a warning. attacks way i could see are a miscalculation that would lead us to a broader military conflict, which i really don't see happening, but the only scenario i envision is if an attack were to happen on u.s. property. i don't think iran would make

that kind of miscalculation because it is in neither side's interest to go to war, and both sides are aware of that. on the u.s. side, i expect additional sanctions. the u.s. has threatened the financial channel that iran has established trade with europe, and that is a strong message. what they would be saying is we are not going to be tolerating any u.s. work around. step i expect is to encourage europe to ratchet up their sanctions, given the uranium enrichment. david: let me raise the possibility of military involvement, of accompanying ships over there. might that lead to a conflict? hagar: i just don't see that happening because it is not something new. we've done that before in those waters, and other waters.

it is not as provocative as it may sound. it is actually more of a defensive measure, so no, i don't think that would lead us to a miscalculation. i was at the white house in 2012 when tensions were heating up and folks were talking about war , and sanctions were at their peak. this is not where he landed then, and i don't expect this to land there now. david: thank you do hagar chemali. alix: coming up on the program, rbc capital head of u.s. market equity strategy, will be joining us. what is actually priced in in terms of g20 while we set up for disappointment. this is bloomberg. ♪

♪ alix: humility over hubris. boeing ceo dennis muilenburg

says he focuses on safety. central banks do no harm. ecb officials head to sentra. fed chair jay powell has to confront rate cuts. plus, merger monday. biofarma, andrray forising new meds chemotherapy. david: welcome to "bloomberg daybreak." thankful that the lights are on because they weren't in argentina. alix: i don't thing of ever heard of the country that lost all of its power. apparently this was a power outage that affected a line to paraguay, and affected many other countries in latin america. the scary part is no one knows what actually happened in argentina to set that off. david: they are not ruling out the possibility of a cybersecurity attack, but it

also is may be technical problem they had. alix: the fact that you don't know about it almost went four hours later is troubling in an economy that is trying to get its funding. there's an election coming up. that is not a good sign for its businesses. david: at the same time, we shouldn't forget that if use ago, we had it in the north he -- that a few years ago, we had it in the northeast. alix: but this is a whole country. that is bananas. in the markets, not a lot of movement ahead of that fed meeting wednesday. s&p futures pretty much flat, kind of rain bound -- kind of range bound. dollar up by 2/10. selling in the bond market, unless you are italy. my head scratcher is oil, down by 1% this bite out of the amazing headlines we are seeing .ut of iran

david: more about demand maybe then about supply. time now for the morning brief. today the paris air show billions -- air show begins. in centraltings portugal get underway today as well, with mario draghi at the head of the central bank. wednesday the federal reserve announces the latest fomc decision, and chair powell will host a news conference. thursday,tw central banks announce -- on thursday, two more central banks announced their decisions at the boj and boe. on friday, u.s. pmi's and existing home sales. trade, intel is

rethinking. joining us with a broader look at semiconductors is bloomberg's taylor riggs. taylor: like you said, ever since may 5, the semiconductors have really underperformed the broader market. that was a reversal from what we saw the first part of the year. the stoxx index through april was up as much as 35% at one point. in may, it all fell apart, having its worst month of underperformance relative to the s&p 500 since 2004. chipmakers are still underperforming. why is that? we heard from broadcom last week that a lot of this is tariff related. customers are not purchasing chips the way they used to, so with the drop in prices of memory chips, some of the big chipmakers that really track those are following along with it, giving concerns about oversupply and customers not re-upping those orders. today, chips look like they are trying to improve a little bit

on reports that companies like intel, and xilinx are trying to talk to the trump administration to reverse the bans on huawei. of course, some of the regular regular chips they produce, like smart phones and computers, perhaps they will get a distinction and the list on huawei could mean that the chipmakers riser little bit today. david: thanks so much. investors are struggling to determine what risks to anticipate and how much that risk truly is. asina,come now lori calv rbc capital management head of u.s. market equity strategy. thank you for being with us. you see the head of intel saying we have to rework our supply chain. how much of this is overall demand as opposed to have to reroute some things?

lori: over the past year and a half, the market has really zigzagged up and down, determine by what is going on with the trade war. i think semis are the purest play on that. i give these ceos a lot of credit. they are being pretty honest with the street, telling them exactly what pitfalls are coming up. there's as much of a cloud of uncertainty over them as there is over for investors because it is really, really difficult to break out. alix: we saw what happened to broadcom last week. they may think that actually, a g20 were nothing happens and a don't actually meet, which is where the white house is setting up investors, is totally not priced. lori: i think that is fair. i saw comets over the weekend saying don't expect much from these meetings out of the white house. it seems like they are trying to tamp down expectations. are they temping them down to bill them -- to build them back or they, or

actually telling us to tamp down expectations? i still sit in the camp of i don't think the fed moves until they see actual degradation and damage to the economy. i don't think slowing growth is going to be enough to get them to move. alix: this is a great binary outlook from bank of america about different deals. so you have no deal at g20, a hawkish fed versus a dovish fed. do you feel like we are in a binary world? why ii do, and that is feel the market isn't doing anything. we had that 5% or 6% break. investors are trying to figure out what the heck to do. i applaud them because they are not overreacting, but they are waiting for this new slow. david: that sounds defensive to me. lori: we've been telling people to buy consumer stable stocks. i am really excited that the

mexican tariffs seem to be off the table because that was one of the big risks to our view, but i don't think they are at risk. we've also been telling people buy utility stocks. we understand people have valuation concerns right now, but they are at levels below peak, so there is room for them to run. alix: that is a great point. at what point does the risk reward change? when valuations say that their profit and earnings might be good, but they are still too expensive? you do often see when you have gone down too much that the to buy,eem to cyclical but we are not close to that yet. david: coming up, heightened tensions in the persian gulf. we speak to republican representative michael call, a ranking member of the house committee.es

this is bloomberg. ♪

♪ david: tension with iran and in the persian gulf more generally showed no signs of diminishing, with secretary of state mike pompeo saying the u.s. is dedicated to protecting shipping in the region. sec. pompeo: we will guarantee freedom of navigation. this is important to the entire globe. the united states is going to make sure we take all the action necessary, diplomatic and otherwise, to achieve that outcome. david: we welcome now one of the senior members of the public in foreign affairs team, republican representative

from texas and ranking number of the foreign affairs commission. i think iran is getting a little desperate. about 40% of their economy depends on energy, and now they designed to reallocate -- to retaliate to stop oil tankers not from iran, and that is what you saw the other day. you saw four previous to that as well. david: do we have the military capability to protect the shipping in the straits of hormuz, as well as the persian gulf? do. mccaul: we it is expensive. we have drone aerial surveillance. we know from an evidentiary standpoint these came from iran. i think the provocation is going to continue. our role there is not to be aggressive in going to war with

iran, but protecting our allies and keeping that commerce open. david: what is our open it -- what is our ultimate goal here? to negotiate a broader agreement? rep. mccaul: i think so. we have 100,000 tons of diplomacy in the persian gulf. our goal is to get a better deal than the jcpoa, when that would include better inspections, stopping iran of their nuclear production, and also the icbm capability. do we see any indication there -- capability. david: do we see any indication they are inclined to do that? rep. mccaul: look, we are talking about the ayatollah. i don't think he is sincere. i think at the end of the day they will be so cash starved, it operations.their

they will have to come to the negotiating table, or the people of iran will rise up against them. david: is regime change part of our goal? rep. mccaul: i wouldn't say regime change, but about 80% do not want to live under the theocracy they are under. i've talked to a lot of iranians in the united states. they would like to see another form of government rather than the ayatollah. david: are you concerned we could throw out the baby with the bathwater? we just had it iran announced they are going to up their uranium enrichment. is the id we are driving them back into a nuclear program? rep. mccaul: they are really saying this in response to europe, so europe has to choose between iran and the united states. they are going to choose the united states. you are right, we have to be careful. we don't want to go back to a full-blown uranian nuclear production.

david: we have the power of the u.s. dollar in clearing come about what damage could we do in our relations with our western european allies. our outlook on the situation? rep. mccaul:. i think it is in the european best interests to bring iran to the table to get a better deal than the jcpoa. alix: there's been talk about potential sanctions on the group whip europe trades with iran. yet?e there rep. mccaul: i think that is something on the table that we are looking at, but we have to squeeze around to get something. i think they are getting very different -- getting very desperate. if you look at some of the propaganda they put out, there's a pearl harbor type scene.

it's what they've been pushing up to their people as to what is happening. obviously it is not. what is the risk this point of a real military confrontation in the region? are incaul: i think they a defensive posture to protect our allies and keep the straits .f hormuz open although we do have military contingency plans. i would caution that. iran is about the size of iraq and afghanistan combined. it would be very, very complicated. david: who is playing a constructive role in the region? who is really helping? europe couldthink play the biggest role here.

saudi is a traditional enemy. the administration did armed the saudi's recently to protect themselves. iran is probably the biggest threat to israel. -- they the lawn just are the largest state-sponsored terror. benjamin -- benjamin netanyahu talks all about iran. alix: still was us is lori calva sina of rbc capital management. i want to show the vix and fx vol. is the move a leading indicator, or will we go through different asset classes and have to trade that? for: it is very difficult me to sit here and here all of these layers of policy uncertainty i am emanating out of washington, whether his trade

or geopolitical. when we see uncertainty pickup, we do tend to see volatility pick of itself. we've been very concerned that markets are overvalued and crowded. if we wanted to get a big pickup in the vix, it could inflict damage quite quickly. alix: where are you crowded the most for the significant downside? ian: it is not directly rated --lori: it is not directly rated to some of these issues, but we tend to see it really happen in the 10 space. of the past six weeks or go, some of the markets have seen software stocks, which are really not cot up in the political issues. it is just a question i think of european investors in hedge funds. , ix: to wrap this up was oil brought this up for the last couple of hours.

this is extreme, and oil is not moving at all. how do you rationalize it? lori: what i've been hearing from investors, it hasn't been we got to get into energy stocks because oil might go up. it is still a focus on what is the demand picture going to look like, and geopolitical tensions, whether from trade, for what is going on in the middle east, i think it all ties back to what does it do to corporate confidence. is there a feedback loop on consumer confidence? this is just one more thing we are putting on top of the equity market, on top of the investor psyche that is causing things to see. but i guess we will alix: coming up, the paris air show kicks off today with a focus on the boeing 737 max 8. this is bloomberg. ♪

david: time now for the bottom line. huawei is reported to take a look at some substantial cuts in shipments because of what they -- because of the u.s. ban. they are talking about 60 million less phones being sold as they bring out a new model in europe. alix: out. those -- ouch. those are really painful numbers to read. pfizer spending $10.6 billion array.farma firm another suitor could be unlikely to emerge, so it could be a relatively done deal. david: the third company we are watching today is boeing. ceo dennis muilenburg says they are making the 737 max planes one of the safest ever. -- bloomberg spoke with him at the paris air show. dennis: it will be one of the

safest airplanes ever to fly. we have a multi-decade airplane that is going to be a very strong operator for our customers, and we are confident in that product strategy. long-term multi-decade strategy hasn't changed. david: joining us on the phone is ron epstein, bank of america merrill lynch senior aerospace analyst. thank you for joining us. how much is the boeing discussion dominating the -- dominating the air show? ron: it was definitely a factor. the show kicked off with airbus a23-xlr.g their boeing has been the larger in tombs of -- in terms of order, i

think. the points of conversation they show, but forget the discussion last week about united technologies. i was going to say, is the overall feeling that all of this is just good for airbus, is --re more stuff where that morefor airbus, in that stuffer boeing means there will be more winners and losers? been many haven't substantial orders for wide bodies yet, in re memory, that is really boeing's strength point. we are expecting to see some the 777,r the 787 and but compared to previous years, to be expecting this

lower given the backlogs. happens totly what the profit margins, in a car you make more money if it is a bigger car. is that true in the airline industry, specifically when you look at the airbus order? they are smaller aircraft? ron: it really depends on the production of the plane and how far down the assembly line they are. 250 is the the newest wide-body. 787 actually does pretty well for boeing, but has a way to go. typically it is inversely proportional to the age of the plane.

ron epstein, thank you for joining us from the paris air show. na,ll on set, lori calvasi rbc capital management. do you enjoy airbus -- are you enjoying airbus? --lori: not really. when i look at the aerospace and defense industry, it is the polar off the doves -- the polar opposite of what i've been seeing. analysts have been pretty bullish. i think industrials generally are an interesting area to poke in right now. this is not one of those areas we would be poking. david: so the business might not be a good business, but it is

not fully evaluated. lori: there is a challenging new slow as well. likeook at an area consumer staples, a space we like, but everybody hates it. . aerospace and defense is pretty much on the opposite end of the spectrum. alix: coming up, markets awaiting clues from the fed. we will be joined by nyu professor of economics. can the fed do anything this -- butt disappointed disappoint? we will take a look. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. monday. it is going to be about spinning your wheels until wednesday when we get the fat fomc announcement. .1%.ones futures up

the dollar losing a little bit of steam in the g10 space. euro-dollar up .3%. , with thearket exception of italy, yields up two basis points. david: not even look at the empire manufacturing number. the survey was 11.0 and it came in negative 8.6. thathan: that is -- alix: is the lowest since 2016. not good for consumer confidence. david: not a robust signal. alix: new orders fell to -12. work hours fell. inventory fell. other than that, it was great. [laughter] week, the federal reserve meeting likely to signal

another double-shift in monetary policy. fed fund futures show as much as a quarter-point cut. joining us is mark gertler, nyu professor of economics. lori calvasina of rbc capital markets is still with us. if you take a look at the data and what the market is pricing in, is there any way jay powell can not disappoint the market? mark: it depends what the markets are expecting. what will happen is the fed will not reduce rates in this meeting. statement,ee in the projections for modest growth with risks to the downside. one thing they will emphasize is they will be data dependent. they will look carefully at the data. we have another weak employment report, if inflation is softening, that will increase the odds for a july cut. if the numbers come in decent, it will get pushed off david:. david:that seems to be the question. how much optionality for july?

the markets say the most likely -- market economists say the most likely is three cuts. mark: they are taking a bet on what the data is. the fed will not be driven by the markets, the fed drives the market. if you think the economy is softening, if you think growth will be below 2%, you might see the rate cuts. alix: does the word patience stay? mark: you may see something like risks to the downside, especially given the data we saw this morning. on the other hand the retail sales numbers were decent last week, so the signals are mixed. they want to see more data. , as: if that is the case the market going to be ok with that? lori: the market once a strong signal so maybe removing the word patient would get risk animal spirits back in the market, at least in the short term.

that ill in the camp believe that that when they say their data dependent. i think you have to see actual deterioration in the data, not just slower growth. you have to see damage. even if markets cheer the promise of rate cuts in the short-term, ultimately you will pay the price for that degradation in the data. david: does that mean you do not think we will have cuts because you think the data will not indicated? you think the data will hold up through the end of the year? lori: i do not make our forecast, so i will deflect that. what i have said, we are not making the official house you, but we would not -- the official but we would expect in the fall at the earliest. people who put it in the summer are putting the cart before the horse. mark: it will depend on employment growth and inflation but that will depend on how the

trade uncertainty is realized, what happens in europe. david: what about inflation expectations? we had the university of michigan set a record low. concern because i think the fed uses inflation is it the age as to help our output is from capacity. if inflation is falling, that is a suggestion that outlook is below capacity. they will be paying attention to the numbers as well. alix: do feel like preemptive cuts from the fed work? mark: it helps. it is always hard to do the counterfactual. what happens if they do not do the cuts? we are confident monetary policy can affect the economy. it can dampen the cycle. david: is there a subtle shift going on with the fed. we know they have a dual mandate , price stability and employment. we are now hearing about the

need to keep growth going. is that a version of the dual mandate or is that something else? the: it is repackaging of dual mandate into terms that are more market friendly. there's been a shift, but i would not say it is a full departure. alix: a backdrop to all of this is the falling inflation expectations. it takes a look at the german, japanese, and u.s. 10 year breakevens. how does a central banker look at this chart and solve for a problem like this? that is one of the central banker's greatest nightmares is to fall into a deflation trap. if we have any reason to believe that is imminent, we will see aggressive monetary policy. alix: with that make a difference in terms of inflation expectation landscape? mark: it would help. the problem we face now is that rates are low.

that is on the front burner of fed concerns. david: does the fed have the power to affect inflation? they have had the 2% goal. we've not going up to the 2% goal. lori: i think investors are questioning that. that is one of the issues investors are grappling with. alix: or is that about oil at the end of the day? it seems like inflation has been tracking the oil market much more closely. how can you get more bullish on inflation expectations without oil? lori: i think there are also technological aspects. people do not understand what the link is between technology and productivity improvements and how that is weighing on inflation. alix: thank you so much. lori calvasina and mark gertler, good to see you. the u.s. economy is reporting one of its longest economic expansion's ever and president trump once the credit as he

prepares to announce his official bid for reelection. one issue lingers, the state of u.s. farming. joining us is tom halverson, co. bank ceo. financial services to agribusinesses across the world. thanks for joining us. you look at how farmers feel. they feel the worst they have felt in decades. what are you noticing through your business on that? tom: confidence challenges. china was the second largest agricultural export market for the united states and 27 teen and that u.s. agricultural exports to china have fallen by more than 50%, that is a significant headwind for the agricultural production economy. this added to many other headwinds, including literal stormy weather and terrible floods and other problems which have substantially affected production agriculture, or to truly in the midwest.

there is a great deal of anxiety and economic challenges. david: there is more than one cause for the farmers. the federal government is subsidizing. is that helping to take away the trade part of the problem as opposed to the weather? availableg resources to deal with the negative problems of trade is helpful for the farm economy. it is also a blunt instrument. getting the actual dollars to the actual people who are most in need and have been most negatively affected is an administratively burdensome challenge. it is also a nonrecurring revenue stream. all of the farmers in this country would prefer to sell their product into an active market and to make their living in that manner. alix: what if you noticed in your business in terms of the false?

what -- in terms of defaults, what kind of loans are being asked for? tom: we lend to co-ops and agribusiness on a wholesale business to affiliated farm credit associations who led the farmers and ranchers in 23 states. conditions are different in california than the midwest or the northeast. working capital levels are much lower than they were. debt levels are higher. credit conditions are tighter. credit, they can get access to finance. net farm income has stabilized at a level 50% lower than where it was in 2013. all the way through the production complex there is less financial resources and more challenges than there were three or four years ago. david: you mentioned geographical differences and the strength of the farming business. other other sorts of differences? certain types of farming? tom: crop differentials can be

tremendous. david: what is up? what is down? tom: the things that until recently have been down are the large commodities like born and soybeans which have been driven by global supply and demand. we've recently seen a 20% run-up of corn prices because of the weather affect, because of the significant decrease in acres expected to be planted, prices have come up. to spot alead differentiation in different places your negatively affected by that in a 50 mile place, that will be bad for those people, but good for other people who can sell their crops for 20% higher price. david: one of the things we heard about other parts of the economy is the of your crisis. -- is the opioid crisis. we have it in agriculture as well and you are dealing with

it. tom: it is a terrible problem for the country as a whole, that it is a crisis that uniquely affects rural america. to put it in some perspective, the number of people who die by drug overdoses in united states every year exceeds the number of u.s. military deaths in the vietnam war. that is happening year after year. that is a terrible tragedy in a terrible crisis. $500,000 to the university of colorado to train and help train medical professionals to do a better job of the way they manage prescriptions of opioids. the country needs to do its best to help those parts of the country that have fewer resources in terms of financial resources,medical other support networks that are often more prevalent in urban areas. david: thank you so much to tom

albertson. now let's find out what is happening outside the business world with viviana hurtado. viviana: iran may break the landmark agreement meant to keep it from developing a nuclear bomb. the islamic republic saying it will exceed agreed-upon limits on june 27 on uranium. wouldonth, iran said it start withdrawing from the agreement in 60 days unless europe through it and economic lifeline. you may remember the u.s. pulled out of the deal a year ago. over the hong kong, where hundreds of thousands of demonstrators protested a bill that would allow extradition to china. she could executive carrie lam apologizing and shopping the bill but protesters saying that is not enough -- and shelving the bill, but protesters saying that is not close enough.

argentina is not ruling out a cyberattack for calling -- for causing a massive blackout. cyber terror is not considered the primary culprit. officials are looking at a technical issue or even humidity. 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. hurtado.na this is bloomberg. david: thanks. coming up, puerto rico's deal with its bondholders. more on its plan to exit its record-setting bankruptcy next in today's follow the lead. this is bloomberg. ♪

viviana: i'm viviana hurtado in the hewlett-packard enterprise greenroom. coming up later, airbus ceo.

this is "bloomberg daybreak." today airbus kicking off the paris air show by announcing a big deal. the company won an order for 100 single aisle planes. the deal could be valued at $11 billion. airbus has also clinched a $4 billion deal to sell the new version of the a330s to virgin atlantic. virgin will buy up to 14 of the planes. target is saying it faced a systemwide outage that kept customers from making purchases for two hours saturday. target said it was not a data breach or a security-related issue. the fastest way to move up the corporate ladder is to get an mba, it is also the fastest way to pile up a mountain of debt. bloomberg businessweek serving up to 10,000 mba grads.

than halfuggests more of the students are part in at least $100,000 to finance their education. that is your bloomberg business flash. david: time for a follow the lead, a deep dive into the stories making headlines and moving markets with insights from industry veterans and insiders. today we take a look at puerto rico's efforts to restructure its debt with the new deal announced late yesterday that could provide an important use of the puzzle. manual -- quinn quinney manuals chair of welcome, good to have you here. give us a sense. what is subject to the agreement announced yesterday. how big is the pie and how much of the pie is this? >> let me try to orient you about puerto rico to begin with. puerto rico has about $90 billion of liability.

$55 billion of that is the pension and 55 billion is bond holders and other. of the $35 billion, there is $18 billion of general obligations credit. that is the subject of our planned support agreement and the $18 billion is being restructured for $10 billion. david: you have all of the $18 billion signing on to this agreement? >> it will take care of all of that but we do not have everyone signed up just yet. right now, depending on the , we havef on claims over 40% of one of the anchor classes of the bond debt and it is $3 billion in terms of dollars. david: under the terms of the deal, what kind of discount is it? >> for the aggregate of geo bonds, it is an $8 billion discount. that on average is a $.64 recovery for geo bond holders.

that would be the level of discount, which is providing stimulus to puerto rico. alix: why is this plan best? >> the difficulties in restructuring puerto rico, one of them has been what do you do when the island is being challenged as to what are your available resources? how much can the island afford in terms of paying general obligations bondholders. the current groups are the ones who are looking forward to be constructive with long-term interest in puerto rico, not to be paid every last red cent today but to reinvest in puerto rico's future with new bonds that will help restore the qualityo credit, credit , and would give puerto rico the tail winds we have seen before with detroit in jefferson county to reestablish capital markets access and capital formation. david: this deal would extend the obligation over a longer time. how long? >> it will refinance the

obligation and be capped out at 30 years. david: will puerto rico be able to service those bonds? >> there will be a substantial cushion which will allow puerto rico to reinvest in important works in growth initiatives for the island. this is the beginning of the end for puerto rico in bankruptcy and a lot of good news for the island. alix: doesn't the governor not like it? -- wehave been looking have been working with the governor for years and we look forward to working with him continuously. the governor has important considerations for the on island pensioners. the pensioners are not being asked to take any impairments. we will stand by our support agreement you there are no impairments for pensioners. we look forward to working with the governor, addressing his concerns. alix: you would take a haircut but the pensioners would not? >> the pensioners are an important part of the go forward economy and we stand by our deal. we look for what we can recover from the island.

david: who gets to decide if this goes forward? >> in the end it will be the district judge. the district judge gets to decide. the oversight board appointed by congress has exclusive power to propose a plan of adjustment and they will be filing with the next 30 days the plan that incorporates our settlement. alix: then what happens? let's say this is on track. what kind of president do we know from other u.s. states and how they emerge from bankruptcy? >> let's be careful. states are not eligible for bankruptcy. puerto rico will be the largest bankruptcy in the history of america and we will see emergence in a matter of months. what we expect to see are the dramatic tail winds that counties like jefferson county and cities like detroit have seen and realized toward reestablishing access to the capital markets. david: compared to detroit.

what kind of haircut did they take in detroit and what is the story today in detroit? poor'soit, standard & has regraded detroit's credit quality to just underneath investment-grade. that is pretty dramatic improvement from where it was when it was suffering through its bankruptcy. we expect to see similar results for puerto rico within the end , we hope to see the courts addressing our plan and providing capital formation. thanks for ax: much for helping us break that down. saidg up, deutsche bank is to be weighing getting out of u.s. equities trading altogether . more on while i'm watching, next. this is bloomberg. ♪

alix: here is what i am watching. deutsche bank up remarket over 1%.

part of this comes rural poor they could trigger cut their equities trading business -- wonderuld -- you might -- apparently they needed to build up some buffers to make the switch which is what took them so long. these assets still have some kind of cash flow. david: one of my questions is do they have the capital to get this done or do they have to have a capital raise? it costs money when you start spinning stuff off. 20 billion euros in cash and other liquid securities that they could run down. it depends how much that would cost. my question is 2012 to 2016, they had a bad bank, but apparently those loans were more toxic than these. david: i guess with the bad bank there can be a lot of long-term derivatives. i am surprised that 10 years after the financial crisis deutsche bank still is a lot of

long-term derivatives that are questionable. i think they got -- i thought they got cleaned up. alix: the toxic ones got cleaned up, but it is interesting to see how the debt will trade. a bloomberg intelligence analyst said this could be a positive for investors because there could be a more sustainable mix in improving profitability. could be good for you. david: the street loves a big write down. , you have bobp michaels, jpmorgan asset management head of global fixed income. markets are a wait and see until you get jay powell speaking on wednesday. this is bloomberg. ♪

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jonathan: coming up, global investors gearing up for a week full of central bank decisions. ecb officials sounding alarm as the market waits for president trump is you. forsche bank ceo -- waits president draghi. good morning. .utures unchanged the s&p 500 in a holding pattern. 2.09%., in the fx market, a little bit of dollar weakness. let's begin with the big issue. a major week ahead for global central banks. >> it will be interesting. >> a lot of central banks looking at rate cuts. >> there will be discussions around policy options available to the ecb. >> mario draghi already mentioned there is room for qe. >>