to have a good deal and a fear deal, or we are not going to have a good deal at all, and that is ok too. alix: xi and trump repair to meet at the g20 after a month long stalemate. apple's big move. detect giant reportedly asking's largest suppliers to ship 15% to 30% of their china -- to shift 30% of their production from china to southeast asia. david: welcome to "bloomberg daybreak" on this wednesday, june 19. happy fed day. a lot of expectations for the fed here. alix: i feel like no matter what, it is sort of like being a parent. you are going to say the wrong thing and upset somebody. [laughter] david: in the meantime, president trump, there are reports that back in february,

he was looking at a way to demote jay powell so he wouldn't be chair anymore, not fire him. i think a lot of people think it would be against the law. i asked senator tillis from north carolina, who is on the finance committee. he thought maybe it was possible. president, ithe is his administration. he should look at everything he can do within his legal authority. i haven't reviewed the legal analysis, but they've got a lot of smart people in the white house. it probably is within his authority not to remove him, but potentially consider another chair. david: it sums like if you were to do that, the republican senate wouldn't stop him. alix: well no, of course not. someone, who would he pick? of --uld be the perfect the perfect dove? david: i think you will come out

for blood if he doesn't get his rate cuts. stay with bloomberg as we bring you live coverage of the latest decision, followed by jay powell's news conference, starting at two is like this afternoon. alix: from one politician to another, and that is parliament. apparently boris johnson again the frontrunner, picking up some steam to be the next prime minister. i've got to say, i didn't think i'd ever see the day. david: he looks unstoppable at this point. he finally came out of hiding and appeared at the debate last night at the bbc. finally we heard from him. alix: boris johnson debated when he was going to become the head of some area in oxford, and was basically kind of funny and jazzy, and that got him elected, and that is what he's doing now. david: a lot of this goes back to oxford. the interesting thing is rory stewart, the upstart that nobody thought had a chance, the reports are that he might be for

lin -- he might be forming a liaison with mr. gove to stop johnson. alix: the drama will continue. overall on the market, it is going to be a pure wait and see for the fed. s&p futures 1% away from the record high. euro-dollar up a little bit. it is a broadly softer dollars story as the session develops. someone till the fx market that the fed might cut. 10 year yield up to basis points after a big surge in buying yesterday. now negative yielding debt across the world. david: now it is time for bloomberg first take. we are joined by luke kawa and gina martin adams. luke, first i will start off with where the markets are and what the fed is likely to do. some people think it is going to be a 25 basis point cut in july, not june. some people think 50 basis points.

but people believe it is going to happen in july. it is pretty obvious whether you are looking at net positioning in the future, looking at the options market. that is a very stretched part of the market, and it is going to be really hard to thread the needle where there isn't a big reaction in the bond market today. think what we saw earlier this month is that when jerome powell speaks, everyone can find a way to read into it whatever they want. when he didn't say patient and did say act as appropriate, everyone just projected their own beliefs onto that. when jerome powell starts speaking, that is what a lot of people are going to be questioning their assumptions on what the fed should be doing next month. alix: so the confirmation bias within just the equity markets? gina: i think the equity market specifically is expecting at least one cut. i don't know if that is june or july. i think if they get the

assurances in june, you can generally see markets hold in, but very clearly we went from pricing no cut before to all of a sudden at least one. the equity market is nowhere near as pessimistic as the bond market right now. bond market is pricing in three cuts. times, it would suggest that we are pricing in one cut at least, and we'd confirmation that that is coming at some point in the near future, today i would expect. david: president trump now says he's going to have an extended meeting with president xi at the g20. this is what he said last night about a deal with china. pres. trump: i spoke to president xi. terrific president, a great leader of china. spoke to him this morning at length. we will see what happens, but we think we will have a good deal and a fair deal, or we will not have a good deal at all, and that is ok, too.

david: are the markets still hoping for something to come out of osaka? gina: i was surprised at the positive response of the equity market, because you thought that done on this news, but you actually got some degree of hope of stabilization in trade policy. we thought we were stabilized as of january in the early first quarter, and all of a sudden it popped up again. i would expect over time, the equity markets become more skeptical that this is ultimately going to get resolved, but for now we do see relatively optimistic that we will see some stabilization. i don't know if deal is the right word, but they be things won't get worse, and sometimes that is enough. alix: i wonder if that makes derivative markets super jazzy over the next week or so. luke: surprisingly not that much. there's essentially a 1% move baked into what we expect after the g20, when we open that

morning. we got the positive trade headlines earlier this week, we did have the premium sucked out of the market altogether, but where there is some vol is in the fx market. we know that china has a penchant for keeping its currency stable ahead of big events, and then afterwards it is anyone's game. if you look at the difference between two-week and one-week, it is at its biggest gap since trump presidency, so this is the super bowl of the trump-xi trade war so far. alix: let's go to apple. potentially apple is talking to suppliers to miss 15% to 30% of its production out of china. i have to wonder, in terms of costs for apple, does that mean they have to pay up for those when they move it? does that mean supply might not be as good from china? luke: i wonder. apple is a company of huge

importance to the people it orders from, so maybe they have a little more power to push their suppliers to absorb more, but this to me speaks to what kind of costs you want to bear and what security you want in your business lines, where tariffs are on and on and you have to deal with short-term sts, or moving more onto your supplier with the knowledge that this is going to get made, and we are not going to have these kinds of legal barriers. as we've learned, you just slap the made in vietnam label on it and it sells through nice and easy. david: is this reassuring that maybe these companies can restructure their supply lines and it won't be as bad as we thought? gina: i think so. i think first movers within the equity market are going to be rewarded for this. the earlier you relocate supply chain facilities, pushback on suppliers out of china, the better off you are probably going to be as a technology organization.

this is throughout the entire supply chain. i think the equity market will forgive any upfront costs because of the uncertainty that comes with that relocation. if you are relocating suppliers or production to vietnam out of china, it comes with a degree of stability over the long-term that you are not going to have if you are still tied to the chinese economy. it is very clear that no matter what happens with trade, the bigger issue for markets long-term probably actually is tech. that is not going away anytime soon. we don't know what the outcome is likely to be. so getting away from that risk i think is incredibly important to the long-term stability of your earnings strength. alix: and otherwise, it is a kerfuffle. -- ourngs to look k thanks to luke kawa and gina martin adams. check out the charts we use and more at gtv on your terminal. you're looking at bloomberg's caroline hyde sitting down with facebook's

sheryl sandberg. they are going to talk about regulation, the new cryptocurrency. is going to be a nice, long chat. david: that is going to be a big issue. it's got a lot of people's attention, particularly regulators. alix: you can check out the whole conversation if you go to on your terminal. coming up, what the markets are looking to hear from fed chair jay powell. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak."

in opec committee sees oil inventories shrinking by almost 500,000 barrels a day, but only if the group continues to restrain supply in the second half of the year. opec and its partners will decide in the coming weeks whether to continue with the cutbacks. a shaky demand outlook has led to weaker prices. bloomberg learning tesla is overhauling its organization in asia to focus more on china. the company is about to start manufacturing in the world's largest electric car market. ceo elon musk is banking on china to boost sales and restore , whichr confidence slumped with tesla stock. david: thanks so much.

the fed will announce its rate decision at 2:00 this afternoon eastern time, with a press conference following from fed chair jerome powell. this chart shows the market is pricing in about 40 basis comes 40 basis cuts in july. with us is ben mandel of jude morgan -- of jp morgan. a good at the sign of decision if everyone is a little disappointed? you showed market pricing, which cut -- whichmarket is showing a rate cut in july. let's reflect on what are the inputs into the fed's decision not just in june, but in july and over the subsequent meetings. you have an unemployment rate at a 50 year low, inflation low but

stable, markets touching all-time highs. in general you have political uncertainty, but no signs the economy is rolling over. how is that an environment where they cut rates? i think there's a lot of data dependency here, and they are going to have to have more thermation that in fact economy is under more pressure. alix: we just saw a sort of scorecard which showed the different economic data we got in may versus june. retail sales pretty good, industrial production not so good, core pce going nowhere. how do you trade a line between economy doing fine with some uncertainty? ben: we are expecting basically zero growth coming into the year. we saw 3% into the first quarter. with the economy growing above trend, which is about .5% to 2%, that is yet another reason why you wouldn't take out insurance

against lower growth. there's a different story if you want to take out insurance against inflation expectations, which are low. it is also something that the fed is currently considering in terms of medium-term strategy and monetary policy. that framework review is ongoing, and i don't think they will prejudice that with tinkering in the rate cuts in the meantime. growth,xpectations of you said they were 3.1% first quarter. it is going to have to do awfully badly the rest of the year to come in under 2%. so what are you looking at if you are the fed? ben: if they are going to cut preemptively, it is all about growth. if the fed is cutting rates, the recent is that the growth -- the reason is that growth is coming under pressure. you also alluded to a subtlety in the market pricing, in that there are two types of cut you can get. you can get a cut because the

economy is rolling over and we have to pull out all the stops. markets are pricing a high possibility that that happens in july or the latter half of the year. then there is a moderate scenario with an insurance cut of some sort raced in. when you look at ash sort priced in -- of some sort priced in. when you look at it, the probability of a insurance cut is even lower than suggested in that chart. alix: ben mandel will be sticking with us. coming up, the fed decides at 2:00 p.m. eastern today. also, caroline hyde is sitting down for an exclusive interview with facebook chief operating officer sheryl sandberg in cannes. you can follow the whole thing at live . this is bloomberg. ♪

nesid: in france, the can international film festival is taking place. sheryl sandberg is sitting down with caroline hyde. yl: the legislative process is never linear, so we will see. but we do think gdpr is a good blueprint for processing of deflation. we also are not waiting for legislation. in the united states, there was a bill that did pass call the , which said for political elections, you should see who is paying for the ads. that bill didn't past, but we built it. it was up and running for the midterms and eu elections. the gdpr controls passed in

europe. they didn't pasts around the around- they didn't pass the world, but we made them available around the world. we are trying to work collaborative with government to write the right rules, but we will are working ahead on protection because we went to be a part of that. caroline: what about the effort in the unit is two breakup facebook, breakup google? you have responded with an interesting take, saying if you are going to do that, what about the chinese competitors? how is that argument landing on capitol hill? do they see that is a real problem? sheryl: yes. i think people are really worried about chinese companies, which are not going to be broken up by their government, but pushed to export everywhere in the world. but when you think about what is underlying this conversation, people are worried about the

size and power of u.s. tech companies, and we understand that. we are large services, and we have a big impact to the world, and with that comes great responsibility. antitrust is fundamentally about consumer choice and consumer benefit. one of the things we think of, and most companies in our sector, no matter how big we look at the time, kind of go through these patterns because new entrants are actually two relatively easy. wants to walk out of this room into this beautiful place and take a photo, absolutely you can share that on instagram, but you can also share it on many other services, whether it is google photos, put it on youtube, share things on snapchat. if you want to send a message, you can use whatsapp or facebook messenger, but there's also ime ssage and we chat. everything we do, there is a lot

of consumer choice, and we are committed to doing the things we need to do to make sure consumer choice continues, such as data portability. you can download all of your data from facebook and move it to another service. a lot of our competitors have grown because we allow that, and we should be held to account to enable that, but it is definitely true that behind closed doors on both sides of are note, people appropriately worried about chinese companies, some of which are far bigger and have far many more people and more services than we do, and i think that is something that needs to be taken into account. caroline: i have a bit of a bias because i am from the u.k., but what are you doing in terms of global human occasion? sheryl: i'm so glad we hired nick. i spent a long time trying to hire nick.

he was the deputy prime minister of the u.k. in a company where most of the people report to me and mark, we ouramerican, but 85% of users are outside of the u.s. and canada. that is really important. so he is running our global communications, global policy team around the world. he has a loud voice for room murmuring -- for remembering that the world is global. market and i want to run the company differently, and part of that is bringing new people who can see that. , yet hes five languages speaks my mother tongue better than i do. he has all of these unbelievably british and a little bit weird expressions. caroline: we love weird expressions. me we: last week you told don't want to teach grandmothers to suck eggs. [laughter] sheryl: what does that even mean? what grandmother is sitting around sucking eggs?

caroline: no idea. sheryl: these are incredible expense and i learned from him all the time. caroline: i'm glad we contribute to those. forward?t m&a going are you worried about the regulatory scrutiny, that you might not able to purchase advantageous companies to make your company even better? does your product need to get better? interestings because instagram is so big now, but when we bought instagram it had 13 employees. i remember when the announcement happened, and banks would call me saying we are here to do year integration work. it was like, we've already given them molly badge and a computer, so we are good. instagram was really small. we will see what happens with acquisitions, but a lot of them were made one at a time. caroline: going back to the regulatory conversation, sure most of you know crypto in the

audience. i am not banking on everyone having used it. but the libra announcement, what exactly is it going to do for those in the audience? how are advertisers going to use it, as well as the consumer base? sheryl: we haven't launched anything. we've done an announcement. we are pretty far away from advertisers using it. we are a technology company, obviously, but we want to bring everyone along. mark's vision was give people a voice all around the world. the idea that you could give people a voice who never had it before, there are 4 billion people in the world who don't have access to the internet, and that is something we worked on. we've now connected people around the world. there are one billion people in the world not connected to the financial system, so let's talk about what that means. if you have a dollar, you have nowhere to keep it that is secure, and not a surprise, bad for everyone, but particularly

for women. there are 100 million women in the world who are sending remittance payments home. that means some of them are leaving their countries, working to send money back to their ,amilies, and paying huge fees 20% more than men. we want technology to help everyone. what we announced yesterday is the formation of a global association based in geneva. we have some incredible partners in paypal, mastercard, visa, vodafone, spotify, uber and lyft, as well as ngos and nonprofits. we want to help there be a global cryptocurrency that is more inclusive. we are a long way from lunch. regulators have concerns -- from launch. regulators have concerns. we are meeting with them. this is an announcement of what we would like to do, with a roadmap of how to do it, and we are not going to run this. this is going to be an

association not reporting to facebook. caroline: so your immediate response to regulatory scrutiny, we've already had people like maxine waters saying it should be halted already. how do you feel about the initial take-up of this? sheryl: we've announced this early. all we've done is announce the formation of the association because we know that we have a lot of people to work with. we know this is a heavily regulated space. we need to talk with people, meet with people, and that is what we are doing, and we are then going to launch. caroline: so hold your horses, to a certain extent. yl: a lot of work to do between here and there. caroline: talk to me about how you are adapting. how, for better or worse, the industry is starting to change from a diversity perspective.

how have you changed in the last couple of years? alix: that was facebook coo sheryl sandberg with bloomberg's caroline hyde. you can keep following that > onersation at live

to try to work that through against the backdrop of the antitrust problem. alix: you can see why some big tech names have leg numbness. let's look at where we stand in the market. you have wait and see for the fed. s&p futures a stone throw away from its record high. european stocks pretty much flat. in the bond market, a little bit of a relief after the huge rally yesterday. the three month-10 year spread a little steeper. mixed dollar story, but the cable rate up to tense of 1%. it was lower because -- up 2/10 of 1%. it was lower because of boris johnson. david: one of the many factors being taken into account in the markets is what is going on with u.s./china trade. there's been a lot of talk on the effects on apple's business, including talk from apple itself. reporting that apple is

looking to shift 15% to 30% of its production out of china into southeast asia. we welcome now shannon cross come across management research director -- shannon cross, cross management research director. does this come as a surprise to you? shannon: everybody is prepping for a potential change. that being said, apple has been so ingrained in china for so long. they manufactured a little bit in brazil and india. not sure it is a surprise, but i think it is something that the company has been investigating pretty much because they have to. david: what will the effect likely be on the input cost to apple if the transfer as much as 30% of the supply chain from china into southeast asia? shannon: i'm not sure specifically what it would be. got to move some of the manufacturing.

there's some logistics costs. we hear it from of the companies moving theigure out production. companies are looking at what they can do. logistics plays a big part. for apple, when you are in a place for that long, a lot of your key widget suppliers, not necessarily the value that comes in from out of the region -- screens, processors, memory, etc. -- but the big stuff gets made in the area. had thise question we morning on this subject is who is going to own these companies asia?utheast what is the chance that some of the chinese suppliers just open up branches in southeast asia? they know how to do it, so we would basically have chinese

owned companies manufacturing and southeast asia. shannon: it is very likely. some of these will probably become local suppliers and some of the regions, but i would assume because apple has a long-standing relationship and that expertise would transfer to other areas. mind, there are other chinese owned facilities whose facilities are in china. david: what about the demand-side? apple says china is a pretty important market. this does not address that problem. how badly will apple be hurt if they have to retrench in china? shannon: at this point they are talking about moving 15% to 30% of production, so that is big, but not walking away from the country. paste on our conversations, i don't think apple has really been hit yet in china from a brand standpoint. it is something they manage, and

they work very closely with the government and very closely with their partners in china to continue to sell, but there's a lot of moving parts at this innt in time when you add all of the things going on from a macro standpoint. david: shannon, thank you so much. that is shannon cross of cross research. alix: lng cut in the crosshairs of the u.s./china trade spat. all of this comes as china is set to become the world's top importer of lng early next decade. isning us is been stilly -- been steely. ben, good to see you. thank you for joining us.

is china buying more or less from the u.s.? how does the trade war impacted? --: keep in find the market keep in mind the market is long supplies. that means china can buy lng from different sources. obviously the u.s. is one of them. numberst i see from the first quarter this year, trade china justo 13%, and keeps adding imports. sincek the answer is china can buy from multiple sources, the only losers are u.s. exporters. alix: do you see u.s. lng being backed out? if so, where do you see that u.s. lng going? guest: if you take the first part of this year as an example, we have the lng that went

through came from australia, so as far as i know there were no -- cargoess levered delivered. interestingly enough, the u.s. -- europe is back as a major importer from a lot that came from the u.s. alix: russia is trying to get a lot of it's lng into europe to back out the u.s., and then where does the u.s. lng go? do you feel like we will be able to keep exporting to europe despite the fact lng global prices are falling? guest: first of all, the price is a very important part here. lng from the u.s. is very price competitive now. i think the imports into europe from the u.s. will only continue, and there is a very

strong push on the european union to diversify its gas supplies, including lng, so i think that would be a big opportunity for u.s. exporters to sell their lng in europe. alix: this shows different pricing around the world. there is no global lng price. the white line is u.k., yellow .s the asian lng if you take into account where china and europe are buying, where is your outlook for demand? what does that tell us about global growth? guest: if you look beyond the trade war and the great weather , for the next four or will just demand continue, and it is going to be gasen mainly by natural replacing coal and oil across

the market. and prices that stay competitive. decide what the price is, and that is what you get when you sell. i think within four or five years, this market will have gone from 320 million tons to close to 500 million. alix: do you see that continuing? will china be the growth powerhouse we expect it to be? will india become that? where will be the areas of strength? guest: china has doubled its imports into years, and we continue to do so. obviously they will be a major actor. they are already the second largest importer. because indialy has a huge appetite for natural gas. as long as it is priced right.

installample, we would -- we will install a number of facilities in china this year. there are projects all along the coast of china. i think india is a huge potential market also for u.s. exports. alix: if you take a look across the globe, is there any pocket of demand worries you feel like growth isn't holding up where it was a year ago? guest: the largest is japan. had a steady increase, percent --year, when a year, 1%. if they bring those reactors out afterwere

not importthey would as much. most have very little means theyure, which would need an import facility. alix: thank you very much. david? david: still with us is ben mandel of j.p. morgan asset management. we have gone from apple to lng, and it also back -- and it all comes back to trade relations. give us where we are on the trade dispute. ben: i don't think you can look at these things in silos. from a global equity market

perspective, you have three things going on. you have the growth outlook, the trade war situation, and the reaction of monetary policy. there's are somewhat of an in --e for us -- someone oven hous blob.f an amorp it is a bit of a dilemma in terms of how equities respond. you have these three things. at most you get two of them. if you didn't have the trade war and growth recovered back to trend, that is a situation where the fed is not considering cutting. they are considering hiking. so you don't get that monetary policy response. maybe something more apropos is that over the course of the next three quarters, and sometime before the u.s. election in 2020, we expect trade tensions to ease. if that is a case, you get a very straight trade-off between growth and monetary policy.

the fed will be super data dependent. if growth continues to be weak, they will ease, but if it recovers we will move in the right direction. david: that as a whole new word you've taught me, trilemma. now let's get an update on headlines outside of the is this world. viviana: it was a preview of what to expect in the presidential campaign. president donald trump launching his prelude -- his reelection bid in orlando. grievances filled the 70 minute long speech, warning the audience what would happen if democrats controlled the government. pres. trump: they would strip americans of their constitutional rights while flooding the country with illegal immigrants in the hopes it will expand their political base, and they will get votes someplace down the future. that is what it's about.

viviana: the president also discussed his upcoming meeting on trade with china's presidency. he said "there will either be a fair deal or no deal at all." the administration is considering three sanctions packages. the idea with the most support is to target several turkish defense companies. turkey's president erdogan is likely to ask president trump to back down at the g20 summit. expert says saudi crown prince mohammad bin salman on should be scrutinized in the death of journalist jamal khashoggi. they say there are 11 suspects in the killing. 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: thanks so much. coming up, the largest donation to oxford university since the renaissance. more on steve schwarzman's donation in today's wall street beat. tune into bloomberg radio on fm, sirius xm, and on the bloomberg radio app. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." coming up in the next hour, lance fritz, union pacific ceo. ♪

alix: you're watching sheryl sandberg, co at facebook -- coo at facebook, speaking with caroline hyde in cannes. apparently she leaves the office by 5:00. that's impressive. they were talking about how they welcome regulation. libra, thealso, cryptocurrency, they recognize that a lot of people are interested. we'll talk about that was tom cotton, the junior senator from arkansas, in the next hour. he is on the banking committee. haveof his colleagues already called to regulate this cryptocurrency by facebook. alix: if you want to hear more of that interview, go to live on your terminal. david: now it is time for wall street beat. we have three stories, two of them -- two of which are steve

schwarzman. alix: the first one is steve schwarzman giving an unprecedented donation of $180 million to oxford university. here's what he had to say on bloomberg television. >> bringing together the humanities faculties, where oxford is ranked number one in the world, and they've never been together. it's all been separate buildings. now it is going to be combined so they could get the invented just cross disciplinary kinds of stuff. alix: that's a nice chunk of change. sonali: it is. he just gave $350 million to m.i.t. as well to create another computing college. the oxford one is humanities and ai. it is cross disciplinary, and in ,he u.k. the fundraising trails the last time we saw a big gift

was february, we saw a $100 million gift to cambridge. so we are seeing u.k. schools get some real money. alix: you can get a humanities degree and ai at the same time? david: i had never heard of that. alix: that is practical, actually. [laughter] sonali: that is the thing. so much money has been going into computing. i go to school at night, for example, and people focus so much on programming, but the business changes quite often, and he don't get the leadership skill if you focus on one or the other. it makes some sense to do both. school,l be a very big so it is going to draw some criticism and some places as well. and we member, steve schwarzman himself went to yale. david: there's been a lot of talk about that. we also talked to steve schwarzman about u.s./china trade relations and what he thinks they are really trying to get. this is what he said.

[no audio] >> what i think the president is looking for, i am not his spokesman on this, is basically equivalent in terms of open markets and tariffs and trade. david: steve schwarzman you listen to on china because he also has invested a lot of money there. he knows china really well. sonali: he has a program for scholars in china, and china investment corp. was a huge investor in blackstone as well. chair of then the strategic policy. we have to take them really seriously when he is talking about china. there's a lot of money flowing still in china, and it has been reported that he's been the voice to trump saying think about the big picture of u.s.

china relations long-term. alix: the third story has to do with twin brooks, the company raising almost $3 billion for its latest direct lending fund. this is the third that they've done for this. their: they exceeded fundraising targets. when interest rates have been so , there was ang fear this would slow down with rate hikes and an election around the corner, but we see a lot of these funds looking to go up in the capital structure to make safer bets than maybe they had in the past. david: twin brook is actually part of angela gordon, a very big operation here in the city. coming fromng news rio tinto, cutting its full-year iron ore estimates. that is interesting because iron $100, withhave hit all of the damage that would do.

david: is it demand? alix: it feels like this is more about supply, but the readthrough for demand is some thing to think about as well. david: and it has to global growth. almost everything does. coming up, president trump waeighs -- president trump measures against turkey. this is bloomberg. ♪

david: if we didn't have enough trouble spots around the world, turkey has had this proven dispute over whether they are going to buy and exported missile protection system from russia. we don't want them to because we think it is a security problem. the trump administration is

preparing sanctions, particularly involving the defense industry in turkey, that will really excessive rate that already -- really exacerbate that already difficult situation. alix: if you look at the dollar earlier outcome of the dollar really popped up. also, president trump is probably really jealous in some ways. [laughter] alix: he has much more control of central banks and can deal with fluctuations in growth differently than we can. david: president putin and president xi get all of their central bank. why can't i get my central bank? alix: i wonder how much revenue they wind up getting from turkey. david: the issue is really by patriot missiles and not the s4 400s.ed -- the s alix: potentially, even before

this turkey was looking at countermeasures against the u.s. there's back-and-forth people want to be extradited. alix: not to say it will move the needle for any companies, but sanctions are being bandied about with tariffs. broadly, it ise just one more country that we have issues with across the world. alix: that is exactly right. we will break all that down over the next hour. coming up, northwestern mutual wealth management chief investment strategist, and columbia investment will join us. this is bloomberg. ♪ the latest innovation from xfinity

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to have a fair deal and a good deal, or not going to have a deal at all, and that is ok, too. president trump talking about meeting president xi. shiftingsidering supply chains in the middle of a trade war. a rateket expects cut in july. global yields hover at record lows as we count down to the fed. david: "bloomberg daybreak welcome to -- welcome to "bloomberg daybreak" on this fed day, wednesday, june 19. they were expressing patients before. now it might be vigilance. alix: the question also becomes if we wind up seeing not the dovishness that some think, does that start pushing out rate cuts into 2020 and not 2019?

what does that do to the dollar, the yields, the euro-dollar future markets? david: it may depend on what happens, actually. we also may have found out who the fed chair is because last february, the white house was considering demoting chair powell to the position of just being a governor. of northenator tillis carolina if that would be ok. this is what he said. sen. tillis: he should look at everything he can do within his legal authority. i haven't reviewed the illegal analysis -- reviewed the legal analysis, but it probably is within his authority to potentially consider another chair. david: he's a member of the finance committee. it didn't sound like he was laying his body down on the tracks to stop the president. alix: exactly. you had stanley fischer over the weekend saying maybe if trump had been less vocal, the fed wouldn't have hiked in december.

alix: at the same time, he said even if he doesn't demote him, he will not have a second term trump's president. we bring you live coverage of the fed's latest policy decision, followed by jay powell's news conference, starting at 2:00. alix: in the markets, it is a complete wait and see across all market classes. s&p unchanged. euro-dollar is flat. it is a mixed dollar story. who wins, powell versus draghi? what is it going to take to move the needle when it comes to zero dollar. in the u.s., you are seeing buying in the long end after the huge amount of buying here and in europe yesterday. same thing for commodities. easy does it. we have six more hours. david: that is big story of the day.

that means we turn to michael mckee, our international policy and economics correspondent, who is on location in washington. we've been talking about the expectations of the marketplace. what should expectations be going into this decision? michael: we don't want to get too far out over our skis. it doesn't look like we are going to get any kind of rate cut today because futures only pressing a 30% chance of that. here's the reason why. i've got a chart that shows what the fed is looking at. growth has been reasonably strong. the white line is consumer spending, hanging in there just fine. it is the blue line, business investment, that is the problem. it is not something the fed can do anything about. it is uncertainty over trade wars. you heard donald trump last night saying, "if we do not make a deal, that's ok." but what does the fed do? the markets are expecting them to cut rates three times in the

next month. do they do that? we will look at the statement language that is probably going to change. they will drop the word patient in favor of something like carefully monitoring incoming data, basically to show that they are on top of things, but aren't ready to move yet. necessary, andf then watch the data and the all important meeting coming up at the end of the month. alix: thank you so much. joining us in new york is brent chiefe, northwestern research strategist, and jean to gene tanuzzo. if you take a look at retail sales, industrial production, how are you looking at how the

fed looks at that? time: i think the fed this may not be cutting for growth, so it may be rising. the fed is really worried about inflation expectations. in the original survey, though sell to the lowest level on record. so i think the threat is going to be ultra-accommodative. they will get away with using all kinds of easy words. i think they are going to see if they can use their mouse to buy some time come july, but if inflation -- if inflation expectations are still low, if the yield curve is inverted, if there is an 80% chance of the fed cutting rates, the fed will cut in july because they don't want to be risking being different with the markets. of the things that has changed since the last time they met is the yield on treasuries. first of all the 10 year, but

also in version of the three-month. will they be driven at all by that how do they take that into ?ccount enough.nce is not it was enough earlier this year butring expectations down, that can push yields a lot higher. i agree with brent, they are going to take the market pretty seriously, and really the excuse they will point their finger to his inflation, and inflation expectations are low, but i also think that growth is actually declining. moree u.s., we see that then we saw in the first quarter, so the market qs matter -- the market cues matter. alix: i want to also point out .he broader structural issue policy makers advanced economies

failed to react quickly to an economic problem that quickly gained social and political implications in the emerging world. is this going to be a world where you see developed markets act like emerging markets, and this is just the way we are going to go, preemptive offer broke. >> i think every thing is changed. in the past, the fed fought inflation for 20 to 30 to 40 years. you're on the opposite side of that right now. we've had a lack of economic growth. we have a difference between the haves and have-nots. you have to contemplate, if weekend's recession before we get 2% inflation, what does that forward?g if we end with negative yield rates in europe, what does that mean for a banking system going forward? j i think they will -- i think they will err on the side of

being ultra-accommodative. before the election, you will hear a lot more about monetary theory. i do think societally you've shifted, and we all have to invest with that as a backdrop. will bothnt and gene be staying with us. they are come our special coverage of the fed decides begins at 2:00 this afternoon eastern time. coming up, more on the fomc meeting, and talking with senator tom cotton of arkansas. this is bloomberg. ♪

david: monetary policy looms large today as we have rate the decision of the federal reserve open market committee. tom cotton serves on the senate

banking committee, as well as armed services. it is a decorated veteran of iraq and afghanistan. he has written a book about his service, called "a sacred duty: a soldiers tour at arlington national cemetery." senator, thank you so much for your time today. sen. cotton: thank you, david. david: let's talk about the fed. what would you like to see the fed do today in terms of cutting rates? david, i don't want to prejudge what the fed will do. i will wait with all of your viewers to see. what what we always want from the fed, certainly what our candidates want, is low inflation and maximum unemployment. see what the fed says. david: if the fed cuts, is that an indication that maybe the

economy is weaker than we might have hoped? it could be a sign that they are worried about slow international growth as well, the indicators out of china in particular, but also europe. they have not been as strong as america for many months now. that has effects on our market as well. i feel good about the direction of our economy. we will see what they do later today. david: the president has not been shy expressing his displeasure with chair powell, who he appointed. there was a report that the white house was considering demoting chair powell. if that were to happen, would you object to that, either on legal policy grounds -- on legal or policy grounds? sen. cotton: i don't want to speculate about a hypothetical, and i certainly can't comment on what conversations may or may not have happened between the president and his senior advisers, to which i wasn't privy. david: let me ask one other

question involving banking regulation. facebook has announced they are going to create a new cryptocurrency. severalyou for your -- of your colleagues came out on both sides of the aisle sailing there is concern about regulating that. should there be an effort to regulate any cryptocurrency created by facebook? sen. cotton: i understand those concerns and i share them. cryptocurrencies are still a very new and emerging technology. that is why it is important we scrutinize them in the congress. they offer some promise, but also some peril as well. there's already evidence that some have been used for illicit activities like money-laundering or terrorism or what have you. there's also some concerns that a company like facebook might use its monopoly status to leverage into new markets beyond advertising. i think those are valid concerns, and things we should evaluate in the weeks ahead. david: you are a decorated

veteran of iraq and afghanistan. you've written this book about your service there, really focusing specifically on the old guard at arlington national cemetery. at the same time we have troops deployed, in increasing number, in the area of iran to deal with the problem of the straits of hormuz and the persian gulf. you have said he would not be entirely against the potential of military action, although the president has said he doesn't want it. why are you more confident that that could come out well for us? sen. cotton: i don't want to seal terry action either -- i don't want to see nila terry action either. remember that iran has been raging a low-grade war against the united states for 40 years, engaging in the exact kind of behavior over the last week, blowing up tankers, targeting ships throughout the

1980's until ronald reagan sank a large part of their navy. they were responsible for the deaths of more than 500 american soldiers in the last decade. we cannot allow iran to continue to engage in outlaw behavior, ,mpeding freedom of navigation or targeting our allies in places like the united arab emirates or saudi arabia. if we don't draw a firm line and put some boundaries in front of the ayatollah, we will only see more escalation. david: you have seen the difficulties of asymmetric warfare. are you confident we can conduct asymmetric warfare? the way iran is conducting itself is through surrogates. are you confident we can conduct successfully and asymmetric war against iran? sen. cotton: the message we need

to send to iran is that we will hold iran responsible for its proxies. feedannot breed, raise, pitbulls, and then let them off the chain and say they are not our responsibility. that's exactly what iran does with terrorist groups like has andw -- like hezbollah hamas. responsible iran for any actions that result in the deaths of americans in the region. david: briefly, we now have an opening at the head of the departed defense. we have the acting mr. shanahan pulling back. your name has been mentioned. are you available for that position? sen. cotton: i am available to continue serving the people of arkansas in the united states sent, and i will -- united states senate, and i will ask them to send me back next year. david: thank you. alix: still with us is gene t

anuzzo. talking about iran and the situation bubbling up, you do you feel like treasuries are still represent in a safe haven? gene: absolutely. if you look at real interest rates in the u.s., they are still a lot higher than in the rest of the developed world, and there is room to reduce interest rates, and much more limited room elsewhere. i think you made a comment economichat an problem became a political problem. i think in this case, it is the opposite, not just in the confidence of companies to invest business and investment in the u.s., so behind-the-scenes confidence is waning, and these issues start to weigh on that overtime. best where might be the

place to get more juice and safe haven? where is the least overvalued on the curve? gene: the long end of the treasury curve has room to go in a flight to quality. importantly, investment fixed income securities and corporate bonds will become the positive yielding safe haven globally, as you have central banks, not just the fed, but the ecb, looking to ease. investor bonds will be the last remaining bastion of hope in terms of positive yielding investment-grade assets. investment-grade overall, not just treasuries, but also corporate or structured securities, become the safest place for a little extra yield. alix:. thanks so much coming up -- thanks so much. coming up, british airways will buy from boeing at the paris air

show. this is bloomberg. ♪

alix: time now to look at three companies worth watching this morning. first, kennedy growth may be teaming up with martha stewart to develop cannabis related animal care, cosmetic and food products. david: i love it. alix: i used to give my cat s kitty xanax. david: is that more about your cats or about you? alix: the size of our apartment is mostly what it talks about, so i would welcome cannabis for cats. david: boeing came out was a surprise announcement with a company that owns british airways, a letter of intent for 200 737 max jets. they said they were being very humble to show their appreciation for the order of

max jets. alix: definitely a big boost, especially after many orders airbus had. they needed something going on. david: i think the question is discount. what did they pay? alix: good for both. david: the third company we are watching his raytheon. brooke sutherland going to snow on the telephone from the paris air show. you got to talk to raytheon, right? [indiscernible] david: can you hear me? paris airam at the show. it is quite loud here, but i did speak with the raytheon ceo yesterday. they are really looking forward to moving forward. they did say the estimate on ,ost energy maybe conservative

so that may answer questions some had about the estimates seeming low on that. does that mean it will be accretive sooner than it would be? i noticed it was going to be a couple years before it started making money for them. brooke: right. if you look at united technology's track record, they've already shown their interest for -- [indiscernible] brooke: -- so i think they are hoping to replicate that. time will tell. it is obviously a very big undertaking. united technologies has a lot of balls in the air right now. alix: brooke sutherland, thanks

a lot. still with us here onset is , northwestern mutual chief investment strategist. how do you feel about it? brent: i think of industrial more broadly, and what happened yesterday with trade war concerns coming off, from a metro perspective -- from a macro perspective. the ge's and boeings of the world are pushing that sector around, but also the tech world is harming industrials quite a bit. given that we still have an outlook that global growth will re-excel rate, those are sectors we still like. david: is the valuation low? is this a time to buy? brent: absolutely. sectors have been overly punished.

we also still like emerging markets in this trade war. david: ok. brent will be staying with us. amex made it to the paris air show. alix: this was amazing. barely bought that $100 jet deal from airbus -- air lease bought that 100 jet deal from airbus. at the press conference, there was kind of a joke, like here's my credit card. had two up the limit on my credit card. david: and everybody could read it is the problem. he can't use it anymore because he had to cancel the card. alix: when there is media around, don't put your actual credit card up with your actual number. [laughter] alix: i'm sure you can hear people in the back thinking, what is he doing? put your card down. that was one of the bigger show. from the paris air

david: these cameras, there's a lot of resolution. alix: in an era of social media. ating up, investors look worry in global growth and where the u.s. stacks up versus its peers, and how the s&p is outperforming the rest of the world. in the markets, it is all wait-and-see when it comes to the fed. for the asset classes, mixed dollar story. bonds go nowhere, commodities go nowhere. we wait for the next five and a half hours until the fed comes out. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. is wait and see until the fed announcement at 2:00 eastern time. dow jones futures flat. one person away from the record high. it was the underperformers that

wound up beating, like energy. over in europe, we are turning weaker. the dax down .2%. in other asset classes, it is wait and see. euro-dollar flat. boris johnson seems to be getting in the polls, which means a hard brexit is potentially in the cards. does not seem like sterling is reacting. gold is a good barometer for what we can expect, a little softer. interesting to watch that into the fed. david: let's get an update on what is making headlines outside the business world with viviana hurtado and first word news. viviana: it was a preview what to expect in the presidential campaign. last night donald trump launching his reelection bid in orlando. grievances felt the 70 minute long speech. he warned the audience what would happen if government -- if

democrats won control of the government going >> they would strip america of their constitutional rights by flooding the country with illegal immigrants in the hopes it will expand their political base and they will get votes. that is what it is about. viviana: the president also discussed his upcoming meeting on trade with china's president xi. he said there will be a failed deal or no deal at all. the u.s. may impose sanctions on turkey for buying a russian missile defense wisdom. bloomberg is learning the administration is considering sanction packages. the idea is to target several turkish defense companies. turkey's president erdogan will likely ask president trump to back down at the g20 summit. china's president xi jinping is calling for the start of a new chapter with north korea. he makes his first chip tip pyongyang to meet with kim jong-un.

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.ana this is bloomberg. david: staying on the subject of u.s. china trade, earlier today francine lacqua spoke with steve schwarzman on the subject as was his views on the us economy. the president is looking for, and i'm not his spokesman, but what he is looking for his equivalents and terms of open markets and tariffs and trade. there is not a desire to entrench the united states. it should be a fair competition. that areese issues being used as tactics, if you

will, are done to bring people to the table so you can get to equal. the best products when, the best price wins, the u.s. loses, they lose. u.s. wins, that is good, but i do not think there is another agenda. it is an evolution as developed market countries like china get to parity. tom: ok. i do not mean to interrupt but people do not know you have also given not only to m.i.t., not only to others and america and oxford, but you have donated significant money toward the education of china. you are a great listener of the leadership of china. what are you hearing from the leadership of china as they go to g20 and deal with this president. what is the nuance you can give

us right now? >> it is a time where things are impenetrable. the negotiations that have been going on were stopped by the chinese side. as you the countries, have seen and we have all seen seems to be bifurcating, going to their corners and steering the business community and creating and adversarial situation. that will continue unless it is changed by the presidents. the meeting in japan is quite important because they have the expectations,et were quite close, but

just sort of disappeared. if that can be put together in terms of a framework, then the trade negotiators can go back to work and get something done. alix: that was blackstone ceo stephen schwarzman speaking earlier today. gene, i do not feel good when you see schwarzman saying it is hard to tell where it will go. as an investor, what is the appropriate way to be hedging something like that but still taking on some risk? gene: we could get progress toward a resolution at the g20. in 280also get it characters or less at any point in time. it is hard to have confidence in that. what you want is to look at the data which has been decelerating, global trade volumes have been decelerating the most since 2015 how do you

protect the portfolio? we talked about earlier with long treasuries and investment-grade assets. where do you see the rebound? i think that is the emerging markets. that is an area where you have a lot of winners and losers but could have a lot of upside if you look at the trade exposed countries across africa and latin america. those are areas that could rebound sharply. david: despite all the uncertainty and the turmoil, the equity markets have done pretty well. they are up close to record. are we protected from a downside -- on a technical level, we are on the uptick on defensive. >> i think, broadly speaking, the trade war and what the outcomes will be -- the president needs a rising stock market and arising economy to get reelected. that is the most important thing

for his reelection. i think he wants that more than a great trade deal. i think the president needs that. we think about all the things he withone, everything starts the u.s. economy being strong enough to impose their will on the other countries. to the extent the us economy isn't, i do not know what he has to negotiate with. david: does he need a strong economy or does he need someone to blame? he has often run on the blame. >> i think his base will not stick with him if the economy in the market turns down. i think of those words in the 1992 election, it is the economy, stupid. i think it will be no different this time. alix: if you take a look at the negative yielding debt it would seem the global economy is pretty terrible. i'm trying to ship -- i'm trying to pull up this chart that shows .e are at -$12 trillion is that an appropriate number

for the underlying growth we are seeing? gene: i think it is time to have a new monetary framework. moving interest rates ever more never get of -- ever more negative has not been successful in generating legislation. central banks are reacting to what has been a real economic problem. they have not been able to re-create credit growth and economic growth across much of the developed world. i think it is there for a reason and we are looking to see more creativity on the monetary policy side as we move forward and try to address those problems. alix: to that point, is there anything central banks can do to drill down that stockpile? gene: what we are seeing is that why they may be -- while they may be blaming inflation as the catalyst for new actions in the is aand europe, that considerable factor with low inflation expectations, what they are targeting as their

currency. the president has brought that up. that does impact the large export driven open economies. you look at the german manufacturing structure -- cycle, which is struggling, europe could -- if you can target the currency without pushing rates ever more negative, that is globally more beneficial. mario draghi responded to president and said we are not targeting the currency. whether they are doing it on purpose or not come if they are using it may have that effect. with regards to the fed, is there a feedback loop that could be negative? it gives the president more ammunition have a tougher position on trade and could encourage him to be made -- to be even tougher? >> i think that is what he wants. he is trying to get the fed to help ulster him. that could be a negative feedback loop. , i think hehe day

judges his success or failure by the economy and the markets. .ook at inflation i think it is transitory but i do not think it matters. if you look at the fourth quarter, we have companies building inventory because growth was strong and then trade feared -- and that it fills up of trade fears and federal reserve fears. your bloombergon cpi inventory to sales, and matches exactly. if you think inventory is coming off, that demand eats up some of the inventory because we have excess inventory discount. i think you'll see inflation moving higher. i think the fed has to cut because the fed has to lose their inflation fighting credibility for the market to believe inflation will move higher and they are targeting it. i think we will get there. david: that is a sobering thought. thank you both very much for being with us.

coming up, churning along or off the rails. we will discuss how trade disputes are registering in the world of railroads with union pacific ceo. ,lix: if you're heading out tune in to bloomberg radio. this is bloomberg. ♪

viviana: this is bloomberg daybreak. coming up later on bloomberg -- havas ceo. ceo this this is -- viviana: is bloomberg daybreak.

republican senator once facebook and google to face lawsuits if they show bias. company's for the user generated content unless they can show their preferences are political neutral. a hong kong billionaire taking a cue from an american business mobile. to payndation agreed tuition for the incoming class at a university in his home province. that will cost about $14 million a year. you may remember last month tycoon robert smith about the payout the loans of every member of the graduating class at morehouse college. bloomberg has learned tesla is overhauling its organization in asia to focus more on china. about to start manufacturing the world's largest electric car market. musk is betting on china to boost sales and restore investor confidence.

that is your bloomberg business flash. alix: speaking about tesla, did youtee this you to -- this uber made her own tesla truck. it was pretty amazing. david: they started taking it apart so they could put the bat on the back and it started pinging tesla. the car was talking to the home factory saying this was wrong. alix: i like the idea. you want the car, make it your self. time for all the lead -- time for follow the lead. today we will take a look at railroads and the trains impact on the industry. president trump spoke with chinese president xi and says he is a great president and atrophic leader and he also on trade inbe tough

the meeting next month. >> i spoke to president xi this morning at life and we will see what happens. we will either have a fair deal or we will not have a deal at all. alix: we welcome lance fritz, union pacific ceo. union pacific is largest u.s. railroad. great to see you again. lance: thank you, alix. alix: how is the economy? lance: three parts of the economy or what we pay close attention to. what consumers are buying, the industrial economy, and we think about trade. of those, the consumer still feels like they are healthy, but the industrial side of the economy has pockets of strength. plastics, industrial chemicals, steel. ofan also see a lot customers pulling back on their decision-making from a capital perspective and an inventory perspective.

trade is the key element. there is uncertainty in the trade profile and that is causing uncertainty in our businesses. what you said about capital investments reflected more broadly. what about your company? is it affecting your decisions? lance: we are a very old company and we have very long assets. it is not unusual for us to have an investment that is a 50 year plus profile. degree our capital investment goes first to making sure the railroad is healthy and thriving. what is happening in a different quarter or year to year probably does not make a big difference. what makes a big difference is where we put growth capital and where we think a market will be thriving for the coming years. we are making different decisions in that area. alix: what are they? lance: we were getting started on a very big terminal in the middle of texas. it was so we could offload some

of the capacity constraints in neighboring terminals. by running our business differently, we found we do not need that asset, so we have paused that investment and will make that decision year to year. david: gives insight into your decision-making about capital investment. do go on sentiment or data? if tomorrow they announced the u.s. china trade situation was resolved, with that change your decision, or would you wait until the freight picked up and you saw at? lance: we do a little bit of both. we do not want to wait so long we get behind the all. -- behind the 8-ball. we also do not want to get too far ahead, because r.o.i. see is an important measure. we do not want a bunch of stranded assets that cannot have a reason to exist. chart that shows

-- doesn't want up hurting things like efficiency gains, things you were counting on for this year for your business that now you cannot? lance: our guidance for this year has been an improvement in our operating ratio below a 61. it is a strong move for us. we've also got into over $500 million in productivity. those are remaining intact and we are more confident than ever we are able to produce those. where a soft trucking market starts to create problems is a topline. markets that were available to us, shipments available to us now might go to a truck that is seeking to get filled and they are lowering their pricing aggressively in order to capture that. we will not chase that business down if it does not make sense from an roi perspective.

-- has been increased efficiency. you inty -- how far are realizing that efficiency? lance: we are seeing enough progress to give us all the confidence this is the right way to run our railroad. when we talk about precision schedule railroading, our implementation that we call unified plan 2020 and it is taking our focus from trains and train velocity to cars and car velocity. what we are doing is trying to figure out if we do not need to touch a car and switch a car, we will not. that has a positive impact on our service product and a very positive impact on productivity. you areou are -- alix: also member of the roundtable. the reason seo survey cannot make anyone feel good. plans for capital investment were low.

what was the response of the white house? how did you feel they were listening? lance: i thought the president and his team listened carefully to what we were presenting. our message was you have done a tremendous job in getting the economy set for success. tax reform was necessary and has worked. your approach in your administration to regulation which is prudent seems to be working, and there is this last piece of trade and trade policy that could break the economy if we do not get it right. we had a nice dialogue on what is happening with usmca, what is happening with china, what is happening with japan and europe. all of those trade arrangements will be very important to our economy. just the tradet arrangements but the talk about the trade arrangements. i wonder if there is a true conflict? the president would say you cannot break an omelette -- you

cannot make an on what without breaking a few eggs. that could cause people to say i am not sure i want to invest at the moment. lance: ceos understand the calculus of taking risks, but we also understand being prudent and making sure your priorities match the work you are doing. when it comes to china, we are in agreement that the issues the president is trying to address are the right issues. the debate comes in, we all are damaging to the economy, the debate is how much and how long? it appears the threat of tariffs and the use of tariffs has driven china to the negotiating table. now it is time to close the deal. david: it is not just china, it is also mexico. what are you seeing in terms of trade? we have the terror threat -- we have the tariff threat in the

immigration issue. lance: those things cannot be co-mingled. look at mexico, mexico is a healthy economy. our trade relationship with mexico is solid. will support 12 million existing jobs and help grow our economy and our job base. immigration is a real issue. it is a crisis right now. from a business perspective, we help the immigration. we do not have a big enough population in the united states to support our economy into the future. we need net immigration into the united states, but it needs to be done the right way and we do need to secure our borders. lance: great to have you -- david: great to have you with us. lance fritz, union pacific chairman and ceo. alix: here's what i'm watching. apple wanting suppliers to shift out of china. a report was out of a local

paper that said 15% to 30% of their supply chain could be moved. is that possible? >> it is possible depending on the components. the final assembly occurs in china. how you peace the puzzle together is critical. we talk to apple suppliers that suggest that the 10% tariffs was the equivalent of potentially moving some assembly into non-china, southeast asian nations. the 10% was breakeven. if you want to re-up the tariffs to 25% for components and a significant portion of the supply chain, it makes sense to strategically move. in the near term you can lift and ship an element of the supply chain to the philippines or vietnam war thailand -- or

, but if youhailand want the components and is set up a true element of the supply chain from the ground up, it takes as long as three years. that is not an easy trigger to pull. alix: is the quality of those chips going to be as good? >> quality is not fungible. there is no give. you have to have whatever the supply chain demands. a certain amount of defects per million, maxing out at a certain point, so that both from a quality standpoint and a spillover into the cost are managed. that is not negotiable. the outcome of that is when you start moving pieces of the puzzle around. what gives is margin, costs, and timing. what is the risk of

coming from china and putting a vietnamese label? >> there is a timing component. we happily -- we have a reasonably sophisticated system in terms of monitoring this. there is a heightened visibility on this heightened incentive to crack down on bad practices. keenly imagine this is a watched issue. alix: good to get that perspective. that wraps it up for us. , morgan stanley head of equity models portfolio solutions as the market stays patient ahead of the fed. this is bloomberg. ♪

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jonathan: coming up, the most anticipated federal reserve meeting in years. investors looking for more stimulus, driving the s&p 500 to 1% of an all-time high and increasing negative yielding bonds to a record $12.5 trillion. 30 minutes away from the opening bell. good morning. this is what a holding pattern looks like. futures going nowhere. the euro stronger. --asury yields faxing bouncing up to 2019 lows. yields up three basis points. that is your cross as a picture. we begin with the big issue. the pressure is on chairman powell. >> it is an important fed meeting for jerome powell. >> he has a communication challenge. >> the pressure on the fed has increased. >> they want to e