keep your powder dry. cut for theo economy to enter a downturn. bullardis up to james to clarify. and who is the dovish of them all? market prices and more fed rate cuts. emerging markets begin easing -- it is the race to the bottom. more earnings volatility, less clarity. volatility is the lowest in five quarters. david: welcome to "bloomberg daybreak" this friday. i am david westin here with alix steel. alix: earnings and news. earnings side, adjusted earnings coming in at $.35 a share, but revenue a beat. you have a new , was just appointed of coo

not too long ago, to set him up for this job. expected butly faster than many analysts had expected. -- thathich is how hard is my question, hollow hard a job is this. limitedey have some exposure to north america. it did a complete 180. david: but it is specifically into a larger story about capital investment and specifically energy. alix: and how deep it is in the u.s. that is what we will learn. we have earnings coming out and the macro picture. that means nothing is happening in the markets. if you like it was a same story

yesterday. the dollar rebound from that selloff. do williams came in and said n't keep your powder dry. same in the bond market. a big buy coming in. can we finally say it is a geopolitical risk story with crude? david: did they shoot it down or not? alix: it is all cloak and dagger. david: meantime, we want to find out what is going on outside the business world. for that, we turned to viviana hurtado. viviana: the trump administration and house speaker nancy pelosi are moving closer to a deal to raise the debt ceiling. the white house and pelosi opposed spending cuts, this for part of a deal. it is up for pelosi to accept or reject items on the list. another sign of the financial toll billing is pay -- boeing is

paying. it will have a $4.9 billion accounting charge with second quarter results. grounding is entering the fifth month. iran is denying a u.s. warship shut down one of its opposed. the president says the unmanned aircraft was destroyed when it approached an amphibious assault ship, calling it a defensive action, another sign of the rising tensions in the region. cargo ships have been attacked, iran shutdown and american drone, and a british tanker carrying iranian oil was seized. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. david: you called it. geopolitics are back in oil, perhaps. this drone came in with an -- within 1000 yards. alix: how many wars start with

something like this, where it is a policy mistake? we are inching towards the line, and it is a nervous area. yesterday, both sides would like to talk, but they couldn't quite get it done, that from century of with john micklethwait. headlinesith these with russia getting involved -- lots of things. david: we are joined by michael and rachel evans, head of etf coverage at bloomberg news. the big news was which clarida and mr.rd clarida williams coming out. fed president william singh when you have only so much stimulus, it is a first-line of economic when -- to act quickly

to lower rate. they must know the end of the month is a really important meeting. michael: what they ignore is traders do not listen to their speeches or read their speeches. they just look off of the headlines. john williams was giving an academic speech about how people make policy and a time when you were close to the zero lower bound. the new york fed later tried to clarify 20 years of academic research, but the headlines came outside williams said you have to to act ugly, and everyone says that means 50 basis points. clarida was just asked would you consider 50 late in the interview, and said if needed to, we would. then the headline is clarida says fed would, then everyone trades on that. it is a communications issue for them. alix: yeah. thinkg back -- i do not we have had that from the new york fed. they said that williams' remarks

where an economic speech on 20 years of research, et cetera, to try to walk back, and the market did a little. regardless, in the paper, he said neutral was at 50 basis points. regardless of what they are doing in july, that is still a dovish statement. michael: when he is talking about neutral, he is talking about that on a nominal basis. you have to add inflation numbers. so you're looking at a fed that is close, little above what neutral may be now with the fed funds rate. he is obviously saying there is scope for a reduction in rates. david: how are people in the etf world responding? rachel: we see a bit of a removal of money from the floating rate funds. it is kind of expected with rates going lower. seeing a big outflow. we saw a big trade around noon yesterday that has not come in yet and we are seeing money coming out of short-term debt,

which seems counterintuitive, but equities have been popping off a bit. if we continue on this pace, we are looking at the worst week for bond inflows since may. it is an equity story, and a lot of people in the bond market are looking for more. alix: and we will get more funds next week with the ecb. we have this great function on the bloomberg that you can put seento a map and you can where you connect back the race across the world. looking at cuts across the world, whether in emerging or developed markets. i wonder about the race to the bottom a scenario. the ecb may revamp their inflation target. is this all tied in? michael: it is. there is a global slump. we saw a series of rate cuts

from the koreans, the indonesians. hit by most heavily trade wars. they are all suppliers to china, which assembles their final products. at this point, business is not good, so they are cutting rates. countries are also anticipating a rate cut from the fed and later from the ecb, some sort of easing that will pressure their currencies. david: it looks like a race between emerging markets, central -- emerging-market central banks and develop market central banks. who is winning in equities? rachel: what i am looking at is where the central bank flows. emerging markets had a huge one at the beginning of the year. we have seen that tail off. we have been seeing money coming out of emerging markets bonds. it is kind of a switch -- will we see that go back into emerging market equities? indonesia, have

south africa, korea trying to get out ahead, but does it do enough to lift their stock market and encourage the flow to go there or do people look to the u.s. where there will potentially be a higher yield environment here to lock in yields? we are not seeing it in the flows yet. alix: our third story, earnings -- really hit or miss when it comes to earnings. it feels like those are being rewarded in some respects. what does it mean for the economy? michael: right now, means a slow down. jay powell has talked about that. the analysis from bloomberg intelligence equity analysts overnight is you are seeing a real reduction in capex spending announcements and in terms of buybacks. companies are holding onto their cash, still paying dividends, for now, it is do not do

anything unusual. we have heard that from that bank presidents we have spoken to. in 2015 and 2016, with the manufacturing slump. not good for the economy. david: are you seeing that, in terms of sitting on the sidelines? there was a bloomberg piece on bank earnings with ceos sitting on the sidelines. rachel: that is fascinating. when i look at the trading environment, the biggest story is moving away from the banks and to electronic brokers. i had a look at volume in the markets after seeing that, and they are slightly below last year, but the average is more than 2017 and kind of more than 2016. we would have expected the average to trend up -- there's more trading on the markets now -- but there is a bigger shift. interesting thing

when it comes to the sidelines. i am seeing people go into broad market funds rather than specific funds. bloomberg's michael mckee and rachel evans. you can find all the charts we use on gtv . coming up, u.s. futures climbing. katie nixon, northern trust management cio will join us. and earnings came out for schlumberger. stocks rallied now 1%. peuch will be ceo. it appears they are moving now -- many expected it to be in the back half of the year. the company also cutting capex. g #btv --

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." here is your bloomberg business flash. a big transaction in the beer industry, an australian company selling to japan's asahi. the proceeds will be used to pay down debt. stillev says it may revive its asian subsidiary. u.s. regulators are investigating a cryptocurrency form in asia that lets people make big bets with little money down. the investigation is focused on whether it broke rules by

allowing americans to trade on the platform. up bbc and itv are teaming to face netflix. the service is called britbox, costing $7.50 a month, lower than what netflix charges for its standard service. alix: i love britbox. david: i am in for that. u.k. dramas are the best. alix: they are super cool. now to the fed cutting rates. rate cuts potentially pushing futures higher following dovish comments from fed president john williams. this is the implied yield -- that white line. the blue line is our current fed funds rate. -- see potentially 225 point

two 25 point. katie: it is possible. yesterday threw confusion into the calculus, whether it is an or to private -- prevention a cure. there is a case to be made for 50, but i am not sure the committee will get there. david: but if you pay attention to markets, if they think they will be 50, will they not just a 75? katie: that is the danger going 50 in july. first of all, i think the fed would be worried about signaling there is something worse going on in the economy than markets thought. second, i think it is feeding fuel to the fire. instead of assuming three cuts it25 points this year, but would still be three points and they would think 100. but certainly communication

continues to be an issue with the fomc. it really moves markets. alix: mohamed el-erian said something similar, saying that the growing pressure on the federal reserve to cut points by 50 basis points is unwarranted, and by complying, the fed would satisfy short-term at the risk of greater risks down the road, basically if you want to give markets an inch, they will take a mile. in july5 basis points and in september, it is not that big of a difference in terms of timing, you might as well go 50 -- i do not disagree with williams where if you want to do something and have a limited arsenal, go big. david: what this is due to the dollar? katie: it is happening in the context of global central banks that are easing. we just heard some emerging market central banks lowering rates. they will continue to do so. the ecb is on the precipice of doing more stimulus. in isolation, i would say it

would weaken the dollar, but in the context of everybody racing to below zero, perhaps it will bring some stability to the dollar. but i do not think it necessarily means the dollar will get weaker. i would say the strong dollar issues of its biggest that many corporations talked about in their earnings calls this quarter. alix: what do you do? jc porter -- jc morgan -- ap morgan said -- jpmorgan said buy risk. katie: i agree. the environment of slow but positive growth, very accommodative central banks is good for risk assets. it means the search for yield will continue. things like global infrastructure -- where things are on top of each other right

now, it means support for valuations. david: but doesn't the risk get riskier? the rest of the world is saying we think the world is slowing down, and at some point, you will pull the rug out from under the equities. katie: the premise has to be that we avoid a recession. if you think we will have a global recession or if you think the u.s. will have a recession, then all bets are off, because those are bad garments for risk assets, regardless of the interest rate environment. our base case is we avoid a recession, very slow but positive growth, and that is with the risk. david: katie nixon will stay with us. coming up, boeing puts timeline on what its beleaguered max 737 jet will fly again. this is bloomberg. ♪

fell: shares at boeing

yesterday but appear to be recovering this morning after the company said it would take an additional $5.6 billion pretax charge for concessions it anticipates making to airlines for the 737 max 8 being out of service. we welcome now bank of america merrill lynch analyst ron epstein, will -- who has a neutral rating on boeing. still with us is kitty nixon. you have a note out on this subject. is this enough or is there more coming down the pike? >> that is a fantastic question. they were very careful in their press release to mention that this was an assumption they made to close the books for the quarter. the assumption is that the aircraft would go back in to service early in q4, but they were clear that it may not be the case, and if it is not the case, it is not enough. each additional month in delays

about $1 billion in penalties airlines, and each quarter of delay is about $1.5 billion. david: and we do not know how big the breadbox is, so to speak, because they think they will be back to service in the fourth quarter, and others think not so fast. ron: that is exactly right. the company, and they were clear that when the airplane goes back into service is not up to them, it is up to the regulatory community. ofx: so do we have an idea the airlines and what they want to do with it and how they will push back on boeing and if they will need more comp? what are we hearing from the airlines? ron: of course they will want compensation. if you think about it, there are two buckets of compensation. first are the airplanes actually taken out of service, about 390

of those. they were in service, had crews, had it costs structure, and they were taken out of service. those airplanes are expensive for the airlines to have sitting around. interruptioniness reimbursement from boeing on that stuff. and if you listen to what american and southwest have said, those are big numbers. it is like lost revenue. so there is that. then there is the aircraft that have not been delivered, and on those airplanes, it is the -- what is the alternative cost and what is the business interruption related to that? what: give us a sense of boeing salespeople are doing now. are they visiting airlines and talking about the 737, starting the negotiation about business interruption compensation? or are they frozen in place? ron: i imagine they have to be in the field, talking to their

customers every day. person-to-person. i imagine they are in communication with their customers every day, as this is a fluid thing. if you look at schedules for north american airlines, they are all flipping, going to service and october, then november -- it is a day to day conversation. alix: why is the stock up? ron: another great question. i think because some investors will look at this and say this is as bad as it gets. that the airplane goes back into service in the beginning of the fourth quarter, we have ring fenced the risk. that is why. what the market has to absorb, and probably will, is the ring fenced may get a little bigger, because this was an assumption to close the books for the quarter. alix: katie, would you buy

boeing here? katie: i do not know. this situation seems to be devolving as we speak, from a financial perspective. while we do not comment on individual stocks, this seems to be a typical crisis, and you do not want to be the first one in when we like this comes -- when news like this comes out. alix: yeah, i harken back to bp. thanks a lot. coming up, they raced to the bottom. markets feeling the impact of dovish comments. this is bloomberg. ♪

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springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. keep you comfortably cool and limit motion transfer. leesa's hybrid mattress is not only recommended by experts, experts choose to sleep on it too. try it yourself in any west elm store. or order online and we'll ship it to your door so you can try it risk free. the leesa hybrid is american made. built to last. and, because everyone needs a place to rest, we donate tens of thousands of mattresses to those in need. experience the leesa hybrid mattress. right now, it's on sale. order today. go to leesa.com. alix: this is bloomberg daybreak. you made it to friday. we had to mr. williams coming up.

williams did not mean to be dovish. he was doing an academic paper but the markets did not blink much on that. investors up by three. you see the dax flat. index was driving any gains we saw in the dax. euro-dollar down by 3/10 of 1%. you had the leader of italy dangling a snap election possibility for voters so that is fun. it really is back in the news. you see -- coming in the bond market over out of europe and the u.s. you have yields in germany by another basis points. it is about gaining the ecb. how much will they wind up cutting their deposit rate in the fall? david: as mario draghi walks out the door. drop the mic. american express, we are looking forward to seeing how the or.

they are doing all right. two dollars seven cents as opposed to one dollar 80 four cents. they stuck with their estimates going forward. up can see their stock is almost 1% in the premarket. american express. the consumer is holding up. alix: take a look at state street coming out. earnings coming in at $1.42 a share but under management, the highest estimates of over 7% year on year here in reaching $3 trillion. what is interesting is that the revenue was down by about 4%. money coming in but you're not making much off the money. david: people thought -- might have a tough time for net income as well as fees. fees are under pressure so you see that in earnings per share performance. turn.w let's it rebounded yesterday from the

setback of ipo. the asian business announcing it would sell assets for $11.3 billion. -- dougto duncan blocks pimm fox from london. it struck me. this must have been in the works already? duncan: it is clear they have been working in conjunction. the market did not know that. the shares have responded positively over the last day. it is a good price, getting something like 11 billion site of $15. it is a good market assets. turns out how much profit you are getting up with it. they have $100 billion to pay down on the balance sheet. higher margin a or lower margin without the business? duncan: it is a high margin, low

growth business. it will be diluted in the short term. reducey recycle it could in the short term but it could go into higher growth assets in asia but also around the world. is the markets going to applaud that if they use this money to buy the things? that is what brought them to the dances. they have leverage on the balance sheet. does the market want them to continue to -- expanding and buying? duncan: you said it in the question. they are good at rationalizing acquisitions. if they can find the right asset to buy, get the margins up like they have done over the last 15 years, the market will like it and the share price performs well when they know there is a deal coming.

the asia-pacific west had a margin of 28%. the asia-pacific east, which is what australia is part of this 41%. you see what they do in areas they are going to acquire. david: that is duncan fox of bloomberg intelligence. alix: the double is way above central banks rolls on. r.is is mip this is where central banks will be in the next year. the writer it gets, the more they are going to cut. joining us now is katie nixon of wealth management. what i find fascinating is you have emerging markets undergoing an easing cycle. ecb said, what does it mean? >> the fed is the driver of

this. what it tells me is emerging markets do not need to defend their currencies aggressively as in the past. what you see is indonesia, south africa, south korea under seven straight exporters. without korea, it is the weakest currency in all the emerging markets. there is a difficult problem going on. this is the beginning of a dovish tilt where we have been expecting -- for some time. david: with south korea, it depends on trade. that's what point might there be a danger to foreign director investment? your all good to get currency down. some point, i will not invest in your country. damian: the south african reserve said that you without a healthy mix of physical stimulus, this is not going to work. we need to see fiscal stimulus accompany these rate cuts. alix: why are we seeing

emerging-market equities selloff and why are we seeing the sx rally? thean: if you look at currency volatility index, it is an all-time low. nobody knows when they are going to cut or how much going into next year and that has got to drive volatility higher. i cannot reconcile that. how can they approach all-time lows, yet there is more uncertainty about where banks are headed. that is one thing that comes to mind. if the markets try to adjust, you will see uncertainty. david: katie come up with this in your hopper. katie: from a tactical x -- perspective, we are looking for a catalyst. it is not going to be monetary easing. the catalyst has to come from the trade site. it has to come from some resolution of conflict.

we are starting to see the impact of the trade conflict on economies and companies. you have had persistent earnings , estimate declines across em. that have really impacted evaluations and sentiments. plus, this rally this year has been not able markets enthusiastic rally. it has been fits and starts. there was a lot of confusion out there and i do not think unless you have a true risk on environment, em is going to outperform. alix: maybe the catalyst will be the ecb next week. here is what -- had to say about em debt. >> there is a huge move of money going into fixed income whether yield levels when historical norms not coming out, bottom of the range. that trend, a company that can really accelerate if we get

then --g concrete, really starting. amian: it is going to create problem for anyone who is a stable investor. the one thing that we are keep an eye on is there will be more rate cuts coming. it is undeniable. china, we are expecting 200 basis points before the end of the year. this is china. there is more dovish moves coming by em central banks. it will suck out dollars, suckow cash flow and if the dollar does remain resilient, it will create missions. alix: in this -- the search for yield, and you want to take on risk, how do you not own emerging markets? katie: you can own u.s. high yields. u.s. highrweighted yields. our college for slow growth in the u.s., avoiding a recession

and dovish global central banks, including the fed. that is a great environment for high yields and i think the uncertainty is going to manifest and more volatility as we get into the second half of the year. david: this is the second time you mentioned this. you are betting we are not going to have a recession. that high-yield investment will look precarious. katie: so will equities. you have to think about what drives a recession and what are the signals that we look for regarding a recession. you have covered bank earnings and even the commentary on american express talks about the u.s. consumer. i would not say resilient because that assumes pressure. you have had steady wage growth and good employment gain. consumer plugging along, great guns. we have heard it from american express. we do not see any catalyst to change the consumption pattern

which will support the economy. -- capitalconsumer investment, the consumer says it is going well. there today, not tomorrow. if they did believe it, they would be investing in increasing capacity. damian: one place the central bank does believe it is an. indonesia does have a deficit. -- has had so much this year, it is stoking the belief that fdi is going to come into the country and so they are justified in cutting rates. high yields in our back door and that is what -- is competing against. alix: when we say domestic equities that are exposed to the consumer, is it a different story? damian: you are eliminating the currency volatility. i cannot stress that enough. you do not know where currencies

are going to head. if the fed does not cut much as theid -- as much as it did, dollar is going to rally. david: ok. an, thank youi for being with us. amazon come up against mortar convictions, next. alix: watch us online. go right to tv . you can also ask us a question. this is bluebird. ♪ -- bloomberg. ♪

viviana: this is bloomberg

daybreak. a ceo.up, ♪ here is your bloomberg business flash. the largest casino operator in las vegas is considering the sale of its iconic properties. bloomberg learned mgm international is soliciting interest from potential buyers from the mgm grand. capital has built the position in mgm and plans to push for changes. a partial victory for one of the court cases, alleging a weed killer causes cancer. a california judge flashing the verdict against the chemical maker. more than 13,000 plaintiffs in the u.s. have suit. analysts estimating it may cost up to $20 billion to settle the cases. we ended france -- and in

france. macron's government was rocked. leading torustacean the resignation of one of macros cabinet members. for a coming under fire lavish dinner paid for by the public. wine not theof best thing when you work for macron. he has fight the accusation he had -- is the president of the rich. alix: the president of the rich and then they have a shot of macron walking through a palace. the lobster and the champagne, you are still seen as not doing right by your people. david: how could he clear his expenses? $550 bottles of wine? how?

we do not get that. david: no we don't. alix: we turn now to bloomberg businessweek. up, thest issue, first president versus the fed chair. new battle line between the u.s. central bank and then it is amazon's most vicious research project ever. a convenience store and bentley turning 100, it celebrates centennial after making it past 99. how will the drive next century? david: let's start with jay powell in his relationship with the president. a fascinating story. how he is handling the president. i must say, my favorite thing with david rubenstein, when they said could they crack it? walksnot a person who

away from things. he is a tough person. he has the right personality for this. seneca, likens him to the stoic philosopher. one of powell's mottos is control the controllable. do what you can do and that has worked for him. trump is not controllable. you do not control the message coming from the president. put your head down, do your job and let the rest take care of itself. alix: that is the picture on the coverage. on, if he has headphones does it matter? it is the spoon versus what happened behind closed doors. peter: it is a difficult situation for the fed because their motives are going to be

interpreted in a way that may not be what they are going for. cut rates. you think it is the right thing to do. it is caving into president trump. whatis a way in which trump is doing could backfire. it causes the fed to go slower. fed could be reacting to markets. isthey do risk markets, it because jay powell thinks it is the right thing to do. he will not do it because he thinks someone wants him to do it. and he has congress. he spent a lifetime meeting with people -- a lot of time meeting with people. peter: he may not be outwardly a politician, but he knows the fed is a political institution. it reports as he would like to put it, to congress not the executive branch. amazon andext story,

we are not talking about commerce. amazon in 2015 ran a top-secret project in a warehouse. brad stone and met day did a great job. being inof amazon state-of-the-art technology. here they are in plywood mockup of a grocery store and you have amazon employees posing as cheese mongers and butchers in a grocery store and jeff bezos comes through to test it out. get rid of this. he did not like anything that would slow the process down for consumers and got rid of the cheese and meat. i first heard this, but to make itt, the way jeff bezos wants it, it

is a 7-eleven. they have to spend millions of dollars in cameras and technology so you have a 7-eleven they go to. peter: they have people who walk out of 7-eleven's without paying now. literally scan on their go app when they come in the door and never touch their phone again. they just walk out the door. david: that doesn't make sense. peter: they had to put scales into the shelves so if you took an item off, you had to tell if there was a 1.5 grand item or a 1.7 graham item and that helped tell them what was being sold. alix: amazon go would not have slurpee's. it would not take long to replace it. we know that lay. -- bentley. is they havet know

had a tough year. really tough. year was a dust air your with a bad one. they are owned by volkswagen, which can sustain them but it is a not a good thing. -- it is not a good thing. when you are in the luxury business, you have to introduce new vehicles. that is what the market is looking for. their new vehicle turned about -- out to be harder to manufacture than they thought. david: they did not have a process to get through emissions clearance. it took longer to make and they had problems. peter: they are trying to get people to focus on the future and they have a concept car, which is a two-door, which is a gorgeous thing. all electric. the leather seats are made out of a winemaking byproduct.

[laughter] it is self driving. wine?it is made with peter: winemaking byproducts. ford: peter coy, thank you being with us. you can read these stories and more in this week's issue of bloomberg businessweek. coming up, slumping car demand in china. japan's biggest partner expects first sales in 14 years. out, and if you're headed on sirius xm channel 119, this is bloomberg. ♪

david: this time it is the chinese auto industry. there has been a slump but we

have numbers that they are saic. for the first time in 14 years, they are projecting a decline in sales of vehicles in china, which is remarkable because the chinese government is trying to encourage it. have numbers that theyalix: doeo account regular cars, like gasoline? david: the whole thing. carshey often make smaller . bmw, we interviewed -- bloomberg whorviewed the head of bmw, said we will grow with the upper end. top.his is change at the we knew mr. krueger was on his way out. they announced production is coming in. krueger likes to think about things, go back and forth. --zipse is full speed ahead. alix: if eb is more than

emergent technologies, you need that. you need to know how to make the cars. you also need an elon musk thinking big. it is -- david: it is the all new corvette. the first corvette that is mid-engine. this is going to be a fabulous thing. it is a d.r. one package. than three seconds, which is important. getting it off the line is important. alix: boys and their cars. how do you wind up playing earnings into a huge week next week? ♪

♪ alix: don't keep your powder

dry. john williams said don't wait to cut. new york said has to lock that williams speech. rosenkranz clarified the blackout window approaches. more earnings, less volatility, less clarity, more volatility. investors take a look at companies in 2019. volatility the lowest in five quarters. unleashing faucets. results for the public company, aboutwhat he is saying ipo. david: we continue to wait for more earnings coming up. in the meantime, it is hot. alix: in here it is cool but it is actually really hot. coming up, you can search under temperature and this is how hot it is going to get in the u.s. the wetter it gets, the harder it is.

in new york, temperatures will soar. plays's are moving higher and if you want to go for cooler weather david, you could go to mexico. david: ironic. alix: the blackout the other day? this could be huge. david: do you want to take a train? a beat on revenue. share, earnings per $1.64 compared to $1.61. we had numbers in the pacific. becomes, question because what we learn from csx is -- did better because of their operation efficiency. dore is only so much you can until you get hurt by the global growth scenario. csx was ahead with their operating ratio. now, they look at the growth forecast and get worried. david: particularly when it comes to trade. these railroads have to take

things do until you get hurt by the global up. we see diminishment in shipping. alix: and housing. snp futures are up four points. to highlight euro dollar down by 4/10 of 1%. the dollar rallying after yesterday's fallout. you have potential elections in italy. david is laughing because of course, italy. this week there must be an election in italy. alix: use the the bond coming out of the bond market in desperate over 1%. david: we owned -- we are under 15% of the way through earnings reports with a full week ahead. welcome to sarah hunt. one thing we want to take a look at is sector by sector. we going to tech next week. the projections will put up a chart and this combines actual so far.

it is at the bottom of the list of what we expect. sarah: last year, you had good sales in tech. there was concern on inventory corrections and you had weakness in the first quarter. people expect that to expanded the second quarter. some of the parts of those about the people talk back half will be strong and the first half will be week. it not -- my play out the way people expected. tech is going to be weaker. alix: this shows what sarah is talking about. a vertical line is where we are now. the topline is average sales growth and the bottom is average earnings. betheory, this looks like to trump and things get better. do you think we have more to go downward? sarah: when the first quarter was over, everyone was great. maybe it will take longer. the second quarter -- technology

is back to a great degree. people tend to look for when that is happening and try to get in when that is happening. you saw the semiconductors start a rally in the second quarter, also letting go of the huawei issue. there are things moving in tech now. if it looks like this is when people talk about earnings, we say we think we have gotten through all this inventory. that is going to be beneficial. into next week, you will look at what they say every bit as much or even more than what they report for second quarter. sarah: that is the story because everyone is looking to see what happens next. the beginning of this year, the earnings were not supposed to be good. the first quarter better than people expected. everyone will be looking to say, what is happening? because of the trae young not getting done, that may affect how people see the back half of the year. tox: is a better strategy ignore the next six months, or do you want to play volatility?

it is anything like netflix, you probably made a nice buck. sarah: you cannot ignore six months. i am surprised we going to going to earnings later but boeing is has beens well as it to all the problems they have been having. most think it is temporary or we can get through the next six months. it is not going to make things worse. people are willing to give a pass. what does it look like even further forward? it looks like trade gets messier. it looks like other issues that are problematic. the question is, what happens then and globally, what happens to the economy? david: what is going on with volatility? you had an individual report like netflix. that is big volatility. sarah: that is the problem with the overall market. because the fed came back and said we will flip from being

, thatt to accommodative took the wind out of the sails of the market going down to the degree it has. everyone is back to the idea you can sell volatility and it will be ok. individual names like netflix, that was the first time they lost subscribers since i can remember. individual names have more volatility into earnings when the news is not so good. alix: what do you like? sarah: what we are looking at now is areas that have had issues. there are places where we think there is possibility because people got ahead of themselves. stocks recovered quickly. it is hard to look at valuations and the market on the backed up and say, there are great values. you have to look for growth that does not look outrageously priced. there are places -- software do not have a great quarter so we're looking at places there. materials are going to have a tough time and it is a tough time to be investing because the in the backdrop is

uncertain. you had a lot of uncertainty in trade. we have not talked about trade lately but i just came from washington. they are going nowhere with the u.s. in china. they are going south rather than north. sarah: and i do not remember all the players, but some are hardline chinese buyers back at the negotiating table. this is not simple. it was not simple to begin with. can we stop escalating, and if we can -- david: they cannot agree on what they already agreed on. they are disputing, not about underlying trade but what they have already agreed on. sarah: that tells you this will go on blogger. if you can stop escalating and say where we are, the markets will like that. if you get escalation, the markets will not like that. the fed has done what it could.

you got an accommodative backdrop. if you start to see an escalation in trade tensions were problems going on in the middle east, it is hard for the markets to absorb all of that, although they seem to have been complacent so far. david: now, let's find out what is going on outside the business world. we turn to viviana hurtado. house speaker nancy pelosi will not accept the latest white house offered. it includes proposed budget cuts. bloomberg learned them across see the cuts for further negotiations. shares of boeing a higher in premarket trading. next week's company plans to report a $4.9 billion accounting charge for the grounding of the 737 max 8. that covers potential concessions for airlines who have had to cancel flights for replacement planes. morgan stanley said the charge met expectations. ship over the

strait of hormuz knocked down one of its drones. aesident trump called it defensive action. it is another sign of the rising tensions of the region. ships have been attacked. iran shot down an american drunk. the british see a tinker carrying iranian oil. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am viviana hurtado. this is bloomberg. alix: we talk about how oil is up even more. it is 1% today. that means they are pessimistic in the oil demand. david: where are you on energy? sarah: that is the problem. the supply comes in higher. opec has to keep cutting. there have been arguments and opec about the best choice. had oil come down

because it looks like it was going to be a negotiation with the iranians. you had a problem with the drum. is it big enough to offset that? i do not know and i do not think anybody does. you do not have a lot of premium in oil but it escalates quickly. alix: buying energy? sarah: it is a tough place. even when oil goes up, the stocks do not react. if you have a long-term view, this is a great time to be looking at that. we will not be using carbons the way everyone is putting on because of electric vehicles. you have to have a longer-term vehicle. the stocks have not reacted to the rising oil prices. you see the oil back up again and the stocks have not moved. it is a frustrating place to invest. there are places you can see, i will get paid to wait. alix: ok. sarah hunt, sticking with us. coming up, beneficial's shakeup the markets. how big and when?

this is bloomberg. ♪

viviana: this is bloomberg daybreak. rewards of all those points climbing to a record at american express in the second quarter. amex spent $2.7 billion on car holder rewards. that was more than expected. the money amex collected from merchants fell short of expectations. a big transaction in the beer industry. -- agreed to sell its operations to japan. the deal has an enterprise value of $11.3 billion. they will use the proceeds to pay down debt. the company says it is still

revising ipo of asian subsidiary 80'ies. --all street analyst after plunging. gas facilities fell 13%, that following a downgrade. the first says it made a mistake in capital structure. the analyst is still sticking with his downgrade. that is your business flash. alix: thank you. i love this story. that stinks. sukilso, the chairman of who founded soon near, who is definitely an assertive player -- it would not surprise me if they were like, let's talk about these numbers. david: it is hard when you have analysts second-guessing all the time if you knew the number was wrong. and you say, what is going on?

that was a relative rating. you posted for front -- fun. alix: betting on that cutting rett -- rates, john williams -- here is what we are looking at. you are looking at the white line. the blue line is the feds on effective rates. 38 basis point cut. we are inching towards the 50 point. still with us is sarah hunt. if you look at this, are you playing a playbook of the feds cutting 50 basis points? sarah: i would be surprised if they cut 50. you have got people all over the map with what the fed is going to do. they got a little better and, we are still going to cut rates. maybe there is not dependency. maybe we are afraid or we raised too much in december and it would be easier to take that off the table and see how things go. this move to 50, we are not at

that higher-level now. if you think things are going to have issues later, do you want to go 50 now, or do you want to wait and say we will do 25 and see how the market takes that? enough to keep growth going. i wonder how much of a change that is going to make. the equity markets love it. they are happy because it means money stays cheap and that helps push people back into equities. david: the markets are heart of what is being said. one thing that struck me about what claire said was it is not just the day today. it is today to down the road. maybe we need to do something dramatic with what is coming up. that says something that is not encouraging about tomorrow. isah: one of those questions come a one of the central banks seeing we are not seeing? we are patient to more dovish. there is that but, is that the fed's job to say in six months there will be an issue?

do i have other things i need to worry about? how good have we all been estimating what is going to happen? theirt really what mandate is. i do not know the answer but i think we are in a there he uncertain time. alix: you have jp morgan coming out and saying you should take on more risk. taking on more risk, the you agree if you end up having a lower, longer consistently dovish fed? sarah: if i look at where governments are, they cannot afford to have interest rates go up too much. europe with negative rates is different. you want to get out of that situation. the get longer-term. we have to be lower because most governments cannot afford to pay. how much the debt has risen in the u.s., and if you look at europe they have the same problem. do i take on more risk if the economic act up his weaker? i do not know those things equate one another. david: i am curious how you look

at it. if you thought the fed was going to help you when it looks rocky, you would take on more risk because it is not as risky as you thought. sarah: yes, but does that last forever? when does the music stopped playing? when do people say the fed is doing this because the equity markets are weak or we cannot get the growth? when does that stop? we are acting as if this one does not. in the end, people talk about modern monitors. we are there globally. alix: inflationary pressures are more intense than i thought six weeks ago. what is a disinflationary playbook? sarah: when you have people talk about, we are going to change the rate of inflation, you cannot get 2% and try for a higher number. you have a problem when you have over capacity. you could argue we are overcapacity ties, especially in people because you have

putting plans in different places and you have to much capacity and not as much growth as you thought. you have a problem with pricing and it is hard to fix. i do not see how lower interest rates makes that better. it means you are not going to close things to continue on when maybe they should not. david: if that is the problem, the solution is less capital investment, not more capital investment. sarah: it depends where it is. there are places you need capital investment. infrastructure needs it. there are plenty of places that need it. one could argue in this environment. david: maybe not more steel mills. we do not need more, globally. coming up, fallout from boeing's 737 max 8 problems. investigators appear to be shaking off concerns. there is up in the market. this is bloomberg. ♪

david: time for the bottom line where we look at companies. long oneen all morning the bloomberg. australiansell the beer business, which is valuable. japan and got $11.3 billion. which will help them by other things. alix: i am taking a look at earnings. the real highlight is they have a new ceo. was -- c.o.o. was groomed to be the ceo. they thought it would be in the back half of the year. they made this management transition now rather than later. down 7.8 percentage points, the most from 2014. they are better positioned than

other services. it is still the environment. david: will there be the growth is the question? and do they get to charge or is the pricing power gone? and to our third story, which is boeing p we have boeing saying it is going to cost us more money. alix: they did not put a -- >> they did not put a number on this. they said we do not know what will happen with the max. we are withdrawing guidance. now they are trying to quantify this. they say they will take a $5.6 billion charge, the second quarter. that reflects the compensation they think he will have to pay for airlines, given the changes they have to make to their schedule. talking about a $1.7 billion increase in cost because of the cut to their

production rates has lasted longer than anticipated. that is a fair amount of money. it is not the and because this rests on the assumption the plane goes back in the air by the fourth quarter, which at this point, i do not know. it seems aggressive. you have the faa saying 2020 is more likely. airlines, including ryanair are thinking about cutting back growth plans because it remains uncertain, when in fact this plane is going to return to the skies. a lot of unanswered questions. david: if it has extended another month or quarter, there are different reporting's about how long this will go. we do not have a cast impact from this charge. they will quantify that next week. that is a question on the minds of analysts's. for me it is about the production rate. if you keep going as first the grounding in 2020, even the rate they are at we do now the 42 sto

look unsustainable. they are talking about ramping up to 57, which is an accelerated taste even before the max grounding during 2020. that strikes me as ambitious. you also have to clear out inventory that has been piling up while the plane has been grounded. they are parking these planes in employee parking lots. they have inventory to clear out. so, what do you do with boeing now? sarah: the people who love boeing continue to love it. even when they came out and said, we do not know what the effect is going to be, the stock did not react negatively as you thought. global you have a duopoly, it is possible people are saying, this is a problem. they will get through this problem and people will start looking at the cash flow again. there is a reasonable argument to be made. the uncertainty is higher and i

am not sure we know what the answer is in terms of how much because if they cannot get it when they need to, you're paying other people's leases because they cannot fly your plane. this is one of those places where you have outcome are not certain of, so i would not become to ball. alix: and derivative place. what about the suppliers into boeing? sutherland ande sarah hunt, your sticking with us. coming up, earnings anything but rough. we will digest the companies first earnings. david is rolling his eyes. this is bloomberg. ♪

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rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. keep you comfortably cool and limit motion transfer. leesa's hybrid mattress is not only recommended by experts, experts choose to sleep on it too. try it yourself in any west elm store. or order online and we'll ship it to your door so you can try it risk free. the leesa hybrid is american made. built to last. and, because everyone needs a place to rest, we donate tens of thousands of mattresses to those in need. experience the leesa hybrid mattress. right now, it's on sale. order today. go to leesa.com. alix: this is "bloomberg daybreak." i am alix steel. we made it up friday. happy friday. the fed shaking things up and the new york fed paring back to

statements. 96, s&p uputures up by seven. the dax up point to present. .2%.e dax up euro-dollar continuing its downturn, down .5%. maybe in the next week a more dovish ecb, that you also potentially have the elections in italy. that weighing on the currency. yields down in germany by one basis point. the curve flattens again. the two-point spread is 24 basis points. shoot down a potential drone and yet losing steam in the oil market. david: malvern update with what is making -- now for an update on what is making news outside of the business world. viviana: for the second time since the us and china agreed to officials from both sides have spoken by phone.

no details on what has been discussed and no word on when negotiators will meet face-to-face. the u.s. wants china to buy more farm goods. china wants the u.s. to ease restrictions on one way. -- huawei. president trump once to nominate eugene scalia to be the next labor secretary. he is the son of antonin scalia out. democrats are likely to fight against the nomination. over to germany, while on -- where angela merkel says she has been feeling good and plans to serve out her term. there has been speculation about her health on three occasions. she had been seen trembling during public events. 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. alix: it is the power of pets.

pet supply retailer she we posted -- chewy posted its first ever results. here to take us through the results is emma chandra. emma: the company gave its preliminary results at the time of the ipo. the focus is on the forecast and the forecast for sales. the company saying four year sales growth will be 39 to 42%. it does mark a deceleration from last year where we saw 68% growth. the company is still not profitable but our colleagues at bloomberg intelligence say it shows strong momentum and ongoing market share gains. if you look at the market, it is sizable and going. 2009 an6 billion in estimated two of reached $72 billion last year. the american pet product association saying the humanization of pat among

millennials -- of pets among millennials is driving that growth. and it is essentially recession proof. the industry moving essentially online. 31% of consumers shopping for pets online did so at chewy last year. that is strong growth. the company also said it has loyal and a sizable customer base. they have 11.3 million active members last year and many of those sales from members came from something called autoship which is a subscription service. amazon, 55% of the online spending for pet products. that is considered to be the threat. to preventhewy due customers from jumping ship to the e-commerce giant. whiskey, your dog, and my

cat, owl. my daughter loves his dog. david: joining us is sumit singh. emma chandra is still with us. the big question is growth for you. you're projecting 40% growth. how long can you keep this up? sumit: good morning. it is a pleasure to be here. we just posted strong first-quarter results in line with our confidence for the market and also the guidance we have published reflects confidence in our ability to execute. combine that with the fact that the market is large, $70 billion and growing at 4%. e-commerce is fairly low penetrated in the united states and we are early days in our growth. combine that with the fact that

we are in a mission to create a one-stop shop that has not been done in e-commerce before, we are excited for what is ahead. we think we have runway. emma: we got to speak at the time of your idea. have had aipo, we number of analysts -- a lot of them concerned about how you will do with the amazon threat. what can you do to reassure investors? sumit: a couple different things in the way we are focused on pets. we have 10,000 team members who are pet parents themselves and focused on the head category -- on the pet category. our website on pet, to our customer service. that is important. we strive to offer exceptional personalized care, which is so important in this category.

we treat pets as family. petre pet parents serving parents so we have this emotive index reading to the category along with the scale of e-commerce. combine these, it is powerful for our customers. we are offering competitive prices and a broad assortment of fast and reliable delivery rocks -- delivery products, and under that 20 47 care. that is the powerful proposition. emma: we look at the likes of amazon and walmart, everybody's improving their customer service , especially when it comes to delivery. how long will that be a differentiating factor? sumit: when we talk about customer service, it is easy to think about as just a call coming in and answering it. we think of customer engagement, valuing the customers. the experience you can only get in a local neighborhood pet store.

that is hard to replicate. you have personalized interaction where david walks in and we say how is whiskey? do you know labs develop hip displays via and they should be fed -- that level goes to build trust. that builds engagement and fuels loyalty and loyalty that fuels repeat purchases. that is the cruz of our businesses. industrial only at but the proposition we believe is durable and long-lasting. david: you do know labs. hip displays you is the issue. what is your front door look like? they are not coming through amazon, they are coming through google search? how do you acquire new customers? sumit: we deploy an array of tactics. classical techniques, direct most of our

acquisition is direct response. we talk to customers from every walk of life, from the millennials to the baby boomers. we are talking across the nation. for now we have been focused on direct response. we believe our customers are coming to us from everywhere. onlinee pet stores, from , from organically regrowing the market. it is intuitive in a little bit of away because we are not there .et fishing with a fishing rod it is more broad than that and we are happy with the strategy. pricingn you talk about and will you follow the netflix spend,where you have to you have to lower your prices, you have a lot of marketing and advertising and that prevents you from turning to real profitability. can you give us a sense of that? isit: one thing i would note we demonstrate consistently we

have a balanced outlook for growth and profitability. we've been getting growth last but at the same time -- growth fast but we have some the ability to get fit as well. margins have expanded 330 basis points. losses have improved by over 69% year-over-year. we are definitely building and enduring franchise. pricing is one of those levers where you have to build trust with the customer. we do not take it as a cat and mouse game. we monitor the pricing and strive to be competitive. that is the strategy we take and we will continue to take to make sure we retain the trust we have with our customers. alix: really appreciate it. bloombergs emma chandra and sumit singh. still with us is there a hot. it seems like the successful ipos we have seen, is this the market or is this company

specific? sarah: most of the ipos that have managed to get to the market are ipos that have high growth. it is not as easy to get people to raise money when you're not looking at such high growth rates. this just tells you what people are willing to pay for right now. it tells you i'm willing to pay for growth and a lot for growth because i assume the growth will lead to profitability. the question becomes does it really end up getting you there were we to seeing markets where the competition starts to become an issue and the pricing is not as easy to get? i do not know what the answer is and i do not think the market knows. people are willing to pay for it and those are the ipos that get out of the gate can make money. david: is a different version of the search for yields? more, ifthink it is i'm not just going for yields, i will go for growth.

the growth will be the earnings yield. david: i will take more risks. sarah: i will take more risks because it does work. ybor looking for similar things. value was underperforming growth in a massive way. nothe moment, it does matter because everyone is going in the same direction. that is what is working, so it is very difficult to step back and say i will go a different direction. it is an absolutely similar idea. alix: do you have a feeling on where direct listings will wind up going? sarah: for certain kind of things people will get the excitement about, and for other things you'll be able to go with somebody who be able to place things and not have to do that work. it depends on the temperament of management and what their own technological capabilities are. if they think they can make it work, they will try, but it not they will stick with a fairly traditional model. alix: thank you so much, great to see you.

catas hard to tweak my likes french food. she is french. she is from france. pate and croissants. coming up, the race for space. >> one small step for man. one giant leap for mankind. alix: a historic giant leap for mankind for the next frontier after man landed on the moon. that is next. this is bloomberg. ♪

viviana: this is bloomberg daybreak. i'm viviana hurtado in the hewlett-packard enterprise greenroom.

coming up later today, jim president mark royce. -- gm president mark royce. here is your bloomberg business flash. the largest casino operator in thevegas is considering sale back of some of its properties. bloomberg learning mgm resorts is soliciting interest from potential buyers for the bellagio and the mgm rand -- the mgm grand. is a partial victory for bayer and one of those court cases alleging roundup weed killer causes cancer. a california judge slashing the jury's $2 billion verdict against the chemical maker. still more than 13,000 plaintiffs in the u.s. have sued bayer. analysts estimating it may cost $20 billion to settle the cases. over to the u.k., where the bbc and ibd are teaming up to take

on netflix. the service is called brick box. -- britbox. month, cost $7.50 a lower than what netflix costs. david: it is time for follow the lead, a deep dive into stories making headlines and moving markets. today we look at space. in 1962, president kennedy committed the united states to landing a man on the moon before the end of the decade. >> what we need in our hour of change and challenge, in a decade of hope and fear, in an age of knowledge and a great, why some say the moon? why choose this as our goal? they may well ask why climb the highest mountain. why why the atlantic. we choose to go to the man in this decade and do the other

things, not because they are easy but because they are hard. david: the united states made good on kennedy's promise when neil armstrong first set foot on the moon. >> that is one small step for mankind.giant leap for david: that was watched by an estimated 500 million people on live television around the world. we welcome peter coy of bloomberg business. i remember it. i was there. i was 16 years old. it was quite a moment. there was a lot that came from that project beyond just being on the moon. there were so many products, so many innovations. how did it change the way we conduct large organizations? peter: science magazine, seven months before the landing, said that the biggest outcome of the

moon mission might be an organizational one. learning to conduct vast projects and harnessing, in the case of apollo, 400,000 people, many laboratory spread around the united states as well as private contractors. 90% of the budget went to private contractors. it was not only a technological achievement, it was a managerial achievement. that is what i focus on my remarks column in this week's issue of the magazine. there are things we can learn today about how apollo did things back then. david: that is 50 years ago. let's talk about where we are headed next. for the future of the space race , we are joined by eric stallworth. back,s a sense -- looking why didn't we do it sooner? commercialization of space.

when it we have private enterprise -- why didn't we have private enterprise move in sooner than we have? eric: it is disappointing we have not. some of the accomplishments have been major government programs. fantastic marvels of engineering, but i think the economies were not there for the private sector investment was not there over the past 50 years. in the last few years we have seen a rise in the private sector investment in the commercial space industry. david: when you see things like space x, which is profitable, why is it that entrepreneurs like elon musk and jeff bezos are moving into space now? eric: i think it is the innovation, i think it is the motivation of a dream that was not fully achieved. 1969u are young person in

and you saw people walking on the moon and 50 years later we have not gone back, that is disappointing. i think they took their hopes and dreams of their youth and are applying it to today's marketplace and are having fantastic success. what is interesting is 50 years ago it was between russia and the u.s. and now there are more countries with bigger pockets involved in this. china just landed a craft on the backside of the moon. israel very nearly had a successful mission, and on and on. india is in the middle of a big project. it is not just a horse race between the united states and the soviet union. it is also about private companies. it is also in general, there has been less emphasis on human travel and much more on robots, unmanned spacecraft. that has opened up the entire solar system and beyond in a way

that would not have been possible had there been a focus on getting astronauts out there. alix: that is a great point. eric, do you agree, and if so how much money from that angle can be put into the commercialization of space? eric: that is a great point. we see that a lot from the robotics missions. the new horizons mission to pluto. how much inspiration that gave the nation. when you see what nasa is doing with their artemis program, the robotics ann landers, the stepping stone and what we are doing. it also engages a lot more for commercial marketplace. there is no question about the inspiration that the moon effort had for the united states. can you make money of their? -- can you make money up there?

which makesex, money for the government spending to launch things. we now have an incentive from nasa on the international space station. is there money to be made? eric: i believe there is. i believe the laboratory on the international space station is a proving ground for what you are seeing in pharmaceutical research, among other things. are companies like nanorax doing on the small satellites from the international space station. up the opens international space station, i think you'll see more innovation from all angles and different aspects of the commercial market life. whether that becomes passengers on the international space station, i think that will open the door for more investment in distaste. i believe there's a lot of money to be made in space. alix: eric staal merck of commercials -- eric stallmer and peter coy, thank you very much. coming up, it is a heatwave and

it is here. we will look at how it will boost electricity prices. if you're heading in the car, bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

alix: here is what i am watching or feeling -- that is the heat wave. all of the u.s. embroiled in a lot of heat. particularly what it will do for power prices. electricity prices like in western virginia or the midwest have spiked. this chart shows new york city peak prices for energy nowhere near what we saw in the beginning of january, when it was really cold. what will that chart look like on monday? that is what i want to know. alix: i do not -- david: i do not know, do you know -- do you use more energy when it is cold or hot? alix: i'm not sure.

it will stress the grid. david: brownouts and blackouts, you have to worry about. over aloomberg has said trillion dollars will have to be invested into electricity all across the world. some of it will be new stuff like alternative energies and how you distributed to customers, and some of it will be plain old fixing wires to get your electricity. david: because we are so good at fixing infrastructure. alix: we are very speedy. it is a good thing in the u.s.. coming up next, pimco usd economist -- usd economist. economist.u.s. this is bloomberg. ♪

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

jonathan: coming up, the final fed speak before this month's rate decision shaking up investor expectation. u.s. and chinese policymakers making a visual contact for the second time since the g20 trade truce. earnings season continues. microsoft plunging double-digit -- microsoft plunging double-digit sales gains. here is your friday morning price action. futures are positive, up eight points on the s&p 500. in the treasury market, yields grinding a little bit higher by two basis points to 2.05 and the theme and foreign-exchange, there is only one -- a stronger dollar. the euro weaker at 1.1225. let's begin with the big issue. 25 basis points for 50? >> it will probably happen. >> they will probably cut 25. >>