low as to your yields go higher than 10 year yields. are they signals of a recession to come? chinese industrial production in 17 grown this slowly years, and germany's economy contracts for the second time in four quarters. president trump delays new tariffs on chinese electronics, driving stocks higher, led by retail and tech for a temporary respite. welcome to "bloomberg daybreak" 14.his wednesday, august taylor: nothing like ripping up the script and throwing out the playbook as we head into the show. bonds are basically the only thing you need to know today. you had the u.k. yield curve that inverted. 15 minutes later, the u.s. yield curve inverts as the 30 year a record low. i sat here yesterday and what

sort of waiting for it. we got it today. very interesting, and a lot of this comes from some of the overnight data we got overseas, like you mentioned from china, and then the u.k. and from germany, and of course now here in the u.s.. markets deteriorate in the last hour or so. david: we come back to the same question again and again. is this a projection of future growth, or or of a position where people need to put their money somewhere and drive down yields as a practical matter? taylor: let's get a quick data check. it is all about bonds today. we talked about futures here after what was a really good day yesterday, deteriorating this morning. off about 1% or so. ns is back in positive territory. german ten-year now at a -64 basis points. you wonder what the ecb does next.

when we look across asset for the safe haven plays, for me it is all dollar-yen. we have again continuing to strengthen. handle is something that catches my eye. gina: we are joined by martin adams and vince cignarella. we will put up our twos-tens spread. when we came on air, it was negative. what should we be taking away from this? vincent: when you look at the practical sense, when the fed overnight money, and a 10 year yield is below that, it is just a matter of time before the two-year yield in the 10 year yield would invert in this situation. i think the bond market is probably telling us more with what happened with the president blinking on trade. by moving the tariffs, what he's basically told importers is ship it all in now in the fourth

quarter because this might revert, so i think we might see growth being brought into the fourth quarter from 2020, and i think the bond market is seeing perhaps slower growth into next year. at now while it is hot. -- get it now why let his hot. taylor: equities near record optimism,wing some while the bond markets were showing us a very different story. who is right as you take a look at both asset classes? gina: if you take equities in a broad spectrum, equities are nowhere near their all-time highs. if you think about what happened over the last year in stock markets globally, the german dax off its 2018 peak, the chinese exchange off of its 2018 peak, you had this sort of sideways global market, with the u.s. continuing to make new highs. markets haveer struggled quite a bit, and that tells you that market have

started to price for global weakness. i think the question coming into the news overnight is how much of this was priced. you've got the german dax already down 15% from its peak, the german exchange -- the chinese exchange down 20% from its peak. how much further weakness do we have to price going forward? my perspective is global stocks have been struggling since early 2018. it's just the u.s. has been breaking higher. it's a safe haven. there's still ample liquidity. the money needs to go somewhere, and it's gone into u.s. stocks as a defensive play in global equity markets. taylor: some of the surprise came overnight from china. you mentioned the dax. the german economy was weaker than expected as well. if you come into my terminal, it is all about the chinese economy. basically, the three indicators we look at, retail sales, fixed asset investment, and value for that industry is all coming in

lower-than-expected. vince, i wonder how much of the uncertainty is coming from the fact that china really is starting to get hit. vincent: china is getting hit, but a new of caution where everyone thinks this might affect the trade situation. setarly july, president xi over a conclave of the most in anent chinese officials town that is essentially the hamptons of china, as it was explained to me. no uncertain under terms would be bullied by the united states, that they would go the distance, and they would not roll over on ag products. in fact, he never agreed to buy ag products. products if buy ag they dropped the ban on huawei. i think now president trump is going at it with a much weaker

hand. david: maybe he won't be bullied, but might he stimulate? we've seen week numbers in china and germany overnight. it raises the question in both cases of more stimulus. gina: i think china actually has been stimulating all year. you look at different stimulus theures in parts of government that has resulted in stabilizing pmi's. europe is a different story. europe has this sort of institutional resistance to stimulating be a fiscal policy and is reliant on the ecb to simulate via monetary policy. the european pmi's continue to make new lows. so this is this divergence that may affect -- that may reflect more stimulative policy on the part of the chinese government. we saw a valuation in the ivanka moving in response -- in the yuan that is probably helped the outlook for chinese growth inherently.

once you have devaluation of the currency, that should help the value of your exports. you should see chinese growth stabilizing the near term, especially if we continue to back off of the future tariffs. david: we've mentioned trade once or twice. yesterday, president trump decided not to go forward with some of the tariffs that were going to go into effect in september and put them off until december, basically saying he wanted to save christmas for u.s. consumers. this is part of what he said. what we've done is we've delayed it so it won't be relevant for the christmas shopping. grinch, not so much. vincent: i think this was a bit of capitulation. he knew this from the beginning. we knew the second round of tariffs would affect consumers, while be first was targeted more towards business. this was, i believe, the message sent to lighthizer and

mnuchin and shanghai. we are not -- and mnuchin in shanghai. we are not going to capitulate. trump, and some type of anger or some other thought process, thinks to put tariffs on china. ,hen the situation comes home realizing how this is going to affect the economy and the fourth quarter, realizing china is not going to bend, he kind of had no choice. where does this put jerome powell? if the economy gets hotter in the fourth quarter because he's brought business forward, that means powell probably has to hold his stake, and that means more contention between the white house and the fed. mr. powell i think is in the hot seat once again, unfortunately. taylor: our equity markets accurately pricing in risk? we've seen significant pullback with tweets here and there. are we fairly valued? gina: i think we are pretty close to fairly valued. our broad model suggests 2900 is fair value for the index, and we

are at 2925. if you look at where the valuation excesses actually lie in the s&p 500, it is all of these defensive sectors. these are trading at extreme premiums relative to cyclical sectors, so much so that it would imply we are already pricing in recession. it is a bit of a bizarre environment because stocks have already rallied on increasing on improvingt earnings outlook. be anxt leg higher has to improving earnings outlook because we've already certainly priced in, yes, things are slow, but the fed isn't coming to save us. you've got to balance that right now. certainly, investors are very defensive. they are not optimistic we are going to have great growth. this is just the latest of a spate of things dampening off is

-- dampening optimism. taylor: bloomberg's gina -- david: bloomberg's gina martin adams and vince cignarella, thank you for being with us today. you can find all of the charts we just used and more at gtv on your terminal. coming up here, more on the yield curve inversion and what it signals about a u.s. recession with sebastian page, t. rowe price head of global multi-asset. this is bloomberg. ♪

david: wework has filed with the sec to go public, issuing their ipo. we have sonali basak here to talk about it. sonali: it is finally coming

out. i would urge anyone who has a terminal to look at the top live blog. what we are not going to have today is the valuation we are looking for at $47 billion earlier this year, but people are expecting it to be a little lighter. taylor: talk to me about that valuation. saying, i was speaking with an analyst monday night who said it feels like it is a tech company, but this is a real estate company. what is it? asali: the idea of its a tech company is what they will be leaning on to sell. but people are looking at the acquisition cost, which looks ok , but the underlying cost and the growth rates are what people will be looking at right now. david: is anyone talking about a possible liquidity mismatch? they make long-term commitments on leases, but people can get out of their leases pretty quickly. sonali: you see it evolving a little bit more with longer-term

customers, and that is what they are going to have to prove people, that they are not a mismatch, especially in a downturn. taylor: we have talked about the type environment in which these companies -- the type of environment in which these companies are ipo think -- are ing. are they concerned about the work it in which they are pricing? sonali: you're looking at pricing today, and i think there is an element of people wanting to get out the door while the market is still hot, but it is already getting quite chappie. david: now they do the roadshow and talk to people? when do you think we will get a valuation? sonali: next couple of weeks , by the end of the month. they will go public by september. hopefully i will be breaking it. taylor: who are the big players involved? sonali: that is what we will be looking at now.

jp morgan should be flush left on this today. david: you had that story about the relationship with jamie dimon personally. sonali: exactly. he has about $40 million of adam neumann's leases, plus some of the mortgages. david: the size of the mortgages on two houses in manhattan. you actually have both sides of this. adam neumann, one of the things i haven't been able to see yet, who is selling. ken adam neumann cell? how much is -- can adam neumann sell? what is softbank selling? taylor: we will wait on that ipo on the valuation. sonali basak, thank you for coming to share that with us.

the 30 year yield plunged to a record low. joining us now is sebastien page, t. rowe price head of global multi-asset. on the phone, ira jersey, bloomberg interest-rate strategist. did anything change fundamentally this morning, or was this just a psychological barrier? ira: i think it is a psychological barrier. market has been trading on sentiment at the global economy is going to continue to slow down, and right now we are pricing for a recession sometime in 2020 or 2021. it is unlikely that we are going to get a recession in the near term based on the fundamentals in the u.s., but the market is pricing for a lot of bad news going forward. david: what is the chance that it is not the same signal it has been in the past because the rest of the world is in negative yields, and that is forcing money into u.s. treasuries? is certainlythat

part of it, but that would be true in two-year notes as well. when you look at two-year notes in germany, they are at -80 basis points compared to positive 160 in the u.s.. so this braid is even wider between in german yields in u.s. yields. so i don't think it is only the negative yield environment. it is also the idea of the federal reserve is behind the curve a little bit. in a the market fear that slowing growth environment, the fed only has somebody bullets. -- only has so many bullets. the worry is that the fed will continue to cut, but want to stop quantitative easing. that's going to keep the long and depressed a little more than it would be and other times the fed might ease. taylor: i want to bring in sebastien page, who's been so patient with us. thank you. the fed might be behind the curve.

does this inversion show you the fed is behind the curve? pun intended, i should say. [laughter] sebastien: it has been a good indicator of recessions, but you have to take into account the fact that the lead time before that signal in the recession -- that signal and the recession is all over the place historically. i think your earlier question, is this time different, is the key question right now. this can be one of the most dangerous things you can say in investment management. but we have major forces colliding. there are reasons to worry. fed policy uncertainty, political uncertainty couple slowing growth, slowing earnings. it is absolutely right to take into account that global central banks have reentered a cycle of somewhat aggressive easing, and the policy right now is accommodative even in the u.s. people, as youe

said, maybe the fed is behind the curve. we talked to scott miner yesterday. this is what he said. >> they are going to cut rates, and they know it, so why not just get as much bang for the buck, do something very fast, rip the band-aid off, and move on? that would send a clear signal to the market that the fed is not going to allow a recession to occur. david: he was suggesting that they not wait until september for their meeting, that they actually cut again before that meeting. what do you thing about that? ira: i think this federal reserve won't do that. would they do that, could they do that? the answer is yes. now, is it possible the fed goes 50? that the federal reserve cuts more aggressively than the market is currently pricing? i think that is a's distinct -- that is a distinct possibility.

because they only have so many bullets left in their easing gun, i think it is more likely they will continue to cut 25 at each meeting, but i do think the fear factor means the market is going to continue to price for three more cuts this year. that leaves them just above 1% on the fed funds rate, and at that point they would definitely have to significantly reevaluate. we might even get more inversion of the curve at that point because then you are probably only two or three cups away from quantitative easing if they need to ease more. taylor: you said the word cycle, which mixed me think the rate cut we saw was not an insurance cut. is this the beginning of a rate cut cycle? sebastien: quite possibly. i agree that the fed could do more should they want to. what we worry about right now is if you use excel spreadsheets, there is something called the circular reference, where your results points to another

result, which points to that same result. at this moment, it seems the fed is sticking -- is taking its cues from the market, and the market is taking cues from the fed. there's this circular reference in the monetary policy environment that is deviating from the dual mandate of stable employment and low inflation. david: ira jersey, thank you so much for joining us today. sebastien page, please stay with us. president trump surprised the markets yet again yesterday when he abruptly reversed an earlier decision imposing more tariffs on chinese goods, at least until december, and at least for some goods. capital gaveheyman us his assessment of what was and was not covered. >> the new $300 billion of tariffs that was supposed to be implement it in september that is now, some of these tariffs are going to be delayed until december, this is a on hundred pages of- this is 122

things delayed. the original $300 billion looks billion. 175 now from welcome bloomberg shawn donnan. does that look right, that $175 tariffswill not have until december? billion or so$100 getting hit september 1, and somewhere around $160 billion hit december 15. a lot of this is in what products are being hit. people were saying that president trump appears to have saved christmas. the delay and a lot of these goods that are being delayed for new tariffs are things like smart phones, toys, laptops, the kinds of things you might give

your nearest and dearest for christmas. that said, the september list is still pretty long, pretty significant. we need to remember that 12 days ago, when president trump first tweeted out that $300 billion threat, we were expecting talks to go on for a while. andere in a relative peace, things have really escalated pretty strongly since then. that $110 billion were so is 100 $10 billion -- $110 billion or so that is going to get hit september 1 is an escalation. david: he said yesterday that this is really to give some relief from christmas. does this water down the good news? christmas comes and goes december 25. by december 15, almost all imports from china will be subject to new tariffs that have been imposed by the president

has part of this trade war. that is not good news for anyone. david: thank you so much for joining us today. that is bloomberg's shawn donnan reporting from washington. markets were up on the care of delay yesterday, but morgan stanley strategists say we should continue to price in escalation of the trade war. "positive interpretations of today's news don't ring true to us. we do not think it meaningfully changes the uncertainty facing corporate decision-makers regarding investments." still with us is sebastien page of t. rowe price. what do you make of it? what is the market pricing in? sebastien: it is all about the uncertainty, i agree. the market is pricing in on the equity side a relatively rosy scenario. the key point here is what is the incentive of both parties to come to a deal. china probably sees this as a long-term negotiation, a test of pain tolerance, a test of endurance.

president trump, perhaps with a fair amount of political support, sees this as a game of chicken where we need to apply maximum pressure. we seen positive development on the crip it -- on the christmas shopping list, but if we say what is the incentive for a deal, there is one catalyst, and we are seeing some of it today. that would be a significant slowdown, a significant downturn. the bad news is good news type of environment. taylor: in my terminal at gtv , it was all about the china data we got overnight. industrial production, retail sales, fixed asset spending. from what we have, at looks like it is lower, and coming in lower than expected. can china afford to wait? sebastien: china has been implementing stimulus. china has bullets to implement more stimulus. you could lead to a bad news is good news environment where we get something more significant.

in the past, china has had these stimuli that can boost returns in the short run, but ultimately in our portfolio, we are being somewhat conservative. we shaved back some of our equity locations relative to bonds. taylor: we will get more next. sebastien page of t. rowe price will stick with us. coming up, germany's economy is sputtering. disappointing gdp data and contraction territory now. this is bloomberg. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ taylor: this is "bloomberg daybreak." it is -- it is all about the bond markets today.

we seen deterioration in the futures market since 6:00 this morning, when you had the u.k. curve inverting, which led to the u.s. curve inverting. you are seeing though russell get hit the hardest, along with the dax due to the data we got from germany. weakness pushing through here to the u.s.. you have a little bit of an increase in the vix, though i also caution not to get too hysterical. to quality,light including gold, which is clearly above $1500 an ounce. the 30 year yield now at 2.06 percent, clearly a new record. it is the inverted curve on that two-tens that catches my attention. good thing i am here because i am going to make it all about bonds today. [laughter] david: ok.

taylor talked about european economic data. they really underscored slowing growth, with germany in particular showing contractions in the second quarter out of the last four. sebastien page of t. rowe price is still with us. this shows us what's going on over the last year with german growth. it is not unexpected, but also not good news. sebastien: no. germany is suffering because of the auto sector, brexit news, the banking sector. this is the first time the entire german bund curve is in negative territory. we are looking at the pmi's, and the wide spread between the manufacturing sector in germany and services, manufacturing pmi's are around 43. services are at 54.5, which shows expansion. services are 70% of the german economy. so it is not all about manufacturing, although manufacturing tends to be more cyclical and predictive of the

economic cycle. taylor: does that mean the economy is in better shape if services, which makes up more of it, is doing better than manufacturing? theourse, we talk about manufacturing pmi all the time, but if you highlight services, is the economy not as bad? sebastien: we can debate that. you can take the glass half empty view and say services are say the come down, or glass is half-full. we tend to belong u.s. stocks, but worry about financials. if you track the performance of european financial stocks, including german stocks, against the bund yield curve, the two , sos track each other down there are structural issues with low rates and financials in europe. taylor: we talked about the european banking sector following the german curve into

negative territory, and the tight correlation. is there any concern about the u.s. banking sector following suit? we know there are structural things in the u.s. that are better for the banking sector than europe, but for the first time in my career, i keep hearing about negative rates in the u.s. is there a risk that the u.s. banking sector starts to look more like a european banking sector? sebastien: there's definitely a risk. the way banks work in negative yield curves is not good for the financial sector. that is true for the u.s. most stocks are really cheap. asset allocators look at value sector versus growth sector. the value sector is very cheap, but the fundamentals are not good. we like growth stocks that do well when you are late in the economic cycle, but those valuations are pretty extreme. growth versus value, we are talking about the 98th and i need ninth -- and 99th percentile.

good valuations, bad fundamentals. bad fundamentals, -- bad valuations, good fundamentals. david: we welcome now marchel alexandrovich, jefferies' senior european economist. do we know anything now that we didn't before? marchel: i don't think we have. basically it is the same picture as before. the german economy is not firing at all cylinders, and that is giving those in the euro zone economy concern. if that is not growing, it is difficult to see where overall euro zone growth will come from. i don't think the number is that different from what the ecb was expecting back in june when they gave us their last set of quarterly forecasts. taylor: when does angela merkel step up and deliver some fiscal stimulus? marchel: i think that's a really

good question. it's a question we've been asking for probably five years or so. i don't think we are necessarily going to get a different answer now than we did before. even over the last 24 hours, headlines out of germany saying there's talk of maybe tax cuts coming through in the german economy, but in terms of increasing fiscal spending, that's not really on the agenda for the german government. so i don't think we are going to get a material change on that front anytime soon. david: i heard a report yesterday that there was some concern about eliminating the reunification tax has been in place since the berlin wall fell and the unified east and west germany. is that something that would make a difference if they did it? marchel: there's a couple of caveats. when this tax cut is going to come through, people are talking about 2021, so potentially two way when that starts to

benefit german consumers. the grand scheme of the german economy, it's not really a meaningful amount. you are talking less than 0.2% of german gdp. so the headline looks nice. it is something that will get attention, i'm sure. but if it is not going to go -- if it is not going to come through in the next couple of years and not at scale, it will have no difference for euro zone growth overall. taylor: a pretty dim outlook for european growth, german growth in particular. how do you play european equities? sebastien: we would probably be underweight european equities in most portfolios at the moment, but however, there is room to go long growth stocks given where we are in the cycle. overall when we look at stocks outside the u.s., the valuations are attractive, but we preferred to play offense with actively managed strategies in emerging

markets and growth stocks throughout the world, including developed markets in europe. we are more worried about financials. david: looking at europe more broadly, can europe really grow substantially without germany? is germany so dominant that you've got to fix that one first? marchel: i think you will get a rebound. i wouldn't be so downbeat on the euro zone economy. there are a couple of positive factors. one is the labor market. today we had a bit of a slowdown in employment growth, but it zero registered growth of point -- of 0.2%. when it comes to domestic demand, consumer spending, on that front, euro zone is looking pretty decent. german numbers are pretty decent. if you look at german wage growth, it is pretty close to 3% year on year. some portions of the german economy are doing ok, but we have these global concerns which

obviously impact germany first and foremost, being the big export engine of the euro zone. until those are sorted out, it is very difficult to see the german economy surprising on the upside anytime soon. will be as 20/20 better year than 2019. david: or shall alexandra fitch alexandrovich of feries and sebastien page of t. rowe price, thank you for being with us. now here with the first word news is viviana hurtado. viviana: today at the hong kong airport, flight operations return to normal. chinese officials still plan to come to washington next month for face-to-face trade meetings. that is a sign talks were made on track, despite an escalation in terror threats. after negotiators -- in terror

threats -- in tariff threats. over to texas, where some believe it is time to start building power plants again. a heat wave this week since elect -- this week sent electricity prices soaring. stand inion would stark contrast to the glut of generation nationwide. texas is facing record electricity demand, in part because of power-hungry shale drillers. wind power hasn't been able to fill the void. 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 the ve on our condo. -- i'm viviana hurtado. this is bloomberg. david: it's august, so that it is hot in texas is not news, but take a look at my terminal showing how prices spiked for power down in texas because it's been so hot. they blew past the $9,000 a

, so they have to build more power plants. you wonder whether, given climate change and things, this is something yet to come. taylor: even a few weeks ago, i remember everyplace across the country was in triple digits already much, so not only a texas problem, but perhaps a u.s. problem. david: coming up, we work finally makes it official on its long awaited ipo. taylor: and if you have a bloomberg terminal, check out tv . watch us online, check out our charts and graphics, and interact with us directly. on your terminal. this is bloomberg. ♪ this is bloomberg. ♪

viviana: this is "bloomberg

daybreak." coming up in the next hour, amy celico, albright stonebridge group principal. this is "bloomberg daybreak." tesla short-sellers are taking the lead in the perennial tug-of-war between bulls and be ars. this year, the electric carmaker's shares plunging 30%. bears have seen almost two point $8 billion of market to market gains. u.s. airlines safety regulators banning certain apple laptop metals on flights. apple recently said some of the macbook pro devices have batteries that pose a fire risk. elect books -- the laptops are 15 inch macbook pros. the hit showtime series

aboutons" is being sued the betrayal of a native american tribe. the suit has to do with an episode involving a casino land deal. showtime isn't commenting. i'm the fiamma or otto -- i'm viviana hurtado. that is your bloomberg business flash. david: i don't understand why they picked the name of a real tribe, and the leader is very similar to one in the show. why did they have to come so close to the truth? taylor: i'm only on the third season, so no spoilers, but "billions" is interesting because they have the muni story that is a little different than how the bond market works. it is an interesting show, though. david: you can tell who these people are in real life. we turn now to wall street beat to cover three things wall street is buzzing about this morning. first up, wework files for an

ipo, with ceo adam neumann set to control a majority. trades.tches give bad at the close of tuesday trading, major stocks including apple and google saw price corrections due to incorrectly reported trades. finally, argentine assets extend declines, wreaking havoc on u.s. money managers, with templeton emerging markets fund bond fund losing the most. taylor: joining us now is sonali bostic, bloomberg sonali basak -- sonali basak, bloomberg investment banking reporter. so wework is going to file for their ipo. what do we know so far? sonali: one number i want to draw attention to its 47 billion dollars, the last evaluation, but also the cost of the future undisclosed lease costing.

eric newcomer pointed it out on the blog. we already knew they were losing $2 billion a year almost, but it is looking at the granularity of what they are going to be paying. david: the question for me, going back to lyft and uber, lyft said we don't really see any real prospect of meeting money. does wework have a prospect of meeting money? -- of making money? sonali: they said the competition, there are pretty low barriers for entry here, and that was one of the big ones also. the other thing i was looking at was the related party transactions. we were talking about adam neumann owning a lot of it. related parties also mention his will be part who of the committee choosing the next ceo. taylor: i said this in the last hour, sort of joking, but an analyst i spoke to monday came .n to talk about wework

realty company hoping to be a tech company? sonali: i think they are really trying to push themselves as a high-growth technology company. the market was loving that when it came to the new ipo's. but you look at some of these others, and they had not been performing very well, so it is a very tricky ipo. a lot of pressure on j.p. morgan to get this done smoothly. david: the keyword is growth. what are they showing in terms of growth? what are they projecting? sonali: they have certainly been growing. i haven't been able to look at the projection numbers yet this morning, but the competition and the barriers to entry, how much gross they can sustain is one thing. and also if the economy turns, that is a big question mark today. if the economy turns, can they sustain that growth? --lor: we will take at th

we will take a look at the top line and see if they can do that. david: let's take a look at bad trades. we saw it come up with google and apple. basically at the end of the day, they were trading at like $208, and all of the sudden, went down to $200 and change, the number they closed at the day before, and then corrected backup. what is that about? sonali: imagine you are a fund manager that owns apple and saw that. usually you would think this was a computer glitch, but it was actually human error. a broker submitted the trades incorrectly. so you can't blame it on the robots this time around. it is something we have seen before. the new york stock exchange just a day earlier had issues with delaying s&p closing levels. taylor: and they said there was no problem with the continuous trading given that this happened at the end of the day, but you wonder, are there any repercussions that would happen?

sonali: if you are a trader, you want your information on time incorrectly, so i'm sure people don't love it. but as you say, there were no real ramifications. david: in a very volatile market right now, we don't want to have some uncertainty on the numbers you are getting. sonali: and this is the basic thing that these exchanges do, provide proper data. taylor: what are some of the other companies that reported this? sonali: those are the biggest one, apple and google, given their weight in the index. but there were 80 in total. taylor: talk about the next story, all about argentina. we woke up monday morning, pretty much all of monday and this.day was all about it has sort of slowed down, but we are hearing more about who was the winner and loser after the last few volatile days. sonali: right now we have the

templeton emerging-market bond fund that had the biggest lost monday, the worst since the the beliefrisis, on that argentina would rebound as a whole. the argentine markets are, of course, weighed down by this. equity folks are not thrilled today as well, especially in this hunt for global yield. it is not just argentina. kind of has an effect as a runoff. david: we knew this at a macro level. now this is person by person, fund by fund. we knew people really believed in mr. macri and his team. they went and invested a lot of money, and now people are getting hurt. sonali: templeton was one of the biggest ones, but another one is ashmore's fund because they were beating 90% of their peers. they were doing great until all of this happened. but again, tumbled in, 12% of their fun ash templeton, 12% of

their fund -- but again, templeton, 12% of their fund was allocated here. w.vid: 12%, wo sonali: i guess we are waiting to hear on what they are planning to do here. at an event we saw this week, was ats had pegged there less than 0.01% probability they would see all of this happen. so they've already kind of bet against the odds here, so i guess they are hoping for gravity to get back on their side. david: no wonder paul singer is looking to buy up some bonds. it worked out all right for him. it could work a second time. sonali: exactly, if you have the stomach for it. david: coming up, the merger everyone has been waiting for. viacom and cbs reunite after 13 years. more on what i'm watching, next. taylor: if you are jumping into your car, tune into bloomberg radio across the u.s. on sirius xm channel 119 and on the

bloomberg business app. this is bloomberg. ♪

david: this is what i'm watching, cbs and viacom finally doing this deal after all. people might not remember, cbs and viacom started off together, and then they were separate companies. then sherry redstone said let's put them back together again. now sherry redstone has gotten her wish. taylor: we were speaking with our deals reporters, highlighting that they could save via synergy $500 million or so, but like you and i were talking about, saving isn't what you need to be doing.

you need to be willing to spend billions of dollars to keep up with all the big streaming guys like netflix and disney. i don't know if they have the willingness to spend that type of money. david: and that is the key question. if you look at the basic deal points, the number one major asset, that is the question. it is a $30 billion market cap, but at&t and disney are up in the $250 billion range. are they going to be big enough to compete in the streaming world? we will find out. taylor: you need scale, but you need to be big scale. david: and you need a plan besides saving costs. how are you going to create enough franchise to say i will go pay a subscription fee the way you do with netflix and we are going to do with disney? a programming note now, the new viacom ceo is going to be joining bloomberg markets. he has been the viacom ceo. he will now be the viacom-cbs

ceo. taylor: take a look. the markets have really deteriorated in the last two hours or so. you can thank you china and germany overseas with 80% drop over there. with asset, you can see -- a 2% drop over there. cross asset, you can see inversion on the twos-tens. you're seeing a flight to safety in gold. david: coming up, burns mckinney, allianz global investors portfolio manager, is going to be with us. this is bloomberg. ♪

♪ david: risk off, way off, as

u.s. 30 year yields hit a record low and yield on the two-year goes higher than the 10 year. are they signals of a recession yet to come? china doesn't help the situation. industrial production growth the slowest in 17 years, and retail sales slump, as germany's economy contracts for the second time in the last four quarters. and macy's earnings lead off the latest read of the u.s. consumer, followed by walmart and overall retail sales on thursday. welcome to "bloomberg daybreak" on this wednesday, august 14. i'm david westin, here with taylor riggs. alix steel is off. taylor: it is all about macy's, because those are coming out. big miss on the bottom line. thing for me. they are reaffirming their annual sales guidance. i thought they might cut that, but they are lowering their earnings-per-share guidance.

going out on the full year, reaffirming the annual top line, lowering their earnings-per-share guidance, which means they are getting hit on the margins, getting a squeeze. that might be inventory, but at least for the full-year adjusted earnings-per-share, now looking $2.85.as it may be inventories. it may also be promotion. they have to do promotions to get clear of that inventory. also, a lot of retailers are having to take on costs for same-day delivery and things like that. with allnd really come of these consumer facing brands, the theme we hear throughout earnings season is it has to have a strong brand in order to pass on price increases to the customer. you need a strong brand, something that customers are willing to pay up for. that tends to be maybe more in the staples, but you see that

filtering out as well into some of these retailers. david: or high-end. the good news is the president gave them a little bit of brake on christmas. investors perhaps not thanking him much. we will keep you posted on those shares. the rest of the market has certainly deteriorated in the last two hours. s&p futures off about 1.3%. for me it is all about that twos-tens, inverted by about two basis points. that german ten-year, record -65 basis points. fresh record again today. look at what has happened for that strength in the yen. we are now strengthening further to a 1.05 handle. yen correlation is something i am looking at. i'm showing heightened

volatility. it doesn't seem to be working right now because president trump postponed tariffs on chinese products at least until december, explaining that it was in order to save christmas for american choppers. pres. trump: just in case they might have an impact on people. we've delayed it so they won't be relevant for the christmas shopping. david: we welcome now from washington amy celico, albright stonebridge group principal and head of china practice. amy served under the u.s. trade representative as the head of the office of trade affairs. as you listened to what the president had to say, what do you make of thait? is this a fundamental shift in the negotiations were just a temporary thing to get past christmas? amy: first of all, i think it is a good thing that some of these

are going to get delayed until december, but there is still over $100 billion worth of tariffs that will go into effect on chinese goods as of september 1, a boarding -- september 1, according to what ustr said after. he's delayed some of those on consumer products mainly to save christmas, as he said, but by no means does this mean there's a decrease in tensions between the united states and china. i see it as a positive develop meant that the two sides can continue talking, which they have done this week, and they will continue to do in early september. but i don't think we could call this a thaw. taylor: we got some pretty negative economic data overnight from china. do we have any indication of who is more willing to come to the table? if china is getting hurt more,

or they more lightly to make concessions? challenge inthe china coming out of beijing is indeed, the economy continues to slow. industrial output down. so the chinese government is trying to balance a few things here. they need to stimulate the economy. they need to continue to see some kind of stabilization in u.s.-china relations, president xi certainly doesn't want to look weak. rhetoric against the united states continues to build in china. there's an all-important leadership meeting taking place now in china that includes china's current leaders, as well as retired leaders, meeting at a seaside resort. they are talking about strategic issues china is facing right now. of course, the slowing economy is issue number one. very close behind it are the rising u.s.-china tensions, as well as the unrest in hong kong. david: at bloomberg we have a

tendency to look at all this through the lens of economics and business. there's also a political element, as use adjusted. as investors decide how to price this out, how much of it is economics and how much is not just the meeting now in china, of also the 70th anniversary the revolution, were president xi may not be able to look weak? are they thinking more politics were up at onyx -- or economics? amy: i think you are right that rightcs are at the fore now as president xi faces the 70th anniversary of the founding of the people's republic of china. indicating that we won't see a trade deal until probably after the 2020 election. i think both sides right now are trying to look strong, not appear to be meeting a deal more than the other side or less than

the other side. in that way, we have some real balance here. both leaders want to politically look strong, but as you know, both leaders know that their citizens look at the strength of their economies. china absolutely has a problem with the slowing economy, so it will continue to demonstrate, and just did overnight in shanghai, saying they are trying to attract more regional headquarters away from hong kong and singapore by incentivizing multinationals to be in shanghai. china is going to continue to do that kind of thing in order to in some way stimulate its economy. in the united states, president trump's move yesterday demonstrate he does care about consumers. he also cares about his election coming up, but neither side seems to want to take serious actions that will reduce tensions in the relationship that continue build. david: thank you for being with

us today. markets were up on the tariff delay yesterday, but morgan stanley strategists say investors should continue to price in escalation in the trade war, writing in part, "positive interpretations of today's news don't ring true to us. we do not think it meaningfully changes the uncertainty facing corporate decision-makers regarding investment." joining us from dallas is burns mckinney, allianz global investors portfolio manager. do you agree that we don't want to be pricing into much relief in the trade war? burns: i think there's a great case to be made for that. this is something you might think of as being a new normal, at least through probably november of 2020. as the rhetoric has ramped up, it is increasingly more difficult to take that back. it is a little bit like the proverbial once the toothpaste is out of the tube, it is harder to put it back in. once tariffs are in place, it is

harder to take them off. i think there is a bit of a political standoff here. inis absolutely correct stating that the concern is you do have corporate decision-makers, that the uncertainty involved with tariffs, we have already seen the impact insofar as you've seen a decline during the first and second quarter of corporate capital spending, and foreign direct investment has been almost halved over the last two years. these are foreign companies investing in the united states, creating jobs for americans. so i think it is something that probably bears watching. it is probably not going to be solved anytime in the near term. taylor: given in the recent days we have seen 1% or more pullback, would you say the equity markets are now fully accurately pricing and that uncertainty that you just described? burns: nothing is ever fully priced in. seen, i what we've

think we probably should expect continued volatility going forward. markets are really binary based on two primary factors, one of which has been federal reserve policy and the interest rate environment, and the second being trade policy. we saw it just in the last couple of weeks, whereby the markets rallied because we had a rate cut, and then they gave it back. it is sort of like you are watching a football game. the other team turns it over to you, and the next play you fumble it right back. what makes it challenging for investors is that it's not really as much as you would like to see a market driven by fundamentals, corporate earnings, and company reports as it is just a market trading on some of these more binary factors. david: but is it just as simple as monetary policy? ecb,er it is the fed or one doesn't take care of the other. ofns: that's a great way

putting it, insofar as a lot of the reasons for the hesitation in corporate capex has a lot to do -- has a lot less to do with capital than it does uncertainty on trade. to that extent, the fed doesn't necessarily have the tools to overcome that. taylor: burns mckinney of allianz global investors will stay with us. we were looking at macy's, down about 12% or so in premarket. if they opened at that level, they would open up the lowest point since 2010. for me, the big thing for me was here washe big thing cutting their full-year bottom-line view, which means they are getting hit on the margins, getting hit on that income statement. you are seeing shares in macy's off about 13%. then some readthrough to some of

the other retailers, like kohls and nordstrom's, also down about 5% in sympathy. david: in particular, the apartment stores -- in particular, department stores. taylor: we will continue to discuss the health of the consumer as we switch on over to the fed. of course, our bond story coming up. -tens all about that two spread, now inverted. the first time since 2007, all as recession risk continues to rise in the bond market. what position does that mean for the fed? we will discuss next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak."

weworksharing startups applied for an initial public offering. to raiseis expected close to $3.5 billion, making it the year's second largest rpo behind uber. -- second largest ipo behind uber. facebook says it will no longer transcribe audio clips from users of its services. a bloomberg scoop reported social network paid hundreds of outside contractors to do the transcriptions. contractors were said to be rattled by the work. facebook says contractors were checking whether the company's artificial intelligence correctly interpreted the messages. the u.s. federal trade commission wants to hear complaints about amazon from third-party sellers. the issue, whether amazon that publish on other e-commerce sites.

chairman stopped short of saying the agency has launched an investigation. that is your bloomberg business flash. taylor: thanks, viviana. another recession warning is blaring this morning. it is all about the two-ten spread in birding for the first time since 2007, as the 30 year low plunged to a record low. i'm still shocked. with me to help understand the rationale behind all of this is burns mckinney of allianz global investors. you know the story. inverts and you think a recession is coming. was this more psychological? not just is definitely psychological, but at the same time, i think what investors need to consider is the u.s. consumer remains strong, and that is two thirds of the u.s. economy. yield curve-ten

inverts, that is a necessary requirement for recession, but recession is not a necessary outcome for that. historically at the end of a tightening cycle like we are right now, the adjusted fed funds rate is typically higher, at least 2%, on average 3%. right now that is this near zero. you have that working in our favor. why is that different? i think there's really two reasons, one of which is that term premiums are much lower today than they have ever been, so as a result, it doesn't take as much of a decline in interest rates for the curve to invert. secondly, the bond market is much more global than they were during a lot of past inversions. really, what we are seeing from the u.s. curve is not

necessarily entirely reflective of what is going on in the u.s. economy, but rather they are just tethered down i ultra low rates overseas. that said, it is not something investors should ignore. it does indicate we are having a global slowdown that certainly will impact the markets. we are telling our clients it is probably a time to, at the very least, focus on companies that may be have cleaner balance sheets, greater stability of earnings. stories stock specific and dividend paying stocks. companies that are growing their dividends are certainly a good place to look for us but debility -- look for stability. david: we absolutely have to look at the global situation, but let's talk about the u.s. situation pacifically -- situation specifically. we've seen a lot of decline in capex. at some point that can spill over into employment issues. we have seen some tapering down

of the remarkable employment growth in this country. are we concerned that might leak into employment situations, and therefore consumer, and point us to a recession? burns: it is certainly a long-term impact. it probably doesn't tip us into between thatt factor and the trade wars that have been taking place, it is probably a couple of factors that have teamed up to pull back u.s. growth from that 3% growth we saw in 2018 down to what's really been puttering along, that baseline to percent growth over the last decade. 2% growth over the last decade. declining capital investment could limit productivity going forward. the reversal of global supply chains is also something that is taking place as well that probably could impact the

markets going forward, as far as being a headwind to s&p earnings. taylor: i asked this question, and i guess i get my answer. at these levels, do bonds look expensive to you, or can you continue to buy because you imagine, i assume, that bond yields continue to fall? burns: i'm not typically a fixed income investor by trade, but they look certainly very expensive to me. it is interesting. when you have what we have now, there's a bit of divergence between what the bond market and stock market are doing. you have a global bond market really pricing and recession, whereas equities are really not that far off of their all-time highs. there's that mindset and tendency whenever you have that divergence for stock investors to say the bond guys are probably right, but at the same time, it certainly looks like signal isyield curve

not necessarily the signal it always has been. david: burns mckinney of allianz global investors will be staying with us. coming up, listening in. facebook has been paying contractors to transcribe audio clips. more on that in today's bottom line. this is bloomberg. ♪

david: time now to look at three companies worth watching this morning. first of all, viacom. cbs is buying viacom for some cbs stock. both companies are downing the premarket. this has been expect it for some time. the question is not so much will they get together, but what they do with the company wants to get together because it is a really tough business. taylor: here's what arguably they should do, is may be spend to keep up with their big competitors. we talk about scale, but scale means big scale, big spending. you have to not only look at the

savings, but the expenses. david: a lot of content is what they need. taylor: the other story is all about the wework ipo. we did get the filing they may just in the last hour or so. valuationout wework's , still about $47 billion or so, valued high growth like a tech company, but that are served -- but there are some questions. they do have an all-male board. most companies are actually going to transition to a little more diversity. but not quite yet, as we work is showing us. they are giving us some big disclosures about the company to avoid any conflict of interest as it relates with mr. neumann. david: and next we will find out how much it is worth. the third company is facebook for not a good reason. joining us is brooke sutherland. this story broke, and my main

reaction is, what? why are they doing this? listening in on people's messages and transcribing them? brooke: it just sort of make you want to pull your hair out. it is an option people opted into on facebook messenger to have their audio conversations transcribed. facebook is supposed to be using artificial intelligence to do that, but was outsourcing to third parties to have them fact checked the artificial intelligence and make sure they were getting it right. i love about the story is facebook commented to say no, we stop to this more than a week ago. more than a week ago? that is after the settlement over privacy concerns, well into a lot of the criticism over facebook after mark zuckerberg went to congress. why are we still finding out about these things? david: and it came to light the freelancers they were hiring felt it was unethical and complained about it, like, we are not comfortable listening to these conversations. brooke: because they felt the humans didn't -- they felt the

people didn't know it would necessarily be a human listening into them. you have the ftc chairman coming out yesterday and saying we might be ok breaking up big tech companies if we feel like it is needed. one way you would go about doing that is undoing some of these mergers. face of -- facebook has been one of the most active doing these deals, with whatsapp and instagram. taylor: thank you. that was brooke sutherland of bloomberg opinion. we are moments away from export and import data. we will have a deeper look at global trade and inflation after stronger than expect it cpi reports yesterday. this is bloomberg. ♪

taylor: this is "bloomberg daybreak." i am taylor riggs in for alix steel. it is read on the screen across the board, china and germany

filtering in through the u.s., all concerns about global growth. you're seeing that picture play out process at. , but it ishe vix bold and safe havens that are rallying. , andve seen yen strength all about the bond market for me. the 30 year clearly -- on a off, noway we are 282.05, lower than a 2.08. david: import and export prices. import prices were up .2%. it was projected to be down .1%. import prices, taking out oil and petroleum, were down. yesterdaytrump just said we are not seeing any inflation at all because of the tariffs.

the imports did take up and you wonder it is starting to have an effect. taylor: you talk about the import inflation with tariffs which jay powell has said is transitory. interesting that it is coming in higher-than-expected on the import side. david: we welcome julia coronado on the telephone. burns mckinney is still with us from dallas. julia, thank you for joining us. what are we looking at these numbers? in this report, as in the consumer price index report for july, we are seeing evidence of tariffs boosting some goods prices. it is coming through in the areas where you expected to come through given where the tariffs had already been announced were imposed. we are seeing that. it is being offset by things like declining energy prices and

ongoing downward pressure from technology and other forces. we do not have an inflation , those pricess are being passed along to consumers. we dowe do not -- taylor: not have inflation problem yet, which we would agree with, but we are starting to feel a little bit of that price increase. what pressure or lack of pressure does that take off of jay powell? something that gives the policymakers or the fed a little bit of flexibility. expectnear term we do that deflationary president. -- precedent. time, we are seeing some near-term pressures upwards. tariffs raise prices. instead of being inflationary,

they are thought of the being stagflationary. the wage growth is something we call investors to focus on. average hourly wages have been trending up on a steady basis. that said, the near-term there should not be a lot of concern, and likewise, it is probably not something that gives jay powell a lot of comfort. david: burns refers to a trend toward globalization. are we seeing softening? i will put a chart up that indicates worldwide trade as a percentage of gdp. it is going down. it did not start with president trump. it started before president trump. what if that continues? julia: we are seeing the ramifications and a number of ways. we do still see a disinflationary force through price discovery in inflation. what we are seeing is more

disruption in terms of the pass-through from the slower global growth into disruptive politics around the world, from china to the u.k. to the u.s. we are seeing that populism pressure as people get increasingly frustrated with the lack of rove. -- the lack of growth. that came from the wave of rising productivity, rising profitability. that will also mean on the profitability side, companies will have a harder time generating double-digit earnings that the markets have come to expect. we are seeing fairly weak earnings this year. analysts are still holding onto double-digit earnings expectations for 2020 and beyond. expectationalistic in a world where that globalization wave has largely played out and we are looking at slower global growth around the

world? that is the concern for me going into the fall. taylor: you talk about rising populism. arguably the story of the week was the surprise argentinian vote. how do you price some of the uncertainty we seem to be facing more and more? julia: this is the hardest thing for economists like myself markets and investors to grapple with. it is not something we can time were quantify with any precision. it does not matter until it matters. we have seen that in terms of the impact of the trade wars on the u.s. economy. it was completely offset by the boost from the tax cut last year. now it seems to be starting to have an effect we can see in the data on investment decisions. maybe it is starting to creep into hiring decisions, but it is hard to model that out and predicted with precision. we have to stay on our toes and seek out the best indicators

weekend to get a handle on it. you mentioned the tax cut we had a year and a half ago. have we spent that in terms of stimulus through the trade problems? julia: yes, i think that is what we are seeing. ,t still is a positive impulse you can see that in government spending and its positive contribution to gdp, but in terms of generating a wave of investment, the impact has been offset by the uncertainty and growing concerns from trade wars. in that sense, they have cancel each other out and it may be the trade wars are gaining the upper hand. that is the worry. that is why we are seeing rising fears of recessionary possibilities because that key leading barometer of business investment is not signaling confidence. wrap up thes, as we

slowing global growth conversation, where do you allocate at this point? what regions do you feel comfortable putting money in? burns: this is the type of market from which we look for stability and predictability of earnings. looking at names that can do that but also returning a lot of cash to shareholders. something like a johnson & johnson. right now you get valuation on your side. it has never been this cheap relative to the market. a 3% dividend yield they have been raising and it is a misunderstood company. it tends to get as a health care name, but you get a large amount of their earnings from consumer products. ,and-aids and tylenol everything we use on a daily basis. consumer product companies are valued higher. you get that consumer staple type of stability to earnings. something like that or defense names are a place where you're

not at all dependent on the direction of the economy. something like a lockheed martin , where they've been raising the dividend by 10% per year over the last five years and growing that cash return to shareholders. david: julia coronado and burns mckinney, thank you very much for being with us today. now let's didn't update on what is making headlines outside the business world with viviana hurtado. viviana: chinese officials still plan to come to washington next month for a face-to-face trade meeting. ont is a sign talks remain track despite an escalation in tariff threats. the u.s. delayed the imposition of some new duties. donald trump he thinks china wants to do something dramatic to end the stand up. in sweden, a verdict in the trial of an american rapper whose case to the attention of president trump. judges found him guilty of assault in a street brawl, but he will not serve any more jail

time. he spent over a month behind bars before being free. president trump call the swedish prime minister and also sent a special envoy for hostage affairs to watch over the trial. sitting outmerican expensive vacations. you can blame debt and signs of the slowing economy. 42% of americans decided not to take a vacation in the last year because of the cost. in the last year, more than two thirds of american adults opted out of recreational activities due to costs. 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. that bank rate is right and people are not taking as many vacations or expensive vacations. i'm not sure it is leverage. household debt is down, not up. it may be more anxiety about what comes next. taylor: could be consumer

confidence starting to play in. we keep hearing the consumer is strong. very interesting. we keep hearing corporations are healthier than they were before and leverage has calmed down. mixed signals. david: the question is what comes next, not where we are now , which has people anxious. coming up, hanging by a thread. we look at the earnings and how other retailers are faring in today's follow the lead. taylor: and remember that bloomberg users can interact with all the charts shown using gtv . browse recent charts featured on bloomberg tv and catch up with us on key analysis. we will have more next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. coming up later today on "what did you miss" matt whitaker, former acting u.s. attorney general. here is your bloomberg business flash. short-sellers are taking the lead in the perennial tug-of-war between bulls and bears. whichshares plunging 30% is made tesla the most profitable short bet in the u.s. partners, -- u.s. airline safety regulators are banning certain apple laptop models on flights during apple recently said some of the macbook pro devices have batteries that pose a fire risk. the laptops in question are 15 inch macbook pros sold between

2015 and 2017. astrazeneca says it's ovarian cancer drug kits gold -- hit its goals in a study. astrazeneca saying ovarian tumor growth slowed in patients that receive the drug. that is your bloomberg business flash. ,avid: time for follow the lead a. the stories making headlines and moving markets with insight from industry veterans and insiders. today we are looking at retail, starting up with macy's which reported earnings just happen hour ago, and shares have been taking a big hit. isombergs emma chandra here to take us through the numbers. had --aking a bank taking a big hit, macy's.

compared with other department stores and also suffering. where was the pain in the second quarter? we saw it when it came to earnings per share, coming in at 28 sent, well below -- $.28, well below the lowest analyst estimate. revenue and comparative sales came in light, but what that suggests is what many had feared -- a much more promotional environment. look at margins in the second quarter, coming in at 38.8%, again below analysts estimate and much lower than where we work year ago. you need margins to be heading in the other direction or at least upwards if you're going to see any increase in profitability. it does not look like we will see that anytime soon. i've mentioned they cut their full-year profitability forecast down $.20. this is as we head into that crucial holiday season went

department stores make the majority of their sales. not the majority, but a big chunk of their sales. 27% of total sales come during the holiday season. a breakstry caught yesterday when the trump administration said it was delaying new tariffs on some items until september. some tariffs will still hit on september 1 and macy's saying it is still evaluating the details, given yesterday's decision. expect a number of questions about tariffs on the earnings call. taylor: bloombergs emma chandra, thank you. u.s. retail sales are due out tomorrow with other earnings we are expecting from walmart, jcpenney, and the like. us is as w retail advisors president and international store hunter. let's start with macy's. it is indicative of the broader market, reaffirming the full-year topline but cutting the bottom line which means

there is a margin problem for macy's. what is it? >> there are a couple of problems. the department store and it continues. less relevant, less traffic. for macy's, the markdowns are hurting the gross margin. gross margin down almost 200 basis points. all of these loyalty programs, there is free shipping. there is no threshold for free shipping, so now i can buy one thing at a time which costs them money. coming out of q1, they told us this should not be a surprise. inventories are way up. kohl's had the same problem. should we be shocked that markdown flood the market? not totally. david: if inventories are up, somebody bought too much stuff. is this a timing issue? stacey: this is not a timing issue. this is an issue of sales have slowed and they got stuck with too much inventory and in

addition they are talking about sses in their -- mi private label businesses and week towards him. the chinese are staying home and the euro is weak, and there is no pricing power for tourism. tiffany's told us chinese sales were down 25%. taylor: you mentioned tiffany's and we talk about some of the lower end markets like walmart coming up tomorrow. talk about the bifurcation between the luxury and the loan consumer. t.j. maxx seems to be doing so well. stacey: they are doing incredibly well because they buy inventory coming out of the department stores that is not selling and it is the treasury -- a treasure hunt. they're not getting hit by the terror conversation as much. target with their private-label business, they are doing incredibly well. they are doing well what macy's is failing at. david: i will put a chart up

that surprised me and compares different segments of retail. the white number is general merchandise retailers. the blue line is luxury and the goal line is department stores. i expected department stores will be down. i thought luxury would be doing much better. stacey: luxury had been doing better than the overall retail market. it depends where you are exposed. this time last year the chinese started staying home. if you have big exposure in china, you've been doing well. now we are going up against that. that is one of the issues. guys and end department stores are the one suffering. david: the blue line's north american luxury. that is what i was surprised by. stacey: you're thinking about coach or cores, which have been doing not well. they cleaned up the channel but now volume is the problem. taylor: who has been best position to hold their own against amazon?

stacey: target and walmart. they are saying we cannot beat amazon at their own game, but we will plant. we will do same day next day delivery. david: what about between the two of them? stacey: i would go for target because the valuation and because investors are looking at them and saying they are still an investment in, but they are driving traffic. walmart and target are the only retailers that have the ability to drive traffic. they are taking the specialty retail segment at the ones that are failing at it like a victoria's secret, and they are doing it internally and doing it better than the competition. taylor: you talked in your note a lot about tourism, which brings up the strong dollar. how much dollar strength has been impacting these retailers, as well as bringing foreigners here to the u.s. to buy? stacey: what you have seen it

now that the chinese are staying home, their currency is weak, the euro is weak, there are less tourists coming to the u.s. to purchase, and that is something we have been hearing about for well over a year. today macy's the thing that got worse. tiffany saying that is not getting better. that is the huge pressure. for some of these businesses, 20% to 25% of their business is tourism. david: what about the slice of the pie. we will get retail sales numbers thursday. stacey: i think you will see the department stores continue to suffer. we'll hear from jcpenney at kohl's and nordstrom. i think the numbers will be top. you will see the opera's guys, continue to succeed. taylor: within walmart and , arguably walmart and target have done well in bringing in fresh food. how much of that is helping

boost the top and bottom line? stacey: for walmart, that is half of their business. they have been pretty inorganic, offering better fresh food. -- they have been bringing in organic. target is behind walmart. what is driving the traffic is you can do pick up, next day delivery, that is where they are waiting. -- that is where they are winning. convenience. david: what about the bottom line? our margins the same on groceries as they are on apparel? but whathey are lower, you want to do is give the consumer in the store and hope they buy other stuff that is higher margins. targeted walmart have been successful in doing that. taylor: very fascinating, especially because this week it is all about retail. stacery widlitz, thank you. coming up, for me it is all about the bond market. hasu.s. 2-10 yield curve

inverted for the first time since 2007. more on what i'm watching, next. tune in to bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

taylor: here is what i am watching. the story of the last three hours, it is all about the inversion of the uk's yield curve, the inversion of the u.s. yield curve, a record low on the 30 year yield and what that means is everyone is a negative yields. .ome to my terminal at gtv negative yielding debt is almost $16 trillion. what scares me is the log, the curvature. the rate at which we got to the level. david: in march we are at a trillion dollars and now we at almost 16 chile and dollars.

-- $16 trillion. david: germany -- taylor: germany had a record 10 year yield. japan ran all of those european ten-year yields are negative territory, and then you bring it back to the u.s., the 2-10 balancing between positive and negative territory. david: they are not done yet. we have the fed in september. who knows where it is going. open," stephenhe parker. here's a look at u.s. futures just ahead of the equity open. it is all in the red. this is bloomberg. ♪ ♪

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coming up, risk assets retreating as the trait euphoria gets steamrolled by another round of disappointed global economic data. germany is shrinking, china posting the weakest industria output in 17 years sparking fears of a global recession. investors taking refuge in the safest part of the market. the treasury curve in burning for the first time since 2007. 30 minutes until the opening bell. setting up to be ugly day in the u.s. the s&p down 1.3%. the euro getting a pop against the dollar. 10 year yield plummeting. 30 year reaching all-time low. crude off as people expect the slowdowns to deepen. of theta from two world's biggest economy overshadowing the de-escalation in the trade war. >> slowdown in