tv on your terminal. browse, save the charts, g tv . iran oil waivers, they love this, global market strategists asking what it means for economists. this is bloomberg. ♪ ," this is "bloomberg daybreak i'm viviana hurtado with your bloomberg business flash. the cofounders of bed bath and beyond a leaving the chain's board. an independent chair has been named and the board is reviewing the operations structure and strategy. nissan will reportedly reject and integration proposal according to nikkei. time harderlong ship with their alliance instead. the partnership says they haven't been treated as an equal and executives believe that this would make the inequality permanent. tesla looking to acquire in shanghai, with security camera footage right there showing a white tesla bursting into flames. right there. that could add to concern about the safety of luxury vehicles using high density lithium batteries. bloomberg business flash. addd: thank you, it could to concern? my car has never done that that i'm aware of. alix: the liquid that goes around to keep those lithium ion batteries cool? it can also just a jump on fire. that's kind of a bummer. i don't think you want that going around. turning now back to oil, mike pompeo is expected to announce that the u.s. will not renew waivers allowing for import from iran. here with more on what this could mean is taylor riggs. >> this will affect companies let -- countries like china, india, turkey, who cannot deliver the oil without the sanctions from iran. come to my terminal, you can see that china is the biggest buyer of iranian oil followed by south korea and then you have india as well, with turkey and japan. these countries have already started to make alternative plans to buy the oil elsewhere. interestingly enough we have been looking at iranian oil production and exports since the sanctions and a trump pulled out of the iran nuclear deal a year ago. the opec supply falling and the iranian supply has been falling, increasing recently, but the lowest it has been since the obama administration with trump taking office and imposing those sanctions and what that of course means for prices, come over here, we're taking a look dubai spread with dubai heavy on crude and that is what has impacted iran the most. you have brent typically trading at a big premium that is declining here, of course, as dubai prices are rising fiserv -- faster than brent given the drop in supply. alix: think you so much, bloomberg's taylor riggs. jpmorgans now is the asset management global strategist. do you like this? do you not like that? david: right now i like that. earlier,re messaging the issue has been with manufacturing and investment spending. the last time we went through something like this it was a higher oil price that got things .oving in the near-term it's good, in that longer-term it's a bit concerning. there is a view out there that the consumer is going to have to be the main driver of growth this year and obviously of oil prices get too high it will impact the trajectory of consumption. david: is it also a concern that we are depending on the whimsy of the decision-making of governments? these are not fundamentals, can people invest on that? i would be focusing more on shale and fracking. these are the guys who have been supply andhe overall demand dynamic over the past few years every time we see oil get past 70, the shale guys start pumping like crazy and for them it is much more of a volume business than it is an earnings business at the current juncture , so i think that rather than watching the political side of things, which can obviously have a short-term impact, watching the response to higher prices by producers is probably the right approach to take. take off on, if you iranian crude, where does it come from? they don't have spare capacity in the long-term and libya is a mess with venezuela also a mess. based on that, if prices are more sustainable, do you want to buy big oil? what's the right way to play that in the energy space? david: the big oil angle is interesting because these smaller companies are not necessarily profitable so as we get into the later stages of a cycle with ipo and m&a activity picking up, the trend could potentially continue, making it more of a big oil story, the big guys picking up the little ones rather than focusing purely on emp. we have got a lot of earnings coming this week including the oil and tech with consumer products. alix: caterpillar. david: exactly, industrials. to what extent does this affect other readings? david: when manufacturing activity picks up, it's often good for the rest of the world. it's not necessarily great for the u.s., but it's better than it was 20 years ago and this is a morgue global growth story. one of the big issues for tech has been the strength of the u.s. dollar, so if we can get the global economy firing on a few more cylinders, not necessarily all, but more than it has been up to this point, it takes wind out of the sails of the u.s. dollar. to me that makes earnings from these more globally exposed sectors like technology, it makes the outlook better than it currently is. alix: on the flipside, margins on the s&p, looking at david's terminal, they are already coming down. with wages rising higher and input costs moving higher as well, what is your outlook on margins and what sectors have better pass through? margins other risk to the broad earnings story this year. take what happened last year with a bit of a grain of salt. there was an accounting error and it led operating margins to drop like 2%. that doesn't usually happen. we are tracking 11% down from 12% in the earnings season thus far and i think there is room for margins to come lower and i don't think we are heading to 9%, 8% on margins. frankly this is an environment where companies can still make it. david: earnings are down dramatically, the most in a long time. did they overcompensate? david: on the earnings side, they defend we did. one of the things we picked up beatsfar is that earnings are their all-time high but revenue is at an all-time low. i think that what happened here is that analysts ran a sales model and said they think that sales will be x. they got nervous about global growth, brought down margin assumptions and earnings assumptions but what they should in was slower overall topline growth, not the gross -- the growth and costs alix:. bottom panel -- costs. alix: battle -- bottom panel, not even half of 1%. what does it mean for the back half of the year? david: people were concerned about the fourth quarter but i think the big risk is in the second or the third quarter. highar-over-year, it's a water on earnings and that is when the comps will be difficult . there will be a bit of a tail in the fourth quarter and if we struggle i think there is room for a bounce back and i think it's shortsighted to get too focused on what's happening in one q. david: could china save us? if the stimulus really kicks in, could it have a profound effect? that's interesting, growth in china has a better impact -- greater impact on europe than growth in the u.s.. your point, does it get capex firing at a higher clip? if so, it brings the manufacturing sector into play and it keeps the earnings going for the foreseeable future. beid: ok, david is going to staying with us. coming up, one of asia's deadliest terror attacks in theaters, multiple explosions in sri lanka on easter sunday. more on that, next. this is bloomberg. ♪ toll from theth vicious coordinated attacks on easter sunday entry lock up is approaching 300 now. for a report on what we know, we welcome on the telephone from new delhi iain marlow's. -- marlows. what are the facts? >> close to 300 people have been killed, there is around 500 injured, the worst terror attack in years. later this afternoon, the government in sri lanka blamed the attack on the national group that actually very few people had heard of this islamic group. it's a local group, the government now is investigating whether the group had any international links or assistance from known terrorist groups and they are reaching out to governments around the world as they look to investigate this. the event is puzzling in a couple of ways for those of us that don't follow sri lanka the way the you do. its muslim, not hindu. this is not the civil war that we talked about for many years. and it looked to be domestic. it was such a sophisticated attack it was a suspected to have had support from outside. iain: the original speculation had centered around two groups, buddhist extremists or known for attacks on muslim groups with injury lockup the other is that it would be some sort of islamic returnee orey -- group with international ties. even groups that follow sri lanka and fair politics and security issues, most were hard-pressed to add details to what was coming out. not many people had heard of this group before. there were a lot of splinter groups and over the last few years the leadership has been divided into different groups and a lot of people were not sure who was responsible, whether it is the group that was named or people just loosely affiliated with it. there is still a lot of confusion. iain marlow, new delhi, thank you. alix: broadening out specifically, in the bond and equity markets for etf and yen, is it a buying opportunity question mark are we fully priced here? what do you see? david: e.m. is coming back nicely, so perhaps a bit of a pause is warranted. longer we still like the fundamentals. we think that the demographic growth story of the emerging a tacticals, from standpoint, i don't think that it's necessarily the reason or the time to run in the opposite direction. you are again seeing the underlying fundamentals getting better, the growth story getting better. importantly, the fed has had a dovish pause and it looks like these companies are getting breathing room. they won't compound at the pace that we started the year. particularly if the dollar remains relatively campaigned or even softens against those individual names. david: segment, a little bit? david: we would be much more interested in what's going on in southeast asia for a couple of reasons. one, the stimulus of the chinese economy. the latter is a preference on manufacturing over commodities. looking at latin america there is a lot of political instability closely tied to what in commodity markets. we kicked off 2019 with enthusiasm around places like brazil, not so much mexico. you have started to you flip up where things in mexico won't be as bad as we thought and while brazil might not be off to the races the way that people anticipated, a lot of uncertainty in that part of the world keeps us with a preference. related to china. how much more juice can we get out of chinese stimulus? david: exactly. there is an element where investors are conflating what happened in 2016 with what could happen today when the dollar was so strong and energy prices were cratering. what the china do? they went back to their old tricks, they got manufacturing going. the stimulus this time around is much more on the consumer side in terms of tax cuts, bank lending, and lower interest rates. it's not going to have the same big bang impact from a growth standpoint, it will be more a wind at your back as opposed to push forward. david: all right, david will be sticking with us. -- alix: all right, david will be sticking with us. coming up, a first look at u.s. growth in the work quarter with tech and oil results. this is -- in the fourth quarter with tech and oil results. this is bloomberg. ♪ alix: this is "bloomberg daybreak. softer volume across the board, a bit of weakness in the u.s., equities nasdaq futures are off, 100 at a record high get again on thursday. i wanted to point out that russian equities were up by 5/10 of 1%. wrubel and equities are up, did you know why question mark pop quiz, who is going to buy? where will it come from? probably russia. david: i was going to guess that. alix: what is bad for iran might be good for russia. on the dollar is a mixed story with oil at a six-month high. 18 basis points, the vix is not really going anywhere. steady as she goes. there is the meantime, a lot going on outside the business world. for that we turn to viviana hurtado. one of asia's deadliest terror attacks in years, nearly 300 people were killed in the easter sunday bombings at churches and luxury hotels in sri lanka, attacks charging christians and foreign tourists. says that two dozen suspects have been arrested. it's no joke, ukraine elected its most-watched comedian to be president. getting 73%lenskiy of the vote in a runoff against incumbent petro poroshenko, voters venting the frustration over the xo beat republic lack of progress since revolution five years ago. in paris it was the 23rd weekend in a row for the yellow vests protests, plus the fire at notre dame failing to keep demonstrators off the streets. the protest began as a response to rising gasoline taxes. they have now developed into a wider protest around the cost of living and the emmanuel macron governing style. news, 24 hours per day, powered by 2700 journalists and analysts in 120 countries. i'm viviana hurtado. this is bloomberg. violence,excuse for but they did have a point, they said they could raise $1 billion for notre dame like that and what are we doing for the poor? alix: and it's not exactly apples to apples, but the idea is pretty glaring, spending all that time, all that money on that and they have been protesting for 23 weeks and it seems like each week is getting worse and worse. are a lot of government issues there, but the fundamental and underlying issue is the lack of growth. a lot of people were feeling better about where things were , friday weh is true will get the first to read on u.s. gdp growth in the first quarter. taking us through what to expect, welcome michael mckee. still with us is david level wets. davidid level wets -- leibowitz. growth inte of gdp st. louis, flat because it only comes out once a month. the white is atlanta, look, it went way low and then came up way up high. new york was like 1.4. the atlanta fed is a in a. how did we get this kind of range? [laughter] mike: there's no real agreement and the disbursement in the forecast is very wide, 1% to 2.9%. of partly because of two factors. way the growth has been constituted has been a big inventory build a because of the trade pressures that are starting to be worked off, it appears, and then there are questions around how strong the consumer is, but the data had lagged. we are not really sure where we are. the trade data is coming in better than we expected, pushing atlanta up without as much of an impact on the new york numbers. we don't really know where we are going to come in here. the other thing, and i brought my own chart to show you as well -- david: these are all your charts. gdp: this is a chart of over the years and on the left side it tends to start, we know this, low, with residual seasonality problems that people are working on, trying to figure why trying to figure out this happens every year, we start out low and we catch up in the second quarter and it goes on to do whatever it's going to do in the rest of the year in general and moved higher. why? we don't really know, but the forecast are that we will see a relatively slow first quarter, but 2.9% would be pretty good and that's the jpmorgan forecast. david: it is the jpmorgan forecast and i think it's interesting, we came into the year with people concerned around the trajectory of growth and where things are headed into your point inventories have almost set us free in the sense that they are providing a nice support to the overall growth figure. there are questions around what the second order looks like, right? the inventory dragged could finally materialize, but i would point out that the consumer finished the first quarter with positive momentum. howquestion then becomes much of the inventory weakness can a consumer that kept us out of recession a couple of years back, how much heavy lifting can the consumer take on question mark hopefully more than was the case in 2015 giving -- given that labor markets are higher. with thet do you do equity rally that we have seen? do you want to sell? hold on? what do you do? you want to't think sell. i think you step back to take a look at what's happening and understand it. the move came from growth figures signaling a recession and the fed could allow markets to move higher. the fed not hiking rates can allow multiples to expand, but i don't think it will expand in a sustainable kind of way. we want to look at the sectors financials in particular are more attractive. taking that a step further, we are also looking for the sectors that provide more income relative to the broad index. we think of it as bubble wrap in portfolios. withink it will be bouncy the path of least resistance for stocks being higher and we don't want to be exposed to what we perceive to be fairly broad swings in equity markets and the remainder of the year while maintaining an element of cyclicality. some people look to small caps. what do they tell us? mike: that there may be a problem out there, we don't know, but again we have another chart to bring up here with matt bailey. he points out that the russell 2000, the white line here, tends to lead the s&p 500 and he noted that the russell had peaked a month or so before the s&p 500 and then both went down. looking on the right side of the chart, seeing what's happening, the russell has gone way down and the two have diverged and that this could be a problem unless the russell turns around. thean't seem to get above average. the concern is that the russell may be forecasting a real slowdown for stocks. people look at it as a possible forecast for the economy was small caps being largely domestic and often heavily leveraged. so, the leverage ratio is much higher than the s&p 500 and if they aren't performing well it may be assigned at there is some sort of problem out there. when we think about valuations, they look like they will be challenged to expand and any sustained fashion, meaning that earnings growth will be key. looking at the russell 2000, something like 35% of the companies in that index have negative earnings and what that is sending a signal of his hey we need to focus on the areas of the market for cash flow is actually generated. this can of rising tide that lifted all ships thus far may not continue. alix: you may want to take a implied small caps and ask -- what do you do with the bond market, then? the kerry still looks attractive, sitting in the high yield to clip your coupon without taking on too much incremental risk. the one part of the credit markets that are worried about is the private space more broadly. something like 80% of leverage loans were covenant light and the bank of england estimates that $1 billion were issued in wereand of that 60%, they used for m&a and lbo transactions. there's a weird synergy between private equity and private credit and we prefer to stay in the traditional bond market. talking about mentions, you're are starting to hear a lot more about leveraged loans. you are really starting to hear about it now. david: everybody talks about it, but nobody does in a thing about it. how much of it was the fed responsibility? mike: none of it is the fed responsibility. it doesn't fall within their purview. david: is that part of the problem? mike: it may be part of the problem, we have a very diverse regulatory scheme here. there was a debate about a month or so ago about this, it's that it is going to make things maybe worse if we have a downturn, but it's not systemic at this point. so, we keep our fingers crossed. alix: to that point, bringing in the fed, what does the fed do to mess up what we have right now, which is like a slow melt up, no big selling, no huge biting, everything relatively calm? mike: the only thing that would do that would be raising the rates. the idea that the fed went on pause isn't signaling that they know something we don't. everybody knows where the economy is, people are not going to worry about them saying -- we are on positive and waiting. they might worry if the fed suddenly shifted gears and said we were worried about cutting , becauset probably not we will know with economic data that things have turned down if they do. david: this all sounds pretty good with the possible footnote of leverage loans, but are we worried that its low across the board? is that make you nervous? it does and i think it's related to the fed's dovish pivot. i know i could be last man standing with this view, but i think it's premature to write off the fed hiking rates this year. i think if equity markets continue to creep higher, despite them not having an explicit mandate for financial stability, we know its front and center for them. we know it's part of what caused them to change their tune late last year. year.dismiss the fed this maybe the calendar works in our favor, maybe it doesn't, but this is a very different fed today than what we are used to, this is not an academic fed going back to tinker with models, this is them taking -- taking and making decisions in much more real-time than we are used to. alix: is the bar higher or lower for a cut or a hike? david: i think the fed is more likely to hike rates before they cut rates. mike: i think that's the general consensus on wall street. if we go up from the first quarter, and there is a feeling that we might, you may start to see talk of a fed rate increase creeping back in, but it will probably have to show itself in inflation with the fed being really focused on that right now. this week we got the michigan inflation focused on expectations. so, they will watch the breakeven's and the consumers and see if anybody is starting to see inflation is a problem. it's been going the other way, that has been their concern. if that stabilizes and starts to rise, maybe you see more talk of a increase. alix: you know what helps? oil prices. it's,l mckee, david level guys, thank you very much. well, coming up, it's a relationship in desperate need of couples therapy. it may also be passed that point. elon public did -- elon musk public dispute with panasonic. this is bloomberg. ♪ alix: i'm alix steel. david westin, this is your bloomberg's newsflash. you never get to read this, this is exciting. south carolina, shoddy production. "painting a skewed and inaccurate picture of the "the times" code said that metal shavings were often left inside of the jets. . david: and a french company -- cool. and targets in france are medidata solutions, the software focus for a clinical trial. they're looking to settle offers for software and services industries ranging from aerospace to life sciences. widenjpmorgan looking to the use of blockchain technology , the bank inviting financial tech companies to develop a platform and last year 75 of the worlds largest banks joined the intro bank information network. that is your bloomberg business flash. they all have to be in the same spot to work. david: sounds tricky. alix: it is tricky. turning to wall street beat, first out, the ubs banker in the mullah report. wall street executives may have noticed of one of their own, the vice-chairman making an appearance. carlos ghosn's indicted on new charges, facing the most serious allegations against him yet. and elon musk takes on panasonic. who is he not taking on? he's in the midst of a public .ispute with panasonic one analyst's recommendation? go to couples therapy. david: joining us now, peggy collins. talk about the mullah report. ubs made it important and not necessarily in a good way. lixalex said, the vice -- a said, he was contacted by a senior kremlin official soon after trump was elected. said, it's an unusual name to pop up in the report, showing how the ubs executive in the investment banking unit that work on russia in the dealings for them, essentially a basically looked like he reached out at one point to the trump campaign, saying -- hey, potentially i have a way to set up a meeting for you. when questioned by the mueller team he said it wasn't between trump and putin directly, it was between a russian presidential aide basically trying to see if the trump campaign or trump could speak at an epic -- economic forum. david: when i was at abc news someone from another government, not russia, said the you know anyone from the incoming administration we could be introduced to? alix: but then he tried to get a job with that administration? david: he did. alix: talking to russians to get it? whatever, i'll be nice about it. looking at carlos ghosn, that poor guy, did you read that article in "the journal," the wife talking about the conditions being kept owned or? -- kept under? heat, nothing to write with. yeah. $5 million was apparently funneled to him from the sun. and it seems to be getting worse. there are reports coming out about the japanese legal system and the time he spent undergoing, but when i read the story, the fact that these were the serious charges makes it seem that these things are heating up. this is now saying he may have siphoned off some money from the company and send it directly out for his own personal use. important to note that he's it vigorously denying the charges and saying these on it tech it -- saying that nissan executives are plotting against him. david: third story, tesla. we have got elon musk out there car,a self driving earnings later this week, and in the meantime having a spat with panasonic, who makes his batteries and at one point he said that tweeted -- he tweeted capacity that is supposed to be given, panasonic, this is a mess and it's your fault. alix: and it's unusual, talking about japan, this is a japanese company. they are not usual suspects were getting in a public spat like this. and certainly when you get into tensions with elon musk, who sends to take it twitter. -- intends to take it to twitter. tolooks like -- he tends take it to twitter. it could be creating some additional temper tantrums, there. as you said, it is interesting to note that one analyst in the story said that they basically need couples therapy. the relationship is breaking down. alix: we will be talking to the analyst in the next hour about that. bringing up the factory and atl isartners, the china the biggest battery maker in the world in you wonder if there is also that sort of competition going on as well. it is hard to build the batteries, it's not like an easy job, to be clear, but i wonder if that is a part of the situation. david: also -- iain: -- peggy: also an indication over the spat that tesla hasn't been able to reduce as many cars and panasonic had to 10% there reduction. david: the core of the issue, it looks like they will not be able to produce as many as we thought . there is a question of demand for those models and if it gets out that they cannot row as fast as they thought they could, it will be tough for that stock. alix: but does it matter? about robots driving cars and a look at this cool from a stuff. let's not wording of that worry about earnings in a couple of days. top of acar in the missile and shot into space. alix: isn't there like a lawsuit now? peggy: no matter what, they will have to report earnings on april 20 for -- 24th, so there will be other details to dig through. ofid: the discipline earnings. many thanks to peggy collins, thank you. coming up, are you a u.s. citizen? the controversial citizenship on the census question gets its day in court. alix: if you have a bloomberg terminal, check us out online. on your to tvrminal. you can ask us questions there. this is bloomberg. ♪ david: ok, some very important breaking news, now. the semi official news agency in iran is reporting that iran would close the straight of hormuz if they were present -- prevented from using it. that's fighting talk, as you note -- you know so well. firstwhen sanctions were imposed on iran, they also made that threat to close the straight, but they did not wind up doing that. this would cause a disruption of epic proportion to cross the oil world, adding shipping times and cost. you have to say that secretary of state pompeo has got their attention. it can't the a coincidence that they were about to come out an hour from now to say that they wouldn't remove the waivers from big countries like china and india to import from iran. if it happened, it would really hurt iranian oil production. and apparently the actual water is a separate territory but you go so closely towards iran, large tankers could be open to attacks. clearl
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