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tv   Bloomberg Markets Americas  Bloomberg  June 2, 2017 10:00am-11:01am EDT

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♪ >> here are the top stories. investors in the united states shrugging off a mixed jobs report sending stocks to record levels. lower. unemployment rate we will bring you part of our exclusive interview with david einhorn. why he says general motors is peddling a bear case on its own stock. everyone is reacting to president donald trump's decision to pull the u.s. out of the paris climate accord. we will examine the fallout and how it might be up to big business and others to invest in green energy. into theout 30 minutes
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friday trading day in the u.s.. it has been a busy week. julie hyman is here. surroundingusyness the jobs report, sort of indecisive. a lot of it goes back to the reaction to rates. we have interest rate sensitive stocks outperforming. equals not much change for the dow and s&p. all three major averages did close at a record yesterday and still close to record levels. the nasdaq the winner of the day up to 5%. oil prices dragging on stocks. energy stocks were the worst-performing group. oil prices down below $40 per barrel as traders are trying to suss out the effect of the opec cut extension. there was another draw down reported in yesterday's
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inventories report. there was also continuing uptick in production reported. traders trying to weigh all of these factors. let's talk about the treasury and ethics markets in reaction to the jobs report. we had the u.s. dollar lower by 14%. down fourr yield basis points. ripple effect in the banks. between the double whammy of energy and financials, we are seeing the stock market held back. we are seeing rates at the lowest level since the election. we have a look at the dollar. the dollar in yellow and the treasury yield in white. we also have the 200-day moving averages. with the drop today, the 10-year yield is below the 200-day. both are at the lowest since the election. this comes back to the debate
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about the trump trade or reflation trade. the airlines today on the drop in oil and a report by delta may , theity was unchanged airline is doing well today. up bythis is the intraday .8% ahead of the jobs report. barely changed now. we are up for the second day. we had four months of gains through the end of may, best monthly run since 2013. great stuff from bnp paribas today. unless it corrects by 5% next week, this will be the longest it has gone without a pullback since launch. it adds to the dax. we have to go back to the 1990's to see the last time we had to wait for a 5% pullback. this function shows the industries up led by chemicals.
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let's talk about the world's biggest maker of wind turbines one of the big decliners in europe after trump pulled the u.s. out of the paris climate accord which throws into question the future some say of renewable energy where it derives about 40% of its revenue . they have rebounded since. littley withdrawal makes economic sense. the chairman says he does not think the u.s. will abandon clean energy plans. this is sterling on a weekly basis. this is when theresa may called the election. sterling rallied that week and the next. it has been volatile since. last week, we had the biggest weekly decline of the year after the poll showed the gap between the conservatives in labour party narrowed to five percentage points. cap week, a poll showed the
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had narrowed to three percentage points. there is volatility in the fx market for sure. in the wake of the jobs report today, thought this chart would be appropriate. this is the economic surprise chart relative to expectations. above zero it shows data is beating expectations. data,ite line is u.k. -17. -36, almost the lowest level since february of last year. in february in the u.k., we were at the highest. how we have come down. the eurozone the winner out of the three in the economic surprise index chart. fascinating chart in the wake of today's jobs report. vonnie: your charts are always sophisticated. back to the u.s. jobs report which showed a pullback in hiring in may at 100 and 38,000 -- 138,000.
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the unemployment rate fell to a 16 year low to 4.3%. participation also declined. wage growth remained soft. investors and economists weighing in today on the may jobs report. have a listen. >> this is a week to mixed report relative to expectations. weak relative to expectations but mixed in terms of where you would expect the labor market to be at this stage. >> we brought back close to 200,000 people underemployed in the u.s. workforce. that to us is an amazing trend. there is some very good news in this labor report. >> nonetheless i think it are on steam for a 2.2% real economy going forward. vonnie: for more, we are happy
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to welcome the executive director. thatu were to listen to and did not know the cast of characters, you might be confused. what should investors take away and what should ordinary americans takeaway? >> we all know the monthly jobs report is volatile. around 150,000 jobs on average is not disturbed. ast is interesting to note mark pointed out a few minutes ago is even though the second quarter is coming in better than soft first-quarter it is still below expectations. you have a continuation of the disconnect between the levels of confidence postelection still on highs with the expectation of this acceleration.
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and what we are getting in the data which is closer to, last quarter was 1.2%. this quarter tracking north of 2%. but perhaps not as strong as the atlanta fed believes by their data. it is a very mixed message. vonnie: what is the market saying? mohamed el-erian was saying this is no longer the trump trade or the reflation trade. david einhorn was talking about his bubble basket. the market is at a record. what is it saying. >> the market is saying the themes that have worked this year are likely to continue working. technology is based on earnings, based on momentum. there is always an element of that particularly when the other sectors such as financials and energy, sectors we would be more comfortable seeing as a catch up trade as a ratification of the economy doing better, not working.
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it is steady as she goes based on the subdued 10-year yields. mark: what is the sum of no fears? can be economy earnings and markets remain not too hot or cold? fears ism of no manifested in the vix being at 10. it is truly extraordinary. the last time we saw that was late 2006. what we need to see to keep goldilocks going is this pick up in the economy that is we heard from gary cohn earlier the administration is doing what it can but investors have grown at the margin a little weary of what is palpably lack of progress. i think it is incumbent on the next several months to show progress. mark: i know it is one question , to clients are asking
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hedge or not to hedge? that is my question. what do you say? >> intrusive experience -- in true shakespearean fashion, the volatility is mean reverting over long periods of time. we are not saying the last episode of the vix below nine, the which was a rally at start of the financial crisis is going on repeat, but we recognize the higher you go and getting toward equity valuation amongst the highest, hedges do make sense prudently deployed. vonnie: what kind of hedges? >> is no question downside options are inexpensive. the other alternative is for people perhaps feeling less comfortable, a higher holding of cash. vonnie: gary cohn, we spoke to
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him earlier on bloomberg, one of the things he said is they are going to fix tax policy and drive infrastructure. will they get it done in the first term, let alone in 2017? >> that is the $20 trillion question. the size of our government debt. u.b.s. believes we will see tax reform late this year or early next year. the scope and depth of it and whether it will translate into increased fiscal stimulus is an open question. vonnie: do you have a best case scenario? >> we do see modest, comprehensive tax reform. what we have been focusing on and the market has rightly been there ison is the idea one issue with regard to taxes that both sides of the aisle
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agree with, and that is repatriation. and that is part of the reason you have seen technology and health care outperform this year because those are the areas of the market were all of the offshore cash is centered. i'm looking at the data inflows in european stocks. inflows just had their biggest week in months. u.s., discuss. >> the value proposition in europe is more attractive than the u.s. at the present time. the potential for earnings momentum particularly given the fact we are seeing emerging markets recover, europe is a bigger seller of goods to emerging markets. when we look at those surprise index is in europe as a whole,
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they have been accelerating. the u.s. has been stagnant to down. that is the kind of environment where europe tends to outperform, when the surprises outperform. vonnie: excellent. i love it when mark brings up a chart that the guest was to talk about. happens quite a bit. julian emanuel, thank you. let's check in with first word news. >> president trump's decision to pull out of the paris climate accord left him isolated. american allies denounced the move. chancellor angela merkel called it extremely regrettable. corporate executives were unhappy. and elon musk resign from a white house panel in protest. hisident trump has taken plan to the supreme court. they will be asked reverse a
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string of losses for the order that temporally bars entry to the u.s. for people from predominantly muslim countries. petersburg, vladimir putin is sounding upbeat about relations between the u.s. and russia. he says they are cooperating on key issues. putin asked u.s. businesses to help improve the relationship. in kabul, several people were hundredsen protested the lack of security. used tear gas to try to disperse the crowd. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
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mark: thanks a lot. oil set for the biggest weekly loss in a month. can crude come back? this is bloomberg. ♪
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live from london, i am mark barton. vonnie: from new york, i am vonnie quinn. this is "bloomberg markets." oil headed for the biggest signalsrop in weeks as opec' needs more time. wall street also saying today it was going to take more than nine months for this market to rebalance. all of the major banks as far as
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i can tell are saying this. >> that is exactly right. oil is a global commodity. their supply and demand. every story this week was about supply. opec underreported. and russia'sudis meeting in st. petersburg talking about oil trying to figure out if they can cooperate and manage oil prices. flow is starting to through the pipeline the previous administration blocked. more supply delivered cheaper. the interior secretary started signing texts that say let's start explore for oil in alaska again. those are two long-term macro supply trends not supported for the price of oil. we have been about $50 for the last two years. that might be the high water mark. vonnie: are you saying those
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projects might have an impact on the price of oil in the near term? >> in the near term, kind of. there will not be supply disruption and u.s. oil will continue to flow. it is more of a macro supply story. the demand side is not good at all. the bond market is telling you they do not think there is growth, inflation, and they are not sure there is global recovery going on. bond prices are rallying. the demand side does not look great and there's plenty of supply. vonnie: is the market anticipating a grind lower or will this be the bottom falls out of the price at some point? >> i think it will be a grind lower. in st. petersburg, the economic minister from russia said we are ready for $40 a barrel forever. i do not know if that is a cap or a floor but that is a bold statement. russians think $40 is ok. they have the ability to affect that price.
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u.s. suppliers have rushed in to fill that in. supply,a stasis of domestic u.s. supply. what might interrupt that is public policy. is there going to import tax? everything changes when you get a policy change. supply and demand is supported for lower prices. vonnie: thank you for that. we will have to wait and see. we are trading lower on the week. "futures inay's focus." looms.&a it is etf friday next. this is bloomberg. ♪
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♪ is "bloomberg markets."
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i am mark barton in london. vonnie: in new york, i am vonnie quinn. it is time for etf friday with julie hyman. julie: the asset management business is looking at consolidating in this environment. it is likely to look different than it does now. here to discuss a potential m&a boom is eric balchunas. what would be driving this potential m&a boom you are talking about? courtney: one word, two syllables -- vanguard. anything going on in asset management, if you pull the you get to vanguard. that one decision having more impact than anything else now. is taking in over half of the money going into funds. i compare them to amazon.
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they are very similar companies. they are reshaping the entire industries. one ofu look at amazon, the things they do not have in common is amazon is public so it gets a lot of attention. the other thing is this. the reason you have not seen more consolidation is unlike the multiple retail where customers leave, you see it in the next quarterly earnings. that is not happen in the asset management business. last year, we saw $400 billion leave active mutual funds. get assets and the funds went up to $11 trillion because the stock market went up. the market has offset this low-cost migration. this is something that could turn into a panic. panic might be the wrong word but it could be set up before we have a flat or bear market and people are like we need to consolidate. vanguard and blackrock are the
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big ones. they have 30% of all fund assets. at this rate, they will have half in five or six years. that will leave the others to figure out how to get bigger to get cheaper. julie: if people are looking for a template, it is not vanguard according to your research. it would be like rock -- blackrock's acquisition. what is that about? courtney: blackrock acquired ishares from barclays in 2009. they acquired etf's that trade a lot, high-volume. they are diamonds because you cannot manufacture it. they have 57 that trade above $50 million. basically everything is going to zero. if you have an etf that trades a lot, you can charge more. it is like having a hotel on park place. they have 57 of those.
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that definitely helped. julie: we have to leave it there. we have breaking news. mark: news surrounding deutsche bank. a trader has pleaded guilty in a medals probe. he admitted in court to spoofing precious metals futures including gold, silver, platinum, and plenty of. he admits to conspiring to rig futures. a trader pleading guilty in a probe tied to deutsche bank. we will continue to monitor this developing story. this is bloomberg. ♪
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♪ i am vonnie quinn. mark: i am mark barton.
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let's check in on markets. >> business leaders firing back at president trump's decision to walk away from the paris climate accord. lloyd blankfein called the decision a setback for the environment and u.s. leadership position in the world. meanwhile, bob iger and elon musk said they were resigning from the presidential jobs panel. attempted robbery and not terrorism, the reason for a casino attack that has left 37 dead. stored the casino, set it on fire. police say the gunman killed himself. victims appear to have died from smoke inhalation. , the economy of verdict recession in the first quarter. greek gdp rose .4% after shrinking the previous quarter.
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driven byion was consumption, while exports and investments fell. ireland on the verge of a huge social and generational change. party isry's ruling expected to choose a new leader, putting him on track to become the next prime minister of ireland. he is 38 and openly gay. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: thank you. ahead of gm'sing annual shareholder meeting. shares are up 12% of the last year, but green light capitals david einhorn tells bloomberg why he thinks gm's full potential is yet to be unlocked. strong in manys areas of its business and has
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made good strategic moves to position itself for the future. there are lots of areas of from product design, sales, and manufacturing, customer support, but one area where gm is week is a balance, of sheet that is too conservative for the value created to be unlocked. the company has a market cap of $50 billion, 20 billion in cash, another $13 billion, and 2 billion more in cash in places like china. there is so much by you locked leads to an inefficient capital structure for the company, and shareholders have been rewarded with the lotus pe multiple, trading at a huge discount to afford. to bek something needs
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done to unlock the value at gm. >> why hasn't management addressed it? mary barra is concerned about her stock price. she knows there is a problem. why haven't they addressed it? >> i think caring about the stock price, i could lose that last five pounds, that if i care enough to change my diet and exercise to do that, where as i would rather have five pounds less, i am not willing to do that. a higher stock price, but they are not willing to do what it takes to make it happen. >> are they scarred from having gone bankrupt, and might they be right about that? >> the company said they are forever grateful to the united states for bailing them out and preserving the company to the last recession.
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to company has capitalized make sure that absolutely, positively never happens again, so there are several ways. you could decide you are fighting the last war and changer balance sheet to make it more conducive to the current is this, the current cost structure of the company, which would require much less liquidity in cash, alternatively, we have a clever proposal which allows the company to keep all of its cash and to have its preservation for any future downturn in the exact same way they have it now, but would unlock the value at gm. >> take us through that clever plan. it involves two class of stock essentially. what are those two classes? >> you have a stock right now, and you get dividends and all the other phase of ownership. you separate the value of the dividends from the other values and unlock 30% to 50% increase
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in value of the stock. >> there is a dividend share and growth share? >> correct. >> they would get one of each? >> one of each. you'd get the same dividend and the same growth, but you could trade one or the other, and people more interested in dividends, you have new buyers for the dividend shares, and alternatively you are interested in the growth of the company coming you would buy the other shares. were workingket properly, the value of those two shares should equal the value of one share, but you think there is a fair man of upside there. where is the market imperfection? >> it has to do with choice. think of it as an ice cream stand it just sells vanilla chocolate swirl. if chocolate is the dividend and vanilla is the rest of the soldtion, imagine if you
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chocolate, vanilla, or swirl. that ice cream stand would attract more customers. there are customers interested in the income feature and by dividend shares come and bring new participants in. that would bring them a 7% to 9% yield. there are people who want to see the stock go up. they would buy the capital appreciation shares, and that would trade at the same pe you have right now. adding them together would unlock the value. >> you took that math to maryborough and her team, set them down, walked them through it. they did not embrace it. what are they missing? why wouldn't they say let's do that? >> they never really engaged in it. attitude and thought it was what we had done from beginning. what we wanted was a solveorative process to
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the balance sheet problem. in addition to our plan, which is up for the shareholder meeting, we have nominated three directors who bring an enormous capital market sophistication which is not present at gm . the cfo is week, but finance is one area where mary are is not strong, and the board lexus level of financial expert tease -- expertise. vonnie quinn vonnie: david einhorn in that interview. to useow walmart plans delivery and its acquisition of to take on amazon. that is next. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. mark: i am mark barton. this is "bloomberg markets." soaring goose business since going public. the first ever earnings beating estimates within a 22% sales increase. canada goose opens to brick-and-mortar stores in new york and toronto. it is expanding its product line. president trump has complained about german automakers selling lots of cars in the u.s., but bmw and mercedes are counting on its suv to pull through its sales slump. both companies have seen sales to climb.
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raising $9.3 billion, 55% more than kkr raised for its asia fun. half of kkr's deals could be in japan. that is the latest bloomberg business flash. vonnie: it is time for our bloomberg quick take. news, the italian giants face off against real madrid, two of the world's best soccer clubs. in today's quick take, we take a
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closer look at world cup soccer. no sporting event is more popular than the world cup, but before nations compete, dave i to host the tournament -- they fight to host the tournament. scandals have docked tournaments and future events and russia and qatar. elected --sident wes was elected on a pledge to restore fifa. the auditing company resigned because it doubted fifa with serious about reform. payments to the ousted president probably broke swiss
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law. the scandal came to a head in 2015 when dozens of senior officials were arrested in the u.s. charge 41 people and companies with corruption. here is the background. it has afflicted the world cup since it began since 1930. fifa will only take bids from countries who have not staged the past two events. south africa recouped just 1/10 of its outlay for the 2010 event. here is the argument, critics -- the solution is a farce selection is a farce. critics also question whether reforms can be carried out by officials who have been part of the system. of thehose were some corporate sponsors, including coca-cola, visa, and mcdonald's. toy and aididas pressed fifa
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investigate corruption allegations. you can read more about this topic and all of our quick takes on the bloomberg. walmart sharing the spotlight with amazon at its annual shareholder meeting. the world's biggest retailer charting its course of action to , announcing a program that sends store employees to deliver online orders at the end of their ships. let's get more from emma chandra at the walmart shareholder meeting. his former putting up a fight against amazon right now? how is it progressing in this battle? you fromd to talk to fayetteville, arkansas. amazon is the big competitor for walmart as it has ramped up its e-commerce offerings. new programed a yesterday which will try to have store employees deliver the
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final mile for online deliveries. they have lowered the threshold for free delivery for online from $35, and amazon match to that, which is unusual for them to do. over thebeen happening last year and is a different situation from the shareholders meeting last year. this is after they acquired for $3.3 billion, and the founder came with that, now anding walmart's e-commerce has been spearheading this move to improve e-commerce for walmart and take on amazon. mark: the brick-and-mortar experience is being tweaked, isn't it? the growth has been more measured. doing to improve that experience of going into the brick-and-mortar stores? emma: that is really interesting. i was talking to an investor who said the walmart experience is
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not all about amazon. it does not need amazon to fail for walmart to exceed. more important, other retailers are doing badly, so they want to see the walmart is making the most of its brick-and-mortar stores. they have 4700 in the u.s. come over one million employees, and they have been focusing on better training, cleaning up stores commit making sure they have higher-quality and more diversified products. they see that as a great way to get people into the stores. they feel they can leverage brick-and-mortar andstores onlis they have introduced things like collect and collect. -- click and collect. vonnie: amazon does have some time because it has been delivering for a long time come of it may has the edge when it minimum produce, but
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wage was a problem for walmart when it was taking a charge for that. what is the company saying about wage growth now? remember, theyy made a commitment to boost wages for all employees in stores. that has been seen as a good manneraken in a positive by investors. we have not heard anything else today about what they might do to improve wages again. further report shows labor market tightening, and for a big employer like walmart, that is something they will be thinking about. vonnie: thank you, emma chandra. still ahead, the follow-up from president donald trump decision to withdraw the u.s. from the landmark paris climate accord, how the decision is isolating the president from global and u.s. business leaders. that is next. this is bloomberg. ♪
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mark: live from london and new york, i am mark barton. vonnie: i am vonnie quinn. tosident trump's choice withdraw the u.s. from the paris climate accord has left the president alienated and called into question the state of global leadership on climate change. good to see you. is the president considering this a win? heyes, in the sense that campaigned on this and promise to leave the paris climate accord. there are a few reasons.
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number one, he does not like or trust international agreements. he has argued it is a bad deal for the united states. notface opposes it and does trust the accords it is based on , so in that sense, he considers it a win. he can say he did something significant. there has been discussion about how this does not jive with ivanka's ideas or jared kushner. there has been --cussion about howthose presid president trump intend this accorded happen another way? lot aboutas been a them having influence on the president in terms of moving policy and a liberal direction, but there is no evidence of that. the president's decision on this issue speaks to it because there the leaks early on that
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president's daughter was going to make this a signature issue and fight for climate change. there is no record of her doing that and no evidence given the decision yesterday that she had influence on her father, so this puts a nail in the coffin to that narrative. they will be behind whatever presidential decision is made. mark: to what extent does that power whenin in his he should be focusing on pursuing his domestic agenda, health care, tax or warm to name but two measures? >> there is a global and domestic element here it on the domestic side, this makes it more unpopular with democrats and a lot of independents who accept climate change is a real thing that needs to be dealt with. republican leaders are supporting him, senator , theyell, speaker ryan
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are praising the decision. again, it gets to their philosophy that number one science is unsettled, which is not back by 97% of scientists who do think it is settled, and it supports their anti-spending antiregulation attitude. it does alienate him internationally. one of the things the president said yesterday when he was making this announcement is that he wants to negotiate a better deal. that was rejected immediately by germany, france, and italy, saying that will not happen. it does alienate him from some of the business leaders that have been supporting him, elon musk for instance announced he would quit the president's advisory council after this. mark: it gives china a golden opportunity to burnish its image as a global leader right now, doesn't it? >> it does.
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i think china will be claiming that mantle, not just for moral reasons, but economic reasons. even oil companies like exxon is going to energy be the power of the future, and china i think will use this mantle to argue the united states is somehow in decline and it should have more influence when negotiating deals. another important thing to know is that if the united states will not abide by agreements after a transfer of power, it casts a cloud over the u.s. ability to shape world events in ies future if the countr can say the u.s. will not follow through on commitments. vonnie: give us an idea of what you are hearing about next week's testimony from james comey. is there any way the president can stop or curtail it? james comey is a private
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citizen now, and he has agreed to testify and has the right to do that. this is the most anticipated piece of testimony on capitol hill since hillary clinton the before theestified benghazi committee that lasted 14-15 hours. we can expect a lot of fireworks on this. democrats will be eager to grill james comey and ask them questions about what his conversations with president trump were like and whether president trump ask him to squelch the investigation into russian meddling. the white house has issued some blanket denials. james comey has not spoken publicly, so a lot of the leaks are based on anonymous sources. this will be his moment to whether heand state is aware of any recording as president trump has indicated may be the case. thickens.e plot
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thank you. you can watch that testimony live on bloomberg tv. mark: still ahead, we had to russia and hear about the atlook for aluminum and possible ipo. catch that exclusive interview right here on "bloomberg markets." weeka week it will be next with the u.k. election, the ecb, and james comey testimony. it will all be covered right here on bloomberg television. don't you worry. the stoxx 600 up again, the best winning run so far. this is bloomberg. ♪
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mark: at 11:00 in new york and 11:00 p.m. in hong kong. in the trading day, from london, on mark barton. vonnie: from new york, i'm vonnie quinn. this is the european close on
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"bloomberg markets." ♪ mark: here are the top stories we are covering from the bloomberg and from around the world. and mixed in a jobs report for the u.s. economy. the unemployment rate a 16 year slowerntrasting with forecast hiring and wage growth. they don't obsess over one number. and then count down to elections in the u.k., polls show prime minister theresa may will likely fall short of a parliamentary majority, meanwhile, jeremy corbyn attacking the prime minister for her response to america's paris accord exit. and speaking of climate, everyone from world leaders to reacting to present at all trump's decision to leave the paris accord.


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