tv Bloomberg Daybreak Americas Bloomberg April 18, 2017 7:00am-10:01am EDT
below 1%. bond trading revenue up a whopping 29% for bank of america. goldman sachs is on deck. secretary mnuchin throws his support behind a stronger dollar, saying there is a big difference between president trump's talk and action. david: welcome to "bloomberg daybreak." i am david westin alongside alix steel. jonathan ferro is off today. the big story today will be about that snap election. coming up, we will talk about the first 100 days of the trump administration. are bouncingures off the lows. the ftse being hammered 1.6%. you did have yields falling below 1%. they are back up a little bit, now only down one basis point. the sterling is moving much lower on the announcement that theresa may was going to speak
today. to theow bouncing higher highest level we have seen since february. a verification of theresa may calling those snap elections. this deal will add point one and working in 2018 -- in 2018in 2019 and 21% in 2019. alix: -- david: coming up at 9:15, we will get more economic data. hour, esther george speaks at it barts college conference. we will have an exclusive interview with her at around 10:00 eastern time. cabinetting with a
where we agreed that the government should call for a general election to be held on the eighth of june. less: that was theresa may than an hour ago at number 10 downing street. now is simon kennedy and a correspondent at the scene of the announcement. was unexpected, david. even right up into the right up to -- even the announcement, there was some speculation as what it could be about. we were expecting it to come at 11:15 u.k. time. it was just about 10 minutes before that. what theresa may announced is that she will seek a snap election for june 8. she will table a motion on
wednesday. she does need two thirds of the votes in the house of commons for this to go ahead. a lot of questions about the motivation behind this. a lot of surprise about this. even before easter, the government was saying it would not call a snap election. she said this was a reluctant decision she had to make, but she wants unity in westminster in the same way she wants unity in the country he hide brexit -- in the country behind brexit. there is speculation this could be a way to strengthen her hand going into the brexit elections. there are some saying that her party's 20 points ahead of the labour party. if a snap election is called, at the moment the polls seem to indicate she would win. kennedy, as recently as march 20, they have said no snap election. do we know what changed? is it the economic data coming in that says the u.k. is holding
up better than we thought? what changed? >> one, certainly the state of the economy. it is an economy doing a lot better than people thought it would in front of the referendum. the economy is pretty resilient. in 2020 when the election was time for. second is the polling numbers. the 20 point lead over the opposition, labour party for the first time in a decade. 55% of respondents saying yesterday that theresa may is handling the brexit talks well. the numbers look very strong for her. when you look across the clinical environment, you see struggle to lead the labour party. you look at the ukip party having their own problems. for theresa may, the numbers
seem to add up, and indicate that the election is worth having a crack at. david: thank you both. -- for more now is on this now is david own and simon smiles. david, let's start with you. how does this affect the timeline to get a job done with the eu? o.: at the moment, it makes her job a little bit easier. the problem, is that she has members of her own party where looking for a hard exit. -- brexit. simon kennedy was saying a moment ago that the polls are that the majority is rising beyond 50. that will give her much more room to maneuver.
she will be in a much stronger position in the negotiating the terms of the exit going into brussels if she has a larger majority pull. when she comes back, she should not face as much dissent from her own party as well. it does make an awful lot of sense. i expect at the moment an increase in probability for a softer brexit. that is with the u.k. wants to see in terms of the general public, they want free trade to continue as much as possible with the eu and some control of migration. she will be much -- she will be in a much better position to ask for that after this. does this change your risk profile at all when looking at brexit in the eu? simon: i do not think so. as was said, she is playing a strong hand. her current party is
particularly strong, so this is an opportunity to take advantage. it is coming with a backdrop of global economic surprises that are positive. we have the first synchronized improvement in the global economy since 2010. looking back to what our clients are telling us, the concerns of what a brexit vote might mean for the u.k. economy have not manifested. many clients are thinking in terms of pounds, but foreign assets show 15% at the same time the domestic shares have rally. business is relatively robust. if there was a time to call for an election, this is a good one. david: we now bring in lloyd stewart would. is a politics and government helow at the university -- is a politics and government fellow at the university of oxford. is this a dark day for your labour party?
she would not be calling for the election if the labour party was in bad shape. >> i think she thinks that all opposition parties are having problems. she faces a string -- strange position where she faces a lead polling, yet she cannot really get legislation through apollo -- through parliament as she needs to alongside the brexit challenge she faces. she is in a strange position of all the political signals think she could -- she should call the election, so it is no surprise that she has done this. alix: we are all in agreement in terms of what this ends up meeting. the market reaction is that the sterling is up 126 over the moving average. how much is priced into sterling now? where do you stand?
>> even if she gets a larger majority, the issue is that the whole process of brexit will be very long and torturous. we do not know where it is going to end up going. the eu head of state meeting in october. i think the economy will start slowing going through the second half of the year partly because of the real income squeeze. i think a lot of companies will be putting investment decisions on hold. the direction of the sterling will continue downwards. is pricingthe market in more of a soft brexit. that is not what we are seeing at the moment with the equity market. the equity market having fallen, but the sterling has risen since the announcement itself. simon, what about this
point of prolonging the negotiations? it might give her a stronger hand, but if it is dragged out is that an environment that the market does not welcome? >> i'm not exact sure it will drag out. david: it will be hard to get the negotiations started until the elections after zune -- after jim. after june.ons simon: well, she still has to get through the two thirds majority to get the election. there is still that possibility being weighed in the markets. breaking news, nicola sturgeon is commenting on this. he is saying that theresa may is putting the interest of the party over the economy. he says it is an extraordinary you term. how do you factor in the geopolitical issue between the
u.k. and scotland? that this make a scotland referendum all the more likely? >> i think it does. gets a larger majority from the conservatives, i think that is a moment of no turning back for the british nationalist party. i think they will use that to try and push for an earlier referendum. this simply that runs north london has not been able to elect a new government bridging the republican and unionist parties. it is particularly extraordinary she has called for an election right in the middle of a crisis there let alone we have a crisis in the korean peninsula which seems on the brink of some kind of conflict. she is putting the self interest party way ahead of any geopolitical concerns that those people face.
it does show you the temptation that she faces is overwhelming. i think the concerns will be brought up against her by my party and other opposition parties during the campaign. with article 50, it is true that the clock will continue to tech, but there will not be much negotiation going on anyways with the french and german elections going on. so, the first six months of article 50 were always going to be dead time. effectively, the article 50 negotiations are going to be moved into next year and beyond. david: that was lloyd stewart wood of oxford university in the house of lords joining us. for thank you to david owns speaking with us. simon smiles will be staying with us. coming up, we will talk about 100 -- donald trump's first 100 days in office.
♪ david: this is bloomberg. i am david westin. steven mnuchin spoke to the financial times yesterday, and he did his best to clarify what the trump administration policy is on the u.s. dollar. although he said that president trump's words that a strong u.s. dollar hurt u.s. exports, he said that the. mean they would do anything about it. he said that the president was making a factual statement about the dollar in the short-term. he said there is a big difference between talk and
action. simon smiles is still with us. how important is this back-and-forth about how the dollar is doing around the world? is clearlyink it macro. it is very short-term. fundamentals determine the direction of currencies in particular. the strength of the global economy and consumer confidence over 16 years is the key driver in terms of dollar strength. dollaryou saw the climbed after the election. it has come down off of that high now. is that some kind of dubious -- is that because of some dubious reaction to part -- to government? the health care reform delay. it is going to take longer. this is a more global growth story. it is about risk. it is not just about the u.s.
leading the way. it is a global growth phenomenon. look at the chinese and their gdp. the 6.9% real gdp, but also at a nominal level that is higher in half a decade of about 12%. in the past five years, it is a global story of growth. in that dynamic, the u.s. dollar is balanced against general risk. alix: what really stood out to me is the idea that you take president trump literally -- figuratively and not literally. that is basically what steve mnuchin was saying. so, what do we do about the u.s. and president trump -- how he feels about things day by day. what you tell your clients? simon: we believe that the tax reform will get through, and that regulations will string -- swing back to something more
easy. i think there is a lot of bullishness from a business perspective in respect to the u.s. economy and growth. we are looking at u.s. assets seeing dramatic outperformance. we see a lot of love for u.s. equities and high-yield, and more recently for u.s. treasuries. as the economy is improving, you are not going to see the fed interest in the economy interest more broadly. alix: meaning you can buy treasuries and stocks at the same time and believe in growth? that is a serious barbell. reform, steve mnuchin now saying that having it done by august is not going to happen. does that change your profile? mon: i do not think so. we anticipate will percent growth this quarter. it is the fourth consecutive earnings season of accelerating growth.
it has been better over the past five years. from that context, corporate fundamentals are backing up the sentiments. i think increasing the general confidence that they have in investments in the united states. also, the business outlooks. david: there's a lot of sentiment, but what about the hard data that indicates the first quarter is kind of soft. you look at job numbers and retail sales. a number of factors seem to indicate a softening in the real data. simon: well, in march, to be fair. that said, there is a debate over it. at the end of the day, investors were buying corporate earnings on the bond and equity side. alix: you can buy yield, you can buy 10-year, and arbel. -- barbell.
if we do get to that 1.56 level, does that barbell growth the system and? -- stand? taking us back to levels of may last year when all the talk was about deflation and secular stagnation. prominent economists were saying that the world is not going to get back to trend growth. what was said -- what changed from a is the economy and growth around the world. in that context, while we think that 2.3% to 2.5% on the 10 year presents attractive yield pickup given the curve against cash, we think it is going to go back to 1.5% -- that is hard to bearish based off what we have seen. ubs, great smiles of to see you. think for coming. coming up, michael mckee will
♪ alix: bank of america jumping higher in the premarket. hard to find a dark spot in its quarter. it's a bit trading is jumping 29%. it is beating all estimates. joining us now is allison williams of bloomberg intelligence. we have goldman sachs coming out in a few minutes. are there any dark spots? >> it does not seem like any dark spots just yet. fixed income trading is good. we did kind of have the bar raised last week, but they did deliver on that. .hat's revenue was up 29%
equities revenue is also coming in better than expected. we will hear from oldman shortly. david: so, this bank loans money and gets money back. the net interest margin jumped up. is that simply from the fed and raising rates? >> that is the fed. they benefit from that more than other banks. i think that will be a question for the call. what does the march hike mean for interest revenue as we go forward? upx: interest income was $600 million. is that good enough going forward? are they able to capitalize enough on a fed hike? >> that was in line with their estimates. it is sort of in line with what the companies had guided. we are going to want to hear what their expectations are given the hike and what is going on with deposit pricing. the prosody up racing, as you know, most management and
analysts thought it was going to trail in the beginning, but it does eventually catch up and get more competitive. i think investors and analysts are wondering when that will start to kick in. so far, we have not seen that. david: and costs were flat i understand? >> they were. david: so, they have cut a lot of cost, but they are managing. >> yes, they are. a $53 billion target set for 2018. they did say that costs will be seasonally higher this quarter. we did see that. to your point, it did basically come in line with expectations. alix: how does this compare? with wells fargo we saw a weakness in loans. jp morgan core loans were only up 9%. where does bank of america now fit in with the underlying fundamentals of the economy so far? >> do have to look at everybody's is this.
for the most part, trends are consistent. we did see lighter mortgage banking, but we have seen that of the other banks. banking across the board kind of hurts wells fargo relatively more as they earn more from that business. will: allison williams stick with us as goldman sachs will come out in just a few minutes. coming up, we will talk the trump trade. live from new york and washington, this is bloomberg. ♪
1.5% after theresa may called for snap elections. the 10 year yield moves lower by two basis points. it willr asset classes, be what is going on over at the u.k.. the sterling getting a big big over the 200 day moving average. bit of seeing a little selling after some big buying about an hour ago. yields up one basis point. gold is relatively flat. 9/10 crude is down just by of 1%. allison williams is staying with us. what are you expecting from goldman sachs? some of the results we have got in, expectations are that they should have some good gains in revenue of about 35%. you have to keep that in context. big gain it,as a it was a tough quarter. despite the jump, compared to two years ago, we are still 15%
lower in over no revenue -- in overall revenue in the long term. their earnings are going to double, because they have cut costs, they were aggressive in cutting costs last year after the first quarter. they took some at a fixed income. t andwe are seeing the lif increased operating leverage. david: with goldman, is really fixed income and trading? >> it is. we want to see what is going on with their advisory business. their fees are going to be good. that is another area where we have had a positive surprise. foras been a good quarter the banks with revenue almost doubling compared to a year ago. only bigger picture perspective for goldman, what our clients saying? last quarter, the cfo used the term "exuberance." a new cfo will take over this quarter.
we will want to hear what clients are saying, because goldman does have that dialogue with some top clients in the world. we want to hear about their confidence, because that is the key driver for the deal outlook. alix: last year, it was interesting that profit was up because of lower costs but also lower tax. what is what happened for goldman if they start delivering that? >> i think we are seeing that could goldman earns more from fixed than anyone else. it is part of the overall revenue pool. alix: it was down 9% from last quarter. >> i guess you can look at it as a glass half-empty or half-full. equities are not so great, so everything is not perfect. however, an optimist might say they are getting a lift and improving revenue, although they are not quite hitting on all cylinders with something that is coming. david: we want to get over to paul richards now. overall, the u.s. banks seem to
be doing better. this and to be moving in the right direction. paul: yes, this is just a perfect market climate to make money. i think it is toughest on the europeans good you are not going to see any price appreciation for european banks. the number, they are more stymied on the balance sheet side. we also still need to get the french elections are the way. for the u.s., it has been a nice quarter. markets are steady. tore is enough volatility make money, and the clients are engaged. i think it is a very good environment. inx: 1.5% for the 10 year september. that is not so good for banks. paul: that was a one off -- no, it is off 6% elsewhere. that is a tough call. paul: it is a tough call.
i think it will be much closer to 2.5% or 2.25%. david: how much of that is the number of rows is that the fed has to grow this year? two more? paul: i think you can say to more. they are looking at the markets. the markets sometimes forget that the fed does look at the markets. i think they are on track for two. towards the end of the year, we will hear that talk about reinvestment. that is good for the markets as well. david: is that what the banks are anticipating, two more this year? the banks are going in line with the market in terms of expectations and interest rates. there is a kind of sensitivity around that. speaking of reinvestment, one other thing i would like to bring up that i think is
important to focus on with the goldman call is what they are doing with technology and markets, their online products. there is a story that came out that bloomberg talked about. if you go to the website, you can see that they have been advertising in their asset management unit for someone to fill out in advisory is this. i think people will -- fill out the advisory business. i think people will be asking what that is about. alix: goldman is out right now. trading revenue coming in at $3.6 billion. like first estimate. equity little above estimates. fixed trading is way below estimates, coming in at $1.69 billion. that is weaker from the fourth quarter, and it is weaker versus estimates. earnings-per-share looking at $5.16. that is also a little bit lighter.
-- at 3.16%. that is a little bit lighter. -- at $3.16. that is a little bit later. allison, what do you think? >> i think there will be an adjustment so that is not actually the run rate. equities, again coming in at $1.67 billion. it is really that that number coming in at 1.69. 540.: it was up it may not be fair to compare with estimates which is kind of like apples and oranges. they seem to be coming up like in earnings-per-share as well. -- a lot of their business -- vix andand equity equity. alix: goldman sachs also boosting their quarterly dividend.
the estimate was for 65. the stock plunging after the results. the stock was up 1%. again, the number is that the fixed trading coming in at $1.69 billion. that is well below estimates, and it is down quarter on quarter. allison? >> it looks like that is the number. it looks like it is real. it looks like a disappointment there. i think investors are going to be very focused on that. what happened there compared to some other banks. banks are all beating estimates based on business next. -- business mix. looks like they did see better results in the credit and securitization business, but i am not sure what else could be going on there. of yourust off the top head, it seems a contrast
between bank of america and goldman sachs. very different types of banks. yes, bank of america is doing quite well compared to these numbers we have seen this morning. goldman sachs is more of a trading enterprise, and it seems to be suffering. on the point about goldman, i think for exchanges are a big part of that. the dollar was very stable in q1. i wonder if that had an impact. the other thing to remember is tot the income going back 220, you do not know how that affects their clients or trading revenue. all these things come into play. in terms of overall economy, i do not think people have a lot of doubts right now. i would say the dollar volatility may have hurt them. alix: goldman says that client activity was challenged in some markets. that is similar to what they said last quarter about their equity trading. there was less trades executed,
and the decline last quarter was in lower revenue decline execution. not quite as much juice as you would have expected. x and that is a volatility -- >> and that is a volatility factor. alix: we are also hearing from the bank that the political climate is to blame. they blame it on low-level of volatility and low client activity level along with the political impairment. so why did it not affect the other banks? >> what might have heard goldman is, if you look at what was happening on with debt underwriting, who is the strongest in that? jp morgan, citigroup, and bank of america. when there is good, primary business that helps you get good secondary business, maybe that was something that was missing. also, corporate client strength. goldman'snk about
client base, they are a bit more headstrong focus. they have made progress in terms of diversifying their client base, but to the extent it was coming through on the corporate side -- jp morgan has a strong derivatives business. to the extent that a lot of trading was going on was on that side of the client house would have held the bank versus someone like goldman. i think they did talk about currencies being a little bit weaker to your point. recap, the number we are focusing on is the fixed revenue coming in. the reason we are hearing is that it was an environment categorized by political uncertainty, low levels of volatility, low client activity levels, and overall seeing a decrease in market client activity. it is so fascinating that we have not seen that from other banks. allison, you pointed out the difference, but that is still hitting the stock relatively hard. it is down 1.5% in the
premarket. it was up 1% higher after bank of america posted those killer fixed ratings. allison, what do we know about their other product like interest rate products? how can they capitalize off the fed hikes? >> the way they capitalize is more volatility and more trading. alix: maybe not for the first quarter. >> yes, maybe not for the first quarter. it is versus expectations. if the market is expecting a hike, and you get the hike, then there is not a lot of volatility around that. so, to the extent there becomes more questions around the hike and there becomes divergent monetary policy, that is where you start to see some more volatility. showing highnk is revenues in mortgages and interest rate, but they were hurt by commodities and credit price. that seems the reverse of what you would expect out of goldman. >> commodities is another business they are relatively
stronger in that others. perhaps that was simply an under performing business in this quarter. alix: allison williams, they do so much for joining us. -- houston williams of bloomberg intelligence, thank you for joining us. paul richards will be staying with us. coming up, we will have the opening bell. this is bloomberg. ♪
♪ david: this is bloomberg. i'm david westin. vice president mike pence has moved on to japan and the second stop on his asian tour. not before he discusses trade with south korea before leaving the country. kevin cirilli joins us now. this was an interesting, nice chat with the folks in south korea. he told them we were not so happy with them entree. what is that about? kevin: there is a report that suggests the japanese do not want to have to deal with the commerce secretary. he is seen as a sort of hard line on trade more so than vice president mike pence. it puts more pressure on the vice president as he towards through asia. david: it is not just a south korean issue, it is also a japanese issue. administration is focused on trade deficits. although south korea has a trade
deficit, we have a bigger one in japan. kevin: we have heard from the japanese prime minister in the past hour saying that they are hoping the u.s. will be able to work with them to not just -- i'm sorry, to not pressure china to pressure north korea, but to also bring them to the table on trading issues which includes the auto industry and some nuclear issues as well. these issues are now juxtaposed together and are one in the same. david: kevin, thank you. we are still here with paul richards. when the president trump was first elected, there was a lot of concern about trade wars. they are now going at it one country at a time. how much of this is an overpayment for markets? paul: i think it is more industry-specific. going to south korea or japan, you are talking about cars. i do not think the prime minister has a currency issue anymore when it was -- compared to when it was at 1:15 -- what
back when dollar 15 he was elected. i think they have to raise it. it is part of the trump agenda. where are you going to glow -- go globally? david: is that going to trade -- change trade in cars? >> i think at the end of the day it is a question about where you are going to be building the cars. what is the next logical thing? we would hear about more investment in south korea and japan. alix: you mentioned the stronger yen taking off pressure when it comes to trump. however, we have heard about parliament electing a banker to the boj. it seems to me that more stimulus will try to get down theyen. -- the yen. is that going to become an issue? from you want to do it
$1.08. i think japan's game plan here 25 yen. dollar i think they are very committed to reflation. one of our guys is in japan right now, and he says it is buzzing. there are 40 skyscrapers that will be built by 2020, and there is no inflation and they know it. they need to get inflation for the economy. and they know it. alix: paul richards will be staying with us. on theare watching bloomberg, you can watch us live. if you missed anything from the goldman sachs data analysis, you can go back and watch it. this is bloomberg. ♪
>> the french election is in the final stretch, but no clear winner inside. this comes from the latest poll. le pen is the blue line. fillon is overtaking le pen for the first time since the end of january. joining us now with more from paris is our bloomberg government reporter. greg, are we going to see a feel le pen -- fillon and le pen situation. greg: i do not know about that, because macron still looks in the lead with the polls. the pastas changed in few weeks. a few weeks ago, the scenario i macroned of le pen and taking the top spot seemed
almost certain. we are going into this final week, and it really is the most uncertain wrench election ever. alix: what remains confidence is the support for le pen. how sticky are the voters for macron? how big will the turnout be? greg: the turnout will be an issue. le pen has a very loyal base. she has very little room beyond it to go. in the second round when the top two run off, it will become very important. macron has less sticky support. a lot of them say they are still uncertain about who they will vote for, but he does have a certain, centrist appeal. he does have much more room to assemble centrist voters. that is what he has been the favorite so far. fillon is between the two.
he has a loyal base, and he is not quite seen as toxic to the french people as le pen is. he is still an unsavory choice for a lot of leftist. socially, he is a kind of conservative catholic. we may not see the move much beyond their conservative base. alix: paul richards still with us. what is the trade going to be like over the next several days and on monday? paul: yesterday, i think the markets walked in with your on vacation, and they forgot about french. -- about france. instead, they focused on north korea. they realized that there was a french election in five days. the great fear -- you can pretty much guarantee that you have le pen in one spot.
next toan put macron her, i think we see a good outlook for the markets over the next five days. however, we are going to continue to watch the polls become tighter and tighter. the market situation we have right now is likely what we will see going into the weekend. if you take our view, it will be le pen versus either fillon or macron. you will then see the markets rally, because then they will win. david: as an investor, do you sideline until monday? argue think you can really try to make some money? paul: i think as an investor, you will try to be more conservative and avoid that gamble. some will take the risk of sunday. day, i willf the
say this for the last time, the french polls for some reason are quite accurate. rhetoric around president trump getting elected, it was saying that if you was elected we would see a 10% downtick in the s&p. that did not happen. what gives you the confidence in the rally on the european side? think in the case of europe, it is that you are finally going to take that uncertainty a way that le pen could take them out of the euro. we need certainty as a market that france is staying in the euro, otherwise the euro is don e. you need france from a market perspective in the euro on monday in two weeks after that. david: how do you hedge against the possibility of that?
paul: you sell. you can buy some downside risk which will cost you some money. at the end of the day, you downsize your long portfolio. i think that is the basic hedge. it is a hard thing to do, because what will you do next monday? sonally.ot do it, per paul richards, think you for joining us. , coming up we will have -- coming up, we will have anthony us abouti to talk with how president trump is doing in his first 100 days in office. this is bloomberg. ♪
the pound rebound. let's talk about sick. -- fic. bank of america beats on revenue, dropping a whopping 29%. king,eenback should stay steve mnuchin throws his support behind a strong dollar. david: welcome to bloomberg daybreak on this tuesday, april 18. i am david westin alongside alix steel. coming up, we will have anthony scaramucci to talk about the first 100 days of the trump administration. alix: we are looking at what is going on in the market, s&p 500 futures are down 2/10 of 1% but the move has been in the u.k., the ftse getting hammered, down 2%. the 10-year gilts yield went nowhere. now we are flat on the day,
1.05. sterling, 1.2671. , bank earnings. are dominating the move, goldman picking up steam to the downside . bank of america down 1%. c trading upica's fi 29%. david: time to set you up for the rest of the day. housing starts and building permits in the united states for the month of march at 8:30. numbers will data, be out at 9:00. esther george speaks at a bard college conference and michael mckee will speak with her. earlier, prime minister theresa may out with an unexpected announcement. >> i have just chaired a meeting
with the cabinet where we agreed the government should call a general election to be held on the eighth of june. alix: let's welcome our team coverage. joining us from downing street is nejra cehic, and we have john fraher. set the scene for me, how much of a surprise was this one theresa may took the podium? .ejra: this was a big surprise we of course did know the announcement was coming at 11:15 u.k. time but only earlier in the morning, there was a lot of speculation what it would include. we did not find out until we got here. it was not a long statement, five or 10 minutes, and she did start talking earlier than planned. the big announcement is that she is seeking this snap election on june 8. it is interesting because only last month her government was
saying they would not be looking to call a snap election, but theresa may said her decision was recent and reflection -- reluctant. it came about as -- from opposition from parliament in other parties. they are saying theresa may is doing this to be able to come if she wins, strength in her hand in the brexit negotiations. polls show her party ahead by about 20 points, ahead of the opposition labor party. if she does get this vote on june 8, at the moment as polls stand she would be quite likely to land -- to win. she needs a two thirds majority in the house of commons to win a snap election and will put a motion to parliament tomorrow to try and get this. another reason this june 8 to date is interesting is there will be an e.u. subject -- e.u.
summit including the u.k. later in the month, so it does suggest this is about theresa may trying to strengthen her hand going into the brexit negotiations. david: when we talk about opposition parties we tend to think about the labour party. what about in the north with nichola sturgeon, how much did that force her hand? jonathan: nicola sturgeon has come out saying that theresa may is seeking a mandate for a hard brexit and that is one of the dividing lines that you will see in this election. theresa may came out making quite a divisive statement, saying if you do not back the conservatives are soft on brexit. the nationalists will challenge that and say that brexit will not be under the terms dictated by theresa may. alix: it seems the market is interpreting this as we will see
more negotiation between brussels and the u.k. because of a more unified government in the u.k.. is that right? john: that is how some people are seeing it. assuming this goes to theresa may, she will go into those negotiations knowing she has a much more unified party behind her. hear her sounding relatively vague about the kind of brexit she wants, and then she can argue after the election that she has some wiggle room to negotiate what sort of brexit she wants to negotiate. certainly, there is some optimism in markets and this takes a bit of uncertainty off the table. the person who really matters at the negotiating table will be theresa may. david: the u.k. prime minister does not have authority by herself, she has to go to
parliament. are the indications parliament will go ahead with the snap indicate that election? nejra: she would need a two thirds majority in the house of commons in order to hold this snap election. she is putting that motion to parliament tomorrow. in terms of how likely she is to get this, we have had some reaction already from the opposition. we had the labor leader jeremy corbyn commenting saying he welcomes the move to call a snap election. others say the election is a chance to change the direction of the u.k., as an appeal to voters. it is looking like she is going to get that support. alix: thank you very much. joining us from london is jordan rochester with nomura international. on sterling, is that the
right interpretation of what happened today? jordan: probably not overall but it is what i expected. air, thelection in the market said there could be a turnaround and what has happened zero,t brexit went from a a nonexistent proposition, to a five. that is a big powerful move in markets. the question since this election announcement, what is the chance of a revival and a pro-remain party getting more seats? if you calculate the numbers, 51.9% brexit in the popular vote in the constituencies, it is more like 69% in terms of brexit . i do not think we get the brexit turnarounds but sterling will continue higher because the market was short going into this.
don't break at 1.27, maybe the market has already done the math. david: what does that mean to the volatility of the pound and 8 when the june election will happen? jordan: i think the foreign exchange market will be the lightning rod and the gilt will be the second part. how this election will impact fiscal policy and military policy, it is quite unconnected. a fiscal response would lead the bank of england to start hiking. what we have is uncertainty after this election outcome. that could mean florin desk for inflows into the gilt. -- foreign inflows into the gilt . i think sterling is a little bit higher but this is probably an opportunity to get short, just not yet. david: what is the possibility
that murray's test theresa may gets what she -- theresa may question --e wants what she wants? 43% 45% for the tories, 23% to 25% for labor. her next opposition is a good 20% off of her so she still gets a large majority. she has a working majority of 17 mps which is why every time you have seen a vote there has been noise about it failing. that majority will likely increase, 112 is the motto we have. let's say she gets half of that. the outcome of brexit, every time it goes to a vote it is more likely it will give -- get past. more onets will focus the talks with the european
leaders, not domestic politics. alix: does this push back the , onlyne that is a crunch a year or year and a half? jordan: the main thing is not the short-term but the long-term. she will not be facing a general election in 2020. that is not set in stone when elections will be held. so in 2020 she will not be facing a campaign where she has just come out of the e.u., which is a hard part for theresa may that she would fight an election while she is going through brexit. it is a bit of a positive. david: jordan rochester, thank you so much for being with us. coming with us, anthony scaramucci will be joining us about how the trump is doing at the 100 day mark. we will be bringing you president trump's comments at
david: this is bloomberg, i am david westin. mixed bank earnings. bank of america beat earnings, goldman sachs missed earnings -- estimates. alex asked has each -- alix steel has a chart. kotok and paul richards are joining us now. did you find some bright spots in the goldman numbers? not find anything
bright and i didn't see anything more than we saw. that will be the big question on the call. goldman will just talk about doing what they do every day. it is what it is, just lower client revenue. alix: the net interest income is down 42%. we had two rate hikes since the end of the fourth quarter. why did we see that pass? alison: for goldman sachs it is a little bit different than someone like bank of america so as costs go up it costs more to fund your inventory. as far as that interest in helping the loan book, it really depends on what your long book is like. americaone like bank of because they have more c&i and commercial real estate they are more able to pass that along on the real estate side and hold back on the deposit side. david: the goldman story last
year, they had a really tough quarter a year ago. wasn't it perceived they should be coming back or is this just the nature of the trading business? alison: for the industry it was a difficult quarter last year so we did expect to see gains across the board, but for every bank every quarter it will depend on mix. sometimes we look at the relative performance of the three big banks, 15% to 20% .ains, goldman not so much are they gaining share? their areas of strength were the areas of strength for the industry and goldman is not particularly -- position well this quarter. alix: do you still like this story? stop --n't do single stocks, we do etf's. we are back in an overweight but
we only do etf's. goldman is one of those etf's. look at what they have done and tracked. they shot up after the trump election, they languished, they went in the tank in march. we would buy the group. we own them. david: u.s.. david k.: u.s. banks. david: not european. david k.: no. alix: you are looking at almost 100 basis points. how do you like the banks? david k.: i am going to make the case for the banks. all the characteristics, allison just talked about them. all of the characteristics of the banks would say, we are back to 2006 precrisis levels, more or less. two things can change with
regulation, without the congress. piece ofake a gse paper guaranteed by the united states and make it just like a treasury. the same thing is you can change the liquidity ratio. changes,ke those two the fed can disgorge the gse paper. bank earnings are probably 15% up just from two regulatory changes. there is a guy by the name of randy quarrels and he understands it. david: about to be named the vice chair of the fed. david k.: i am bullish. david: he do not have the leverage you had in 2006. david k.: but they are well capitalized, on a different structure, they are managed better. alix: running along with
goldman, what does their pipeline look like? alison: that is another difficult thing, it was not so great compared to a year ago so would probably want to hear more about what is happening. keeping in mind with the pipeline, we also want to know about executions because sometimes they get stuck, and changes in the pipeline might be that markets opened up. market, strong equities a strong ipo business this quarter, strong underwriting, so a lot of deals getting executed and not necessarily replenished. maybe less revenue going forward. alix: thank you so much. goldman stocks down 2.5% in premarket. coming up, anthony scaramucci will be joining us, more on president trump's first 100 days. ♪
david: this is bloomberg, i am david westin. when president trump was elected he talked about deregulation having to do it the banks. we have been waiting to see who he will appoint to the fed. randall corals is on his list, perhaps as vice chair. joining us on the set is anthony scaramucci and david kotok is still with us. anthony, i will not ask you about randall quarrels specifically, but what does this say about the trump approach to the fed board and who will be on it? anthony: it is a solid approach, randy is a great guy. i have known him dating back to the bush administration and his time at carlisle, these are guys who believe we have to have fair and proficient is regulation but not overregulation.
president is a commonsense oriented person and he sent the message to his staff, let's appoint people to these posts that agree in fair regulation but not overregulation. even think about glass-steagall and the comments gary cohn has made. if you separated those banks you can get more liquidity into the market by allowing investment banks to use their prop trading desk again. i think the administration is looking at that. quarrelsll a randall be able to do a lot of deregulation without going through congress? question, and you don't have to take a class in thenistrative law to know flexibility of the executive authority of the president and let the agencies do. do.hat the agencies can
unfortunately, congress does not maker desk like to make decisions. congress likes to be in a monday morning quarterback position as opposed to being on the sphere. could we be on the cutting edge of a new era for markets? because of regulation, relief from it, without congress after overars of pressing banks, regulating banks, penalizing banks? are we in a sea change for financial? alix: we hope so. anthony: i actually think so. if you look at the economic history and some historical werext, after the banks devastated in the 1930's and rebuilt their capital structures
the bund -- boom and until the oil crisis hit. if you get a little bit of a springboard reflect -- perfect from a relaxation and regulation you could see a lot of earnings power and regulate -- and lending. we have to figure out a way to get the community banks working again so that we can get small businesses back in the lending and borrowing game. david k.: i got permission for a quick follow-up. insurance companies also relieved from some of the rules, insurance companies now in the group. do they have the same outlook? alix: long on insurance companies? anthony: i do think that, but i also think what the president is learning and all of us in washington are learning, things are taking longer than we would like. my prediction is by the beginning of 2018 you will see a
lot of the foundational structure of what the president wants to put in place in terms of the regulatory rubric and where the future is for financial services. cohn,mnuchin and gary they will tell you we want to keep people safe but we want the economy to prosper and that is something i think we can get the right intersection. david: the fed is a regulatory bali -- body and sets policy. -- anthony: i think the president is going to make the case for allowing his people at the fed to remain independent and do what they think is best when it comes to monetary policy. if milton freeman was alive today he would tell you to put a , let in charge of the fed
that computer look at the economic data and set the rate. that may make for a more stable environment. i do not think that happens anytime soon. alix: who was on president trump's speed that i oh, steve mnuchin and gary cohn or steve barron and? -- steve bannon and? i think allnthony: four of them. i think the president has done a good job of blending that. alix: he hedges, anthony hedges. anthony scaramucci and david kotok are sticking with us. ♪
down, 1.8% due to the fact that theresa may is calling snap elections. the 10 year yield down by about three basis points. this is a really big story of a stronger pound, getting whipsawed earlier. gold relatively flat. housing starts month on month down 6.8%, but building permits up by 3.6%. we had that really big storm in march, potentially distorting the ability for housing starts although conjunction -- construction jobs were not bad for march. where are we in housing for consumer data? aroundlar index is still the lows of the session, s&p futures holding ok. the 10 year year to -- yield pretty much -- david: is this weather related?
>> it is less robust as mortgage rates rise slowly but it is still there. we are not back to a baseline neutral. david: housing sort of took us eight --ditch in 2000 into thousand eight and has been a remarkable driver as we come back up. anthony: i have not seen the data, but we have got to look closely at middle-class housing and lower middle-class housing because that is recovering. you get more disposable income into the economy and that will lead to better than expected growth. ,t is one of the lagging things why it has the economy only grown it 1% to 2%? middle-classwith income, there is just not enough disposable income to start that positive consumption cycle. david: follow-up with the
president's economic plan overall. this is one of the main things he said when he got elected, he wanted to drive growth throughout the economy. how was that coming along and what is he doing that can drive that middle-class income? anthony: we could go through a lot of his executive orders and a lot of the work he has done with ceos large and small throughout the nation. there is a lot of symbolism. we were saying this at the break, the presidency, a lot of it is symbolic, a lot of it is communication. one of the things the obama administration had plaguing them is the business community viewed them as antibusiness. the fact that this administration is viewed as pro-business it is relaxing to ceos around the united states and they want to make that incremental investment and incremental hiring.
the president will be in wisconsin today. he is a jobs president, a growth oriented president, and i think this is resonating and will filter through the system. my guess is we will start to see that in jobs data. david: it is fair to say there is some doubt because an essential part of that growth strategy was tax reform and that does not seem to be moving forward. we had steve mnuchin talking to the financial times saying it will take longer than we thought. to what extent is there difficulty with a congress that does not like to say yes? anthony: i could be wrong but i think the market has figured out this is a 12 to 18 months phasing in of tax reform. i think the media and people like myself would like it to happen yesterday, so the reason the market has not getting hit -- gotten hit since steve mnuchin made those remarks
market hasthe thought about these remarks and discounted it appropriately. it definitely takes 12 to 18 months to get full regulatory reform. do you feel like a tax reform delay has been priced out of the market -- priced in the market? david k.: i think tax reform could be the positive surprise that can really left stock stock prices if it increases repatriation and gets the stock down to near brady's number, near that ways and means released memo. you haveice that memo a personal shift of $14 and rising in the s&p 500 index. that is a powerful addition. alix: you mentioned repatriation and getting the lower tax rate depends essentially on bad.
it is hard to know where the president stands on border adjusted tax. we do not necessarily need a huge budget deficit. can you help us understand? anthony: it is early and i think what the president is thinking about, he is assimilating that information. people were accusing him of switching his opinions earlier last week and so forth, but i think this is more intellectual eve all meant. i think -- evolving. i think this is the flexible nature of a business person turned politician. here is something i love about the president, there is five or six people you mentioned that are at the table and have very different opinions and strong personalities. this president is a great assimilating and i think he will
craft something with steve mnuchin and gary cohn that fits the economy and leads to the growth david is talking about. david: different points of view within the white house are healthy, but then you get to congress. he has republicans against him from the freedom caucus, democrats against them. how does he put that together and get to a majority, much less a 60 vote in the senate? anthony: here is the biggest problem in washington that i see. ed these political parties. we have extreme left leaning people and extreme right-leaning people. when we had the cold war, everybody had to dial back their political extremists and get to a deal. what the president is trying to figure out is how to create that opportunity for the american people. my guess is he goes over the top using twitter and visits to
wisconsin to get american people to shape -- shake their congressmen to act. david k.: will we get a litmus test and one of these unusual elections, like the georgia congressional seat, as a wake-up call to republicans if they lose a seat? anthony: i don't think so. the reason i'm saying that is if you saw what happened with the prior seat, people thought the recall -- the democrats would win and the republicans won. i think 50 years from now a political store right right, that was an unusual situation where people were not getting along like they needed to push the companies -- the country forward. us baby boomers are super righteous, super sanctimonious, particularly when it comes to politics. what i love about the president, he is none of those things. he just wants to move the
present -- the country forward. alix: where are you every day, are you at the white house? unemployed but i still have an office at sky bridge. david: what is your next job? david k.: stay tuned. -- anthony: stay tuned. alix: will it be on the east coast or the west? anthony: i am hoping it will be in washington. david: we would love you to break it here. anthony: i did break the sale of sky bridge here. that is david cal and anthony scaramucci. let's get an update on what is making headlines outside the business world. up,: let's get you caught and the u.k. a surprise announcement from theresa may. she called for a general election june 8, an indication
she is concerned she cannot get brexit legislation through the house of commons with the majority she inherited from david cameron. >> the other political parties oppose it. at this moment of national significance there should be unity in westminster, but instead there is division. the country is coming together but westminster is not. emma: an election was not due until 2020 but polls show the conservative party 20 points ahead of that opposition. an early election would give her a chance to consolidate her power. withdent trump says talks xi jinping has convinced him to abandon his hard-line view on trade, at least now. >> the understands it is a big problem and is working on it. am i going to start a trade war
with china well he is working on a bigger problem with north korea? i have great respect for him and we will see what he can do. president said he has not changed his position on trade with china, they have. -- according to people familiar with the matter, a pro paris block inside the administration has loaned their support. exxon and shell are those on board. there will be a high-level meeting on the paris accord, perhaps today. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: coming up, wall street continues to binge on netflix. shares are poised to open at a record with investors sharing the company's outlook. capture has had an
♪ emma: this is bloomberg daybreak, i am emma chandra in the hewlett-packard greenroom. coming up, linda mcmahon joins us from washington. ♪ now to the bloomberg business flash. walmart making another attempt to build up its online -- in talksand talk to buy a men's clothing store. those discussions are in the final stages. last year walmart but jet.com
for 3.3 billion dollars. johnson & johnson's blockbuster arthritis drug took a hit in the 6%st quarter, sales fell against pfizer. this highlights why j&j needs to ever,ts biggest purchase purchasing actelion. amazons deal to stream national football games is bigger than .eported previously amazon will include as much as $30 million worth of marketing and promotion to the leak, pushing the total value -- the league, pushing the total value to $80 million. that is your bloomberg business flash. i am emma chandra. alix: france's presidential race is in the final stretch, no
clear winner but macron is pulling ahead slightly versus le pen. paris is greg, bloomberg governor report -- government reporter. what is the latest? arrests intly two marseille this morning of people who were planning to carry out attacks during the presidential campaign. is still in a state of emergency because of the terror attacks over a year ago, and the emergency has extended through the election campaign. we do not have any more details, we just know there were two men, one about 30 and the other in his early 20's. police found weapons and explosives when i searched their apartment. as far as the election, it is a very tight race.
we have macron and le pen out front but it is four candidates within six points of each other. alix: does le pen's victory margin on sunday matter? .reg: no, not at all it only matters to get into the second round because a whole new race begins. what matters is who she is up against, resuming she is one of the top two, which is likely. she has a very loyal base of voters but it is very hard for her to go beyond that because she is seen as toxic by most french people because of the party's past and the anti-european views. if she is up against macron, he is a centrist and is favored to beat her quite a bit. onl is a little bit -- fell -- fillon is a little bit
difficult. stuff, lots coming over the next couple of days. david kotok of cumberland advisors is still with us. in the market we have seen volatility pick up. how are you playing in the french election? david k.: i will not play in the french election. de gloire.h the joie we have strategies fully invested, we would like more volatility and we have it. we made the case for banks earlier. the energy patch, does it stabilize? we think a positive kick from housing helps the u.s. and u.s. markets. maybe trump and company are starting to do a little better. there is a sense that maybe
dinner -- maybe they are getting organized. alix: you do not care about europe? david k.: i am underweight europe. i think europe has problems. a prolonged period of negative interest rates that will continue for a while, or undermining what takes massive effort now. and greece could explode anytime. david: what do you say to the people coming to this program who say yes, but europe is undervalued. and the u.s. is fully valued so it maygain is in europe, be weak in the united states but it is growing and it is cheaper. david k.: it is cheaper if you use valuation metrics. if you use earnings growth, we are on an earnings surge in the united states. on thisreporting them
program every single day and will continue to do so. if we have some compositional shift, financials, very underweight by historical standards. the u.s. is the financial capital of the world and with brexit, it will be more so. reform, theo tax delivered promise or promise which has yet to be delivered? that is the key. if we get tax reform and regulatory reform we have a bull market that is prolonged. david: what about the quality of the earnings, how much is financial engineering as opposed to people buying more stuff? david k.: a fair question and a tough one. there is no question that some of it is real in terms of earnings, and that is the piece that counts. you see it in the companies where the ratio of employee to revenue is so wide, because it is not based on labor cost.
it is based on technological advancement. on monday ifppens we get a spike in european stocks. will we get a -- will it drag the s&p up or the opposite? david k.: if the s&p sees good news, it manages to like it. geopolitical risk, it manages to get behind it so there is a bull market on the way. alix: david kotok of cumberland advisors. we have a bloomberg terminal interact on tv , with us directly. bearu missed david kotok's talk on europe, fear not. this is bloomberg. ♪
on netflix. joining us to discuss their earnings and outlook is paul , director of north american research for bloomberg intelligence. netflix came out with their earnings, did the street like it? paul: a little bit of a mixed bag. they missed on the first quarter subscriber numbers domestically and internationally. typically that is the death nail for the stock but the growth in the second quarter was better than expected. i think the bulls can step back and say the long-term subscriber story is still in tact. david: is their future mostly internationally? paul: they are not fully saturated but clearly on the way. clearly the growth for this company over the last couple of years and over the next several will be from their international markets.
to 3.5e adding 2.5% percent out of the u.s.. about half of their subscribers are in the u.s. and half are international. hitd: how much is this a driven business? paul: they did not have house of cards in the first quarter of this year which they had last year and they cited that as a reason they were not able to grow subscribers. for someunts subscriber changes q1 to q2 but long-term they have a diversified portfolio of programming that they acquired from existing media companies, plus more and more original programming that has proven for the most part to be quite successful for their metrics. we do not have nielsen ratings to see how successful the programming is, but some have
been very successful. alix: do you know anyone who doesn't watch house of cards? david: but they have to pay for it, pay for these expensive programs. paul: there are two numbers they focus on, the long-term program liability which is over $15 billion for netflix. that is something they have to grow into over the next four to six years. the next is their cash burn current year. they predicted negative cash flow of approximately $2 billion this year and if you look at the bloomberg terminal it does not look like they will be free cash flow positive until 2020. david: the great thing about broadcast television is it was a cash business. this is not a cash business. paul: the company is interesting, in their quarterly
level they said they think investors should look at the company different. focus more on subscriber growth and absolute revenue growth, and the improving profit margin. they are coming to an inflection point where their international businesses that had been losing money have started to become profitable. alix: paul sweeney of bloomberg intelligence. coming up, richard carrin hill will be joining us -- aaron hill will be joining us. also lows of the session, a little weakness in the dow. 500 -- the ftse continues to get hammered. ♪
behind a stronger dollar, saying there is a big difference between talk and action. after banks sacked of america beats revenue estimates, jumping 29% in fixed. netflix traits user growth for profits. we have a read of the numbers in just a moment. david: welcome to "bloomberg daybreak." i'm david westin alongside alix steel. jonathan ferro is off today. alix: here is where we stack up in the markets. u.s. equity futures off the lows of the session. the ftse continues to get pummeled in the market as theresa may calls snap election in the year. the rate moveren of the day, moving lower on the announcement that theresa may
would make a press conference earlier in the day, and rebounding now to the highest level since february. gold is steady. oil is down about 0.4%. downgrading their outlook for global growth. it is lifting it. 3.5% from 3.4%. u.s. growth unchanged. 2.3%. it didn't raise outlook for japan, u.k., and china. 6.4% growth in china. i always joke that they do nothing, but they revise it upwards. david: china is up. the ones that are of the most as a percentage are japan and u.k. blackrockng up, the global chief investment strategist will be weighing in on the imf global outlook. david: we have had mixed bank
earnings out so far. bank of america beat earnings estimates. goldman sachs missed analyst estimates. goldman sachs is down almost 3%. bank of america is up 1.5%. joining us more is thousand williams. -- allison williams. it is a tale of two banks. gotson: over at goldman, we a lot of questions. i am sure their answer will be it is what it is. we are focusing on what we are doing. investors will want to now, was there anything unique? they have talked about lower client activity. it probably just comes down to a miss. miss: if you wanted to that goldman, it would not be on fic.
allison holker goldman sachs is focused on the institutional capital markets. equities trading is coming in just slightly better, although better for most. came income trading much better than expected. alix: what did we learn so far at bank of america? allison: going through the quarter, talking about interest rate sensitivity. it was not necessarily new. they are pointing out that they have re: had a huge help from the rise in long-term interest rates. pointgo:, each 25 basis is only going to be about $150 million increase for quarter. a 600 million dollars increase in the first quarter. alix: what about loans? notson: loan growth at 6%, strong overall for most
companies. it is holding up better than some of the other industry groups are getting. fees is the other stories we are seeing. we saw this big slowdown in commercial and industrial loan growth. a lot of that is companies tapping the capital markets. that has led to better fees. david: what about looking out for the rest of the year? besides amelioration of interest at bank of america. allison: there is probably nothing changed. most of the banks are looking at the curve and getting their expectations in line with that. on the negative side, goldman sachs looks like back lots are down a little bit. also down versus a year ago. investors will want to hear more about that. they will want to get them clients active. , and really the activity
in terms of where was the strength, when was the weakness across different lines. is there something more going on? alix: thank you. allison williams of bloomberg intelligence. joining us is daniel chung and dani burger. bank of america said interest income was going to improve, but not as much as the first quarter. the market things we're getting to more rate hikes. how do you square that? daniel: we like this. we have a strong economy. we think the yield curve is going to steepen a little bit. banks should do well in that environment. alix: when does this happen? what do we need to see to get that? daniel: i think you need to see a couple more quarters of earnings growth. earnings season right
now. we think it is going to be a strong one. we think the economy in the u.s. is doing well. the economy in europe is improving, if only modestly. when the bond markets sense that, we think we will see steepening in the yield curve. david: how sensitive is that to inflation expectations? not picking upe much. the stress is 0.5, which would not stress a lot of inflation. --think you are going to see u.s. employment is improving. wages have been flat for a long time. there are signs in many areas where they should pick up a little bit. consumers have been restrained in spending. housing is well below average levels. it is picking up. to strengthening economy and spending, but also higher inflation. alix: what about positioning?
theyone says they love financials, but they are under owned at the end of the day. >> a lot of this is coming from the tremendous rally we have seen since the end of the election. a lot of this is profit-taking. you have to reduce a huge increase in price. they are still up a lot since the election, 17% versus the s&p 500. etf for example, those have come back for example. you are seeing people pare back what they have invested. there is not an overwhelming bearish sense. a lot of it is they haven't run out so much there is a little bit of profit taking. david: expanding beyond financials to the equity markets , how and certainly before the price-earnings ratios? daniel: some sectors are still
undervalued. if you look at the 20 year -- david: for example? daniel: health care and technology. consumer is neutral. other things are overvalued, utilities, staples, telecoms. a lot of that is the result of yield chasing investors chasing equities with high heels, which is the main factor driving up performance in 2016 continuing this year. there was a big version two classic growth -- a version to classic growth stocks. looking in the discounted area of the market. alix: when i come back to is the trump trade. my favorite chart to look at comes from breakevens. you can see the two-year,
five-year, and 10-year. the two-year at 1.5%. from where you sit, how much of the trump reflation trade is still in the market? daniel: most of it is out. third peak, you had one re-inflation helps. earnings accelerating in the u.s., you have taken most of the trump inflation trade out. now we are talking the fundamentals of these industries. >> that is one interesting thing we are seeing in earnings. you are in an environment where a lot of the run-up to the election is coming back. what is the reaction going to be to earnings when we don't have this mix of politics hilton to the price? we are seeing that from banks coming down. before that there was optimism with regulations. that has pulled back. we are seeing what exactly are
the opinions on revenues, different segments, and earnings in general, how are people going to react when policy is taken off of the table? chung willdaniel both be staying with us. get a look outside the business world. taylor: we are starting with m&a news. cardinal health is down. a medicineying supply unit 465 $1 billion in cash. will buy says they back shares and pay down debt. cardinal health says they are going to lower fiscal year earnings to the low end of the range. those shares down over 11.5%. it is all about netflix this morning. they are rising after the company saw better than expected second-quarter subscriptions
after a miss on second-quarter -- first quarter subscriptions. they are looking at international subscribers. they say international subscribers should come in at 2.6 million, ahead of estimates. i'm going to renew just so i can see house of cards. alix: aren't we all? we have breaking news for you, esthercity fed president george saying the fmo secret start shrinking their balance sheet and make reductions automatic, not subject to a quick reversal. much debate on how you get back that balance sheet. she says keep it automatic. do not subject it to a quick reversal. speaking to michael mckee later in the morning. black rock's global chief investment strategist will be joining us. later, linda mcmahon reveals her
david: this is bloomberg. i'm david westin. president trump signing new executive orders today. these are supporting his motion that we should be buying american and hiring american. what are these executive orders going to say? kevin: he is going to try to programhe h-1b one visa through executive order and encourage companies to hire american workers over foreign workers. that could rub some folks the
wrong way in silicon valley, particularly as this is a heated policy debate that has pitted silicon valley against lawmakers for quite some time. he will use his tools at the justice department to enforce that. he is going to encourage all government agencies to use american companies ahead of using outsourcing. this is a congressional recess, but he is looking to use presidential orders for that campaign rhetoric. alix: 5/10 of 1%. that is in line with estimates. capacity utilization is in line with estimates. we saw industrial production revised up 0.1%. hard data is not killer. steady as she goes. david: kevin, how is the white data? reacting to this eco
it has tended to be soft. kevin: a huge point of argument for the administration has been that economic confidence and indicators has been a direct result of the administration. since then, we have seen the stock market dipping, and we have seen fall through economic indicators, which i think could pose a political risk for the administration. he is in his element according to the administration officials i have talked to. ceos like talking to him. that is why you see him heading to wisconsin today to talk to ceos about these executive orders. we are entering the end of a two-week recess. when lawmakers come back, he has to get some type of legislation done. we have seen steven mnuchin walked back claims that there would be tax reform before the august recess. i think they are facing the
reality that working with congress is a little more difficult than they anticipated even though it is a republican-controlled congress. david: thank you. it are today, we are going to have linda mcmahon joining us, small business administration. chungwith us is daniel and dani burger. let's talk about steve mnuchin. we may have to wait for tax reform. how is that likely to affect the markets? daniel: given this administration today, i think the market is discounted a lot of the things that they have been trying to get through or want to get through are more -- much more less likely to get done. that doesn't mean they won't get done, but the health care for example, the kind of rushed it to congress.
they could not get the votes. i think we will see more of that. david: the markets are not waiting for tax are from. they are moving had based on underlying elementals. daniel: the markets were excited reform.st-moving now they are focusing on fundamentals. alix: output of manufacturers sought in march the most in august. business equipment declining. that is not what we want to see if the economy is changing in cyclicals. this data does not support that. haveavily taxed companies come down a little bit. what if we continue to see weakness from the dollar tying into these trump comments? that is going to hurt industrials and materials
because we have turned into an economy where shale oil companies are exporting a lot. these industrial exporters will be hurt by the difference in the dollar. you will have a lot of things at play. you have political risks playing into that. we have geopolitical risks. it is a balancing act. remarkseferring to the about the dollar from steve mnuchin, does it make any difference what steve mnuchin or donald trump says about the dollar? is it up to the fed? daniel: i think it is much more up to the markets than any individual. europe, if youn are really thinking about the dollar, that is one to watch. the french election will be pivotal. the dollar is still a safe haven currency. you will see if strengthening as a result that is shocking to the market. david: thank you both for being
alix: kansas city fed president esther george making headlines this morning as she is speaking at bard college. here's what she said. judgment --eet the adjustment should be smooth, but once he goes it should be on autopilot. inflationdon't let overshoot 2%. he says fiscal policy could be upside risk. balance sheet normalization
should go on autopilot once it happens. she is not incorporating fiscal policy. interesting data from esther george. michael mckee will have an interview with her later this morning. munoz airlines ceo oscar reassured bloomberg that the airline would rebound. the sober tone contrasted with a better than expected financial performance for the first quarter. joining us is justin bachman. did anyone care about the actual numbers on the call? >> they do care about the numbers on the call, but the question going forward is what happens to united's results three months from now? will there be any impact from this incident? alix: will there be? what was the color on that? in the past we have not seen
a lot of long-term damage to an airlines results when there has been an incident of some type of misbehavior by the airline. i think this one could be a little different just in the sense that it had such a strong legs to it as far as that story went on and on her days. -- for days. in this case there could be a hit. we have not seen that quantified yet. i don't think united is ready to state what financial that there will be. it is something everybody will be watching. david: the one thing that strikes me as a little different is the reaction to the other airlines reacting. with $10,000 that they will pay, isn't that saying at least their competitors are saying this could affect the marketplace? >> it could. i think just because the public reacted so strongly that once you are in your seat, why are they going to drag you off?
that is the message that came through, and the other airlines responded. i doubt don't it will be paying a lot of $10,000 tickets for their own seats. david: you did not have social media by up with video of the incident. it is a pretty violent incident. >> it is. it causes an immediate visceral reaction for most people that watch it. it play for days and days all over the world, in china, which is a huge market for united. i think it was really a case where the video was so shocking to people. it took united back that that was how law-enforcement would respond. alix: passenger revenue for each seat flown per mile is going to rise by 1.3% in the first quarter, they'll be the first increase since 2010. what would be your confidence on that if they have to undergo a price war to get people to come
back to the airline? >> i think the chance of a price war is minimal at this point. we are seeing airlines are regaining their pricing power after a long stretch where they did discount quite a few affairs. we are seeing this summer, when the summer travel it's up, that is when you will see airlines hit this number. it will be interesting to watch in the fall in the winter when traffic slows. alix: thank you. 3.1%d airlines stock is up in opening markets. this is bloomberg. ♪
nasdaq also moving lower on the day. the excitement has really been over in the u.k. we had a big move in sterling. dollar lower. sterling edits highest level -- at its highest level since early february. the dollar index below that 100 level. we have been all over the map this morning. yield getting a nice bid there. oil softer as well, down 0.2%. taylor riggs is looking at first word news. >> futures set to open a little bit more negative this morning. there is not a lot of follow-through in that u.s. rally we saw yesterday. --don had its first day
worst day since june. the u.s. is still in a holding pattern so to speak. the s&p is where it was two months ago. let's look at the individual movers. i am taking a look at banks. goldman sachs had its second quarterly earnings share miss since 2011. earnings top line came in less than estimated. come revenued in coming in better for bank of america. alix: those banks taking it on the chin there. the breaking, the imf did not downgrade the overall growth estimate, raising it to 3.5%. 1.2% up fromed 0.8%.
richard, part of the theme we have been hearing is we have had this synchronized global recovery. then we had weakness and softness in the u.s. is that global synchronized recovery still in effect? absolutely. the imf data is confirming what we have been seeing for some time. this is not just a story about u.s. growth getting better. it is about growth getting better in all major regions at the same time. recently, mostst of the surprising global growth is coming outside of the u.s. u.s. growth is holding up. you are getting positive surprises in europe and asia. in u.s.y the debt equities because of this global growth story. what is your call? >> we think fundamentals will drive markets.
oftentimes investors get caught up in short-term noise. learned that you need to focus on what is ultimately going to drive markets, growth and earnings. we think we are in a sustained recovery, a recovery which is broadening overtime. that creates a positive environment. we would prefer to take risk elsewhere, areas like european stocks, emerging markets stocks. alix: how do you factor in earnings in europe as well as the u.s.? how are earnings beats going to be rewarded? lowerectations are much in europe and emerging markets than they have been in the u.s. we are starting to see earnings pick up in europe, and potentially double-digit earnings growth this year. as we look at the valuations of
those stocks, that is what makes it more attracted to the european market and emerging markets. you are getting positive earnings momentum, upgrade coming in analyst expectations, that the valuations don't fully reflect that. david: i want to understand the fundamentals a little more. let's take europe, what are you looking at that indicates there is hope? normally that will be demographics. i don't see a lot of people coming into your. otherwise it has to be productivity or fundamental reform of the system. >> all those features you referred to, demographics, activity, fundamental reform they point to a low growth environment. those factors apply to europe and the rest of the world. we are still in a low growth environment. it is a growth environment that is getting better. we are seeing some cycles. whether we look at industrial production data, business confidence, the consumption data
coming out of europe, it is getting better. as an investor, i don't want to just buy long-term growth story. i don't think you have to believe in the long-term restructuring story in your. you are buying into the valuations of those companies. the european stock market is a global stock market. half the revenues for european companies come from overseas, particularly emerging markets. low gdp growth in europe does not mean lower earnings growth. that is what we are seeing. alix: that is the earnings call. in the u.s., we have stronger data. it is getting lumpy. cpi is lumpy. intory output is down 0.4% march. it is getting softer and softer. does survey data start to roll over to meet hard data? >> i disagree that it is getting softer and softer. we have just gone through a
period were expectations were extremely depressed. a lot of the soft data was downbeat at that time. there were real fears of a u.s. recession. soft data has gotten dramatically better. the hurdle now is that much higher in the u.s. expectations are that much higher. we look at the pattern of data coming from the u.s., it is still robust and consistent with reasonable growth north of 2%. expectations have moved higher. it is harder for that data to move the market over time. when we look at the hard data coming out of the u.s., that data far from being weaker is also strong. it is not that hard data is lacking soft data, it is that soft data is bouncing back. when we look at the picture of the u.s., it is not softer and softer. we see growth remaining strong. it is a different environment, one of sustained growth.
what that means is you need to be more selective in the u.s. market, where there are parts of the market that have more open than -- hope in them. we see lots of opportunities to make money going forward. david: we have covered europe and the united states. emerging markets, typically when it comes to them is we think of geopolitical risk. is that going down or being fully compensated for in the investments? >> you are starting to see that geopolitical risk ease. there is a large premium in many emerging markets assets, particularly stocks. you saw spikes after the u.s. election, and zones about global trade wars affecting many attitudes toward emerging markets. what has happened since then is the fundamentals within emerging markets have continued to improve.
we have seen growth pickup. we have seen china enter 2017 with a strong pace of growth. we see earnings picking up. the fundamentals have continued to improve. investors have started to reassess some of those geopolitical risks, particularly with comments coming out of the u.s. administration that have been softer than many people feared in november and december. particularly towards nafta. that is encouraging international investors to start gradually reallocating to em. ofx: we are getting calls one point eight percent. what worries you? >> you are getting volatility in the 10-year bond yields. we sought lower yields last year. we will not go below those barring some major economic
shock. the path for interest rates is gradually higher. risk to change that view is the fed raising rates more aggressively. that has diminished in recent weeks. there is a risk that geopolitics spikes again. that appears to have diminished. the third risk is a rolling over of some of the data. you don't see investment spending coming through. none of the data we see here at black rock tells us that is happening today. that is something we have to be focused on. the data tells us we are still in a sustained global economic expansion. david: thank you. that is richard turnill of black rock. we want to move to netflix. shares have bounced around from losses and gains, and the stock is currently heading to its biggest intraday decline in nearly a month. joining us to discuss his
michael pachter. he had an underperform rating since 2011 on netflix. so have not been too right far. are you sticking with your story? >> im. if i am not right for six years, it is ok to be wrong again for another year. the stock is valued on a metric i don't think is as important as investors think. people pay for subscriber growth. netflix figured out years ago that that is what they get rewarded for. that is what they deliver. in most cases, when people invest, they look for free cash flow, profitability, cash generation, and companies that grow because they are generating cash to fuel growth. netflix is not doing that. they are at -$2.5 billion in cash burn the last couple of years. almost $3 billion. it is heading to a most another
$2 billion this year. they don't make any money, but they are making up for it in volume. that doesn't make sense to me. the value these guys on present value of future cash flow. they said they expect to burn cash for many years. i don't get what people are playing for. who cares if they go from 100 million to 200 million subscriptions if they are not making money. th.id: they are buying grow at what point do they turn off the cash flow -- positive cash flow? >> they said they will not be cash flow positive for many years. that is page five of the investor level. be casher is they will flow positive when they raise price by four dollars or five dollars prescriber per month.
they will probably make $1 at $15 per month month. they are not going to keep growing at this rate at $15. david: the yuan assume they will -- do you assume they will hold those subscribers at $15? >> i think price elasticity of subscribers is low. they probably lose 10% or 15% of subscribers, not more than that. the problem is it is harder to $10. at $15 than at they have half of all above median household incomes on the planet. what is left is below median income households, much more sensitive at $15. what do you pay a profitable low
growth company? not 40 times there cash flow. alix: since 2011, the stock is up 313%. no one is disputing the fact you are saying. no one cares. how do you square that? your facts are right. the market is not telling you they care. it is like amazon. >> im in a regulated job. the regulators tell us we have to value companies based on fundamental analysis. the fundamental analysis says his company is not worth what investors are willing to pay. that is fine. if people want to dream and invest, i encourage them to do so. if you think the stock is going up, you should buy it. i am a voice in the wilderness saying the rubber is going to hit the road, and eventually
this thing is going to have to perform on a cash flow basis. it is not going to get there. i am one of 30 analysts, and i am probably the only one with the cell rating. i am fine being in the minority. alix: thank you. really sticking with that. i missed out, but i'm sticking to it. david: we want to go to washington. linda mcmahon started a small regional business in connecticut and with her husband vince build it into the wwe. now she is helping other small businesses realize their hopes and dreams as administrator of the small business administration. thank you for joining us. >> it is a pleasure to be with you this morning. david: you are early on in your tenure. you understand the situation of a small business person in this country. what can you do to make it
easier for small businesses in this country? tenants, helpee with capital, counseling, and contracts. obvious, access to capital. we are identifying lender to come into the program so that our small businesses can have the capital they need. counseling is equally important. it is helping them with business plans, helping them understand they may need to take a look at what they are doing so they create the kind of jobs they want to and so they can be successful. aboutcts, government has $500 billion in contracts and about 23% of those are allocated to small businesses. we want to be the conduit to help these small businesses that their share of those contracts. it is a good plan. we have 68 offices around the country.
we service consumers at the grassroots level. david: i'm glad you raised the issue of government contracts. this has been in the news. whether that 23% number is being met or not. there have been suggestions that people have tried to go around that. how can you be sure that 23% number is being delivered to true small businesses? >> we are monitoring that. we want to make sure we get the proper feedback, that our measurements are in place. it is also about building relationships so we can make sure the people that are operating on behalf of small businesses are in there helping them pitch for these contracts. out of that 23%, 5% was the goal for women-owned businesses. we exceeded that thi last year. we want to grow that number. we are working hard to make sure all government contracts are going to that 23% allocation.
understand there have been some major government contractors that are excluded from this. the cia, supreme court, various parts of the government. would you like to include those in the denominator? >> i would just like to see more of their businesses get to that 23%. $500 billion is a significant number. i think we have a lot of room to grow. david: one of the things we have heard from the president is that regulation has been a problem for small businesses. you should know if anyone should. isn't a lot of that regulation state and local? is that anything federal government can address? >> it really is a combination. what i hear from small businesses more and more, and the last five years when i was campaigning for the senate in connecticut, it is not just the specific regulation, but that in
combination with the volume of paperwork and compliance. business small operator is not just the ceo, but the janitor, bookkeeper, marketing director. they don't have the time or expertise to comply with the volume of information that is required. they cannot afford to hire it. as much as anything, it is the volume. that is created by all the regulatory agencies. a fair amount is federal. david: let's go back to when you were running your own small business. if you got to eliminate one federal regulation that would have benefited you the most, what would it have been? >> you're asking me to really rolled back the clock now. i'm not sure i could focus on one particular regulation. except, it was always compliance issues and volume.
i think that problem still exists. that is one we can work on. i have met with a lot of businesses who say we are not saying we shouldn't have regulations to protect people and the environment and workplace, but it is just duplicative compliance that is the issue. i think we can look at that. finally, there has been talk of possibly folding sba back into the department of commerce. you have said you don't think that is a good idea anymore? is that likely to happen? is there a move to pull this under wilbur ross? >> now. it is really important to keep the sba separate. commerce does some amazing things. i think especially with the export business and trade, but we really need the local district offices we have. fromi helped build wwe
the ground up, it was always global in reach, it was local in execution. that is what sba does as well. david: linda mcmahon, thank you very much. alix: we are 10 minutes into the open. here is where we stand. the dow, s&p, and nasdaq a little lower. the s&p down about three points. health care and energy are the losers of the day. check out tv . watch us online. interact with us directly. this is bloomberg. ♪
to all of the calls. let's start with goldman. what insight have a provided to that miss they have? cfo has beencoming speaking. i don't believe they have opened it to questions. he has blamed it mostly on the lack of volatility. we were talking about that frequently in the first quarter. it was really across asset classes. he mentioned equities, commodities, fixed income. what is puzzling is why it affected goldman so disproportionately. it might just be there client --ister, as a mixture is client mixture, asset mixture is different. david: the market was no more volatile for bank of america, yet they beat estimates on
fixed. julie: it is confusing. maybe there will be more questions about that once they open to questions. they did talk about strength in the investment banking business. as we know, it was relatively slow in the first quarter. he did point that out as a strong point. in the statement, like going fine set the operating environment -- lloyd blankfein said the operating environment was mixed. he has not talked on the call. it is unclear if he will be answering questions. blog, harveyt our schwartz, the outgoing cfo is talking on the call and thinking it run. they are asking about the performance in fixed income and commodities. that bank of america
called started at about 8:00. what did we learn? moynahan,heard from reiterating targets on common equity. he did not say when it was going to happen. he said they are getting there. the company talked about deposits. that has been a hot topic on all of these calls. are the banks seeing pressure to pay out on deposits? bank of america said no. at the same time they are collecting more on the money they are lending. that was positive. david: they have a lot of deposits. julie: some of the other banks have said they expect down the line to see more pressure on that, but bank of america did not talk about that on the portion of the call i heard. deposits were up year-over-year. disciplinedlped by
pricing on deposits. net interest margin at bank of america performed -- increased more than we saw at the other banks. the company said that should moderate for the remainder of the year. alix: great stuff. lots more to come. we are nearly 26 minutes into the session. here is where we stand on the markets, a little weakness here in the u.s. a lot of weakness for the ftse, down 2% on the day. 10-year yield down 10 basis points. stirling is the mover of the day. this is bloomberg. ♪
♪ vonnie: we're going to take you from new york to london. we are going to cover stories out of paris and beijing. here are the top stories we are following. an interview with kansas city fed president esther george moments away. we will ask one of the more hawkish voices how many rate hikes are appropriate this year. mark: prime minister theresa may called for a surprise snap election with a vote to be held on june 8. she looks to strengthen her hand going into brexit talks. sachs stunnedn the world with a miss on bond trading revenue. gains.f america boasting how did goldman get left behind? k: