tv Bloomberg Daybreak Americas Bloomberg May 7, 2018 7:00am-9:00am EDT
head of the decision on iran's sanctions. all you central bankers. em currencies get whacked on the stronger u.s. dollar. air france's nose dive. the ceo resigns, strikes continue and politicians warn the survival of the airline is at stake. david: as we look at new york city, welcome to bloomberg daybreak. i'm david westin here with alix steel. spring has finally arrived. alix: then you come out and it's a dust of pollen over every single car. and then you have allergies and you get shot with two types of medicine you are still in pain. a pretty steady world when it comes to the bond market. , not a lotutures up of action except for that stronger dollar. at one point euro-dollar
intraday of the lowest in about four months. bond market going nowhere. , up overthe shocker 70, up 9/10 of 1%. where human 2014 november? david: where was i? ands investing in tech sitting on boards. time now for the morning brief. the u.s. treasury yield will auction a total of $73 billion in 3, 10 and 30 year bonds. wednesday we will get numbers for the u.s. and also on thursday, the bank of england will announce its bank rates and bond repurchase program. on saturday the deadline for president trump decide whether he will be asking for increased sanctions on iran as a never to renegotiate nuclear deal. it may have some do with oil. alix: we are joined by
bloomberg's chief content officer and gina martin adams. boyle, 2014 high. what does president trump do on saturday? >> all signs point to him backing out of the iran deal. it would be a shock if he didn't. all the people around him suggested that he has made up his mind. even though there were some members of congress in his own party who suggest we should stay in. i think it is a pretty far gone conclusion at this point. alix: is there any more upside to oil? gina: i think for six months this an asymmetric test. frankly energy stocks have been telling you for the last six weeks even closer to three months that there is some persistence in the oil price recovery and this will continue to exacerbate that trend.
at some point you do get concerned this is a supply-based rally that may not be supported by demand growth and that is a big problem for the economy, the equity market at large. so far the energy sector has been rallying. everyone dismisses it, it's not permanent. david: if congress back the president, what does europe do? europe has a role to play. marty: iran has made it clear they would like to preserve the agreement with their european partners and they have a vested interest in doing that as well. what becomes problematic is if the u.s. imposes sanctions, what do europeans and as a practical matter do? are they forced to agree with them because they have no way to operate otherwise? the rhetoric out there is
that iran has an easier time selling to -- selling oil to other countries. stilly could in essence get the oil out, not as much but we won't go back to a free sanctions iranian output level. david: it's not just oil. ,here are a lot of businesses it will be very complicated at the least. s showing up in margin concerns for the s&p 500. companies not only have to be on the top line, but on the bottom line. there needs to be this cohesive story in order for the stock to do well. a lot of the reason for that is the recovery in commodity prices have not necessarily been justified or driven by a real strong surge. so investors are getting nervous. how much of this is going to be passed through. what will it mean for margins going forward. we talk a lot -- rising
labor costs. is what's story happening in emerging-market currencies. e.m. asline is jpmorgan index. --fx we get a rise in another asset class. i thought this wasn't going to be the taper tantrum of 2013? i thought these would be more insulated from the arise -- from the rise in u.s. dollar? marty: it seems the best laid plans went awry. situationry difficult and it is very localized, but it still has an impact on markets everywhere. so you just can never count on things being normal in these days of uncertainty. alix: that leads me to how i lead in, we saw with central bankers and argentina, the only way to stem the tide is if you hike your rates enough to keep
money in the country before you can get inflows. that is quite a hike. gina: and it has consequences for domestic growth. ultimately it constrains growth domestically. it's a fine line and a balance the central bankers have to make. in a lot of ways this time it is not different. every time they start hiking interest rates, every time or move, it does tend to have consequences for emerging markets. we are seeing that occur. we have been able to dismiss that thinking it would be different and now we are figuring out there are consequences to this. one of the more stunning interesting statistics for the year is that the developed market equity markets are outperforming the emerging-market equity market we are supposedly seeing acceleration growth. that is somewhat rare. david: air france is taking a nosedive overnight. a huge labor problem. in can see down by 10% now
trading over in europe. i want to put over a chart to see that shows what air france has done and it's really fallen down. you see on the right, that's how far down it's gone. there is an ongoing labor dispute. does it go to the essence of what mr. macron is trying to do? marty: it is all about a market-based economy, something he has supported and he has taken a firm stance. there will not be in the government bailout, so they will have to stand or fall on their ability to get workers to agree to wage demands and management that forced out the ceo. it is a test of macron's leadership for sure. david: to pick up on his point, the french government has been clear, the french finance minister said if it does not make the necessary efforts, it will disappear. that is a pretty strong message to the market.
gina: very strong. david: does air france survive? gina: it is anybody's guess at this point. the it is the headliner airline of its country. it is certainly not something we are accustomed to hearing in developed equity markets. volatility is the pretty extraordinary relative to the rest of the markets which have called. david: they already had fuel cost problems. if you talk about a worse time to have doubts about an airline, right now when people are booking their vacations over the summer, this has to be a question -- this has to be it. gina: this only exacerbates those problems. othero speaks to some problems that of been occurring at what he markets at large back to the wage cost input. investors are somewhat nervous. where our wages going in the year ahead.
we have been somewhat soothed by the data flow that they are not accelerating the pace we worried they would. this is still an issue and it speaks to the margin concerns. how are companies going to navigate this overall. marty: one thing that's interesting is nobody is talking about gasoline prices. alix: i am. hugelythis used to be important from a political and economic standpoint. rising gasoline prices and we don't hear it. gina: nobody believes it will continue. there are a bunch of deniers that this could continue. in reality the longer it goes on , the more pressure it becomes and the more problematic it becomes. marty and gina martin adams, thank you so much. crude's move.e on
blackstone's real estate unit has agreed to buy gramercy property for $7.6 billion in cash. tot represented 15% premium the close on friday. the company specializes in buying and managing commercial real estate in the u.s. and europe. there is a big transaction and the flavors industry. internationa flavors and --grances have agreed to buy for $7.1 billion. that was an 11% premium to the closing price yesterday. alix: oil prices on the move. rising above $50 a barrel for the first time since november of 2014. traders brace for new u.s. sanctions on iran. president trump said he will decide may 12 whether the u.s. will stay in the 2015 iran nuclear deal and waive those sanctions. joining us from dubai is bloomberg's middle east and act
-- and africa executive editor. i want to start with you. what is confusing to me is you have iran saying they are prepping for this. ory don't want oil over 60 $65. the saudi saying they don't want volatility. why is the price not paying attention? >> the price not paying attention because the markets are betting the trump will pull out of the deal and reimpose sanctions and as a result you might see a lot of barrels disappearing. if you remember when the deal was struck, iran was able to really ramp up its production, its exports of oil on the back of the easing of sanctions. some of the sanctions have remained, but international sanctions were removed. if you ramp that back, in a market where prices were already rising, that's why you are seeing markets reacting in this
way. alix: what's the probability from your neck of the woods that we will wind up seeing some kind of complete implementation of sanctions? what's the reality on the ground? riad: the reality with the iranians is that u.s. sanctions, u.s. pacific sanctions have , international sanctions have been removed very -- removed. iran has a few deals here and there. the fact that the u.s. sanctions , especially the banking ones remain in place has limited this and we have seen european companies coming in and checking things out, looking at potentially making deals. it has not really happened. it has not taken off in any major way which is a huge disappointment to the iranians. if the u.s. now tightens sanctions further, you are
likely to see even that european interest in the research disappearing and dying away possibly completely. david: breaking news, there are reports the buyout from -- raised in dubai is in talks with a stake.ck to sell it has been somewhat troubled through misuse of funds of it had to lay up a lot of people. and colony -- barack northstar could be a partner. a real business that makes real investments. not just donald trump's spokesman. inside the bloomberg here and you can see the underperformance of energy stocks versus the oil price. energy stocks that white line.
are you playing energy on the supply side-based rally? >> we really are and one of the more important things is the supply and demand dynamics from a global market got to balance a lot quicker than the marketplace thought. we are seeing balance in the first quarter of this year versus the first of next year. and the cartel have done a lot to keep the demand and -- demand-side in check. when we look at that. you could not look at that any better when you think about the fact we have seen a natural increase in the price of the barrel for oil. in the equity complex just not playing along yet and that's where the real opportunity lies. alix: the issue is that if you have a price rollover, if the worst case materializes. some of the rhetoric is that saudi arabia will pump more, iranians could wind up selling
more to china. are there workarounds that the markets are not realizing yet? may -- theyrkets are pricing in trump will pull out. if he does not you might see a pullback. the saudi's have been firm and they want to try -- we have reports out saying they are aiming for a price of $80. the idea they will wrap up supply is not a sure thing because you have to think about the deal which is a big part of saudi thinking. they are looking for those $80, at least that's what the reports we have are saying to pump up the valuation. it's a key part of the reform happening in saudi arabia. increased oil prices are good for energy companies, what about the rest of us? at what point to higher oil
prices weigh on overall growth in the united states or more broadly? people have been skittish about input costs. prices -- are much more productive whether it's in power generation or driving ourselves. to the extent we are talking about this increase on revenue season five or 10 years ago we would have a much bigger concern. is certainly something to pay close attention to, but in terms of the order of magnitude of slowing the economy down, it's more of a nuisance than a structural change. or e&p'sthis services, in the u.s.? art: e&p's. we are really looking at an inflection point here. i think it's more predicated on
the fact the global supply and demand picture has increased in the local north american e&p companies have gotten more productive and have clean up their balance sheets. ,e have stronger ones coming in we may see some volatility around the decision whether or not to stick with the nuclear deal. basic fundamentals point in that direction. what's the one thing you will be paying attention to? i think any news coming of of the u.s. on any hint what donald trump is going to do , everybody's expecting them to pull out. with donald trump, you never know. we will watch the people visiting him and seeing what the have to say. if they can see a shift happening in this that seems to be the position of donald trump right now. david: thank you so much.
♪ air france stock plunged in the wake of ongoing labor disputes, and the abrupt up archer of the ceo amidst a crisis. shares are trading 10% lower and we welcome greg from bloomberg in paris. explain to us the situation, how bad is it? it is probably not as dramatic as the finance minister made it sound when he went on tv yesterday and said the survival of the company is at stake. it's probably not. but it is a major issue that they lose money several quarters and make money other quarters. they make less money than british airways make and their
big competitors in europe and competition is growing stronger. they need to invest in new planes. some of their long-haul flights are barely on planes that at this point. the company needs to get its profit margins up if it's going to can heat successfully with its european peers. because hisleft latest labor demand's were turned down in a companywide referendum that he called maybe unwisely. he has left. we are flying unit rudderless and the u.k. -- and the union will continue with their salary demands. david: the strike seven going on for some time. their ceo offered 70% over three years or four years and they said no way. is there a deal here? they want and bank immediate 6% rise and the argument is they have accepted
late wage moderation over years in order to get the company back into profit because it had been making real losses. theseay we made all moderations and now we want to get paid back. he said we don't have the money to do it. it's not like the national railroad company which has a strike right now, that is fully government owned. here, air france is a private company. government stake but it's only 14% so they are a total minority shareholder. it's a commercial enterprise in a competitive field. that's why the stock is down. it's not clear who will come in and cut a deal. david: does this fit into the president's overall approach to labor reform? is the agenda of the government to help the labor force to not give in to demands? greg: the government has been
firm and everything whether it's labor laws or reform of the national railroad company, which are their negotiations to handle. air france is theoretically a private company but it is an affective national airline company. the government will put money into it. it does definitely fit in with this hardline view that france needs to shape up and modernize. david: thanks so much, greg. alix: currency chaos. emerging-market currencies rocked is the dollar strengthens. more on that next. this is bloomberg. ♪
italian equities rising for ofts of 1% -- rising 4/10 1%. i mentioned the dollar seems to be where all the action is. 1%,-dollar down by 4/10 of hitting the lowest level in about four months. is changing the story for some of the emerging-market currencies, rising against the dollar. they had to hike rates to 40% in order to do that. here in the u.s., the bond market under a little bit of pressure. a lot of supply coming on. what will it take for the markets to absorb that? what kind of yields will we see? the story of the day for me is to the highest level since 2014. david: let's get an update on what is making headlines from
outside the business world. kailey: vladimir putin has been sworn in for a fourth term as president of russia. he called for international operation, stability -- international cooperation, stability, and peace. he was elected with 77% of the vote. the european union is considering a temper my to avert a transatlantic trade war. tariffs ony tolerate metal goods. president trump's lawyer is leaning against having it interview with special counsel robert mueller. rudy giuliani told abc news such an interview would be a trap. he also said president trump would not have to comply with a subpoena. that is a hot topic for legal experts.
global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. alix: the strengthening dollar weighing heavily on market --rents, client last week climbing last week to the highest level since february. 20 day volatility finally picking back up. joining us is a ubs wealth management director, and art hogan of the riley fdr. this was supposed to be different. we weren't supposed to see the temper temper drums -- temper tantrums. are we? >> paper was a tough month for emerging markets -- april was a rough month for emerging markets.
increasepretty sharp in rates, competitive by some domestic challenges. because risks, turkey because of elections for everyone come argentina -- for every best for everyone -- four erdogan, for argentina. we don't think this is a 2013 type scenario. emerging markets are more resilient than they used to be, and we think this will support the asset class moving forward. david: that is what we've heard. they are more externally resilient. they are not as dependent on commodities. so why isn't that stabilizing things right now? why is there so much movement short-term, when you say longer-term there won't be? >> we think there won't be.
real interest rates are a lot higher than the used to be, or for exchange coverage ratios. all of these factors taken together looking a lot better than in the 2013 temper tantrum. if you come inside the bloomberg, you can see ascii developed. it has been the developed markets that have been outperforming, puzzling if we are in this growth recovery. >> it is interesting. you and i talked about this multiple times. if we are the central bank in the united states that is a year and a half or two years ahead of the other central banks, if we are looking at relative strength versus global strength, why won't that be bad for emerging markets? over the last six weeks, we have seen relative dollar strength, and now we are finally seeing reaction in emerging markets. i actually think the dollar has
gotten a bit of ahead of itself on the near-term. to see commodities go up as much as they have in the near-term, it would continue to strengthen the dollar. i think this is going to be we will be saying of a summer that we really got concerned about in the spring. i am not as concerned about what that means for domestic equities. to the point that emerging markets perhaps are a bit more resilient to the strengthening dollar, i think we are probably at the top end of the range. david: for quite some time, the answer to just about any question we had was global synchronized growth. is it time to start questioning whether that is intact? >> no. i think to the extent you look at first quarter for just about everybody, we had a bit of an air pocket. when you look at all the developed countries around the
world and see if there's an expansion, that's true. is it the pace of economic growth we saw in the third and fourth quarter? no. does it have something to do with input costs, rising utility costs, and a lot of volatility? it isut i don't think time to be calling this the end of global synchronized growth. we just don't have the exponential at that kind of growth we saw at this time last year and certainly into the fall. david: we're going to turn specifically now to argentina. quite a dramatic set of events in the last few days as they ended up going up to 40% interest rates from the central bank. we bring in now justice carrigan, joining us from dubai, although based for a long time in latin america. give us a sense of how we got to the situation in argentina. very difficult to point the finger directly at argentina for what is going on. as we've been hearing, this has thea lot to do with what
u.s. treasuries have been doing and the general perception about where u.s. interest rates are headed and what that means for global growth. is coming to some extent, an innocent victim of this. by the same token, it has been slow in bringing for some of the acrirms that the m administration pledged to do, and those chickens are coming home to roost as we saw this extreme their episode last week with the central bank raising rates by almost 700 basis points in one go. doubt as i understand, no that the strengthening dollar put the issue to a number of emerging markets. wasn't there a substantial policy missteps in argentina when the reports are that central banks try to go along, and that people reacted,
inflation went up, and they took remarkable steps up in the interest rate ramy: -- in the interest rate. reporter: that's right. the central bank cut rates even know there wasn't any evidence that inflation was falling back to target or in any sense under control. that sends a message to investors that the policymaking group in the argentine central bank wasn't necessarily to be trusted. which should still be showing a little bit of naivety and caved in to pressure to some extent from the government. that is a memory that has lingered with the investment community since then. perhaps that is now beginning to kick in and what we are seeing at the moment. david: thank you so much for joining us today, bloomberg's justin carrigan. woo: r 40% rates enough to investors back and stop outflows?
>> we think so. response was pretty strong. it was a coordinated policy response from the central bank and the finance ministry. this might be enough. it will all depend on the external environment. if the dollar stops from appreciating, is u.s. interest rates stop from going up, then the answer is yes. there is a great piece over the weekend talking about argentina. "the loss of policy credibility is perhaps the simplest and most direct at summation -- direct explanation for argentina's predicament. already vulnerable autonomies -- tooto providing into trying to pursue too many objectives with too few instruments. macroeconomic balances only
grew. i think the government did get the message that the market is sending. looking forward, the commitment for fiscal consolidation will be there. the commitment to fight inflation will be there. we just need the external environment to cooperate. david: i wonder whether there's an inherent discount in emerging markets because of the history of not having a truly independent central bank. part of the problem in argentina reportedly is because they had too much influence early on. right now you have turkey, the turkey, putting interest rates down. to the extent that we've always had a concern in emerging trusts that, can you the monetary policy, and will
they do the right thing in terms of adhering to current and beneficial fiscal policy. i think you will always see a discount for that risk. i think more important to argentina right now, away from getting trust back and its policymaking capabilities, is that the dollar doesn't continue its ascent. we spent the better part of last year with the dollar going nowhere. now that we've firmed up and he is a six-week phenomenon, i think that is why we are taking up notice. i don't think we head into july with a 92 handle on the dxy. when like the panic we had people got worried about hyperinflation and people got more worried about the emerging marketplace. alix: let's put the dollar and the if aside. which emerging-market winds of having the best i think sex
reserve file -- the best fxx reserve file? >> on the em currencies base, we are finding value in and. in strong fundamentals. that is what we find appealing at the moment. when you look around the world for investments, do you look at things like india at all? >> we certainly do. when we look at our model portfolio, we are revising about 20% of your investment to be international and/or local. it looks like a place that is going to have some attractive possibilities. andy a has had the problem for decades now. -- india has had the problem for
decades now. broader north america, if we get something renegotiated on nafta, there is some great opportunity. that is where a discount has been laid in terms of the not being able to get this renegotiation process started again this week. i bet there will be a lot of good news out of that before there is any good news out of china. they've benefited so much from the low oil because that is reducing now. thank you both very much for being with us. coming up, martin winterkorn was once revered for building bmw, but now lawmakers want to hold him accountable for the emissions scandal. you can turn on the radio and listen to our colleagues tom keene and jon ferro. "bloomberg surveillance" can be heard in washington, the bay
is super serious in taking on warren buffett in the candy business. alix: joining us now is jason kelly, bloomberg's new york bureau chief. reporter: it is so interesting. that -- $7.6 million for logistics and warehouses. this is a total amazon play. you have to think when you look at blackstone making big bets, they've made huge bets on commercials. watch this space. lot more to come here. wealthyere are so many people in asia that the private banks are attending to manage more money. reporter: that is exactly right. there's got to get more work out of these bankers. the other thing that jumped out to me is the most kailey leinz
the threshold has always been $10 million, but it was a loose 10. now it is a hard 10. [laughter] ared: a lot of people crashing into asia for private wealth management. reporter: absolutely. david: that is where everyone says they want to go. reporter: the wealth is being generated at a much faster pace in asia. david: this is quite a story. david what according was that -- davidter corn rkorn. corn -- winte reporter: one of the things that makes me think of, since we are
talking wall street, 10 years since the financial crisis, where were these guys with all the bank ceos? thatther big news , safe the bloomberg passage for the new ceo. he was apparently afraid to travel around the world because they were afraid they might arrest or subpoena him. alix: one guy, really? i can't believe that. manipulated and lied to the authorities for a long time. the final one is buffett versus musk. this is happening. i was at the meeting and saw that question asked.
elon musk says he is starting a candy company, and that he is super serious about this. reporter: there's almost a kind of trump-ian element to this. like that's it, we are starting a candy company. alix: 40 you doing listening into what is happening at berkshire hathaway? toyour job stopping mean analysts. reporter: another must-read on the bloomberg today is about the youtuber who really took over the call last week. david: it keeps us busy, that is for sure.
♪ giuliani went to abc news over the weekend and talked with george stephanopoulos. he had a number of things to say about his position. >> he said the president did know about this after the campaign. >> at some point, yes, but it could have been recently. they could have been a wild back. >> you stated it as fact. >> maybe i did, but right now i am learning. i can't prove that. i can just say it is rumor. they don't have a case on collusion. they don't have a case on obstruction.
that's why they are asking all of these questions. i'm going to welcome into a questioning for perjury like martha stewart did? when i am facing a situation with the president and all the other lawyers are, and which every other lawyer in america think he would be a full to testify. >> using the president is telling the truth? if you believe that, why do you th -- why don't you let him go in and testify? >> because i would be living in some unreal fantasy world where everyone tells the truth. david: i'm not sure what his position is at this point. is he going to testify? not testify? plead the fifth? >> he has no idea what donald trump is going to do at the end of the day. he is advising him not to go into mueller's trap, but as he
says, he may decide to do it anyway. david: i can understand a lawyer saying i've not had time to study the facts, but then why go on nationwide tv to explain that to everybody? guest: the focus is now on rudy giuliani and his performance on abc. they are not taught me about donald trump and whether or not he is being truthful with the american public. plus, he gets on "saturday night live" in the cold open. david: oh i miss --alix: oh i missed that. who played rudy? guest: i don't remember, but he was really good. [laughter] like so much in this administration, it is a lot about the noise that it scares the basic issues that people tend not to focus on. david: although the history of people getting more attention than president trump has not been good. guest: that's right. the betting has already begun on how long rudy giuliani can attract this much attention and
not become in the crosshairs with his boss. david: does this have any effect on the mueller investigation at all? guest: no. i really think it doesn't. the bottom line especially on the stormy daniels thing is a really fundamentally doesn't change things. the issue is whether or not donald trump colluded with the russian government. there is no indication that that's happened. mckinnon. thanks, marty. coming up, mark weinberger will be joining us. dollar strength leading the euro-dollar to a four-month low. this is bloomberg. ♪ mom you called?
oil prices breaking $70 ahead of the president's decision on iran sanctions. it is all you, central bankers. it is up to central bankers to follow argentina's and rate hikes to dissent currencies. nestle pays over $7 billion to starbucks to get caffeinated in the u.s. david: welcome to "bloomberg daybreak" this monday. i am david westin with alex deal. all that oil on the dollar. alix: what could be better for me on a monday? here's how the markets are playing out. futures moving modestly higher by about eight points. it is all a stronger dollar story. you are dollars -- euro-dollar 1.19. how will all of the different maturities wind up observing the supply? 2.96 10 year now.
over 1%, despite the fact we had a more conciliatory tone from the white house, despite the fact that iran does not even want $65 oil. david: and we always thought shale would keep down the price of oil. alix: if you look at the rig count, it's tick for tick. david: time for the morning brief. kneeling --ies nearing $7 billion more than the auction last year. cti thursday. thursday, the bank of england will announce its decision on bank rates. saturday, it is the deadline for the president to decide whether he will ask for increased sanctions on iran as part of his efforts to renegotiate the nuclear deal. let's get the headlines outside the business world. kailey leinz is here.
kailey: the president is seeking support for his embattled choice to head the cia. the president tweeted that democrats do not want her because she is too tough on terrorists. there is concern that her role in interrogating terror suspects could hurt confirmation chances. boris johnson said it would be a mistake to walk away from the uranian nuclear deal. -- iranian nuclear deal. he writes the deal has the fewest disadvantages. he says negotiators are close to a deal that would address the concerns.s the president threatened to pull out of the deal by the end of the week. primary pollutant has been sworn in for a fourth term -- vladimir putin has been sworn in for a fourth term as president of russia. he was reelected to a six-year
term in march, with 77% of the vote. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. alix: thank you. oil prices moving above $70 a barrel for the first time since november, 2014. toders bracing for the u.s. stop waving their sanctions relief. we have heard conciliatory talk over the weekend from the white house. here is what george schultz had to say. , as negotiated, i did not think was a good deal, for reasons that are now obvious. them from to stop getting nuclear weapons is important. personally, i would not walk away from the deal. i would keep it. alix: with us as mark weinberger, local german and c--
-- global chairman and ceo of ey. he served as a member of the president's strategic policy form. also with us is nick bennenbroek. hello, everybody. welcome. get --heart of this bill deal is what happens to the oil prices. you can see oil prices versus the 10 year even mark -- break even mark p at how much of a risk is this? >> it is another one of the incredible uncertainties businesses are dealing with. no one thought oil would rise to $80. no one is project in it is coming back up after it went down. whether it is the iran deal or someone else in the world popping up, it will inflict inflation and prices. i think you have to focus on the signal, not the noise, and see where the global economy is
going and not worry about fluctuations in the price much. alix: speaking of, if you look at the dollar and commodities moving in tandem, that tends to be more unusual. i wonder if oil is telling us the dollar rally will not last. did: i think it will last it is unusual for it to move higher. it depends on the underlying strength of the global economy. if it is not robust, it is unusual to see the dollar and commodity move higher at the same time. david: do you expect the dollar to move higher or not? what does it say about the strength of the u.s. economy? >> if you look at the chamber of commerce, the boardrooms i am in, the business roundtables recent survey, we are seeing the most confidence we have had in decades. investment confidence. we are seeing consumer confidence. i think you see continued upward pressure. the real question on the dollar
is what does the fed do with interest rates and where does monetary policy go? as for a strengthening u.s. economy, that will continue. david: has the rate issue become an issue in the boardroom yet? nick: i do not think interest rates are the real fear. in the financial market, it would be interest rates and how fast they strengthen. could strangle economic growth if it goes too fast. right now, disruption, growth, acquisitions are all things businesses are focusing on. alix: you do not think the dollar rally will continue? nick: no. i do not think it is a long-term story. we are doing extremely well in terms of the economy, but in terms of risk in the world, there is plenty of room to catch up. --have all of this goal will global monetary policy. you have to get closer to the u.s. that will cause the dollar to go down. at thef you look
euro-dollar now, at a four-month low, obviously it is a dollar strength story, but you could say it in the rollover soft data story for the euro. nick: at this point, i even some of the u.s. numbers, jobs numbers, were not so great. we saw a small decline in some of those numbers. i do not think it is a change in the long-term story. i think foreign currencies will come back. david: you talk to ceos around the world. do they want a higher or lower price of oil? mark: you know the answer to that. it depends where you sit, which country. in india, you are an importer. in the middle east or higher -- africa, you want higher prices, because you are an exporter. there is no one answer. canary,was talking to an independent u.s. oil company. the ceo said obviously higher oil prices are good for them, but their input prices are
costly, because they use oil to import oil. david: and whether it could curtail growth. mark: a higher price of oil will make it more expensive, but some of the oil producers will do better, and will spend money on capital expenditures. it goes both ways. alix: which bring up the fact if you price oil, you probably go by the ruble. is that still the relationship you see? nick: if you are brave. it is quite volatile. you can also buy the canadian dollar. there are a few currencies you can play. alix: does a higher oil and lower euro change the world -- change carry trades? nick: i do not think so. alix: what is still in play? nick: right now, volatility in emerging markets and trade talks negotiations. possibly asian currencies. the korean won looking at rate hikes, possibly.
david: looking at longer-term prospects for the dollar, you are saying you do not think we can continue this rally for too long. how much of that is a question of the trade deficit? is it a question of current account deficit? more withas to do monetary policy. ultimately, we will see the bank of england, bank of canada, european central bank, even the reserves are -- of australia and new zealand -- we will slow down a little bit. others will speed up. that will turn the course of the dollar. alix: mark weinberger of ey and the denenberg of wells fargo securities, both of you are sticking with us. on commodities edge, we will speak with an investor in u.s. shale companies. iran --ill talk about how do you play shale producers when we are at $70 oil, and what
upscale coffee triggers in the u.s. starbucks will use the money to speed up share buybacks. blackstone group has agreed to buy gramercy. a 16% premium to gramercy's close. warren buffett warned about a nightmare link to new accounting rules. it has come true for his company. the rules require brush are -- berkshire hathaway to report unrealized gains or losses in net income. that helped lead to a $1.1 billion loss for brookshire in the first quarter, the company's first net loss since 2009. that is your bloomberg business flash. david: we will take advantage of ey, weinberger, the ceo of and talk about this accounting change. i was out in omaha. this is quite the subject. rick sharga -- berkshire lost money because they had things
they had to mark to market. changehis was a consistent with international accounting rules to better reflect the value of equities with a readily -- when you have a copy like berkshire that has so much asset whatquities, it will dwarf may be the operating income. it gives you a real-time vision, as if they sold the stock that day, what it would be worth. companies report gap and non-gap to explain the difference. had a a shareholder question, saying why are you so resistant to disclosing this? warren said you do not understand it well enough. we always disclose it on the balance sheet. but is berkshire hathaway particularly vulnerable to this? they have 60 operating
businesses, but they are also a huge investment have any. most companies are one or the other. with these company assets have its issue, but you are right. you just have to separate it and look at it. alix: literally david sends this email when he is in omaha, sending a huge paragraph on that tax accounting changes. a really big deal. i am like, do we have to do a whole segment on this. ? [laughter] from accounting cows to currency chaos. the dollar weighing down emerging-market currencies. take a look at finally a pickup in vol. the lower panel is 20 day vol. of wells fargok securities, how much more downside do we see in em fx? 1% towe could see another
3%. if you look at global markets ahead of sharp decline, now they are starting to stabilize. good news. a lot has to do with central banks. they are still -- you get a small pullback, but a buying opportunity. over theamed el-erian weekend wrote about argentina. he said the loss of policy credibility is perhaps the simplest and most direct expedition for argentina's predicament. deteriorationn is -- with too few instruments. which central banks have the orer to hike rates to 40% have the reserves to sustain and offend their currency? nick: very few in the emerging market space. perhaps the chinese, which is not really an emerging market, but not a g10 currency, with a free, tradable currency. i would say most of the emerging
markets will be buffeted by the likes of the federal reserve and the ecb. but you make an interesting point, which comes down to policy credibility. you have to be selective. david: you talk to ceos. how much do they have to take this into account in making investments in emerging markets? provided central banks are cautious -- that did not happen in argentina. and it is not clear turkey will be cautious. do you have to take into account the possibility of policy missteps? mark: great point. if you are investing in emerging markets, you are thinking long-term. 70% of world growth will come from emerging markets. projections by imf is that emerging markets will grow twice as fast as developing markets. companies have to be there. they will be in there in the long term. you look at the growth aspects in china, india -- even russia is growing 2%.
companies will continue in emerging markets. david: one of the things we were told in revisions and tax cut is by cutting rates here and also repatriation, we would have more investment companies in the u.s. and presumably less overseas. has that happened? mark: it is happening. beginning to happen. you will see more of it. -- itave expensing now has made it more profitable to invest in the margin in the net it states and other places. we are seeing hundreds of companies establish when looking at supply change, where before it was prohibitive to have the 35% tax rate. the u.s. is not a tax haven now. it is just commensurate with the rest of the world. absolutely, you're seeing companies look at that. you will see an increase in investment both by u.s.
businesses that may have been overseas and can now bring that money back, and foreign businesses who will invest directly in the united states. alix: which argues for the stronger dollar at the end of the day. certainly one of the factors. it is not who gets to the finish line first. it is who catches up as we get closer to the finish line. and then there is the real economy and what is happening in terms of the financial markets, bond yields, a derivative of the economy. alix: i want to get your take on emerging markets, which has the most value. wcrf, looking at the world currency rankings. the peso, regardless of its rally over the last one for hours, the argentinian peso is a worst performer than the ruble or lira. we would you buy? peso, whichhilean has ties to asia. -- to china. in asia, i would look at the korean won.
also, the singapore dollar. they manage the currency as opposed to interest rates, so they are doing relatively well. but wehe mexican peso, have to get past short-term issues -- the nafta negotiations -- thedifficulties presidential election. but the fundamental long-term outlook is not bad for mexico. alix: your strongest conviction not in em? nick: it remains the euro. their central bank has a long way to go. they have to to start raising interest rates. we are looking at a large capital inflow over time. it is a question of picking timing. 1.30, 1.35 is feasible over 12 months. ceo,: mark weinberger, ey and nick bennenbroek of wells fargo securities will stay with us. tonight, do not miss our exclusive interview with jpmorgan's jamie dimon.
europe. thanks for being here. give us the mechanics of the deal. what is nestle getting for this? >> good morning from berlin. it is not a deal where they get physical assets. that is important to point out. buying physical starbucks assets. they are getting the right to market starbucks beans, you said it should be shin network, and , you said beings through it should be shin network, and push these beings through that network, which they have globally. nestle is best known for the sopresso capsule -- nespres gusto, but dolce they do not really have backs of beans and you can roast it. -- people maygory have thought we were moving to capsules, but there is a come back to this third wave of coffee.
-- starbucks has that great following in the u.s. starbucks has the brand. nestle has a distribution. that is why they came together. david: they will also pay royalties to starbucks as they sell their products. we think of nestle for nespresso, nescafe. is this a concession on nestle's part that it can not best starbucks? benedikt: that is right. there has been quite a lot of movement in the coffee industry. j.a.b. has aggressively pushed into the market, buying assets like curate -- keurig. nestle dabbled a little bit -- greenought flute -- mountain coffee. for them, it was the question can we grow with our own brands, cafe, or doesso, nes
we need someone else whose brand we can harvest? kammel, thank you. how do you drink your coffee? mark: weak, with sugar and milk. alix: is a grinding beans or take out? mark: i do ground beans. nick: i do instant and k-cups. david: she has a fancy new coffee maker. this is why it is coming. [laughter] alix: it is true. my husband bought me a nice one. i was making cappuccinos. treasuryon of u.s. going to auctions this week. we break it down. this is bloomberg. ♪ ♪ mom, dad, can we talk?
that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. alix: this is "bloomberg daybreak." i am alix steel. if you're looking for action, dow jones up 65 points. s&p up by seven. disappointing data as far as
retail sales out of italy. orders rolling over. the only action you can really happens in the dollar and crude. euro-dollar, four-month low, 1.19. 92 handle on the dollar index. i want to point out the argentine peso. story in emerging markets as the peso moved a touch higher after friday's rally after interest rates were hiked 40%. -- fascinating story. dead flat. $73 billion worth of supply coming online. a lot in the 10 year as well. 2.95 is how we print. oil moving higher with the dollar -- wti over $70. david: you can get currency if you raise interest rates over 40%. alix: at least your currency is up. [laughter] david: let's get an update on
headlines outside the business world. kailey leinz is here with first word news. kailey: the european union is considering a compromise to avert a transatlantic trade war. ale bloc may tolerate met tariffs. but midterm elections in the u.s. may change the political calculus. china is trying to put a positive spin on trade talks with the u.s. it repeated the government's position that the u.s. should not make unreasonable demands. china is now studying ways on how to lower imports on some products. from the three nafta nations try again this week to come up with a revised trade deal. a number of contentious issues
remain. the u.s. is threatening to impose tariffs on steel and aluminum from canada and mexico if they cannot agree on a new nafta deal by june 1. global news 24 hours a day on air, and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. alix: thank you. a big week for economic activity. part of the reason why you are not seeing a lot of action today. $73 billion worth of treasuries will be auctioned off. cpi later in the week. on deck thursday is that the yearly policy decision. remember when that rate hike was a done deal -- not so much this time. joining us now is ira jersey. still with us, mark weinberger, and nick bennenbroek of wells fargo securities. i want to start with this option. in the bloomberg, you can see the 10 year yield and net position's for the 10 year. what happens with $73 billion worth of supply? for i think we are set up
these auctions. it is not a surprise we have more supply. we have more three-year notes coming tomorrow. the 10 year and 30 year later this week. all of these things are being set up for in the market. that is one reason why you have some of these shorts. is going forward as auction sizes get larger and larger -- how good will demand hold up in that situation? what you have seen as the man remains the same but you have more supply. comingover ratios are down. if that continues the next six to nine months, the question is and we hold yield levels with this much supply? alix: how does that fit in to your not bullish dollar going forward in the medium-term? nick: this is certainly an issue of absorption over time. one of the things we have also seen in the market heavenly is this issue of a rising budget current account
deficit. while yields may move higher, it comes with concerns and risks. we do not necessarily think yields will be supportive, and we still focus on relative monetary policy. david: what about that deficit, from a different point of view? if you are a ceo, you're competing for capital. if the government is in there and raising a lot of capital by borrow a lot of money, does that not make your life more difficult? mark: yes, certainly with a large interest rate and large deficit payments, making capital more expensive. it would hurt returns to corporations. the reason u.s. companies have done so well is they basically had a free cost of capital across the world, in japan, europe, and elsewhere. , the on the flipside correlation between the dollar and yield seems to be reasserting themselves, which could pose a problem for
everyone, investors as well as businesses. you could see that you can see historical correlation about half a point here. what do you make of this? ira: interest rate differentials and the dollar go hand in hand. one of the interesting things is foreign investors into u.s. treasuries are an important part of the market. they buy at auction between 15% to 20% of most of the longer-term bond auctions. who shows up is important. a lot of those investors who come into the longer and our private investors in places like japan and europe, where interest rates are still low and likely to stay low. there are not a lot of options for them, where to get a lot of liquidity and a little bit of yield. plus, if the dollar is expected to rally at all, then you would wanting to be-- in u.s. treasuries more than staying in your local currency. david: there is a demographic
issue, that as the world ages, they want longer-term sureties, because you have tensions and things like that. does that give encouragement to those trying to sell treasuries in increasing amounts? ira: great point. one of the reasons why you have seen decent demand from investment funds in the long and is that there is this idea that you are going to have asset liability managers, like pension plans and insurance companies, that continue to buy more. alix: how much has that factored into your softer dollar thesis? ira: -- 5, 10,emographics are a 15 year issue. currency factors tend to be a little more short-term and cyclical. in terms of larger cycles, five years up, five years down, we believe we are at the start of a long dollar down cycle. theuld argue in terms of
correlation between interest rates and currencies, that has become more complex. it has reasserted itself but remains fluid. alix: does that mean you can see a weaker dollar and higher interest rates? nick: yes. alix: so what is your 10 year call? 3.10 in terms of where 10 year yields and up this year. we saw a burst at 3%, and now it has gone sideways. david: mark, currencies depend on short-term things. pensions depend on long-term things. if the pension growing or shrinking for u.s. companies? when your discount rate goes down, you cannot expect to give more money in out years. our companies struggling? mark: there is no doubt.
from the u.s. tax bill has allowed companies to put more money into pension plans, raise wages and the like, but you mentioned demographics. it is a short-term issue. going back to the business, 90% of everyone under the age of 30 today lives in an emerging market. the vast majority of wealth is in the emerging market over the next years. now --s from that is where you will see, regardless of fluctuations in daily currency, a big push north to south and west east in terms of investment. alix: when a company is investing, do you feel they will go to the debt market? or do they live within cash flow? mark: it depends on individual circumstances. i think, increasingly, as rate start to rise, it gets more expensive, they will issue last that. -- less debt.
it depends on the individual companies. david: stock is good in part because they are buying it back -- mark: that is why you're seeing buybacks. the cash and the balance sheets -- a lot of the foreign capital able to come back from the tax bill is part of it. that is why you see a boost in over $7 billion in share buybacks this year. but you see liquidity from lower tax rates going forward, hopefully also used in equipment and training for workers. alix: rounding it out, the end of the week will be exciting, because we get the boe rate decision thursday. we cannot you go without asking what your call is. was aix weeks ago, a hike done deal, 90% priced in by the markets. now, it is 10%. we will do not think see a move this move. what will be interesting is economic predictions, the comments to hear from mr. carney. we are still looking at a third quarter move.
david: is is the point where we start talking about an unreliable boyfriend? [laughter] alix: for sterling, do you see downside capped? nick: still in a range. brexit is not going away. we are not going to have a cliff edge scenario, but we will not have that tension lifted as well. i think the downside is capped. alix: one and done for the boe, or is to still a conversation? nick: this year, one and done. david: ira jersey of bloomberg intelligence, nick bennenbroek of wells fargo securities, and mark weinberger, ey ceo, thank you. disney is coming off a record block buster. and listen toadio tom keene and jonathan ferro from 7:00 to 9:00 you then, pimm 10:00.h tom from 9:00 to
kailey: this is "bloomberg daybreak." i am kailey leinz in the hewlett-packard enterprise greenroom. coming up, michael shaoul, m arketfield asset management chairman and ceo. now to your bloomberg business flash. the new ceo of volkswagen has gotten a rare safe passage deal from the u.s. the justice department will allow herbert diess to travel
throughout the world without fear he will be arrested in the u.s. for the diesel rigging investigation. the u.s. filed charges against the former ceo, martin winterkorn. shares of air france falling the most since 2002. the french government warning if airline will disappear it strikes continue. fridaynce's ceo quit after failing to reach a wage agreement with employees. an international flavors and -- forces agreed to buy $7.1 billion. that is your bloomberg business flash. david? david: for those of you who may
know have seen it, that was from "avengers: infinity war," number one at the box office for the second week in a row. it has sold over $1 billion in tickets worldwide, which sets up disney's announcement of earnings tomorrow. shaw and paul sweeney. barton, are you with us? >> i am. david: you told me -- they told me you were not here. he has a neutral rating on disney. i start with lucas. i understand it is not this quarter, but it indicates the extent to which these blockbuster movies have become so important. >> one movie that will be is "black panther." disney rules the box office on most every month. thany has more grosses
warner bros., paramount, and one other company at one time. the movie business keeps growing every year. david: how prominent will the movies, the film part of the business, be as opposed to theme parks or television -- or member television? -- remember television? >> the movies are great. that is the best part of disney now. that and the theme parks are doing tremendous. what a lot of people will be focused on is what will happen with their over-the-top subscription roll out. they lodged espn plus. they will be interested in surplus, a harbinger of what could happen next year when competitor their ott to netflix. david: there is pressure on bob iger. cbs reported earnings -- i was surprised that their offerings
figured so much in their earnings. >> even viacom had a better than expected quarter. it is from the operation side of disney. --estors will look at one of what are the early signs of uptake for espn plus. this is the future of disney. bob iger already says the company needs a direct relationship with consumers. i do notis is what understand -- i understand over-the-top and why it is important to everyone and trying to compete with the likes of the foot and amazon. at the same time, when you look at espn, the walt disney company has been so large and has been growing at a rapid rate. if they are actually coming down in growth rate, can they get enough money out of over-the-top to make up for that loss? barton: that is the problem with the stock. there is a lot of skepticism
about that. fox,playing disney through disney buying fox. cheaperget disney through fox. that said, these guys have great brands. with tax reform, earnings per share will be growing overturning -- 20%. the stock on those earnings is valued at 13, 14 pe. an attractive growth company with defensible positions and big segments. tvis overshadowed by these questions. at the end of the day, these guys will be buyable. they put up good content. if you are careful, there could be opportunities in disney equity. david: no question disney will be viable. how essential is the acquisition of that substantial portion of point for century fox?
to go if the strategy is all in online -- i am not convinced disney is there yet. if you look at espn plus, most of these sports are b, c sports. the nba finals still exists on regular espn. future,ou look at the having some international play, if they end up controlling sky, that could be important for them. you see a lot of different media companies trying to offset softness in the u.s. tv business. david: a little company called comcast is also interested in that scott is this. where does that stand? the handicap is the market expects a takeover war, if you will. certainly a competing bid from comcast for sky. the question is does comcast ore over the top of disney,
toy first century? question.t is a what is the likelihood, from the way you see it, that brian roberts make go toe to toe with bob iger for all of 21st century fox instead of the sky part? barton: if he is successful in his efforts with sky, he almost certainly wants to go after fox. -- owns i think that this is a multi step process that is one of the reasons i like fox. you have a discount on the disney offer and the possibility of a bidding war for fox. the only caveat is comcast shareholders have not been happy. the stock has been punished. i do not know how much of a told that takes on a family company. they are used to marching to
their own drum. as i understand it, what you think the most important thing in the earnings tomorrow is the report on how over-the-top is going for disney ? barton: yeah. it immensely on that. movies are doing great, tax reform is great, what are they doing to transition with ott. david: what are you looking for? lucas: the same think it i would assume disney would hedge and say it is too soon. they just rolled this thing out. bob iger will offer some platitudes about it looking good and move on. we can get see if body language from management under appetite for fox and sky and for going toe to toe. david: the price is already big for bob iger. he has made big deals. paul: this is transformational
about the company. the thing about transforming a company like disney, that will buy far be his legacy. david: his biggest and maybe most difficult deal at the same time. lucas shaw, paul sweeney, and barton crockett. alix: and you still have not seen "the avengers." have you seen it? lucas: no. alix: you haven't? we just did a 20 minute segment, and you have not seen the movies. [laughter] oil at its highest since 2014, despite an up count. more on what i am watching next. bloomberg users can interact with the charts using gtv . click on it and get all of the details as we go. this is bloomberg. ♪
alix: what i am watching is oil, sitting at $70 a barrel. everyone is getting excited about it or's potentially. the u.s. rig count versus oil count. the yellow line is wti. in 2014, look at how high the rig count was. 100. now, we are around 70. do we wind up inching back as oil prices continue to rally? does that offset any supply disruptions we see from potential iranian sanctions or venezuela? david: you talk about supply constraints. does that curtail rig count? alix: i would say yes. you talk to permian guys, they do not want to shut down rigs, but how much more they can add is the question. most analysts say by the end of 2018, that should sort itself out. david: by the end of this year,
is that right? alix: and you can divert money into other basins. you know what? i miss the rally at 70, and i missed the rally at 50, so i am not playing the market. i am personally paying attention . coming up, michael shaoul. internet, do not miss our interview with jamie dimon, joining us live from the jpmorgan global china summit in beijing pay that does it for "bloomberg daybreak: america's." unless you are planning a dollar or oil move, it is a very quiet day ahead of big options this week. this is bloomberg. ♪
ferro. this is the countdown to the open. ♪ crude through $70 for the first time in more than three years. traders racing for the possible return of iran sanctions. resumed today with official sounding hopeful a deal can be reached in the coming -- emergingergy market selloff deepening. futures positive after a week of losses on the s&p 500. .3%.e up nine points, againstar stronger pretty much everything. withdollar trading briefly a 118 handle and in the treasury market a bit of stability over the last couple of weeks. 294 is revealed on the u.s. tenure. crude through $70 a barrel for the first time since