tv Bloomberg Daybreak Americas Bloomberg June 6, 2018 7:00am-9:00am EDT
the chief economist for the ecb confirms the next meeting is live. european yields job. let's buy some beans. china could by $25 billion more in goods a year. nafta crumbles. the u.s. could seek separate deals with each country. the peso tries to recover. david: welcome to "bloomberg daybreak." it is all about trade. alix: very specific movement with trade. i was struck by how much more the peso moved to the downside. part of that was mnuchin talking about steel tariffs, but shows the vulnerability of mexico. david: industry after industry figuring out what does it mean for them. it is not in the abstract anymore. alix: china is like, yeah, we will buy some colal for you.
david: the politics are not very subtle. is where the market is trading. the deck story has to be the selloff in bonds in europe. futures up five points. up as the ecb takes a dovish tone out of the markets. you can really see that in bunds , jumping eight basis points. crude continues to roll over a little bit. week will be the g7 meeting next week. the top story in the market perspective has to be the ecb. that theclear
governing council will have to make this assessment. this assessment will be weather progress has been sufficient to warrant a gradual unwinding of net asset purchases. said was not very different from what the ecb has said, but enough to reverse the dovish feel. >> the devil will be in the details. unwindalking about an where they will reduce the balance sheet? or are they talking about ending it and standing pat where they are at now and reinvesting what is already there are smart if that is the case, i'm not sure it represents any wholesale change. i think people can hang their hats on the fact that they're willing to have a discussion about policy normalization. this is the most subtle
communication strategy i have ever seen. alix: exactly. >> it is incremental. there was some concern about whether or not you would see normalization given italy, given the bond market scare and that may spread to neighboring countries. that appears to the contained. economic growth is healthy. the inflation numbers look good, so the time seems right to take a step back. what that looks like, we will have to see. alix: what i don't understand is what the market is reacting to. u.s., you would have seen the curve flatter, spike into year yields. you're seeing a bigger selloff on the long end of the curve. i wonder what that is about when you have financial conditions easier in the u.s. and europe. updated economic projections out of that ecb meeting.
commentsading into the that they would not be talking this way unless we see the uptick in inflation and wage growth we have been looking for. i think the trade is hinged on speculation around that come and not just qe per se. david: our second story is trade with china. reports that china would like to increase imports by $25 billion. we put up a bar chart that shows of the products they were talking about, it is roughly double what is going on here. the interesting thing to me is the orange is all agriculture. , coal is that it little white line there. >> that is a big question, how much of a difference does the chinese pledge make? they're talking about boosting coal and oil imports.
the u.s. has said how much of a difference with that make or whether just divert exports to other nations. kind of seeing any structural reforms the u.s. is looking for. it treats the symptoms of the trade deficit without getting at the root cause. it is unclear how the u.s. will respond to this even with those averred appeals to trump's base camp of voters. alix: i should point out that bi said coal purchases could triple this year in value to $1.3 billion. total imports are $150 billion, so this is a small amount of money. alix: how many soybeans do you have to buy ticket to that number? had a big jump yesterday. unchanged in premarket today,
but does beg the question overall, do we need to factor in a true revival of coal? you have the government shuttering coal plants in the northeast. >> when you look at that chart, you almost have to chuckle. if you want a demonstration of why we are having problems getting china and the u.s. on the same page, this is it. this is a small overture that to seet sway negotiators it in the way the chinese see it. it is also not addressing underlying issues with regards to the openness of the market and the intellectual property issues that has driven our trade disparity. it is basically throwing a couple of dollars on the table and hoping that is enough to keep us happy. >> can the u.s. actually ramp up its agricultural production to the level to meet these increased chinese demands if we were to get this agreement? david: one thing we were not do
is wrap up with mexico. they will put their own tariffs on us in response to steal and l and aluminum.e there was a reaction in the peso with larry kudlow going on tv and saying we should have bilateral agreements. it was a reaction in the marketplace and not looking good for mexico. >> it is not. there is concerned that there is strength in numbers. when canada and mexico is negotiating against the u.s., then all of a sudden you start talking bilateral trade discussions, that shifts the interests of the party's involved. that canada and mexico are interested in moving down this path. it is also not going to be nafta if you have high-level trade agreements. you need all parties to sign on
if you're going to work within that existing framework. alix: what i thought was the market reaction. this might be mnuchin getting into the next. , but theat a low canadian dollar has a spike. will we be looking at two different plays on nafta now? >> we do know mnuchin lobby trump to ease off canada, and that may be baked into it. type moved to a bilateral of talk, you have to make a bet on which nation would probably benefit the most between canada and mexico. with the stability we have gotten out of canada and justin trudeau combined with the election in mexico and a potentially incoming president, we're going to take a harsher tone towards the u.s. and we will put your bets on the loonie rather than the peso. even mnuchin's comments were not about nafta.
who is calling the shots? ross,larry kudlow, wilbur steven mnuchin? >> donald trump. david: when does that confusion infect the market? >> it already is. everyone is expecting any nafta deal will be pushed to 2019. of goal is to get this ahead u.s. elections in the congressional window that paul ryan had flagged ahead of the mexico elections, which are increasingly likely we will not get, so snowballs this confusion and uncertainty and lack of a deal. alix: thank you both very much. coming up, more on next week's ecb meeting, bonds declining and the euro strengthening after potentially a hawkish signal from the central bank. what it means for assets. with bostonuss that
alix: breaking news on twitter, down 2%, the company will offer $1 billion in convertible senior notes. they will do it in the private placement to certain institutional buyers. can are convertible so they be converted into equity at some point. they are looking to give initial purchasers a 30 day option to purchase another $150 million in principal amounts on the notes. all this means they are raising more money. comingthere stock is up colluded in the index for the first time, so not surprising. alix: it is surprising shares are down 2%.
dilution concerns rain. david: we want to take you now to the zach a stand. there isronauts aboard european, and of course a russian. he is from the russian space agency. they are delivering equipment and supplies to the international space station. this is the launch about to take off. 2, one. 3, engine igniting there. ms09.ft off of souyz
>> nominal. you are fine. 30 seconds. everything is nominal. >> getting fuse of the -- views of the soyuz. everything on plan as it delivers -- with anhe launch american, russian, and european on board headed to the international space station to deliver supplies. we've come a long way from apollo or gemini. alix: ryu one of those kids who always wanted to go into space? david: it was one of those exciting times, during the race
with the russians. maybe oilothing else, pumping or something. and then launching a spacecraft. david: it is always fun to watch. alix: we will keep you posted. an amazing shot there. it reignite streams. it is all about the selloff in europe in terms of the bond market. confirmedf economist at the central bank's meeting next week will be key for reaching a decision. it is clear that the governing council will have to make this assessment on whether progress so far has been sufficient to warrant a gradual unwinding of net asset purchases. alix: joining us now is paul
gordon who reports on the ecb for bloomberg news. why do you think the market responded? >> the fact is he is confirming a report we had yesterday that policymakers intend to talk about ending qe, something they have not done in a formal for .hem that tells you we are almost there. bond purchases schedule to run until september, so a decision in june or july. nobody wants to leave it until september itself to almost berybody expects they will wound down by the end of the year. alix: it feels like the timing is interesting after the drama in italy. continuing yesterday, more modest today. how do you feel they will be discussing the exit with italy.
>> the ecb's main concern is spreads in yield italy widens to the extent that the economy is under threat and whether it spills over into neighboring economies like spain, greece, portugal, and so on, reminiscent of 2012. so far it seems to be contained and there is no obvious reason to worry. the ecb cannot set monetary policy for italy. if italy does need help, it will have to find other methods. the ecb could be involved, but that comes with conditionality. alix: thank you. boston privateme wealth cio and oversee $7 billion. welcome. i want to put up a chart here. it compares financial conditions in the united states and europe. the white line being the united states. the blue line being europe. is this a constraint on the ecb?
they don't have as easy at time of it as the fed does. >> that's true. they are behind a couple of years. raised rates coming into the sovereign debt crisis and set off a chain of events that has kept the european economy a couple of years behind the u.s.. are talking about tightening, the reality is you have no concerted fiscal policy in europe. over two, you are behind from an economic standpoint. there are still countries on the periphery there are not as have less you latitude to take steps to tighten policy at this juncture. david: what correlation is there between tightening rates and financial conditions on the other. tightening is particularly important. think about a market for treasuries, we have a global market. buying bonds does
not have a significant impact. there was not as big a market for european sovereigns as there was by the ecb bond buying. there are concerns the demand for that market could fall off sharply if the ecb is no longer a buyer of last resort. alix: does this make year of better investment than 48 hours ago? ofomberg spoke with the ceo carlyle group. here's what he had to say. >> we see europe from an economic standpoint steady, stable, and growing. that tends to lend itself to a good private equity environment for real estate environment, energy environment, infrastructure environment, credit environment, and that is where we are spending our time. alix: do you agree? >> i do. there are opportunities. whether there at is enough bifurcation so you can pick your stocks to get that value you are looking to garner.
the valuations are more attractive, especially on the equity side. if you are thoughtful at this point in the cycle, there are still opportunities, especially u.s. investors who don't have that international exposure that european investors in global investors have outside her market. david: you will be staying with us. we are to find out what's going on with first word news. >> a business flash. devon energy selling at stake in midstream partners for a little more than $3.1 billion. energy is based in oklahoma and focuses on oil and gas expiration, development, and production. bhp billiton has received first-round bids for its u.s. shale portfolio. bp and chevron are among the bidders. another is royal dutch shell, which has teamed up with blackstone.
that facebook is not told futures how their personal data is being shared. fourd partnerships with chinese device makers. while way has been named as a potential security threat. -- while way that is your bloomberg business flash. david: thank you so much. facebook shares move down on the news about the chinese data connection coming on the heels of the new york times report about broader sharing of user data with a wide range of demise makers. -- of device makers. dan, welcome back to the program. good to have you. give us your take on facebook. it seems to be a rolling set of revelations. facebook is giving user data to various people. manufacturers, now chinese companies, one of which
is the national security concerns raised about it. >> it is a double whammy. news over the weekend in regards to apple and samsung and potential sharing of data with them, now we have the information coming out this morning with regards to facebook with these chinese manufacturers , so it seems like facebook has their back against the wall a little bit defending themselves against these allegations. muchcomes after the publicized cambridge at a latex over the last couple of months. facebook against the ropes, but the real key so far we have not seen coming out of facebook that people need to focus on is that we have not heard of any major advertisers saying they will start to pull their dollars from facebook. that is what it is all about in terms of driving earnings. we will see what happens, but that is the key thing i am
focusing on. david: as an investor, are you more concerned about that poll that came out saying younger people are leaving facebook for things like youtube? always out there that the younger generation will go to these other venues. the interesting thing about what arein terms of the next legs it can grow on, you have over 2 billion users, other franchises starting to emerge of this point. you read about the success with instagram in terms of subscribers. people don't focus on how is facebook going to get their next one billion subscribers. for everyone user in north america, they are signing six
users in the asia-pacific region. like tobacco manufacturers where the u.s. became so saturated that eventually they had to go overseas, then they just exploded. i don't know if you travel to europe like i do, but everybody there smokes. you think maybe that is where they get their next billion subscribers, not so much the u.s.. you adding or holding neutral in your position? >> facebook is still on our buy list, still a stock we would look at in terms of new money coming in. we have a sizable position. back when after the ipo, so we have a good profit in it. the stock is trading pretty much tose to a few two-week i -- a 52-we kind. we have not changed our fundamental position.
the key is that advertising revenue. as long as that comes in, the story is intact. alix: twitter down after announcing more financing. do you buy on a dip as it is added to the s&p? >> we don't own twitter. we do follow it. it is not a stock we are overly active in. you have a couple of things coming in. he talked about the addition to the s&p 500. that is huge. the twitter story is still convoluted because of the fact that they don't have the user growth we would like to see comparing to other players like google and apple. they don't garner the same amount of revenue the other companies do in terms of advertising dollars. i think it is a neutral on twitter at this point to see if they can get more traction after the addition to the s&p 500. alix: good stuff. thank you very much.
our guest is still with us. fang versus s&p versus tech, how do you play it? is theissue or challenge u.s. population has started to look at those as safety stocks. if you think about the names they feel comfortable with our these names they are comfortable with. we see other opportunities outside of the fangs within technology, but i would say we are looking thoughtfully outside of fang. alix: good stuff. you will be sticking with us. coming up, what is next for nafta? this is bloomberg. ♪ s is bloomberg. ♪
at anothering record as fang stocks like amazon, apple, netflix close at record highs. european stocks, the ftse much better. pretty much flat on the day. it is a selloff in europe. by eight basis points. oh 80's in france up by nine basis points. all about the selloff in the core in the long and as you potentially have the ecb inching its way forward to acuity exit area to that meeting next thursday, front and center. , crude up byts 6/10 of 1%. david: now let's get an update of what's making headlines outside the business world. emma: brazil can't stop the slump in the real falling to its lowest level against the
dollar since the impeachment of dilma rousseff. policymakers try to stem the route by offering to sell an additional $1.5 billion of contracts. betweenk's summit president trump and kim jong-un could last two days or two minutes. officials say the white house wants him to commit to a timetable to surrender his nuclear arsenal. -- this arom president trump will walk out of the meeting if it does not go well. the u.s. and china over a deal that would divert a trade war. china has agreed to buy $25 goodsn more of u.s. this year. the trump administration is finalizing a deal to allow -- ite telecom maker bte was cut off for violating a sanctions agreement.
global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. not just trade with china but in the news today. president trump's chief economic adviser larry kudlow said the president asked him to say the administration is not proposing doing away with nafta altogether but it is considering negotiating separate agreements with canada and mexico. we welcome eric farnsworth, council of the americas vice president. great to have you here. bexley what difference it makes whether it is three people in the deal or a two-party deal. what difference does the bilateral versus multilateral make? eric: from the negotiation itself it changes the dynamic of the negotiation which the white house is looking at thinking if you negotiate with one party at a time instead of two, that you, the united states are able to drive a different sort of deal and force the other party to make other concessions, particularly because their
economy is not as large and they are not as powerful politically as the united states. dealing with two countries, they can coordinate their approach and make things difficult for the united states. substantively, it matters. three countries in a region. we are north america. the way the supply chains and production has gone together since nafta was first passed means that we are three fully integrated economies. it is difficult to diss aggregate those economies from each other so negotiating as separate parties is really going to complicate things, not make it any easier. david: there is a big mexican election coming up this summer. he does not see much of a fan of president trump or nafta. bilateralhe nature really affect that election or vice versa? eric: july 1 is the date of the we have to wait
until the votes are counted before we declare the victor but he is leading in the polls. he has come out and said he wants to see nafta continue forward. he is also somewhat of a nationalist. one would anticipate that he would take more of a strident .osition if he is elected it will complicate things. he probably won't have a huge amount of political space. no mexican president who might be elected would have a lot of political space to make a lot of concessions to the united states. this is becoming more politically complicated within mexico. in trade negotiations it is also about the politics and you cannot discount that. david: particularly with mexico their issues like security, drug interdiction. thus far, they have not been part of the table exquisitely. if we push too far, what are
other ways we could be affected in the united states beyond trade? eric: that's very true and important point out. they are not specifically part of a trade negotiation nor should they, clearly cooperation on counter narcotics, immigration, one of the presidents priorities, issues on antiterrorism and security, issues where there is a fluid exchange every day with nex mexico. that depends on trust and goodwill. anmexico feels itself aggrieved party within the ec space, there is no law that requires them to quiet rate with united states. officials have alluded to the fact that mexico might decide to pull back cooperation. the outgoing president has review of the full range of cooperation mexico is undergoing with united states. stake.look at what is at don't do anything you might regret over the longer term.
david: great to have you with us. eric farnsworth of the council of the americas in washington. alix: what does it mean for an investor? here is what john byner had to say about impending trade war. >> it is in no one's best interest having an all-out trade war that would have implications on growth, inflation and on market sentiment. it has not hit market sentiment in a big way which is why you have not seen volatility spike up. you have not seen markets perform poorly despite you are seeing ugly commentary about what others are going to do. shannon, how do you navigate it? shannon: i think we have seen impact to market sentiment around this trade situation. i think there's uncertainty. continue to see
investors move toward names like technology. we've seen the movement and small-cap stocks. oflso think it's a lack foreign exposure for some of these small-cap companies. they will not be as affected by tariffs. i think the most important thing is to think about this as far as a level of uncertainty. i think the admission should is creating additional uncertainty and navigating that is going to put us in a position where we have to think about the valuations of some of those companies that are being hit on tariffs are some of the more attractive valuations. what i think is delaying is rotation back to value names and i think that for us, one of the things we are looking at is this reversion, growth versus value. i think we are hesitant to put more stake in a rotation back to value stocks as long as this tariff situation is going on. alix: that would explain why value investors cannot seem to catch a break. what's weird is that schwartz --
this shows it. in january all of a sudden those shorts got really burned. do you feel this is a tactical trade or there is complacency? shannon:shannon: i think we are seeing complacency in the market. the pullback in february. a solid earnings season that a lot of those companies stock as positively move as we would have expected given strong earnings. going into this cell in may go away for the summer we really did not see that. with the lack of volume in the market i think there is complacency. people are setting up for summer. i think there is a lack of breadth of cross the market. -- across the market. terrace create a buying opportunity. if you bought coal stocks which you would not have wanted to buy
, you could be making money right now. shannon: especially looking at a short-term window from a technical perspective. i do think you need to be careful to make sure you are messaging appropriately on why you are buying these stocks and it could potentially be on headline news. but there are opportunities in the reality is, if you look at the probability of a full-scale trade war it is still low. if you are willing to put some time into the stocks and hold positions for a while instead of rideout volatility, i think you could pick up gains in the back half of the year. , great tonnon sukko have you. investors make their way into digital currencies. keene andsten to tom john farrell from 7:00 to 9:00. bloomberg surveillance can be heard in new york, washington,
emma: this is bloomberg daybreak. coming up in the next hour david kota. now to your bloomberg business flash. serviceat united parcel , the first strike since 1997. more leveraging talks to replace a contract that expires at the end of july. ups says it is confident it can reach an agreement. the world's largest personal computer maker will cut more jobs than originally estimated.
ofmany as 5000 by the end fiscal 2019. about 1000 more than the company discussed in the reorganization plan two years ago. hp has managed to produce despite falling demands for pc. google's parent -- an employee alphabetsnt at shareholder meeting today. the company proposing a plan saying it will not propose a commitment to global sustainability. that is your bloomberg business flash. david: at the bloomberg invest grsatz, mike nova discussed worker does have the most promise going forward. >> anywhere there is a social uberrk with simple -- with i keep using uber as an example. it matches drivers and riders. drivers and riders and it sits
in between, billing service and a map, search prices and charges 25% to 30%. that is right for decentralized system to compete with it. uber is not going to roll over. they are going to fight back. is a perfect case. what's interesting is the way the token in a theoretical decentralized uber works, it is a future on what a ride would cost or how many rides can you get for one token. and riders and engineers and speculators own that token they want to go the same direction. as more people use that service, ubers,y take d a use thezed uber, as service ridership grows.
the token starts feeling like equity even though it is not. it is an interesting case because here is a company, one of the fastest growing companies in the history of the world. it's changed the way we maneuver around cities. even before it goes public, there is a threat that is coming. it's not coming this year, is coming years down the road before everything gets scale. michael novogratz speaking at the bloomberg invest summit. i feel a guy been hearing chatter about how to use block chain, also potentially with asset-backed securities as well. a couple law firms are looking into bed. have a reallyu complex situation with a lot of different contracts a way to monitor, instead of putting it on paper you're putting it in block chain. alix: you have lots of data in
intermediate or he's -- lots of intermediaries. i'm going to buy this oil from you and you have the oil, it helps it move along faster. david: one of the first times i heard the block chain where it really made sense. alix: now we turn to wall street beat. three things wall street is buzzing about. at deutsche bank's executive exodus. senior executives depart as lenders ask a back on parts of the business -- as the lender scales back on parts of the business. raven's main fund sees its best monthly return in a decade. howard knows best. alan howards fund serves almost 37% in the month of may. i think of tangled, the disney movie. david: moving on from tangled, joining us is jason kelly, bloombergs new york business chief. .eutsche bank, back in the news
three senior people from investment bank leaving. this is getting to be a pattern. jason: here we go with the drip, drip, drip of talent leaving. you brought this up in terms of getting bad news out there but also the way these things tend to happen. banks don't always implode. sometimes, they just kind of fatal little bit. which is not to say deutsche bank is going away. david: does a fascinating piece that said this is not lehman, this is fannie mae. it's not going to be a sudden crash but as they lose money and lose people you lose confidence and someone has to step in.
you lose confidence and someone has to step in. it might be the german government. we've got to be careful about it. the tone comes across as i'm not saying it's not important -- david: and i'm totally sympathetic but he has a tough hand to play and you can move too fast or too slow but you can move too slow.
this is what we are in this is what we aren't. you got to get there. alix: now picking up some speed. management.rd asset best monthly return since 2008. the master fund searched 7.6%. a couple months ago already making fun of him. eat my words. jason: this is an interesting turn around. one of the biggest turnarounds we've seen in the hedge fund world in a long time to be honest. there are a couple things at play. one is the firm and howard in particular sort of got it together. david: they refocused at the firm. jason: exactly right. they are down dramatically in terms of assets under management. the other thing to note, macro has made a comeback. macro is a strategy that is a lot more useful. it's not a surprise to either of
given low interest rates low volatility and as much as the headlines tend to gravitate -- grad it, a fairly benign political environment potentially higher rates, little .eopolitical risk alix: we had the geopolitical risk before. trump, brexit. jason: that is an interesting point. david: i want to talk about alan howard. it's a smaller fund. takes bigger risks. it is up 36% in the month of may. jason: that is the sort of figured that will be well read on the bloomberg. in part because that number is
eye-popping. as you dig into it one is the fees,hing less than 1% with 30% carry. if that continues -- david: people pay for quality service. happy to pay it because they're getting so much money after they pay it. alix: they are only open to small amounts and current investors. it's a very closed fund right? jason: that's exactly right. things can open up when you are performing this well people tend to knock on your door. alix: come to my main fund because assets are cut by a billion dollars or something like that. david: that's not going to hurt the main fund. alix: people like us talking about it is not going to hurt it either. david: thanks so much. great to have you with us,
fascinating story where the chinese government went to airlines and said we insist you no longer call it taiwan you are flying to. you have to say taiwan, china. the u.s. government went back to the same airlines and said you dare do that. what they said was it is orwellian nonsense to call it taiwan, china. there's a fight with the airlines about what they can call taiwan. alix: can imagine it would be legal for u.s. corporation to follow orders from china. on the flipside, what's china going to do about it? david: no idea how sensitive this is. the state counselor, one of the top guys. we were talking about all sorts of things. in the middle of it he got furious about taiwan. he wanted a message sent back to the united states. they take this seriously. alix: in reality how do they
penalize companies? david: curtail lending rights. rights.ding -- landing rights. the south china sea, another big issue. taiwan is that gray island off to the right. they've been going back-and-forth to general mattis, building artificial islands, totally against national law. the chinese have said don't fly those b-52s over this. alix: how does that deal with military versus trade? kotok, why david he says a trade war would hurt emerging markets the most. ♪
likes of the chief economist for the ecb confirms next week's meeting is live. european yields jump higher. billion moreuy $25 of u.s. goods a year. nafta crumbles. mexico hits the u.s. on tariffs. the peso tries to recover. >> welcome. should have shorted boones. shorted you would have been happy now. in the equity market, triple digits up. euro story.nger
then mr. pratt said it straight up. they will be discussing an exit from qe. boone of on the differential. yields moving up there by nine basis points. an interesting two days. it is rallying again. there.ng happening >> we have a story crossing. ackman is deciding he will go into hedge fund buybacks. he is using rittenhouse to revise an activist hedge fund
headlines continue to come out. m a is here with first word news. china haggling over a trade war. the trump administration is .inalizing a deal from a sanctions agreement. next week summit between president trump and kim jong-un could last two days or two minutes. camofficials say they want to commit to a timetable to surrender his nuclear arsenal. they say president trump will walk out if it doesn't go well. if it does the president may invite cam to his florida resort. the main opposition party in the
u.k. will keep the country closer to the -- eu after brexit. jeremy corbyn wants the u.k. to stay in the eu single market. for would be the seat theresa may. global news 20 for hours a day powered by 2700 journalists and analysts in 120 countries. >> when i hear about that choice, two minutes or mar-a-lago, it is the lady or the tiger. they are playing golf. >> they do skiing. >> that is a pride thing. he can't look weak at golf. father claimed his bowled a 300. david: let's go to china.
wilbur ross went to china for trade talks. we have a peek of what they were talking about. the chinese will increase imports by $20 billion. show the product they are talking about, overwhelmingly agriculture. shows if they did increase how much it would be. this is just the ones they are talking about. billion thee $200 u.s. has been asking for. the deadline comes a week from friday. , and joining us , im minneapolis, sterling want to turn to you first know what effect this would have if they increased agricultural imports this much. >> the first thing is it is
going to lend support to a nervous market. tension.is has created having some clarity would provide stability. this is a global market. they will buy more from the u.s.. they are buying less from south america. the global supply will stay relatively the same. i don't see this being a big driver beside that it will take some risk from the market. >> if they wanted to make this, how much could the united states export? on how much christ wants to move up the u.s. could increase exports into china 10 or 15%. 33ht now we send them million tons of soybeans. we could push that to 50 million. with that happening that means
there are fewer beans out of south america. we could see domestic prices rise. that would be the net effect. the total is that white line. 33 million tons from the u.s.. you are an investor. what can china via? >> natural gas. alix: how would you play it? >> if you like the energy space, we took profits, that could change. if you like the energy space natural gas is the place. in etf you can go to scg, a way to get natural gas producers. a number of ways. soy is a little harder. look at the price differential.
raise the feedstock price. .mpact another country there is a finite number of soybeans in the world. if you change pricing you destroy market-based transactions and replace them with this type of negotiation. everyone loses when you do that. alix: we have talked about the potential of cotton. what about commodities we have not talked about like coal? china wants to get off of coal. what is the potential there? >> a lot of potential. beef is just beginning. u.s. imports are at their birth. the interesting target is corn.
china has an ethanol situation. they are trying to increase ethanol across the country. they don't have the corn supply to do it. alix: thank you. great to catch up with you. you are not getting something for nothing. they are going to be buying something. >> they are getting this cte deal. let cte not off the hook. >> clearly that is what is going on. i think he makes a great point about corn. corn is something we could produce more of. we have the capability. we have ratcheted back ethanol subsidies over time because market forces changed.
that is a place we could expand and ship it to china. david: let's talk about china and credit. high-yield. we will put up a chart that shows the yields here. corporate investment grade credit has been increasing quite a bit. the chinese seem to be allowing defaults to happen. >> of defaults to happen in but hearingitaly banking systems and loans makes the system stronger. do they permit it? strong, in china are just like you see in italy. and cain from boston college has a new paper out on italy in zombie banks. -- it applies to
china also. yet to cure a banking system. if you don't you don't take losses. not going to let cte failed but others they will. how do you distinguish between what you're going to be buying in china if you like the trade? the trade inout china. i do in europe also. we are are overweight u.s. banks. they have been through the cure for 10 years and now they are getting liberalized rules. if you say i want an allocation of thanks, where are we going to put it, i'm one to put in the united states. coming up, the ecb chief economist says the meeting will be peter buetel to decide when to end the bond buying program. qewill discuss the future of
the unit is value to $9 billion. chevron and bpr move bidders. shell has teamed up with a private equity firm, blackstone. and the union would be the first strike since 1997. a have negotiated more leverage to replace a contract that expires at the end of july. ups says it is confident it could reach an agreement. more changes in the top parade that deutsche bank.
leaving.eads are deutsche bank ceo is scaling back the advice and has promised to cut the number of senior executives. that is your bloomberg business flash. alix: it's been a meeting for the future of q you. -- qe. >> next week the governing council will have to make this assessment of whether progress so far has been sufficient to warrant a gradual and winding of asset purchases. alix: with us, before we get to say how you are playing today, what is your base case for what the ecb is going to do next week? >> we are going to see it when the banks make a choice to
remove the basis points alone or look at their opportunities. do they have the first available repayment or they can accelerate? does a bank reduce its position the the ecb on the first of tro? that is not something on our daily radar screen but we're coming up to a payment option. we are going to learn about what , tos will do individually see how they are making portfolio adjustments. we are going to get a window into the zombie bank issue. the ecb can talk all day long about we have to normalize rates, change interest but what are they doing? they keep moving with expansive liquidity. they are worried about the banking system.
that is something in the discussion every single day. that is a trade-off issue. alix: we know you like u.s. banks. what about the rest of europe? do you want to be -- he rolled his eyes. i ask, because the market still has to unwind the expectations. eventually, yes. the process if we think we are gradual here, they have to be more gradual. how do you play coming out of zero? look at our history. they have to come away from -40. with bolder action to clean things up. the ecb relation and european banks, you have things subsidizing banks to make loans. a lot of liquidity.
keeping the rates that low is hurting the banks. ify banks would be benefited the rates were moving up. can they help the banks coming off of the quantitative easing? >> if they do it without withdrawal of liquidity. if they permit runoff and allow portfolio adjustment at a gradual pace, that is what is key. that is what the u.s. did. long stretch out. anybody who needed to refinance had 10 years to do it in the u.s.. that base is in place in europe because of the construct of the different countries and nations. alix: may be able change of deutsche bank starts to fail. my mother targeted refinancing operations for ltlro.
yesterday there were differing views on if your hurdle is high to invest if it is a good opportunity. they have the private equities. >> it is hard to get deals because of the takeover code. investor. it is hard to straight to a when you havee such uncertainty, when in the u.s. you have a better choice. david: emerging-market currencies are under pressure
alix: indonesia defending the decision to raise interest rates . they say it helps stabilize the currency as fed hikes reverberate. >> this is the first thing that we did. is more thanty three times. the increase of the risk, this is the thing that we did. the rupee has been quite soft. us, raised rates to combat the fed.
maybe we will see it again tomorrow. what is your call. >> policy being misapplied. it off.talked about you raise the interest rate to defend your currency. markets know it. you give them protection on a trade. the pile in harder. you slow down your own economic activity. it is a lose lose proposition. for central banks to do this, they do it repeatedly. they see it constantly. right now we're seeing brazil. they are just now starting to -- but theyality have a looming election. they have political uncertainty. >> and they are politically motivated because they are not
independent and do not allow the currencies to float, so they do not have symmetry and risk to the markets. if you are a market agent and you have a one-way bet you are going to take it every time and hammer the currency. david: it is up 16.8% right now. >> if you had to make a switch to the currencies where would you go? the same issue is applying in different emerging countries. alix: a lot don't agree with you. morgan stanley, all saying this is the time to buy e.m.. franklin templeton also bought them. that the opportunity is more in latin america than a developed nation. we are in this crazy populace transition world. >> i remember the quote about
thinking one way and you think the other way, and what makes one right and one wrong? piling on trades and emerging markets when central banks are raising the interest rate to defend their currency, over time it is a dangerous trade. if you know how to buy and sell in aiming, it has been great. there is why to pay trade in investment. on a longer scope of time come middle-class is developing. it is a different situation. >> if you have the time and if ,lobal economic growth expands we don't kill with trade wars, yes. a great place. concept, great place. set that global
growth all bets are off. be with yousure to today. thank you for joining us. >> i like u.s. banks and i like the small and midsize. we are overweight u.s. banks. in etf's you can do them in for securities. the brazilian riyal is leaving -- leading losses here. watch that as trading gets underway. up, the u.s. trade balance. more on nafta. this is bloomberg. ♪
up by 2/10 of 1%. the euro keeps climbing higher. here the curve is steeper. we're looking at trade coming out of nafta negotiations. a trade balance now shrinking a touch. not as bad as we were expecting for april. march, a revision to the negative 47 billion. a $2 billion difference for that trade balance. , this islabor costs the final read. we did see revision here. productivity revised lower. at for the first quarter 2.9%.
>> i have a chart that shows the u.s. trade deficit with the world. the top number is zero. the trade deficit gets smaller. now we have 46. it continues. alix: the conversation is if the u.s. economy holds up well we are going to be buying stuff. but imports fell in april while exports did rise. that scenario did not play out. david: i wonder why that was. alix: we have guests to tell us. welcome to the program. good to have you here. thoughts on these trade deficit numbers? i don't know why exports would go up. >> we have seen volatility. it is important to look at it on a moving trend.
the fact u.s. has a sizable trade deficit with error key trading partners. this is something the trip -- trump administration is drawing attention to. overall we are talking about billions of dollars in terms of negative trade. good.looks like it is all services increased a little bit. volatile numbers change from year to year. because this is not seasonally adjusted numbers, you can't make too much out of it. alix: but we are going to. we will blame you for not vying chinese made dresses. raises the question, why consumers were not spending more when we have this tax reform. they were, but earlier in
anticipation of tax reform resulting in a larger increase after-taxake-home pay. they were spending, drawing down page,s, then we turn the and a lot of consumers are disappointed in what they saw. consumers may not be spending but the u.s. government is spending. you mentioned the trump administration has focused on the trade deficit. this chart draws a parallel between trade and budget deficit. the blue line and the white line . it says the trade deficit will follow the budget deficit on a lag. as a practical matter can we make real progress as long as we are borrowing at the rate we are? to be difficult. .e need china to buy our assets
it is a symbiotic relationship and we can't address one side of the equation without addressing the other. need other countries to buy our bonds to pay for our deficit. where do they get the dollars? we pay them for the stuff they sell us. this is something economists predicted when the tax bill passed. it would have the opposite effect of what donald trump was hoping for. alix: exports rose to a record. the deficit with mexico did had a deficit with canada. they had a surplus the month before. aide fromto a top mexico, what was your take away on how they are looking at this? >> they're looking at the relationship as important for the mexican economy.
they need the united states. they want to work with the president even though the president has been somewhat his rhetoric.in he governs practically. that is what is he -- that is what he is trying to do. he doesn't want a bifurcated nafta. a bilateral basis or a trilateral basis? >> they want trilateral. it would be difficult if you had two different -- three treaties among the countries. it would be hard to harmonize. just because we're in the middle doesn't he cut -- doesn't mean they still and canada are not trading with each other as well. >> businessman after businessman .ay overall nafta has been good things could be improved but it has been good. what is the risk?
argument nafta needed to be updated. a lot of language was antiquated . it needed to reflect the new economy and protect different aspects that have changed. thewhen it comes to potential of nafta falling to the wayside there is a large potential risk if we cut off those trade lines. is a global economy. consumers and businesses benefit from being able to have access .o goods, labor, services >> we've had all these years were people of integrated their supply lines. >> even though the economic impact for the united states might be small it would be big for a lot of companies that have supply lines going across borders. thing, you heard
justin trudeau say the u.s. should exempt us from the steel and aluminum terrorist because we have a surplus. ,he trade deficit with canada on month over month, down 45%. the canadians are buying a lot more of our stuff and selling us less. david: an important point, goods and services. it is different. i think that the president increasingly are looking at goods but not services. >> that is right. they're looking at goods specifically. does that make sense? >> it does and doesn't. it is harder to import bus drivers, nurses. services are domestically focused. transferableily when it comes to computers and
soccer balls. the trump administration is focusing on manufacturing and sidestepping services. >> we measure trade badly now. everybody knows it needs to be updated. parts to other countries to be assembled and brought back here. the value of much of the stuff we import is 4%. the rest of the value comes from other places around the world. that does not show up in the data. it is one of the reasons president trump doesn't quite understand what is going on. >> it complicates the issue. alix: thank you. great to see you. the trade balance is narrowing in april to $46.2 billion.
also the march number was narrowed a little bit as well. struggles. company a flood of executive departures shines a light on challenges faced by the food industry. we take a look at shifting consumer tastes. and you can listen to tom keene and jon ferro. bloomberg surveillance can be heard in new york, boston, and across the united states on sirius xm. this is bloomberg. ♪
alix: bill ackman is trying to revise it using his gains. jason kelly for global television, can you walk me through the logistics? most read story on the terminal. it is about bill ackman. and real estate. do, there aiming to is technical stuff going on here. the net asset value has a wide delta to the stock price. ackman has been trying to make that up, essentially. , the fundews for him is doing better.
he has also been successful as a real estate investor in philadelphia. outside the fund. he is essentially using that asset to borrow money to buy back shares in this to get back. david: to raise the price. >> exactly. david: he thinks it is a better deal. >> that is exactly right. this is where investors are always asking, what is your stake in this? you are a smart manager. >> he is no different from jamie dimon buying jpmorgan when he thought it was underpriced. he made a lot of money off of it because he was right. alix: is that desperate? >> it depends on your perspective.
>> he had a terrible year last year. he has been more successful on wall street. bill ackman his help to make the case for activism. .e has had some bad bets we will see if this will get him on track. money is money. under price, overpriced asset. alix: glass half empty. david: food giants are dealing with rapid shifts. food conglomerates have seen ceo step down, most recently with the departure of campbell soup's denise morrison. the global chief marketing leader at campbell soup, and joe
pollock. welcome. i want to start with you. tell us what is going on with packaged food. there has been turnover. >> there has been. it is about the industry and the challenges for the big food companies. they are struggling to find growth. have gone three years of cost-cutting. now they are looking for topline growth. it is harder to be relevant today with the fragmented choices. changing andds preferences changing. they're looking for ways to grow. are people buying fewer goods or paying less because the prices are going down? >> people are still eating. what is happening is they are eating different food in different places. more people finding these new
outsides, newer brands more relevant. there are less process, they are meeting needs of they are not finding as much today. versusake a look at s&p -- there is a typo. the underperformance. do you look at a worse offender versus good offender? >> they are the ones take a look and looking at the new looking at functional foods, natural, organic, the consumer is moving away from big brands. store for the shelfstable face -- space.
acquisitions with spaces that are organic or natural protein is a big space. they have taken protein to a value added space. that is where we see the sweet spot is. , what roleurmoil does acquisitions have? a bar chart suggests it was on the rise but it has dropped off. >> mergers and acquisitions make sense that the multiples are so high right now. we expect those to come down as earnings are hurting. may be mega mergers. courting big companies in the past. we expect that to happen in the future. their motto has been to cut costs and drive earnings. that only happens for a certain time.
yet to grow topline. they haveappened now hit the wall with a have driven the cost off and they have another big acquisition where they can grow the top line. for time, driving up costs. >> a while ago, we were talking huge companies commit huge bids. is that the way forward or is it it going to be companies buying smaller add-ons that can get better marketing, different products? >> you might occasionally see those big ones but then you are left with a slow growing company. there is an unbelievable desire for these companies growing faster. they are going perfect premiums. even our own brand our focus is more about growth.
reaching a trend. you come from a marketing background. how has social media changed economics of this. beverageith a large company said their standards have gone down. you can market through social expensivedon't to buy ads. >> right. social media, a digital marketing, much more democratic. you can reach people 1-1. you see companies able to quickly get into the market. same thing when you look at the channels and distribution of this. alix: how easy was it for you to get in the market? >> relatively easy. compared to what would happen in a big company, we are in
e-commerce first. there is no long struggled to get on a shelf. you are looking at how to survive in this world what is the best strategy? securing supply chains or buying small startups? buying walmart with jet.com? >> yes. all of the above. if you are looking at today's market, major cpg companies, you want to be engaging in all of those strategies. the small startup companies that are close to the consumer and hitting consumer trends. you want to be engaging with supply chain. amazon is changing the business. retailers are trying to figure out to compete. you look at how the retailers and the cpg companies are going
to compete in this new marketplace. you also have to look at a large prospective of what is going to move the needle. it can give you a lot of of acumen ina lot terms of understanding a new market and new product category. big, ithen you get that is hard to move that very quickly. is there anyone out there who is doing something in the way walmart did? with the flip card they do seem to be moving aggressively. >> i don't know anyone is moving with the scale and speed that it takes right now. everyone is trying different things.
the acquisitions are too small. you have to buy a lot of them. , general mills, they have made a lot of these two scale up. , iid: getting the deal done know that is a lot of work and that is not an efficient way to grow a business. >> the best thing you can do is innovate. that has been difficult for traditional brands. you are seeing more newer brands perceived to be more on trent. alix: fascinating conversation. thank you. you spoke russian. >> no, no. alix: thank you so much.
alix: what i am watching is the brazilian re-all. really getting hit yesterday they came in and fx swapextraordinary options per $1.5 billion. it was selling of so much more than other emf fax. able toral banks truly prop up their currencies and markets where they are fundamental issues? you have a relatively stronger dollar. >> asked turkey. we have seen this quite a few times.
it doesn't seem to be working. you cannot blame them when a trucker strike was hugely disruptive and not pared back. david: it wasn't that will ago we had the impeachment of the didn't. he is bringing a great group of people in. it wasn't that long ago we thought it was rosie. alix: you want money and investment. it is really been by the government now. there you go. on bloomberg markets, the federal reserve will lift interest rates next week. jon ferro is getting insight. this is bloomberg. ♪
coming up, the united states and china continuing to haggle over the shape of a deal to fend off an impending trade war. u.s. policies laid for exports problems abroad. an italian fiscal plans radel in the bond market, why investors my -- may not be able to rely on the ecb. the hawkish ecb giving the euro a bit of a list. much on offer, treasury yield two basis points and three days of gains on the s&p 500, futures positive of about .1% in the united states. investors are weighing the potential for a pickup in volatility. >> this is not a time to take concentrated isolated risk. >>