tv Bloomberg Daybreak Americas Bloomberg July 20, 2018 7:00am-9:00am EDT
the fx put. trump bashes -- potentially stabilizes the u.n. after the pboc lowers its rate the most in two years. the italian job. bonds selloff and a report of a breakdown between the prime minister and the populist leaders throwing leadership and out. we made it, it is friday. i am alix steel. onset.elly joins me jason: an exciting friday it is. jeepers creeper's. alix: you come in and you zone out. equities rolling over. . you take a look at the s&p futures down. it had been a monster dollar value. president trump put a stop to that yesterday. that dollar really helping commodities also take a break
now that they are slipping into correction territory. that little bit of rollover in the futures market really came on the back from cnbc who said he could go for any minute to $550 million of chinese imports. jason: that cut people off guard because the number that had been out there was $200 billion. -- i can goind of to 500 billion. says, yousee what he have to take it seriously. he has not yet backed down but you are waiting for the follow-up where people come out wassay what he meant to say . jason: we are from several investors who said we need the tit-for-tat to stop so we can stabilize. that is what ceos are saying. talking. merkel is the eu is ready to retaliate
against any u.s. auto tariffs. those comments are real and you have the commerce department and their hearing yesterday, 40 plus people going to play against these auto tariffs. eu is ready to pull the trigger. jason: we heard the ambassador yesterday talk about the herecations for carmakers in the united states, especially down of the south. these are real jobs that have come into that region. they could be affected if these tariffs go into play. week, youtheme of the had seen specific moves in the dollar but it felt common in the equity market. you are coming on friday, you have really -- you don't know what is going to go on in the next 48 hours. jason: let's jump in to the first take. we are joined by lisa abramowicz and sarah ponczek.
lisa, you do so many things. lisa: thank you. jason: what do you make of these trump comments about the federal reserve and the tariffs? lisa: i'm wondering how much business is within his immediate contra of cabinet members because we are hearing there is a arriving -- there is a rising amount of angst on the heels of the helsinki meeting. s president trump operates as his own entity not really taking any insights from congress people who are saying, while it back. our constituents are going to be hurting. he is not missing -- he is not listening to them. it feels like he is off to himself with mixing wonder how much power does he have. are people going to step in and try to curtail this? jason: sera, alix brought up a good point about how the markets
20 figure this out. sarah: a lot of investors say moderate a trade war. it is hard to do unless you have the details. he job that $500 billion number. he has brought it up in the past and brushed it off. now people may take it was seriously. investors have been trying to put trade on the back burner ever since they have gone into trading season. saying.hat they are we saw what is happening with alan: a after cutting their profit forecast. investors are trying to focus on the fundamentals and if we keep getting headlines like this, it makes it more difficult. lisa: i would say, ok, that is the cap on the dollar rally. isi am an investor, the cap 6.81 and also the pboc is good to step in and cap that. you can see the overnight trade.
verbal interference and technical interference from , that is all i really need to know. alix: this is an interesting phenomenon. i was speaking to lehman miller on yesterday and he was saying that china is an actively depreciating their currency, they are just allowing it to weaken and then they showed overnight, we are done. we are going to try and stabilize it. represents based on what he was saying, he doesn't want to antagonize president trump further. if xi jinping had allowed the u.n. to really plummet and weaken a dramatically against the dollar, that would have been goading trump on to do more. people can take what they want but this indicates, we are not in the throes of a currency war.
earnings.'s jump to ge the big-name out. a little bit of a beat. stock moving a bit. sarah: the stock is up 73 basis points so not a huge move. a lot of investors were mostly saying they want to see this turnaround plan is on track. they want to see a positive step in the right direction. if you broaden out and look at industrials, so far companies have reported earnings. every single one of the industrials companies have been on both sales and earnings. they have been outperforming more on a single day after reporting. it is the only sector to do that. we have been keeping the industrials going but with a big focus on ge. the story of ge has not been a good one. jason: the story of ge is womp w omp. good one. [laughter]
alix: talking about deutsche bank. i think it brings into question, you have honeywell raising estimates. it is a question of how much you are going to get rewarded for beat. it feels like that is another question as we head into the reaction of earnings season. >> at what point does industrial companies earnings become a narrative. we got the fact that this is as good as it gets with pat impeller last quarter. if you see industrials beating, does that turn into the global economy is doing pretty well? at what point does that become the narrative where people looking for cloud can -- cloud to hang on to and hang their pessimism on? alix: for the market is all about the threat -- the threat of bpp and german bunds. did you know that medical
anxiety over in italy isn't over? anxiety overical in italy isn't over? the populist government, a mini move is what we have seen today. there's questions over who is going to take over the state lender. you have the finance minister who everyone is excited about coming in because he is more neutral and he disagrees with the populist sides. that caused a lot of anxiety. there is some reports that they met, maybe they'd come to some kind of agreement. how does an investor need to factor in this idiosyncratic geopolitical risk in europe? lisa: at what point does the ecb step back? in the end of the day? hiking at some point, if they are going to keep stimulus going . at a certain point people say, if i'm going to buy, i can
withstand the political turmoil. people have to come up with that spread. that andtable with just ride the political turmoil. this is normal for italy. >> when i look at it, this is the top story. five basis points -- whatever. that was my reaction. jason: this is the story of europe. in terms of this wave of populism. merkel had to deal with it. theresa may having to deal with it. italy, greece, all over the place. investors have to be getting tired of this narrative. >> it almost seems like it is the narrative of the globe. we are seeing it all over, especially in europe. if you see it there reaction -- if you see the reaction, you see the entire government bond yields. , whatintroducing the idea
if uncertainty comes back to the forefront? brought calm to the market in the first place back at the end of may? if that is coming to play, whether or not he is going to be there, he could introduce risks. bloomberg's lisa abramovitz and sarah ponczek, thank you very much. the two populist leaders as well in theminister have met cdp in the cdp chief. keep that on your radar. we will update you on your radar. you can find all the charts by running gtv on your terminal. you can check on the chart we are talking about. ge offers investors some relief. the company is topping wall street estimates. we have more with seema shah. this is bloomberg. ♪
alix: -- taylor: i am taylor riggs. jpmorgan says says the bull market in u.s. stocks is ready to run. forecast thethe u.s. equities could keep gaining for another 2.5 years. fund is looking to invest $1 billion in the world's most bible artificial intelligence start of bloomberg is learned that softbank are finalizing the deal. cantime makes -- it contributes to china's vast surveillance system. -- the california company
reported same-store sales that rose less than expected. there spending aggressively. that is your bloomberg business flash. -- positive comments about their crowd business. alix, what you make of it? >> we have seen a huge surge. microsoft is following the trend . seems like they might be catching up a little bit. microsoft has been pivoting hard. after wonder whether some of the clouds have been an obstacle.
-- i have to wonder whether some of the clouds have been an obstacle. maxalt has been making acquisitions to bring -- microsoft has been making acquisitions to bring people into the space. alix: turning to industrials, g delivers beating earnings estimates. they have strong demands for aviation and health core equipment. running is now is karen ubelhart. and seema shah joins us now from london. karen, what is your biggest take away? karen: it looks like a decent clean quarter was not always the case with ge, so i think there was a sigh of relief. they didn't cut numbers. they have only done at five cents for the first half. they cut cash flow by $1 billion. ag company had good
international business. as a pair down in such a slim themselves, where are they in terms of what they are spinning off? what they are going to keep? the first $20 billion is just about done but that was the small stuff they announced in november. round two is a ways off. first move will be health care. baker hughes is to use away. the big stuff we got to wait for. we are looking for cost reduction and some stability. care in our aviation's is going to keep carrying them. that is a story. jason: onto to bring -- i want to bring you in here. i want to get deeper into this earnings season. we pivoted from financials to
industrial. how is it feeling out there? consensus general that we expect earnings that has a pretty good quarter this year. the global growth dynamic has been weakening. out theok further second half of the year, the second risk building up on the trade side. we have the u.s. having strong growth momentum. industrials is such a circle sector that will have to be affected whatever the global output is. alix: over the last quarter, industrials up 4%. the equities are underperforming. what he do about that. ? what is the trade? seema: it makes sense. if you look at q1, there are so
many good earnings numbers. that's because of the cyclical nature. if you look into 2019 just -- for the global economies, that is the time when many people want to start to rotate toward more defensive sectors. having said that, it is such a diverse sector there will be opportunity. jason: this seems to be a field of optimism in the short-term forecasting. you look at what honeywell said about its numbers. ge mentioned sticking with that fairly bullish estimate even though they are well above where the street is. in those terms. 2018, good, but do you see those same clouds that seamless talking about? karen: the growth rates will slow. i don't see a big down term --
downturn. reallyod numbers are not being appreciated. >> how much do you have to beat to be rewarded. seema: that is the rewarded -- that is the question for -- seem a, that is the question for you. if we are midcycle, how are you going to respond to earnings? what kind of beat is going to guarantee upside? seema: i would agree with jpmorgan to some extent. the equity market can still go further. move into next year, you still have to look at the fed hikes coming into play with a lot of uncertainty, especially with the trade. look at the trade -- look at the headlines from this morning. the one interesting thing we are is asia, a lot of
clients and colleagues are saying they feel too much bad news has been coming out of asia. alix: bachus for that on the call -- walk us toward that for the call? karen: i would like to know a little bit more color on power stabilizing at all. aviation margins were little weak. it is explainable because they are ramping up the new engine. i would like a little bit of color on that. cash flow, they explain, it is power. that is not new. feels like the cost side, their stabilizing. they are getting their arms around it. it is not falling apart. news. news is good just it feltl eric
like a closet full of shoes was falling over the last month. karen ubelhart, thank you karen ubelhart, thank you very much and seema shah is sticking with us. market jitters over italian politics yet again. italian bonds falling and the governments populist heavyweights will break that down. this is bloomberg. ♪ s is bloomberg. ♪
kevin: this morning, we can cross reports that there were serious differences regarding the finance minister and then there came a whole bunch of denials. apparently the government has reached agreement on the head of the state lender. day. is up and down all now there seems to be some sort of calm returning. jessica braun this story out for us. -- jason: broaden this story out for us. in europe there seems to be a bit of a trend where they come together in a fragile coalition and then they start to break apart again. what is the concern outside of italy in terms of the contagion? kevin: there's is the question of where the money will come
from. there are doubts about italy's commitment to the euro. the government always tries to tap that down. every time they try to tap down, somebody says, maybe it is a possibility. alix: think you so much and we have learned there will be volatility. >> it is amazing how quickly it moves. you have a report come out and you have people come out and they deny it. it is back-and-forth. it seems that every country in western europe. alix: seema, how do you play the political turmoil in italy? seema: in a way, it is really depressing. they really did reveal their hand.
i think there does need to be some kind of premium priced into italian bonds. that volatility is going to stay with them. they are eurosceptic. the deputy pms have a lot of power. -- italy for the time being. alix: seema shah, you are staying with us. it is the metal rebound ending a roller coaster week. more on the commodity correction. this is bloomberg. ♪
-- that led to weaker european stocks. that last is italian banks again political turmoil heats up a time banks. .8% in other asset classes it was president trump putting an end to the tighter rally. euro-dollar up. have we hit the top? what are the ripple effects especially as china steps in to defend their u.n. from -- there you want from falling further -- from falling further. this get a look at what is making news outside in the world. president trump has doubled down on his controversial summit with vladimir putin. news of the meeting came as a shock to his intelligence chief, dan coats. there is a rising concern that
members of trump's team do not know what the two leaders discussed during their meeting in helsinki. president trump's extraordinary backfire andould get him exactly what he doesn't want higher just rates. the president told cnbc that he is not thrilled with rate hikes. prompt as policymakers to feel like they have to demonstrate independence and raise rates. british prime minister theresa may is reaffirming her brexit commitment to a soft irish border today. may is visiting northern island and urging the eu to accept her proposal for a free trade area on goods and an open border with a northern ireland and ireland. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. you know what theresa may remind me of, it is like the voice of the teacher in charlie
brown? amazing. is this irish issue has been such a major sticking point. the irish prime minister was over in the united states in the case. it is a very big sticking point. alix: in the markets you got metal streaming losses. concerns over the man headwinds and -- over demand headwinds in china. joining me now is tina davis. tina, good to see you. we have more headlines on trade. tina: when you talk about the rising dollar, you cannot always have a rising dollar and rising commodity prices people we have seen that throughout history. if you see little bit of weakness in the dollar, you see a little bit of recovery. we are seeing a little bit of a
comeback and what has been a rather missable quarter for metals. that's rather miserable quarter for metals. can we call it enough? back.volatility has come kind of a cross commodities wears equities markets have been relatively calm. commodities are the exact opposite. if you look at some of the technical indicators across commodities, you see bearish signals. jason: tina, when you look at the earnings and the commentary you have heard from executives on conference calls and digging into the numbers, what does that tell you the near-term? tina: it depends on the commodity. if you look at the oil space, we saw returns from stronger j and baker hughes. all the action is good to be in
north america, focusing on shale. is saying all the action is moving overseas and they are focusing on the international business. you will be looking for the big oil earnings next week. we will wait and see what they are saying. steel's favorite day of the week. alix: when you see big oils earnings going forward, what will be the theme? >> looking at what they are doing with their cash. second quarter was better but it is not a $100 oil field. they're looking for restraint and paybacks. exxon is going to be interesting veryse they have been refusing to do any kind of buybacks.
farming their investors saying, trust us. if they continue to do that, it will be interesting to see what their shares do when they announce on friday. alix: i am not a market investor. still with us is seema shah. seema, translate the commodity weakness we have seen. the oil confusion that we have seen as to how you put that money to work? seema: you really have to separate oil from the rest of the commodities space. for commodities, we have seen it has been moving in line with the trade story and the sense of how china and trade is going to be affected. we have seen that this morning with that stabilization in you u.n..- in stuff that we are hearing at the white house suggests these trade
tensions only going to continue for the time being. on that basis, maybe commodities have a time of stabilization. when it comes to oil prices, a very different story. given by geopolitics. very little capacity left in the market so any geopolitical risks have got great potential to create significant volatility. alix: when you look at oil earnings, you have to look at two prongs. no doubt earnings are going to be good. if you're looking for value and cyclicality, that is going to be the energy sector. it is still exposed to president trump. he doesn't want full oil prices. want high oiln't prices but the u.s. is quite
immune from the very sharp rise in oil price. little say there is very from the trump side that he can do to bring down the oil price. unless he is willing to backtrack on a lot of the tensions that have been stemming from the u.s. jason: seema, i want you to hang with us. i want to bring mike mckee into this situation. mike, trade has dominated every single conversation this week. we cannot escape. what are you hearing this morning out of germany? mike: one thing we should say is he didn't say he is going to go and post $500 billion worth of terrorists. -- worth of tariffs. he said are you ready to go to 500? he didn't say anything like that was imminent. -- worth ofmaybe we should coole rhetoric on that.
mainstream economists would say that is a bad idea. it is not a good way to look at things. he is in the mood to put tariffs on. the real question for the markets is does he go ahead with the automobile tariffs? that has europe worried. he has eu coming to talk to the president and his people next week. he seems ready to do it. that would have a big effect because autos is a big component of the national economy. jason: mike, you are a veteran fed watcher. you know more about the federal reserve than anyone i know. put into context the comments the president made yesterday about the fed and its ultimate independence. you got to go back to bush 41 the last time a president weighed in in this way.
what does it mean? nixon was less time that a president had success. bush -- you had bob rubin coming along with the clinton minister starting to policy, not talking about the fed. is not under the direct control of the government, although it is funded by the government. they could have an impact. it probably doesn't mean anything, the resident said. i will repeat what i said, if you ask a president if investors rate should be lower, any president is going to say yes. they don't have the dual mandate. they need the economy expanding and the fed has to worry about inflation as well. you cannot blame donald trump for saying that. you should not have talked about it because just talking about it can influence the markets. we didn't see much market
affect. i don't think jay powell is want to pay much attention to this. have morea, does it application for the dollar? as an investor, you're looking at a president who doesn't want a summer dollar. guess what a stronger dollar. seema: you have to pay attention to it. strong -- he was against a strong dollar policy. that didn't stop the dollar from strengthening in the first half of this year. we have to look at the growth dynamics. all of that is pointing to a strong dollar. alix: what does that wind up doing to asset allocation? for small caps, they had had a really good run. analysts are now downgrading their forecast. how do you position for that?
looks toward international equities. it is upset by the stronger growth numbers coming out of the u.s. area thatis the one if you want to insulate your portfolio from the trade tensions, u.s. small-cap is a way forward. it may be that a lot of people are starting to think that trade is not to have such a significant impact on global growth. leaves.ading the tea seema shah, thank you so much. michael mckee, good to see you. why jerry seinfeld and rough head to a garage for the vintage car collections. more on that. that is an awesome car. jessica it is an amazing -- jason: it is an amazing car. alix: this is bloomberg. ♪
alix: this is this is bloomberg. . coming up next hour, robert shiller. we turn out a businessweek beat. when i sit back and chill and let the experts take over. from trade damage why american allies no longer trust washington are making free trade deals that leave the u.s. out. how the electronic retailer found a way to thrive in the age of amazon. rhodes scholar, inside the company that is restoring vintage vehicles.
road -- womansplaining? jason: is an hour of women. i like it. massar, mynow, carol partner. nice to see you. , peterer story this week coy, we love the sky. so on the news. carroll: can you see this. this is the world and this is the united states. peter coy is asking the question -- will het trump have in a lasting impact? he has called the eu a foe. cis morning. there was the controversial conference. whatever side of the political aisle you sit on, you would call
it controversial. he is asking what kind of lasting impact this will have. he gets into this idea that you are eroding trust with your allies and even with your enemies. that's six around and he gets into this whole nationalism wave that we are seeing. president trump didn't create this but it is a very good at pushing it further. this is the kind of thing that divides countries. alix: we are going to talk to robert shiller and he said stock market investing is a long-term investment. president trump is short-term, even if he runs for two terms. that playing out in the confusion in the market. jason: peter coy really looks at everything from an economic lens. it is interesting to see this cover because that says a lot about the world. he talks about some of the longer-term implications here at
home and how would ripples through. >> we're in the midst of earnings season. we're joined here with the ceos are saying. they are talking about capital expenditures. the summer ceos amid uncertainty about trade wars. they just pulled back and say let's wait and see. that has implications. you don't make a new investment in a new factory. that's iave been haven't been in best buy in years, but apparently the turnaround is working really well. , anding in a french man initially the stock went down wait,cause they're like, how do you say his name? he comes in and works in the website and the app. he makes two day delivery. he really weworks -- he really weworks the company.
the consumer, how they spend their time. they have this in-home advisor. they will go to your home and say, what do you need? they are not pushing sales. have is high-tech homes with alarm systems, window treatment, they will help you put it all together. his answer to the question, what do you do with amazon? hug them closer. >> do they wind up coming to your house and dealing with the wires? hoursband spends 48 trying to unravel a piece of wire. >> a lot of things are wireless now. [laughter] story.s a financial they were not doing well. the stock is up 300% since he came in. he has turned things around. good story.
jason: you make a lot of money in the stock market, what do you do? you buy a really expensive car. alix: only if you are david westin. jason: it is a porsche and you need it brought to its essence, you take it to north carolina. >> it is called road scholar. she went down to north carolina. the car right there, she said is like seeing a unicorn. 1952 porsche. there's about 11 out there. this is one of the first cars that porsche gave its name to. the paint, they use horse hair brushes because that is the kind of brushes the use after world war ii. they put them in all of these competitions and sometimes they win. jason: pebble beach is the place you go to show off your car. >> i have been there, it is
pretty amazing. exclusive cars. this is a place that jerry seinfeld -- when hannah was there, jerry seinfeld's car guide was calling in. roughly rent, these kind of people -- ralph, marin. alix: carol massar, thank you very much. you can find all the stories in the latest edition of bloomberg businessweek. coming up, g delivers eating earnings estimates for a second straight quarter. a look at what the company's turnaround plan is. check out bloomberg terminal. you can go to tv , click on our charts and graphics. scroll to the right hand side of your screen. check it out. this is bloomberg. ♪
morning. it is still about the future of the company. in a recent bloomberg opinion column, brooks sullivan wrote just broke sutherlin wrote. joining us now is brooke sutherland. they beat and a said, the plan assigned to work. is that the right narrative? brooke: i don't know many people put much stock in ge's defined earnings numbers. they have taken steps report but you have a lot of -- you don't see it as industrial companies. i don't know how much people rely on that headline number. the big focus is on cash flow. ge cut its annual guidance for 2018 because it came up short in the second quarter. it is looking at -$1.4 billion.
d weighted. be backen this says -- this is of a very steep hurdle for us to clear and that is exactly what the company found itself in last year with the ceo had to cut the dividend's. jason: so much of the story is about the nav at it -- is about the narrative. the number can almost be massaged to get a little bit of a pop, up a little over a percent in premarket. the conference call, what do you expect to hear from flannery? >> i think he is going to get more questions about that cash flow number? what is expectations are for the go forward company after the get rid of the health care business and baker hughes. those are strong cash flow generating assets. you have to ask yourself what does the remainder company look like going forward? ge has a significant debt load the behest -- that they have to
manage. alix: the stock is holding on to its gains. we saw it bounce around a little bit. why? what was so positive? it wasn't so terrible, that wasn't going to keep the stock higher. brooke: they were desperate to see signs of turnaround. people want this company to do well. it is an american icon. people want to see a comeback. you do have to look at the numbers and a healthy dose of skepticism is more -- is warranted. they also were not -- some people were prepared for a guidance cut. they did not get that. i don't know you can roll out a guidance cut eventually. greatming would not be for ge to cut its guidance right now. i am not so sure they can still
hit those numbers. jason: honeywell gutting upwards for the rest of the year. that seems like a positive story. brooke: it is the exact opposite story of ge. heart of what makes ge so interesting is it is having this problem against the backdrop of other companies doing well. it is really to the ceo's credit goes he wanted to change the focus of honeywell and focus on revenue growth. alix: how they let these two companies. brooke sutherland, thank you so much. more on ge coming up. this is bloomberg. ♪ retail.
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beating on earnings for the second quarter in a row. john flannery's call takes place in half an hour. president trump bashes rate hikes, potentially stabilizing the rate after the pboc lowered its rate for the most in two years. breakdown between the italian prime minister and populist leaders, throwing leadership into doubt. happy friday. you made it. it is a gorgeous day new york city, if you look at the empire's a building. -- empire state building. jason: it is such a lovely friday. a lot of news to get to. we will get there. alix: welcome to bloomberg daybreak. i'm alix steel. jason kelly is joining us. up by three points as we start to turn over as a report from president trump he would not think about tariffs on $500 billion worth of chinese goods.
he talked about the fed and not liking them raising rates. the spread weaker, 24 basis points. has nownger story paused, helping crude up by .1%. ge offering investors relief after earnings beat estimates. strong demand for aviation and health care equipment help to boost results. joining us now is scott davis, melius research chairman and ceo. ing of $27.t why do you have a buy? >> we think the stock is discounting pretty much every piece of bad news you could throw at it. down. come the report was fine. it was not inspiring when you
compared to honeywell, honeywell was fantastic. it is a $13 stock. they did not need to put up much to give it a lift. i think it is going to be fine and flannery is making progress. it feels like mediocre seems pretty good for investors in ge now. what is your sense of the state of the turnaround at this point, which flannery has laid out pretty well over the last few months? folks seem to be waiting for the results. >> it is so hard to tell. in many ways, it is hard to tell how good a job he is doing. his power numbers, he could be taking costs but demand is not there. a business down 20% on the power side is severe to try to cost cut out of. is rest is great, aerospace
solid, health care is solid. he is controlling what he can but power is a mess. honeywell,mentioned this is the tale of two industrials. what are they doing that is so right? >> i was thinking before i came on that the honeywell versus ge results is a illustration of the cody of honeywell made these great decisions as far as these deals they did. global expansion, cultural improvements. ge did the opposite, the culture drag down. they made bad deals, including doubling down on the power and oil and gas. honeywell is well positioned to succeed in this type of world where ge is not. jason: scott davis, thank you so much for your call. good luck to through the rest of
the earnings season. by luke kawa, bloomberg's cross asset reporter. what do you make of earnings so far? let's pull back and get a sense of where we stand. >> they have been good. should the typical rate hold for the rest of the season, we will be running a pace of 24% year on year earnings. resultsthe investors have been different from last time. pop andot getting the drop phenomenon. it freaked a lot of people out. people haveuggests more confidence about the forward outlook. i find that ought given the dollar and tariffs make that outlook look more muddled. alix: i like you brought that up. can see the earnings revision for 2019 versus the
performance of those sectors. materials, a big upgrade to earnings but performance has not lived up to that. is that going to continue? think you flagged a great point on industrials. they have been the ones beating all of them that is important. stock reactions have been important. coming into this season, on a technical level, the level of industrials relative to the market, we have nowhere to go but up. it might be more improving and the exporting oriented companies are growing topline and bottom line faster than the domestic oriented constituents. not expectou might given the american narrative first. jason: financials, we of got a pretty good picture. the big banks are coming in.
what are you seeing? >> if you want a good scare story, that is where to go. to bloomberg equities and they have flagged the commercial real estate, problems everyone has been warning about might be starting to come true. should be eminent, jpmorgan has downgraded signature bank. it is saying irrational activity as the cause of the downgrade. there are problems in the space. they're worried about commercial real estate walking away. i think that is the space to watch. banks very sanguine. alix: also the idea there are risks but they still trade with the macros.
good stuff, thank you. market, will earnings be good enough to distract you from eight 10 year yield that is at its highest since 2008? the blue line is the two-year yield, it has shot higher. it is this last leg getting us level.hat 2008 joining us now is sebastien page, t rowe price. you can go by the two-year. >> cash is becoming more attractive. it is a strong earnings season. we mentioned over 20%. this is driven by tax cuts. if you adjust, it is good. 12%, 13% ofng at earnings growth, 80% are beating estimates and this compares to
69% average for the last three years. bottom line, strong earnings. as rates are rising, bonds are becoming more attractive relative to the stocks. a few more things on earnings. not many companies are mentioning trade concerns. aluminumoming real for but the major concern is the rising dollar. you do not see a lot of exuberance in the market returns years today. the -- your today. what does this tell us? we are still on the 3% growth economy. the market does not think 20% is sustainable. about the forward guidance you are hearing, as you cautiono ceos, is their in there and is that being agreed with by investors? >> i would say yes.
there is cautioned that a lot of this is the tax reform, the weaker dollar, historically comparable year-over-year and headwind with energy. you have a lot of factors that you have to step back from both the company ceos and the investor perspective and say this is not sustainable. the market is pricing that in. 4p for the u.s. is not exuberant. where youing about what one, here is person had to say. theou want to shift portfolio to have more up front yield, more assets linked into gdp growth and you want to lock
in liabilities. rates have bottomed. alix: what do you think? when rates have room to continue to go up and when the fed is raising rates, is one late cycle and it of the key risks for risk asset. pulling off the stimulus zone and going into tightening mode. i have a colleague who told me slamminge the fed is the brakes, someone goes through the windshield. the fed is conscious of that risk. we are in a late cycle environment but it is atypical. we are getting fiscal stimulus at the same time. sebastien page, t. rowe price, you are ready to stick with us.
♪ trump roque with tradition of avoiding common some monetary policy when he criticized the federal monetary interest rate increase. he said, i am not thrilled. i don't like all this work we are putting into the economy and i see rates going up. i'm going to let them do what they feel is best. joining us is narayana kocherlakota, the former
minneapolis federal reserve president. good to see you. put on your old hat, you hear president trump talking about this. what do you think? >> thanks for having me. it is a great question. to thing,e immediate he has put us in a position where we are even more bent upon carrying on with what we think is appropriate for the economy because we have to show we're not being influenced. what does that mean? the fed is more likely to go forward with their rate hikes later this year just to show that on the margin, they are not being influenced. alix: you're not alone in thinking that. tweeted that the
surest way to get the fed to continue raising rates is to tell it to stop raising rates. do you think that jay powell is going to have to move faster or talk more hawkish to overcome that headline? no, i do not think it is going to be anything that needs to be done publicly. might come through, suppose we saw softening in the economy. likely to thing, we should be going forward anyway with the rate hikes despite that information flow just to show that we are still in charge of monetary policy. it is not the white house setting the tone. jason: speaking of jay powell, we heard a lot from him on capitol hill, testifying before the senate and the house,
setting the comments aside. what did you make of the message chairman powell delivered? chairman powell is delivering the message that is congruent. we have been hearing the economy is strong and that things are going well and that the fed is going to continue with its plans for normalizing interest rates. over the next year in order to keep inflation from accelerating. jason: so much of the early days of any fed chairman is about body language, choice of words, everybody parsing everything, talking about the words. what do you make of the chairman so far? , he is not anis
academic like the previous chairs. he comes from a business background. i think that helps them in this capacity. for him tor communicate about monetary policy with congress, with the he translatese for himself into the language that is going to be familiar to the layperson. these are great moments for him. the press conference was great. the testimony was great. are capacities in which he is serving the fed well. alix: we joked he was using one syllable words we understood, which was amazing. i feel like we are waiting for president trump to start tweeting about the yield curve here at -- curve.
be your response on what the spread of a 24 means? my own perception is that the president said -- is what the presence that is consistent with what has been coming out of the administration, from larry kudlow and peter navarro. i think the fed should be prepared to hear sharper criticism from the president and the administration. things are going well for the economy. if things were to soften further, i think you might hear sharper criticism from the president and from members of the administration. the fed has to be ready. alix: great to get your perspective. thank you so much, the former minneapolis fed president.
still with us is sebastien page of t. rowe price. i love the chart we can look at of the dollar and you can see the dollar dropping after that headline that president was not happy with the fed raising rates. president trump does not want a stronger dollar, do you need to start changing investment? >> i think this is a short-term effect. rates in general, there was a reaction. this is transitory. the fed's independent and is not going to be influenced either influenceding to be to go more aggressive in raising in response or to abide by that. think a lot of this is short-term investment reaction market sentiment. sentiment, weterm
look at 1618 months. six to 18k -- at months. we think it is a negative factor for company it earnings -- company earnings. a lot of those earnings are companies that have international exposure and have benefited from a low dollar. short-term, the fed is independent. importantm, it is from a asset allocation perspective. jason: if you listen to the commentary so far, what is winning the day in terms of what is occupying ceos minds so far. we have talked about tariffs, tax reform spirit what is dominating the conversation? matter andand trade it matters as we have seen an aluminum. -- seen in aluminum.
it is not coming up as often as you might expect. the strength of the u.s. dollar is one major factor. tailwindse have had that we do not expect to be sustainable for the next two or three years and that is reflected in those conversations. plus earnings growth is not sustainable. alix: you will be sticking with us. we are having headlines. -- yield curve in bearish inversion is bearish. that is a big surprise. jim bullard said the yield curve is bearish. he says the balance sheet could be holding long-term holdings was mentioned earlier this week as well. bedoes say the inflation may
unnecessary to invert the curve. are going to continue to watch more closely what all of the fed speakers are saying about the economy given what chairman powell said that he is not worried about a recession in the near term. you think about what we heard earlier, all those inputs coming in, they rely on these fed presidents to give a sense of what they are seeing. whether it is bullard or others, what they are bringing to the table. alix: sebastien, weigh in on this in terms of the curve. how would you be playing that in what signal do you take? >> it is not as bearish as most people think. flattening yield curves, it usually is
accompanied by acceleration and risk assets. inversionrs is the itself and how close we are to the inversion. we do not think we are about to see and inversion. look at investor positioning, most investors are short the 30 year. jason: let's pivot to europe. we have been talking about what is happening in italy and political risk showing its head once again in that country. a reminder of the instability across europe. as you step back, how do you factor that in? can you model european political risk? >> political risk is impossible to model. it is important to keep track of it. from an investment perspective, we are overweight non-us
equities, which includes european equities. at 13. markets are earnings growth has decelerated. growth is not as synchronized says it was 12 or 24 months ago. ultimately, europe is earlier in its cycle. track of the disruptions but we look at fundamentals and valuations which lead us to be overweight those markets. alix: if you are overweight europe, what do you wind up u.s. when you look at the -boy and the spread, 300 basis points is where we sit? interest rate differentials will implements the dollar at some frequency. it is one of the factors we look
at especially for emerging markets. when i talk about being overweight globally, it is outside the u.s. emerging markets, we are neutral. overall, overweight stocks outside the u.s. factor, one of the risk factors where paying attention to. alix: we will talk about emerging markets. the other story was deceleration, the decline of the u.n. the one.upport -- of yuan.the assetre going to have an meeting and about one hour. we are going to look at emerging markets. stronger dollar have been bad for emerging markets. they are down relative to the u.s. significantly while the
u.s. is up. valuations.ractive trade and an stronger dollar be impact on that affect class. you still get 10% of earnings growth and it does look sustainable for 2019 and 2020. her have interesting tech companies. prayed --stian sebastien page, t. rowe price. it is time for the conference call, we're going to bring you highlights. this is bloomberg.
european stocks lower and you can see that reflected in the bond yields. btp up nine basis points. the selloff continues up that front-end. the dollar, a decline started yesterday when president trump started talking about the fed and how they should not be raising rates. u.s., 25 basise points as we have jim bullard saying the yield curve inversion is a bearish signal and that the economy is good for now but that the gdp will moderate. crude saying thank in this dollar is not rallying. commodities getting a break. yesterday, around this time, the head started rolling across the bloomberg that disney would win the deal for fox.
brian roberts crying uncle to bob iger. has a great story on the bloomberg. break it down for us. this was the deal of the year. malter -- rupert murdoch should be sending brian roberts a thank you note. he has driven up the price. pay 35%orced disney to bob iger agreed to in december. the story,said in rupert murdoch is laughing all the way to the bank. jason: i love the details you had about the meeting of the minds between murdoch and eiger. you were at sun valley where there was a lot of this happening behind the scenes. >> this came down to eight relationship between rupert
murdoch and bob iger. it was interesting to know who was hanging out with you. went and had breakfast with rupert murdoch a prominent table on the first day. that is a bold move. alix: can we glean anything from the fact that bob iger said, you let me have fox and you can take sky? you can rebid. is that the horse trading that went on? not allowed to talk to comcast as part of the agreement. maintains his agreement did not allow him to do that. if you're rupert murdoch, that might have driven down the price. you do not want that. talk that disney may let them have it but there's nothing to stop disney to make its own offer first guy.
bob -- for sky. bob iger did say he thought it was the crown jewel. i do not know if he is going to go away so easily. jason: your life gets busier from here. m&a in the media world. talking to david at sun valley and he was saying, this is going to make my company more valuable. i expected to drive up valuation. you have got movie studios on the block. everybody is grumbling around to see what the next asset they can get to help them better compete. alix: for sale, look at me. that deal to buy fox, it played out as some insiders predicted. kay koplovitz.
here is what she had to say. robert murdoch likes disney stock and would like to have that longer-term. as the delta gets bigger, it is harder to justify. that is a tax efficiency is there on the delta -- on the disney bid. they've got to pause and say, who has got the better deal? alix: murdoch would like disney. kay koplovitz joins us now on the phone from rhode island. get your crystal ball going. help me understand what is going to wind up happening with sky. >> we have been talking about this rivalry for the fox properties for some months. this is been the story of the year. we said that murdoch favored the disney deal.
he likes the stock long-term. that is what he wanted all along. he is the winner. with sky, i do not think we have to see what happens with regard to whether or not murdoch will be able to achieve coownership. he owns a minority piece. you may see comcast on the theinder and here we have together,working disney in a minority position, if that is what happens. iger who gotk bob a big win here with a fox properties, he may say enough is enough. i can live with a minority share. it may be a powerful combination
for both companies. on the horizon, what is going to m&a is going to increase this year. whatention of discovery is i have been thinking is going to be a property people are going to look at. service in sports europe as well. they are another entry into the marketplace as well as the other acquisitions they have made. it is about a $13.5 billion market. he could be salivating over the opportunity for an a position that discovery. jason: let's talk about netflix. they came out with earnings that disappointed some folks. they are the elephant in the room and driving a lot of strategy and potential m&a
across the landscape. how do they fit into your analysis of the broader landscape at this point? >> they are so dominant in terms of what they have achieved in subscriber growth. in not a hiccup achieving the subscriber growth they had projected and underperformed significantly. that does not mean they are not continuing to be a powerhouse. i think they will recover and i do believe they have set a standard that is remarkable in a domination of new creativity for the marketplace. they have a lead over others in the international market. if they are going to continue to be the front rudder and -- front runner and others are going to
be chasing their performance for a number of years. that is why people are looking at this international market as i have got to get into that market. it is global whether some people want to recognize it or not. that comcast tried to engage amazon. eighto see one of these tech giants coming in to buy one of these, do you think that is ever going to happen? , i think they see and they do not want to get too involved in the types of having to install and mainstay and -- and maintain that and they would rather ride on other technology. do not see them going after
the broadcast for different reasons. it would be interesting if they did. at the moment, they have a great position. would apple go after it, would google, would microsoft? would they want to buy and operate that business? little bit ofe a work in that marketplace in selected markets. possibly. it is not in the cards now. i do not see them doing it. alix: kay koplovitz, really appreciate it and nabila ahmed. de, the stockg slipping into negative territory. john flannery saying the earnings are coming in the low end of their forecasted range. there are opportunities in europe and asia. talks, andrump markets listen. how should markets react?
♪ alix: this is bloomberg daybreak and this is the hewlett-packard enterprise greenroom. coming up later today, an interview with martin franklin. president trump says he's ready to go with import tariffs on chinese goods. the markets moved, stocks are long-term investments. president trump is still a short-term event. starting todence is roll over from that record high as the s&p pushes higher. line ofe line is the
how many respondents see stocks higher which is -- versus the blue line which is the s&p. that, you need to understand investor psychology. us,ave robert shiller with a sterling professor of economics. he is the author of a best-selling book on investor psychology. he joins us now from yale university. your intro is going to take up the whole segment. headlines,ok at the how should an investor be interpreting that if they need to be investing longer-term? >> it is tough at this point. we have what looks like a major regime change. they just cut corporate tax rates from 35% to 21%.
regulations, tariffs, it is difficult to predict the market. we have seen a lot of earnings growth. everything is looking good and investors are confident. because we sawn that happen in january, february of this year. we had a correction in the market and that could happen again. alix: i want to take you inside the terminal to see this. it dovetails some white you are taught -- on what you're talking about. as conversations heated up, we saw a steep increase and decrease in those that are hearing favorable news. are that mean investors going to be making correct decisions or-- they're going to be making irrational decisions? >> i am big on the irrational. people are pretty smart. these are hard to resolve.
insights of economists and historians have to with international politics. nobody knows. alix: i'm going to interrupt you. president trump says that china and the e.u. have been manipulating their currencies. that is like a trade war to add fed war to a fx war. throughhat is coming his twitter account, taking away our competitive edge, not a level playing field, the president says. let's talk about this, you spend a lot of time examining the notion of a narrative and the pace of the narrative has increased dramatically and can turn, as we're seeing, on a tweet.
how does that play into where we are today? is an expert on narratives. i can quote donald trump for that. he talks about it in his books. they are ghostwritten but they were written with his input. he is living a story and he is attempting to describe himself as a genius, a stable genius. he is trying to live out that script and people think he might be right. he does think independently. people think this is a major turning point in history. there is a risky is going to flub up. he has made some recently. i do not know where this is going. -- hes. does not incurred has got a lot of enemies. a unstable situation for
the stock market. even though volatility is down, it is a risky time to be in the market. jason: we've the narratives of the past week together. the narratives of the past week together, the helsinki summit, the interview about fed policy, and this latest comment about currency manipulation. part of the narrative it seems is constant noise. how do you find the signal? well, donald trump is tweeting signals all the time. around to hisme interpretation of history, that the u.s. needs a strong leader and there is only one strong leader capable of that and that is donald trump.
his behavior over the last week confirms that. sometimes, i think he might be right on some of his takes on conventional arguments. maybe it is a good idea to warm rather than allow the dynamics to play out in a negative way. but i ambe right worried about it. playingerconfident and overconfidence does play into some people's imagination. on theo catch you up headlines, president trump tweeting that china and the european union have been manipulating currencies and interest rates lower while the u.s. is raising rates, while the dollar get stronger, taking our competitive advantage. as usual, not a level playing field. the dollar downtrend started yesterday afternoon when
headlines broke that the president said he was not happy with the head raising rates -- the fed raising rates. if you have a president who does not want a stronger dollar, can bull?er be a dollar the complaint against currency manipulation is not new with trump. we heard it before and under the obama administration, there were complaints filed with the world trade organization about chinese behavior. entirely a partisan issue. the thing that is different now is that trump is bringing it out in strong terms, and angry terms. he is good at giving angry speeches and some of that is feeding into the imagination of people.
portends well it for the dollar. the behavior in criticizing the is challenging our norms and expectations of a president. we have an independent central bank and the president would be better to keep quiet about interest rates. dollarignaling a weaker and that is what he would like. we will see what happens. jason: as this narrative plays out and as this redefinition of the narrative plays out, it feels like it spreads to other narratives, whether it is elon musk, who we seem to be hearing from, or mark zuckerberg or others or other world leaders who feel compelled to weigh in. play that out. is this just a cycle we are
going through or is this a change and how people communicate? >> people are the same as they have always been. we have had people like donald trump who showed overconfidence in the past. have tended to forget about them. think of you a long, who in the ong, who in- huey l the 30's, was advocating a universal income. he was fascinated. grandson carried a further and created the earned income tax credit, still with us today. was it a bad thing? wild but he threw something into the mix that has stayed with us. there might be an upside to trump.
he does question things and he gets people looking at assumptions. i wish he could be more stable and try to deal with the world trade organization and our legal framework. on,: also joining us, hold is the head of u.s. fx strategy. president trump tweeting that he thinks china and the e.u. are manipulating currencies. you dovetail that with comments on the fed, is there any point in being a bull? >> it is a limiting factor. the dollar has been benefiting from trade war concerns. dollar willthat the be hurt less and the dollar has been going up. if limiting factor is that
the u.s. is trying to improve its balance, the dollar is going to be another source of concern. we have been expecting to hear for a while a complaint about dollar strength beginning to come through. these comments are not a surprise but they are going to be a factor that limits how much the dollar can benefit from the trade war. jason: we have another tweet from the president following this, quoting the united states should not be penalized because we are doing so well. tightening hurts all that we have done. the u.s. should be allowed to recapture what was lost due to illegal currency manipulation. debt coming due and we are raising rates. this following his comments yesterday questioning the federal reserve policy and on the heels of chairman powell testifying on capitol hill earlier this week. again, doubling down on this idea of federal reserve
independence, if he continues this narrative, does it start to stick? >> i hope not. he should stay away from the central bank. this is a famous thing. we have a strong man running the show like in venezuela is the extreme case. they have inflation, a horrible economy, because the strong man is not letting the normal functioning of the central bank work. it is something that is unfortunate right now. i do not see anything good coming out of president trump starting to strong-arm the federal reserve. that point, more coming from president trump and tweets, saying it highlights how it hurts all we have done.
he is coming out against the stronger dollar. again, daniel, what can president trump do? what about over the next six what are recourses the white house has? >> there is not much they can do from a practical standpoint. the verbal comments do have an impact. global investors are overweight u.s. assets. they have be willing to stick with the dollar for the dollar to be stable. if the administration craze the perception they want the currency weaker, it is going to be tempting to reduce exposure and the dollar will get hurt. it is the way it happened in the past and i would not expect it differently this time. the administration is limited with what they can say about fed policy and there will be
pushback if they start to criticize. is thing they can do complain about policies in the other economies. boj can complain about policy being so accommodative. that is the just of the first week. you're going to see more pressure from the administration to normalize policy. alix: appreciate that, robert shiller, professor of economics. what is happening? bloomberg markets, the opening with jon ferro. this is bloomberg.
president trump turning up the pressure on china, threatening to slap tariffs on pretty much all imports. and meeting presidential resistance, the dollar rally, the yuan still struggling to find stability, and stepping on the fed's independence, the white house pushing back against high rates. in the market, 30 minutes away from the opening bell. futures negative eight points on the s&p 500, down one third 1%. , treasury yields blaze higher. the conversation, all about rates. the president tweeting moments ago the united states should not be penalized because we are doing so well, tightening now hurts all that we have done. the u.s. should be allowed to recapture what was lost due to a legal currency manipulation and bad -- illegal currency ma