tv Bloomberg Daybreak Americas Bloomberg May 6, 2019 7:00am-9:00am EDT
increased tariffs on chinese goods in two tweets. beijing still reportedly sending a delegation this week the -- the's country struggles to respond. occidental increasing its cash ,ortion for its bid on anadarko all or nothing for the ceo. david: welcome to "bloomberg daybreak." i'm david westin, here with alix steel. this was supposed to be a victory lap on u.s./china trade. i'm not so sure. is good for the markets, then not so much. it appears it is not going to be wednesday he will show up. maybe thursday. alix: no doubt, mr. trump posturing over the last 24 hours. the question is, posturing for what? david: is this the art of the
deal, or does he really mean it? is he trying to get a better deal? alix: markets skittish. .t shows what was baked in s&p futures getting hit the hardest, down 48 points. you have a safe haven bid into the dollar, with the exception of the yen, now at a five-week low. treasuries just started trading. yields now down by five full basis points. commodities continue to get crushed. crude off by 1% as trade war fears permeate all the asset classes. david: it is time now to focus on the week ahead. tuesday, the salt conference gets underway in las vegas. we get thesday, first earnings report from lyft since it and public -- since it went public. wednesday was the day the chinese trade envoy was set to return to washington, but it appears that will be delayed
until at least thursday. thursday we will get ube r's ipo pricing after the bell. time now for the bloomberg first take. we are joined by peggy collins and marty schenker. let's start with that trump tweet from yesterday, marty. "the 10% tariffs on chinese goods will go up." deal with china continues, but too slowly. you understand the president of the united states. what is he doing? marty: i do? [laughter] the president decided to tweet on trade. whether he consulted with his advisers, or if this is something he had to put out, i think clearly he wants to cut a deal with china, but as he said,
he once a great deal, not just a good deal. maybe this is his way of putting pressure on the chinese. let's see if he tweets again this morning with the dow futures down 500 points. alix: i wonder if we didn't have that good jobs number on friday if this tweet would have happened. he's been putting so much pressure on the fed, saying that if the fed is in line, the markets will be a rocketship. it is just interesting to see. is this about the deal falling apart, or him putting pressure on for the last few things they want? alix: david, you made the point earlier when you had the pboc cutting rrr for banks. david: it didn't strike me as a coincidence that here is some liquidity, and donald trump says how come i can get jay powell to help me that way. marty: the world has become a
more dangerous place over the weekend. we are not talking about north korea or gaza or venezuela. david: or an aircraft carrier going towards iran. these things have a cumulative effect, and donald trump throws fuel on the fire by threatening a trade war. alix: you have futures down, vix jumping, moving to safe haven. how much of this was that we we are positions that seeing some squaring, or we are really pricing out trade? peggy: i think it is a jolt. investors have been surprisingly unenthusiastic about how well the market has been doing. it's been almost eerily quiet. so i think this was a shock to some investors. volatility spiked the most since october. in some ways, investors are a little whipsawed. alix: looking at potential m
of occidental is ramping up to try and outbid chevron for anadarko. now we are looking at 78% in cash, raising leverage. part of that is the buffett backstop. marty: that's right. let's not be too fine with this point that warren buffett sees a real opportunity to make an 8% return. [laughter] marty: it is no more strategic financeoes help occi and puts them in the driver seat on this acquisition. i would expect them to abandon the chevron deal pretty soon. david: it was also interesting who was the midwife on this. who calledn moynahan up warren buffett. peggy: it is interesting the connection there.
as marty said, i think become competition of buffett's financing and the extra cash they are getting for the company wille last 24 hours or so potentially dislodge some of the shareholder resistance. alix: it is also interesting whether or not this is going to be a spark for more m&a. occi is saying this is a specific deal. if they don't get anadarko, they don't want to go by something else. peggy: it underscores the value of this permian basin. that is where these two companies, chevron and occi, are really battling for triumph. david: bloomberg's marty schenker and polygons -- and peggy collins, thank you for being with us. you can find all of these charts and more by browsing g tv on your terminal. a few miles above the earth, there we have it right now, the international space station. we have spacex's dragon cargo
craft, which has now been captured the international space station. they are going to be docking and offloading 5500 pounds of equipment. alix: apparently there is a robotic installation to the earth facing port module that will begin in a couple of hours. this is the 17th commercial resupply mission to the iss. david: it is so extraordinary we almost don't remark anymore. it is like a shuttle to new york , they are going up so often. and they make money off of it. we focus on elon musk and tesla and the difficulties making money, but this private company has been very successful. alix: and of course, the goal is to carry people. david: that is the next step. alix: it can carry seven, and if it continues to be successful, that would bode well. you can watch all of this very cool footage. we will continue to have coverage of the comings and goings with spacex dragon, the coverage of the robotic installation around 9:00. david: it is rather beautiful,
tariffs on $200 billion worth of goods, and look at the rest of chinese imports. we are joined by george magnus at the chinese center at oxford. thank you so much for being with us. play it from the chinese point of view. there are reports the chinese were surprised by this. should they have been? george: obviously the full story will materialize in the passage of time. to some extent, i think the chinese position has been to back away a little bit over the last few weeks from a position were aerican officials little uncomfortable about during the winter. i think that is to do with the chinese economy that has stabilized in a way that was not really apparent in the weeks immediately after the buenos
aires summit of the g20 when trade talks were generated. beennk in a way, china has -- it might have been a little bit of u.s. pressure, but i think they probably have been a little bit surprised by this. obviously the mood music from officials on both sides until the president's tweet was pretty constructive. david: it has been something of a cloak of secrecy about exactly what is going on with negotiations, but we've had hints that the u.s. has been distressed they thought they had an agreement, a draft came in, and they were outraged because that is not what they agreed to. is this a chinese negotiating tool? we talk about president trump's tweets may be as a device. are the chinese doing the same? george: i think china's position has been to have these talks kind of spun out for as long as possible because i think with the passage of time, they feel
their negotiating position is strengthened. certainly you could look at the position on the economy, obviously looking a little better than it did three or four months ago, so that gives them a little more confidence. the longer it goes on, the longer they feel the president may be obliged to settle for what a lot of people have suspected all along, that this will be a political deal rather than a real trade deal. there probably would be, and might yet be, concessions by china in terms of how many imports they will buy of agricultural products and aircraft, energy and so on, and may on things like ownership companies,oreign opening up financial services, and someone. on the meaty stuff that everybody thinks there ought to be some kind of progress about, like industrial policy, technology transfer, intellectual property section,
reciprocity, enforcement, which is something the american side has been really adamant about -- like, what are we going to do to make the commitment are stuck to -- these are proving to be every bit as sticky as people thought. the closer we get to this kind of -- this is supposed to be the end for the trade talks -- it is really becoming very difficult. alix: how does china have to respond to these more aggressive tweets from president trump? , there at the moment have been kind of mixed reports. there have been suggestions that from the foreign ministry, the trade talks are still going ahead. the very large team of up to 100 people are still supposed to be coming to washington. but nobody has said anything, and it hasn't even really been reported properly in china, about whether china's printable negotiator will be part of that delegation. it is quite difficult for
the chinese to come to washington under this kind of threat of tariffs from friday because it looks like they have positionb to a foreign , which hasn't really been negotiation of equals. that is a very sensitive thing. we will have to see. if he does not come as part of the delegation and the trade talks still go ahead, but without him, i think that it is clutching at straws a little bit. if the delegation doesn't come at all, i think the trade war kicks off again, and obviously financial markets are already telling us what they think about that. david: the reports at the moment, all influx, is that they are going to come a little later, which is ironic that the president put a friday deadline on it. the chinese saying, let's put ourselves up against that deadline. if the tariff increases go into
effect, what does that do to overall negotiations? does that make an ultimate deal much less likely? george: i think it does. again, obviously with the particular individuals involved in the negotiation's, particularly president trump's changeity as going to his position from time to time, we don't really know. this might be sinfully designed to put more treasure -- more pressure on china to get over the line quicker. wearing aatience is little thin here. it may just be that this is a matter of detail to get everybody sharper in terms of dotting the i's, crossing the t's, but it is presumed it is only a matter of detail that is left. if there are still important issues of substance that are unaddressed, or that the united
states government is still very unhappy about, and things that the chinese were never really going to budge on, i think imposing the tariffs from friday would certainly sour the mood. it would be very unrealistic to expect negotiations to resume anytime soon after that. david: thank you so much, george, for joining us today. that is george magnus of oxford university's china center. alix: with us now is peter tchir ofcademy securities' head microstrategy. peter: i am still very concerned that we get a good deal. i don't think we will get a good deal, and the longer this drags on, it doesn't look like -- it doesn't matter what the deal
will look like. companies are making changes assuming we will not get a deal. overnight, onee the china side, cutting the rrr rate for small banks, trying to stimulate certain areas of the economy. how much more of something like that do you expect versus what the fed can do, which is a whole lot of nothing? peter: china has much more ability to simulate things. there has been talk about a dollar shortage in china, one of the issues that might bring china to the table. i think there's a lot going on here. sides areth better off if we come to a deal. it is interesting there was a time without the economies of both places were slowing. now we have the reverse. the chinese feel their economy is stronger, and given the information last week that came out, the u.s. appears to be stronger. does that make a deal more or less likely?
peter: i think a little less likely. the thing people aren't watching enough is we are starting to start trade war's on more than one front. we are picking on european autos. i think that is a chance we start pushing europe away from us and into china, and bb people start structuring deals without the u.s. i think we've got to be very careful about this. we are supposed to get a good deal, not a great deal. alix: goldman sachs is talking about the fact that a trade deal now seems less likely, but that the auto tariffs now have an increased probability, and the approval of usmca may be less probable than it was on friday. what do you think? peter: i agree on all of that. that is why we turned bearish on trade. even when i thought a deal was very likely, you start seeing trump pick these other fights. that is his nature. he likes having someone to go after. with europe in particular, no one really is responsible for coming back and negotiating with him. he tends to let those one-on-one negotiating situations.
there is a real risk that europe spirals, auto tariffs are really bad. i think that pushes the economy over. david: and usmca, this is up to the democrats really in congress. is there a chance they say trump has had real trouble on trade, we are not going to help him out? peter: that is a real possibility. i think the trade escalation is a problem. we've got to stop it, unless we see markets go back to december levels. alix: peter tchir will be sticking with us. coming up, more on today's risk off trade. more on the lows of the session, still looking at an ugly day for the equity markets. this is bloomberg. ♪
you have money moving into the dollar, the yen, the treasury market. ofh us still is peter tchir academy securities. what you do today? peter: you've got to be very careful with risk today. i think the fed is pulling some support. me a littlepushes more risk off. i think equities pullback. alix: can you really go long on treasuries here? you even laughed as i asked that question. [laughter] peter: low rate bonds are not bad here. you don't have to take the interest rate duration risk. you can take a little bit of spread risk. you want to be cautious, though. i think some of what has been lost in the shuffle is all of the percentage of so much money in cash. cash is an asset class, especially when it is paying 2% to 2.5%. david: are there equities that make more sense?
what about investment-grade versus high-yield? alix: i feel like investment-grade is better than high yield on the investment side. if equity is pulling back, we are going to see that. what i am not concerned is getting enough attention is the russell 2000 pulling back. i would be watching that. maybe you are supposed to start looking at european equities, depending on how this is going to play out. alix: i'm glad you brought that up. we saw today investor confidence in europe holding on. in here.coming some earnings are seeing big beats. what is the readthrough to a deal with china going to be good with germany? peter: if we don't get a deal, the next thing that happens is china turns to europe to try to make a deal that may excludes some of the u.s.. that might be a positive for europe. as china pulls away from us,
they will still want to deal with someone. our big downside fear from a trade standpoint has always been and our current attitude difficulty of negotiating with forces other countries to pull away from us. we've already seen japan and europe strike deals. that could occur. david: what about emerging markets? do you stay out of that right now? is case-by-case. we are very concerned that turkey is headed towards leaving nato at some point, leaving the west. that points to the lira being very weak. we would avoid turkey at all costs. alix: just today, it is not getting any worse. same thing for crude. same thing for dollar highs. what are we going to learn? peter: i think we are going to learn that this is some negotiating posturing. president trump likes to stir the pot a little bit so that in a week or two he can say, had i not done that, china would not
have given up good enough deals. i think it is still going to disappoint markets, and the likelihood of no deal is definitely increasing, and putting tariffs on would be a huge mistake. it is the u.s. importer that pays the tariffs, not china. that hurts small business is a lot. david: you might want to mission that to the president. i'm not sure he deadly understands that. alix: peter, thank you so much. really great to see you. coming up, trade concerns hitting oil, although crude off the lows of the session. we will speak to bank of america merrill lynch's head of commodities research. this is bloomberg. ♪
now off by 1.8%. the dax getting hit the hardest, but again, off the lows of the session. we were down over 2%. european autos getting hit as well. and other asset classes, you can pretty much expect what we are seeing. euro-dollar now flat. you did see a stronger dollar. now the dollar coming up. money still coming into the long end of the bond market. there might be some pent-up safe haven demand. we are at 18. crazy. not crude off by one full percentage point. the commodity market getting hit .cross the board joining us now, francisco blanch, bank of america merrill lynch head of commodities research. good to see you.
we are going to talk about trade. what is your take away when it comes to commodities? francisco: you guys were talking about this in the last segment. clearly when a tariff comes to boot, the u.s. dollar tends to depreciate against the currency where the tariff has been applied to. if it is china, that impacts commodity prices negatively. i think it is pretty straightforward. we have been expecting the opposite, potentially a removal of tariffs. we were expecting the trade deal this week. clearly the commodity markets are not adjusting very well, although it is difficult to know if this is just a posture or a final outcome. david: we can't know that at this point. is it really just the question of foreign exchange, or is there some reflection a global growth may be affected, which would be a more my fundamental change?
francisco: if we have higher tariffs on china, fundamentals will be affected. if you look at the indicators like pmi's, in the services sector, consumer confidence, things are going relatively well. business confidence is very low. a lot of it goes to protectionism. we have these forces coming at each other, and if we don't get this trade deal done, there is a meaningful chance that growth in many fracturing expands to the other parts of the global economy. alix: last week, to me headliner was that copper had the worst week since august 2018. was that part of that story? print cisco: i think -- francisco: i think that is part of it. energy has had a meaningful recovery. has seen opec plus
about 2.2 million barrels a day. ratehas taken double the over the span of four months. now we are facing me iran sanction waivers expiring. that keeps an impression on the supply side. the metals are not steady. david: so around sanctions, we talk about demand of global growth. what about the supply side? are they really going to hold? think they are because we have a much better tracking systems. generally just a much tighter monitoring regime. also, people are afraid of the u.s. treasury. oil,tart touching iranian
you get entangled into u.s. sanctions, and you could lose control of the company. we've seen a number of companies now being ran from washington, d.c. internationally. you have to blend what you do, and my sense is this time around, sanctions will hold .retty well that is the situation. alix: what was so perplexing to me is if you look at any kind of spread, it is very tight. they want to three-month is perfectly reply thing what you are talking about. but if you look at the overall flat spread, it was lower. what do you make of what is happening in the markets? there is a physical market that is very tight. we still think under the with trade negotiations, we are getting to
it target. you are right that also, flat prices have had a hard time rallying. think part of it is the strength of the dollar. part of it is also the fear the market has that trump is going to tweet something. maybe there is a change in my set. we saw it in october -- in mindset. we saw it coming into the prior sanctions waivers window, where he decided to issue eight waivers. in point.ng's case despite the selloff overnight, we've actually recovered quite a bit already. remember, the market is very
tight physically. francisco blanch, we are going to turn to the commodity the m&a the m& -- . occidental is upping its cash bid for anadarko. guest: this certainly puts ox -- puts occi it a higher position. they are able to secure some of the sale of some of the assets them over the weekend. at this point, it certainly is leaning itself much more towards
occi winning the bid. we will have to wait to see if there is a response from chevron in the near term. david: clearly occidental likes this deal, but the market doesn't seem to agree. we've seen the price of the stock go down and down. how much does that take care of the leverage problem? leo: certainly a lot of it is leverage. if you look at opcc -- if you look at occi prior to a acquisition of anadarko, it looks closer to 1.8 times debt to even. i think the market had concerns that some of the anadarko assets weren't a very good fit for o cci. certainly the agree with that as they are selling the african assets to total.
assuming that sale is to a pretty significant increase in leverage from what they were. alix: if you come inside the bloomberg, you can see occi, anadarko and chevron. the rumors came in that perhaps occi was making a bid. francisco, if i am looking at what is happening in the stock, that is going to meet me not want to go do m&a. is this the start of something, or a one-off? francisco: going back a couple of years, the bid across the access space was super wide. nobody wanted to buy or sell assets. the sellers had able market. you had this extremely
widespread. when prices converge around $60 a barrel for brent, there is probably a fair number that you should put into your assumptions that should be right around brent. that is what is triggering this for brent to be around $60 a barrel. we've been making this case and our medium to long-term outlook. i'm not surprised to see that finallyt is starting to move more because those expectations are coming in. alix: to that point, this is a look at the curve. to 28, you've been
anchored around $54 or a little less. there hasn't been that movement despite the volatility. would you agree? leo: we did see a fair bit of consolidation in 20 as well. obviously this is a much bigger deal with the bidding war for anadarko. i do think we are going to see more incremental consolidation over time. factorsone of the big is that we have seen the multiples on the independent ep sector contract over the last couple of years. we have seen the valuations of the oil majors actually improve. i think that put the majors in a much better position to want to consolidate some of these independent emts -- independent e&p's. we thought it was a good time to
buy. i think that will be a big trend from that perspective. anybody that believes their stock has an advantageous valuation versus some of the independents may look to buy one of these. david: thank you both very much for being with us. now let's find out what is going on outside the business world. kailey leinz is here with first word news. talks: u.s./china trade appear to be on life support today after president trump unexpectedly set a new deadline, warning that friday, tariffs on 200 billion dollars of chinese goods will rise to 25%. tariffs may also be posed on billions more of chinese products, the president unhappy with the pace of trade talks. the chinese delegation is still coming to the u.s. for negotiations, but no word when. hasacex dragon capsule arrived at the international --ce station, tarryin
space station, carrying equipment. first -- that finished the co-owner of the horse that finished first and was disqualified and the kentucky derby is considering their options. option for only appeal is the federal court system. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. david: thanks so much. you talk about a heartbreaker. alix: that just hurt. but also, if you are the winner, too. sex -- that sucks, who know about it say it was not a close call. alix: really? david: coming up here, catching up.
investing approach and tech driven changes, and occidental moves closer to sealing the deal with anadarko. we will take a look at warren buffett's $10 billion investment. david: joining us now is jason kelly, bloomberg's new york bureau chief. before we get to that, kraft heinz is in the news. they have to restate their earnings. le with theo re-falloi sec. jason: one of the big questions coming out of the weekend was why aren't they kraft heinz numbers in the berkshire numbers? -- now we know why. they are talking about misconduct. that is not great. it really speaks to the big
problems at this company and why this hasn't been a good investment. david: warren has the perfect solution. everybody else get out of private equity. [laughter] although,, interviewed the shorts men -- interviewed stephen schwarzman, who had a different view. ,> the alternative class private equity, real estate, and credit, has done so well for these investors over very long periods of time. they are continuing to increase their allocations, but it is a time where you kneel little more then whenr investing prices are lower. david: steve likes it just fine. where i'm just doesn't want him doing it -- warren just doesn't one him doing it. [laughter] jason: warren buffett has long
been a non-fan of private equity. he said he feels like private equity firms don't love their investments enough. alix: let's go to the next story on technology. lots of questions from individuals at the shareholder airing about buying texas -- buying tech share. this is the younger generation coming in and maybe pushing buffett and berkshire a little bit. this could be the future direction here. jason: there's a lot of value -- david: there's a lot of value already in amazon. are you a little late to that party? in the meantime, a big investment warren buffett is making into the occi anadarko bid. jason: this was the biggest news. a $10 billion investment firm buffett changes the landscape on how this deal would go forward. alix: this is why you pay top dollar for certain investment banks.
i need financing. brian says, i've got a great deal. jason: our bloomberg news colleagues spotted the fact that the jet went to omaha. david: if you'd used netjets, they wouldn't be able to track it. [laughter] david: many thanks to bloomberg's jason kelly. he is on "bloomberg businessweek " on bloomberg radio. coming up, we will speak with vice media's ceo. this is bloomberg. ♪
ncy dubuc, who is now putting her own input on vice -- her own imprint on vice. what is the essence of what you are trying to do there? nancy: we are really trying to clarify what is vice. what we really are are five distinct lines of business, and bay lines of business. our television group, or studio come our agency -- our studio, our agency. you are obviously trimming in some places. what are you going to trim back on, and where you going to grow in? nancy: that was really a reflection of the fact that how fast we really have grown. look at reorganizing around line of business globally.
that allowed us to really look at some effective and strategic reductions aced on centralizing some of our back office and shared services groups. about that more than inducing any particular business. david: to what extent are you still in an investment phase as opposed to a profitable phase? nancy: this current investment led by 23 capital allows us to accelerate the current plan we have. i am having my one year anniversary, doing a lot of listening. we've laid out a strategic loop print, so this really just lets us get to that even quicker. david: when do you expect to be profitable? nancy: that is my never one priority. i can't give you the day or months, but we are feeling really good about the plan we've laid out and hitting that plan.
do you have enough runway? nancy: i am confident we have what we need to get to that point. david: vice is a well-known brand. punches above its weight, perhaps, in that respect. it is getting bigger, not smaller. of course, you have netflix, .mazon how can vice flourish in that ocean? some bigose are and powerful companies and brands. as you said, our brand is incredibly powerful. we can bring those younger eyeballs and creative to the table. it also goes back to the diversification of our business. we can contribute as a studio, as a consumer facing brand.
we are also global, so netflix continues to grow internationally, as does amazon, and local language reduction is required. that is a powerful match. david: we've agreed vice has a very distinctive brand, but a lot of it is associated with young males, particularly in edginess or out there sort of brand. does this work as opposed to five years ago? the world has absolutely changed, but what you see on vice now has already dramatically changed from those days. our audience is approaching pretty close to 50-50 on digital, which is where you see the largest number of eyeballs. the news division has helped to them do that dramatically. when you have products like fyre festival on netflix, there's a
really dual audience projects. david: thank you so much for coming in and give us an update on vice. report back in as things develop. media's ceo.s vice chiefcoming up, baltic's investment strategist will be joining us on this risk off day, although it is not as bad as it was before. dow futures off the lows of the session. the nasdaq getting hit hardest because the tech might have the most to lose when it comes to a trade war with china. other asset classes, a bid for the dollar and bonds, and a selloff in commodities. this is bloomberg. ♪
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higher tariffs on chinese goods and says the u.s. loses $500 billion a year with trade with china. shatters confidence in the markets. and occidental increasing the cash portion for its bid for anadarko. it is all or nothing for the ceo. david: welcome to "bloomberg daybreak." i'm david westin, here with alix steel. as you said, the president has tweeted again focusing on the trade deficit again. it was intellectual property and enforcement. now he's back to the trade deficit. alix: yesterday i was reading the news. i was like, clearly this is posturing from the white house. i just don't know what it is posturing about. this it come from a prison of
strength because of jobs on friday? maybe time will tell. but i will point out 2020's presidential election. i think uppermost in the president's mind is how does this appeal to his base. he's got to look tough with the chinese. david: but they also really want to sell their soybeans and stuff -- alix: but they also really want to sell their soybeans and stuff. s&p futures now only off about 0.5%. still seeing a bid into the yen, down by about 2/10 of 1%. the 10 year yield now lower by just four basis points. crude only off by half a percentage point. is this a disposition doing story? david: we will find out. time now for your morning brief, focusing on the week ahead.
in tuesday, the salt conference in las vegas. on tuesday, we get the first earnings report from lyft since it went public. yesterday was the day that china's top trade envoy was supposed to visit washington to wrap up trade talks. it appears that will be delayed at least until thursday. thursday we will also see uber's ipo pricing after the bell. the president this morning tweeted again about the trade deficit, saying, "we are losing five lien dollars a year to china, and we are not going to do that -- $5 billion a year to china, and we are not going to do that anymore." you and your members monitor these negotiations carefully. were you all surprised? guest: yes. as of last thursday, i was getting calls wondering if we
confirm the reports. david: what is the likelihood this is a way of getting a deal done by friday? erin: it would be par for the course for how the president has negotiated in the past, nearing the final round of a negotiation to try to increase some leverage. it was a pretty extensive threat, however, not only to increase the terrace that remained, but potentially put a tariff on every other import from china as well. david: by all accounts, the chinese were taken off guard by this as well. in beijingolleagues are telling us they were able to reach several people who they had anticipated being flying off, but that most of them were still planning on coming to washington. the big question is whether or not that is just the mid-level negotiators or if vice premier
-- or if thes them vice premier joins them. if you are a ceo, what do you do? erin: if you are in a sector that is going to be potentially affected by either the maintenance or the increase in tariffs, you need to be looking at what your exposure is to china/u.s. cross-border trade. services companies, financial services in particular, may see some continued openings that might be hedged for a bit. but whether the tensions increase or not or whether there is undue attention on american companies in particular is difficult to know right now. david: which type of companies have the most to lose? nasdaq futures were down more than the s&p, suggesting that tech is maybe in the crosshairs.
ofn: tech is definitely one the areas that was under negotiation. it is hard to know what we are seeing for tech, potentially a continuation of more than the same, or the potential that some very difficult issues could be resolved. agriculture clearly exposed any company dealing with cross-border trade, as i mentioned. wait game is really a about what other progress might be made on the intellectual property rights issues or technology transfer. we just don't have enough detail to know where things are and what might be lost if a deal doesn't come through. alix: at this point, would markets and ceos be comfortable with any kind of deal? because that is better than where we are right now? i would say this is not a scenario where any deal is better than no deal. -- certainly china's
retaliatory tariffs against agriculture, technology, energy products will continue to be challenging and make their products noncompetitive. david: thank you so much for being with us. alix: >> in the markets, the tweets heard across the board. s&p futures off i 1.5%, dow futures by almost three. us is baltic's head of global research and strategy. is this going to be a buy the dip? >> i think it is because as long as the chinese to galatian -- the chinese delegation still
comes and things are moving along, i think you will see a the highs.to what are we going to do with the chinese trade? how is a deal going to be struck? i think rates could see risk. david: last time we spoke, you were reasonably sanguine to. are you rethinking that this morning? >> absolutely not. think the guys that got it wrong in september are going to get it , too.here was basically talking economic apocalypse at a global scale because of trump tweets. this feels like "groundhog day" because trump always comes out with the same tactics. who can say it is not a
negotiating ploy or it is? but it certainly seems to be consistent with the playbook. it's convenient to him and china to get a trade deal. purposefully putting a we have not yet gotten to trump purposefully putting a nail in the coffin with china, but with the resurgence of trade war talks, that could potential he get affected. david: is there a rubicon to cross? if they do ramp-up the tariffs to 25%, does it get harder to pull that down? >> yes. there's a huge amount of legality and structural reform that has to happen once they are in place, which always takes time to unwind. that is going to be the biggest struggle, do we really want to cross that threshold?
we knew from the beginning that we were going to have sticky points, which were going to be ip protection, technology sharing, what does the wto look like, how do you switch a country from developing to developing. right now it is up to the country. why would you ever switch from a developing nation to a developed nation in the eyes of the wto? if people haven't left yet, if everyone is still sitting in their offices, i am pretty sure you will get a delay in these tariffs. people need to get here and have this discussion. i think this is a certain amount of a ploy to get people to the table. ,e've kicked this cancer long delayed it since september and since march. david: you both will be staying with us. coming up, oil also sliding on this risk off day.
renita: this is "bloomberg daybreak." kraft heinz plans to restate earnings from 2016 through part of 2018. the company found evidence of employee misconduct in procurement that raise the cost of goods sold. the impact on earnings is expected to be less than 2% in each year. bloomberg has learned that japan's softbank is considering an ipo for its $100 billion vision fund that has investment in tech companies ranging from
work.o we that if you're bloomberg business flash. alix: commodity markets jolted at the start of the week. following alongside risk assets. we talked to bank of america merrill lynch about why we are seeing lower oil prices. here's what he had to say. >> we remain bullish. we still think under the conditions, there is no breakdown in trade negotiations, we see more within the next three months. alix: spreads are tight, but overall prices are at risk from trump? >> yes. there is a tightness in the physical market, but also in specific types of crude.
28is easy to say there's that actively traded. in the floating market, the brent is going to be tighter because we are short heavy oil. iranian and venezuelan sanctions. there's going to be a certain amount of trouble in the floating market, while on the it in thee have coast. alix: what is the risk of commodity prices when you take a look at them overall, when it comes to trade or potential trump tweets? how do you look at that? >> undoubtedly geopolitical risk has to come to the forefront. $65 is my forecast for wti by the end of the year. we are not too far from there. 97, we should be pretty stable with the exception of geopolitical risk.
i will hi nate -- i will highlight venezuela, which is sitting on the biggest oil resources in the world, and potentially a binary event to either bring oil surging or dropping significantly. if we get a regime change their, the first thing i would expect to see is u.s. oil companies getting first dibs in venezuela. if that were to be the case, we would get down tied pressure because of more supply, but we have a collapse in oil production. venezuela is producing less than neighboring country co lombia, with just a fraction of the resources venezuela has. alix: square it for me. you have a potential trade war. certain threads are tight, but not all of them. do you go along with oil? i think you play the spread -- with oil?
key --ink this bread is i think the spread is key. yourselfnt to protect but try to capture a little bit of the upside, you go short wti, but not a one to one trade. maybe two to one, where you still get net leverage to the upside while minimizing some of that downside spread. we are moving a fleet right next to iran. this is something where you're going to have that chief political risk. how quickly can you turn on those spigots? can you really get in there and change things that quickly. commodities of across the board are weakening. do you think that is a one-off, or a larger issue about global growth? we saw oil surge with regards
to a repricing of risk. as it pertains to china and u.s. growth, certainly the markets are far more optimistic with regard to the demand for commodities versus the end of last year. . now we have the u.s. growing up above 2.5%, likely to continue to grow at a moderate pace than a contractionary or decelerating pace. the demand is there. the markets are pricing that. this is going to be a volatile week, the bending on how things had out. there's a number of scenarios that could play out. china could trade or completely cancel the meeting. if they don't, that is unequivocally a market negative. but a lot will be inherently volatile, and the markets could
see my base case, which is a positive one. >> the thing that is nice with demand, right now we are going into summer driving season. you havea new were -- a lot of new refiners taking up. even if you get this negative headwind, there's a certain amount of stability that will's there just based -- that will sit there just based on since analogy -- on seasonality. david: coming up, occidental sweetens its bid for anadarko, upping its cash portion. more in today's bottom line. this is bloomberg. ♪
commission, which is about to start a formal investigation into apple possibly disadvantaging spotify. alix: not good. learn, learn. ale. taking a look at tot if they wind up buying this $8.8 billion of lng assets, they are going to be the number two ioc seller in the world. if you take away some of the state owned companies, they are the second behind shell. they still have investments in the u.s., so how does that affect their investment strategy? david: what makes it all possible is that occidental deal. that is our third story. we are joined by brooke sutherland. big news over the weekend. brooke: occidental formally increasing its offer, adding
more cash to that bid and structuring that asset sale with total. this is meant to ease the disadvantages of its bid relative to chevron. it obviously has a smaller balance sheet. it now has the backing of warren buffett. selling all these assets mitigates the litigation it will have after the deal. the question for me is whether oxygen or shareholders go over -- whether occidental shareholders go for this. david: they will be paying out of their pocket because they suspend share buybacks, they just announced. brooke: right, and the terms they are giving to warren buffett are very expensive. investors are worrying, is this all worth it? are you giving up too much in the quest for this asset? is the ceo to obsessed with it? is she seeing the economics and
the right light, or is it more about winning here? they may not need to get shareholder approval to get this deal done. alix: and buffett says he might even be willing to put more money into the deal. do you think this is a good deal? ark: no, i don't think it is a good deal. it will be structurally tough for occidental to take down. you're going to delete a lot of your chemical flow. just given the global construct and breakdown of gdp. at the end of the day, it is going to happen. they are too invested. and theytoo in there, need certain growth within the permian. the middle east is a tough contract with no real ability to grow.
how do youchemicals, fill in the void? i think there aren't sir -- i think their answer is anadarko. alix: their call is ongoing right now, the ceo saying it will be an easy integration for anadarko. they saw double the amount of synergies that sever undid, and now says they will exceed. what i found interesting was the role warren buffett played in all of this. is that a new type of m&a financing we will see here? brooke: he's done it in the past. you saw it with general electric. he's been talking for a long time about wanting to put that -- to work,, hasn't
has put money into this deal. he has his game plan down. brooke: he gets the upside and protection against the downside. david: what he did with bank of america, he made a fortune on those warrants. alix: that's why he's doing it. it makes sense in that respect. do you look at this as a one-off with occi, or the start of some serious consolidation? mark: right now you have to see the permian really start to consolidate. you have to follow the pipe. componento be a big of this on a going forward basis, so you what to see consolidation, but the people who have the support and logistics behind them. had you get it to the coast in the most cost-effective way. brooke: the one thing i wanted to pick up on come on the synergies numbers, i scratched
my head a little bit. they don't have as much overlap with anadarko as chevron did, so target, wasir chevron understating the amount of cost views they could get out of this? they potentially have more fuel for a bit here. alix: occi is saying it is efficiencies. we will see. thank you both very much. coming up, president trump's trade threats spoil stocks. more on that next. this is bloomberg. ♪
s&p futures off the lows. dax off over 2%. one of the hardest hit. european automakers hardest hit but off the lows of the session. money flowing into the yen and the dollar and the bond market. that is still the case but it is not as pronounced as it was earlier. even in the next is off the highs in the session but not as bad as we saw. , but a riske a risk investors are now taking in stride. david: investors are puzzled. you do not know whether it is real or a faint. alix: exactly. joining us for market reaction to president trump's tweets is taylor riggs. taylor: we have asian markets opening up and it does not look pretty. you can see on the board, china's main equity indices were off 5% to 6%. companies and tech
leading the losses. hong kong equities having their october and that is bleeding into the u.s. equity market. i want to come into my terminal gtv and take a look at china's broad market industries -- indices. it is having its worst move in three years. today's losses have wiped out all of the gains we have made. back to our lowest level since march 8. if we step in my terminal, i want to take a look at the reaction in the yuan. we had strength and classic yuan weakness and some of the trade prices start to heat up. today you are seeing a two standard deviation move in the yuan and you have that within the trade talks. this is back since trump's election. big heightened moves and today a big standard deviation move. weak by .5%.
commodities -- corn, cotton, and soybeans getting hit 2%. within the hard metals, those off 1% to 2% and crude off the lows of the session but looking at big losses, down to the lowest going back since april 1. alix: thank you so much, taylor riggs. still at this is kathryn rooney vera. for broader emerging markets like asia, what is the read through? kathryn: china is the hardest withut it came just today the drop in required reserve ratios for small banks. there is a lot of flexibility for many major emerging-market central banks to be flexible with monetary policy. inflation is relatively low.
we need to have cool heads and look case-by-case. i like msci emerging markets. i like it in december and i like it now. david: you make an important point. the number of central banks in --a will be hearing from there's a lot of speculation about rate cuts. inflation is low. brazil has a record low rate and inflation is extremely moderate. inflation is moderate across the globe in broad terms. it has less to do with economic deceleration. that was more of a fear of you months ago. we see economic growth data picking up and becoming more comforting. a further deterioration with trade talks in china, you could get a fed more apt to cut rates. then you would get emerging markets following suit. if the dollar remained stable,
if the u.s. is continuing to grow and going to avoid recession, which was the fear, and if we do get some trade accord with china. emerging markets are going to continue to receive net influence which will happen year to date. as you look across emerging markets, where you see value? is there growth potential that is already fully valued? kathryn: sure. china, for example, which was our top pick into the year was up before this recent drop 37%. at that point we are recommending buying puts on puts onequity, buying s&p. we have clients that were getting concerned with complacency in the markets. that was a way to protect your returns, which had been very high.
the emerging markets of more than 10% year to date. you can look at brazil and mexico and china to get some of that bang for your buck, especially in the recent drop we have seen, which has moved on fear rather than fundamentals. youngwe also welcome hugh , aberdeen head of asia. we are talking about where to find value emerging markets. where do you see it? plenty of value, usually in the most unexpected of places. of the minor some markets, sri lanka for example, not terribly exciting to most people but that is why there is value. malaysia, thailand, littered around emerging markets generally. stock specific, particularly in the small caps because people tended to neglect those. people have been focusing on china. .hinking everything was safe
of course, as we know, it is not that safe. david: if we are talking about equities, one question is what is the degree of liquidity? when you mentioned sri lanka, that is fine, but i can't -- but can i get in and get out? hugh: you cannot. absolutely not. that is why it is good value. that is the issue with many of the markets. even some of the large stocks in some of the emerging markets can be underneath many billions, very liquid. typically, there is one concentrated shareholder and markets are thin. these are not trading markets apart from the massive tencent and alibaba of the world. that even ifthesis things get more difficult between china and the u.s. these are specific stocks that will do well levered to the domestic economy?
how is that insulated from china? hugh: these are domestic focus, it might be the domestic bank, the domestic retailer. undoubtedly, everything is linked loosely to china. some are far more protected. india is far more insulated from china and far more of a domestic market. it does not have that big export sector. canbig domestic demand and be an uncorrelated market because we know it is subject to huge flows in and out of emerging-market funds. david: how subject is it to the election coming up? hugh: very subject to the election. everyone is assuming modi will survive and come back into power. that is our assumption as well. hiccupsups will -- any
will cause the market to pull back. the market has been shaky for the last three to six months. david: you look at investments in latin america. how big of a factor is that to you that you want to be able to get out? kathryn: it is critical. our clients are institutional investors they have to be liquid instruments. one i like is argentina. argentina has seen a big collapse in confidence. if you do think the presidential election will favor the market friendly candidate, which is more likely than not but still very binary. it could be -- cristina fernandez could come back and that would take the markets lower, but the markets are already pricing that in. argentina is a proxy for emerging markets. it is very volatile. it is a commodity story. it does have that vulnerability to the china trade talks, but i
think that if you like emerging markets, you think china and the u.s. will come to an agreement, then you should take a look at the value play, which is argentina. alix: what she brings up as the election uncertainty, which is also happening in india. how do you view that going forward in terms of what is at stake? hugh: big issues. we have had elections in certain countries and if not have the results. alix: is at the rise of the antiestablishment? hugh: i think there are similar forces around the world. the rise of populism. a rise of nationalism, , which had been working in emerging markets for 30 years, having seen the barriers come down is what has driven world markets. the threat of seeing barriers coming up is my biggest concern
for the world as a whole. hugh young of aberdeen and kathryn rooney vera, thank you both for being with us. we turn to bloomberg first word news. u.s. china trade talks appear to be on life support after president trump unexpectedly setting new deadlines. he warns that on friday tariffs on more than $200 billion of chinese goods will rise from 10% to 25%. tariffs will also be posted on billions more in products. china says a delegation is still coming to the united states for negotiations but there is no word on when that will happen. , investigators want to find out more about an emergency landing of a jet that killed at least 41 people. officials say the plane made a hard landing and then a fire broke out. thejet and return to
airport after the crew reported a midair malfunction. knownn wants new -- once as donald trump's fixer goes to prison today. michael cohen will serve a three-year sentence for a number of crimes, including campaign-finance, violations link to hush money payments on the president's behalf. michael cohen's lawyers unsuccessfully tried to get his sentence reduced after he testified on capitol hill. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. young.nita this is bloomberg. david: coming up, companies caught in the trade spat crossfire. cumminsdiscuss with chairman and ceo next in today's fall the lead. this is bloomberg. ♪
renita: this is bloomberg daybreak. coming up later today, john delaney, democratic presidential candidate. this is "bloomberg daybreak." left airlines and u.s. regulators in the dark about a faulty cockpit alert link to those 737 max 8 crashes. the playmaker a knowledge is it knew the alert was not making properly months before the liner crash last year. aaa -- thetell the faa or the airlines until after the crash. apple will unveil a number of new apps and software tools for its software conference. the iphone maker has to walk a
fine line. quarterll upgrade iphone apps such as its maps, reminders, and messages. fans cannot get enough of the avengers disney movie. $2 avengers has passed billion in ticket sales in its second weekend. it is now the second highest grossing film of all time. that is your bloomberg business flash. david: thanks so much. time for follow the lead. a deep dive into stories making headlines and moving markets. take a look at the u.s. trade relations with china and north america through the eyes of a major u.s. industrial company, the largest independent producer of diesel engines in the world. cells the engines cummins go to china and it also sells $600 million worth of products annually into mexico.
we welcome tom linebarger, the ceo. good to have you here. it will not surprise you we want to talk with china. it is big news after the president's tweet. what do make of the negotiations? tom: thank you for having me. it is hopefully just a bump in the road. obviously these negotiations have been going on for some time. the trade ambassador has been good about focusing on structural issues and trying to resolve long-standing trade issues with china. the trade ambassador also understands the relationship is important and important to u.s. businesses and farmers. they want to get a constructive deal with china. these are hard reforms for china to make and we should be realistic and understand they are hard to make and will take time. we may not get everything we want it i appreciate the effort by the administration and i am still hopeful negotiations are
continuing and they can continue constructive engagement. it is important. that accounts for a lot of jobs in the u.s.. a lot of farm livelihoods depends on having a relationship with one of the other biggest economies in the world. david: you've made no secret you are skeptical about the use of tariffs. you have written about it. has your business in china been hurt and what could happen if further tariffs go into effect? tom: our business in china has held up well. relationships are strong. we have been paying a significant cost in tariffs. is we arebjective mostly trying to resolve structural and nontariff barriers. carrots are not our biggest issue in china, but by imposing tariffs we are raising a cost on u.s. business. most of those tariffs are being raised by you his businesses. it does not seem like the -- by
u.s. businesses. it does not seem like the right medicine for the illnesses we are trying to solve. alix: what kind of business decisions are you not pulling the trigger on because you're waiting for some kind of resolution? tom: we estimate this year we will pay about $150 million in tariffs related to the caps on china. -- the tariffs on china. we sell most of what we make in china in china but we have had opportunities to import small volume engines from china from large volume plants. plants that are large and selling to chinese customers, but we can import some of those. with the tariffs they do not look competitive. those we have had to change. we also have to look for ways to mitigate other imports we have from suppliers in china to reduce the impact of tariffs. mostly what we are doing is looking at places where there
are existing supply chains, many of which are outside the u.s. the result is we are spreading costs and shifting supply change around. i'm not sure we are looking for. alix: on the earnings calls, it has all been about margins. whetherms to be a worry it comes from labor input cost or tariffs. what is your forecast for the rest of the year? tom: our business is doing well. we just announced quarterly earnings, we were up 8%. business is strong around the world. our margins are doing well. right now, economies around the world in the industrial markets are strong and our forecast is that will continue most of the year. we are worried about the u.s. truck market, which is of great market for us, beginning to tell off at the end of this year. -- it happenskly
cyclically. we are seeing orders lower than production. that will be late in the year and we will do with that. we are dealing with input cost increases. definitely tariffs. the steel and aluminum tariffs on mexico and canada are impacting import costs. we working hard to try to find ways to import those. our plants are working efficiently to try to offset some of these costs. david: we are very much focused on china today, but there is also the usmca, the successor to nafta pending in congress, it does not seem to be making much progress. where is that and how important is that your company? tom: usmca is the most important trade agreement for most u.s. businesses. i'm on the business roundtable and i chair our international engagement committee. i talked to many ceos there. for the vast majority, our trade relationship with canada and
mexico is the most important relationship we have. it is definitely true for cummins. the usmca is a very important agreement. it is not only replacement for nafta, but it also adds modernization elements, more ip protection, a lot of e-commerce provisions which are good for modern business services and other things. these improvements, plus the fact that nafta it is our most important agreement make the usmca critical to get done. i would characterize the situation a little differently than you did. i would say that while there have been issues raised by democrats, i think democrats are open to hearing the case for usmca and i think the trade ambassador has made a big effort to make that case. we had the business roundtable and our usmca coalition, which is now 350 members, trade organizations, individual companies, we are also trying to
alix: here is what i am watching -- the markets. trumpcare threats rattling equities. on the phone is michael antonelli, baird market strategist. we are seeing a little bit of buying the dip. michael: let me say how appropriate is the market is down on the anniversary of the hindenburg disaster. here's what i want you to remember. the first hour of trading will be the emotional reaction. the people who want out. the people who say i read the
headlines and i am scared. i'm worried to discount the first hour of trading. more important is the last hour. cooler heads prevail and analysis will have been done. i'm more concerned about the last half of the day. it is going to be tough today. the amount of negativity around the market is amends. i do not know today is the right data bu -- right day to buy. alix: basically are saying dumb money versus smart money. you want to be buying safe havens are going to treasuries? michael: i don't think so. today will be a great test for the buy the dip theory. we have not had a pullback since early march. money on the sidelines has been talked about for a while. a lot of people have missed out on this. this is a one or does joe day negative impact -- the one or two day hit negative impact. i do not know if i would be
rushing to safety. over the medium term, this might be good for the market. david: now that we know it is the anniversary of the hindenburg disaster, what else will traders know at the end of the day they do not know now. michael: the week need bulls will be flushing on the open. a lot of bad holders will be running for the hills. any company that might be vulnerable to international shocks or changes in sentiment will get thrown out early today. i think you'll start to see some of the weak hands displayed today. alix: micah linton alley of their, thank you for joining us. baird, thank you for joining us. coming up, "the open" with jonathan ferro. thanks for joining us. ♪
at comcast, we didn't build e nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪
thethan: coming up, president shattering the calm on wall street, threatening to hike tariffs on chinese imports, fueling a big risk off move. u.s. equity futures dropping, haven assets rallying. the world awaiting china's response. trade officials consider delaying this week's trip to washington. 30 minutes until the start of trade. good morning. up 1.5.on the s&p and in the treasury market, yields lower for basis points to 2.48 on the u.s. ten-year. we begin with our big issue. donald trump injecting uncertainty back into markets. >> this is the height of brinksmanship politics. >> it is an unexpected move. >> market pricing assumed there would be a deal and no further escalation. >>