Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240714

Yield down to basis points, the crude off 3 10 of 1 . Soggy is how i would put the market action. Time for your morning brief. Time for a look at the busy week ahead. Robert lighthizer and u. S. Officials travel to china for the first facetoface meeting since may. Tuesday, the bank of japan Rate Decision plus earnings from bp and apple and on wednesday we will get the fed Rate Decision followed by the chairs News Conference and earnings. Thursday we will get the bank of england Rate Decision as well as earnings from barclays and general motors. Friday it is jobs day for exxon and chevron earnings. Time for the bloomberg first. Ake the question is, the trade deal. On the agenda are still many things, from hallway to soybean huawei hallway wal to soybean buying. Low barthink that the for expectations is that they will agree to meet again, but no one is expecting breakthrough on the stalks and the best case is that they agree to continue them. Perfectly correct. The situation with the meeting moving from beijing to shanghai, from sources im told that his optics and a shot across the bow in that shanghai is the Business Center of china and essentially trade representatives have been extracted to tell lighthizer to look out the window and if you dont agree to a trade deal, all of this is going to be for everyone else but the United States. That is something that is probably not being well taken by the Trump Administration and i think it is probably the result of those tweets on friday saying that there probably wont be a deal until 2020. He says they are going to agree to talk nothing will come out of the meetings. Like a long time ago. To has the upper hand now . Where has the data been worse . Where has where have things been worse . China has signs of a slowdown. Meanwhile, there are some concerns of the u. S. Being affected by the trade barriers in terms of individual company profits, so i think its basically a wash. I think that donald trump is basically in a position if he doesnt get what he wants he can extend this into the political season and basically challenges doocratic opponent to actually cut a deal with china, which be a bad thing for the u. S. I agree with marty. You twice question like never agree with anybody. He knows where [laughter] no, there is going to be anything happening between now and the election and as trump said, if im reelected they will sign a deal within five minutes. Hes already teeing this up and playing it into the election as a political football and part of the debate as this is a very slow moving boat and getting a deal done with china is not an easy situation. He called the wto over the weekend to basically attacked china. I have to give him this, china should not be called a developing country. That ship has sailed. There is absolutely no reason for china to agree to the terms that trump wants. Especially now. Alix and maybe trump has a bit of a point. Mentioned, 48i hours to go. This is one of my favorite charts, showing the odds of the fed cutting basis points in july. Its not the odds but the volatility of the odds that struck me. How do traders need to be positioned over the next few days . I dont think you can expect them to do more than 25 basis points. The data has been improving, they need to keep some ammunition if the data should turn more to the negative. I would expect it to cut by 25 basis points. To be very neutral, which i think the markets will see as hawkish. They are expecting the fed to tee up another cut in september. I think this is setting up for a disappointment. Alix mr. Trump and the tweeting after that . First, let me say, totally agree. [laughter] alix you guys are killing me today. Nobody agrees with me. [laughter] i would expect donald trump to continue to beat the drum to try to force the dollar down, even though hes not really going to do anything about it. The fed is going to make its 25 basis points cut and i think that the language is critically important, whether they set up for the next cut or if they say that is it for now and just wait and see what the economy does. Alix over 2020, its the same thing. Right. If the economy slows down, the small chance that we go into a recession, he will lay it at the feet of the fed. Alix our third story here, tying things up there, you can see the stock, up 24 , pfizer lowering earnings and revenue outlook is of the deal. If you look at the markets and see these kinds of tieups, how do traders view it. Defensive, offense of question were good, bad . Its pharmaceutical Companies Gearing up for washington coming after them and the closer they are to being in a smaller group, with industry tieups, it gives them a bit more of an upper hand in terms of pricing by basically saying where else are you going to go . It just gives them a bit of leverage. Alix wheres the president on drug pricing . Hes blaming the democrats for failing to work out a deal on a price level for drugs but the democratsme came to donald trump two years ago, one of the first things they said was to get together and deal with drug prices. Its basically washington in action. In thes a going to stay 2020 mindset like it did in 2016 . I dont personally think drug are a critical election issue. Hunting it resonates with voters. It all sets up a crazy busy week in earnings. We look at earnings and say ok, they are not as bad . Or do we say they are not as bad so cut the back half of the year expectations . I think the bar is pretty low for expectations and i would expect analysts to lower the bar even further. When you look at where the real sense is, are the earnings good or are they just beating expectations . That seems to be the debate. I think they are just beating expectations and perhaps not as good as people would like them to be in terms of keeping the market where should be. Lowering expectations will just give better optics on the both sit on the situation. Alix i agree with both of you. [laughter] alix good to see both of you. All right, in other news, protests continue in hong kong over the weekend, china condemning the violence. Saying that it has gone far beyond the scope of a peaceful march and demonstration, undermining hong kong prosperity and touching on the bottom line of the principle of one country, two systems. No Civilized Society under the rule of law would ever allow axa violence to take place. Joining us now from hong kong is karen lee. Walk us through what we saw over the weekend and the current about the fight between china and hong kong protesters. These were shocking images that we saw over the weekend, clouds of tear gas hovering over ,arts of downtown hong kong usually this area is packed with diners are shoppers. Protesters marched on across the city, half of them marched the other way. Catching police off guard and then having a confrontation at , sparkingn office concerns that china would send quell unrest. N to we saw a riot police throwing tear gas and rubber bullets at protesters. Protesters also throwing projectiles at the police. It was a confrontation from both sides that escalated in a way that we havent seen often over the last eight weeks. Some american flags held by protesters and china condemned foreign intervention today. They labeled us the black hand when talking about the western intervention with hong kong. Walk us through how that is playing out in the west versus china dynamic. When wes significant started seeing american flags at the protest. We havent seen many of those. The chinese rhetoric against the they call interference and the black hand of the u. S. In the protest here over the last couple of weeks, it really has increased. It has increased at a time when trade talks are restarting and we see that happening tomorrow here in china. This is really kind of the protesters way of pushing back a bit at what china has been saying about the u. S. Very much foru break that down with us, karen. Coming up, trade talks and the fed, front and center. We will get a read on it with tom or tell, ceo and cohead of Global Wealth management about what they really think about the Global Economy. This is bloomberg. , this is bloomberg daybreak im Viviana Hurtado. Pfizer forming a generic drug giant, getting a bit more than 40 of the new entity. Considered considering a career crisis that is deepening when the stock ker freeze his flat flagship fund, selling their holding in trust to help pay taxes after woodford locked it down after a run of redemption request in trust shares plunged. Exact sciences is set to buy Genomic Health for 2. 8 billion cash and stock. The move is to bolster the cancer technique capabilities. They focus on Early Detection of cancer. The Genomic Health business is commercializing clinical oncology tests. That is your Bloomberg Business flash. A big week ahead for global investors. Energy stocks reporting the chinese u. S. Trade talks resuming tomorrow and the july jobs report on friday. I want to mention the 166 companies on the s p reporting. Joining us now for a take on how to invest is tom naratil, ubs global head of wealth management. What do your clients say . Tom theylly care really care about first what is going to happen with the fed. First its to take the uncertainty of if and how much is in their decisionmaking process. Youu Rick Nash Alix recently had alix you reason we had a survey with your clients. What is their mindset . Tom very high cash levels around the globe. 26 with investors and assets around the globe at 22 . Those cash levels are more consistent with what you would volatile challenging environment similar to the financial crisis. So, its really the old adage of a bull market with a significant amount of cash and people waiting for a pullback but not getting the pullback they are looking for. So if we continue to see the fed and the Global Central Bank rather than the u. S. Central bank, we wont get the pullback. Are they going to allocate soon . Are they going to stick to it and wait . What do we think . Tom this is exactly why we have advised investors to be overweight u. S. Equities. With one central bank in tightening mode slipping out to a more dovish stance, clearly that is more positive for risk assets. Although cash may appear to be actuallyt choice, its diversification and exposure to equities that will their out. You ow much risk are will bear out. Alix how much risk are you advising they take on . Tom we are in an environment where if you look at cash, Central Banks are telling you that whatever you thought it was worth, you will get paid less on it going forward. Clearly the alternatives are primarily in the equity markets. You need to kick diversification into the bond market also . Is it a just in case . Overweight onight the just in case bit of portfolio insurance, but clearly what you have seen is that investors are getting rewarded advantage of what is really some good underlying optimism about the economy. Ironicight, which is so because in your survey, the number of people optimistic about the Global Economy being up in the First Quarter, yet the allocation to cash was Central Banks being easy. That doesnt make a lot of sense to me. Alix there certainly are a lot of conflicts between what investors are saying and doing, but the way to optimize rationalize that is that they are waiting for their opportunity to buy. The other interesting thing that showed in our survey that i think is critically important to job growth, Business Owner optimism has been strong since november of 2016. It has reached the highest point since its last survey. Alix is that why you want to be overweight u. S. As opposed to europe or latin america . Tom that is one of the reasons. This growth is responsible for 65 of the job growth in the economy and if you look at the plans to either invest in their companies or to increase hiring in their companies, these are the strongest numbers we have seen in two and a half years. Alix all right, well, tom naratil will be sticking with me. Giant, pfizer, merging with mylan. Hares of mylan are up 23 what does this mean for the rest of the industry . This is bloomberg. Alix well, pfizer merges with mylan and generic drug stocks are coming under pressure from pricing and legal headwinds. Joining us now from london, sam szell he. Do you like this . Sam i like it from the pfizer perspective, it takes a business that is essentially a drag on their earnings margins and top line growth and puts in the risk. This is what they should all be doing. Alix what is kind of left . What is the new Mylan Company with generics from pfizer going to look like in terms of that and the pipeline profile . There is some good detail in the press release that had already estimated around 24 to 25 billion in debt. They are aiming for two and a in the multiple from 2021, a pretty good rating if they can manage that. Thats serious cash flow. Im more focused on innovative businesses, which is why im excited for pfizer. But we will have 19 billion revenue. There were estimates that the new products coming up could yield one billion dollars in yearly sales if approved. What kind of pressure does this put on other kind of pfizer Like Companies in the industry . All of these companies are chasing the development of innovative drugs that give them Pricing Power. That is why they are going into genebased therapies, into specialized cell based therapy to get pricinges power in a world thats going against them in terms of the pricing perspective. But you know, they are already doing it. Degree pfizer to a catching up on its Business Model with most of the industry. Alix ok, any more mergers, then, or this is the catch up . There are still companies that could and should deal with their structure. Johnson johnson is the most famous one with its Large Consumer medical Health Device business but every time they ask that question they are adamant that that is the right structure and what they want to keep running with. Maybe these issues that they are having with opioids changes the mind going forward, but i doubt that. They have been adamant on that. There are a few other companies that will be looking at tightening up their structure. Right, sam, thanks a lot. Good to catch up with you. Tom naratil of ubs is still of still with us. Have your clients feel about health care . Is one of the things that really interesting about health care, its a diversifier for those who are concerned about u. S. China trade war risk. You see the top concern of investors is that its a close number four in the u. S. And for those looking to have exposure to the markets to avoid some of the u. S. China trade conflict fears, health is an attractive sector. Is health care slowing down . Of their concerns and what we hear from small Business Owners is that they currentink that the solution that we have an u. S. Is ideal for them. At a certain size things kick in incrementally for you and what they like to see is a repair of whats out there for health care in the u. S. Alix do they feel optimistic that they are going to get that . Say that they are impatient for results but realistic about the prospects of that. Alix im glad you brought that up, when it comes to the election season, feels like the last election cycle was very much about drug pricing and you saw a lot of things moving very quickly when it came to changing dropped my mike here, hold on. The question is, how they look at drug pricing and other issues in the election now. Tom if you look at concerns around the u. S. , its political environments in individual countries. What that is is a larger expression about a number of Public Policy issues that are out there, including things like drug pricing, including things like the acrimony of the political debate. ,lix all right, tom naratil thank you. You will be sticking with us. Coming up, the u. S. And china returning to the tray table as the white house lays down the chances of a deal and we will look at it with the u. S. China trade president. Mylan deal, but not a lot of Movement Across the board. You will have to wait and see for the fed. Now we are pretty much flat. The big bull market is the ftse as the cable rate continues and we will discuss that in just a moment. This is bloomberg. Alix this is bloomberg daybreak, happy monday everybody. This headline says it all, the most important week of 2000 18 calls for a sanity check. Not a lot of Movement Across the board, the record on friday will be the followthrough and the real action is over in london, the idiosyncratic ftse 100 is up with a big heart of that being the switching board with the cable rate at the worst performing currency getting hit, down 6 10 of 1 . Part of that is the Boris Johnson no deal brexit will have meetings every day until october 31, when the u. K. Is expected to crash out. Michael global the have more on that every single day. We are still talking brexit. Eurodollar, pay attention, 100 10 would be very significant. Watch that as we head into the session. The the curb in the u. S. , going nowhere despite another warship in the region and hostile talks between the u. S. And iran trade negotiation hers resuming trade talks after the last negotiation broke down. There is no shortage of things , tech issues and enforcement on the agenda. Joining me now from washington is jay parker, u. S. Business council vice president. Good to talk to you. What would be a win for the u. S. And china over the next 48 hours . Jake ultimately what we are hearing is we need some had a purchase of american agricultural products, which we are seeing today. Chinese state media announced they were purchasing 3 million tons of soybeans that would be tariff free. We are hearing from Agricultural Companies that many private Chinese Companies have been asking about Agricultural Commodity prices so we will likely see an announcement after the meeting and frankly there needs to be movement on while as well to help both sides return to a more fruitful negotiating environment at the key outcome is going to be aligning on which text of the agreement the both sides will return to in continuing negotiations over substantive issues after the disconnect between the two sides going in over the last couple of weeks. Im glad you brought that up, the word in may is that they were 90 of the way there. Are they starting talks . The thing about that 90 is that those were the easiest issues to negotiate. Realast 10 is where the challenges are. Outstanding issues that go to the core of their economic system. The state owned enterprises reform, subsidies, industrial policy. The areas that fundamentally operate in the chinese economy are the most difficult for them to address. Its important to note that the actions taken on huawei have run counter to what they can focus on in the industrial policy space and because of those actions china now believes that domestically they need to be more selfreliant and impose more subsidies and industrial policies to reduce reliance on u. S. And foreign technologies. Alix im glad you mentioned that. Its also products. Caterpillar gear, their products having been cannibalized by domestic products within china that can manufacture them. For u. S. Businesses, how do they look at Something Like this . Jake competition with Chinese Companies is one of the top concerns in the market. They are increasingly innovative but the bigger challenges competing on a level playing field, one of the key aspects the Trump Administration is trying to address and we are hopeful that by reducing some of those restrictions and better protecting intellectual property in reducing industrial policies it will give the u. S. More of an and and even playing field. The other conversation has to do with sort of outgoing chinese money and direct investing from china into the u. S. And how much that has slowed down. When you talk to businesses, how much of that is because of trade and how much of that is a structural shift within the Global Economy . Jake realistically many of the reports last week were fairly breathless on the chinese numbers in the United States. Those would have happened three mainfor reasons. In 2016 they saw many of the state owned enterprises that were vanity investments like sports teams, they decided they needed to focus more on strategic assets as opposed to the real estate investments. Also at that time there was significant downward pressure with china imposing new currency moreols for investment broadly and finally of course the United States has brought more scrutiny to bear on chinese investments in the u. S. Because of strategic investments. That is, because of those three factors, we would have been in a similar place today. Alix so if you are a business leader, do you feel better, the same, worse . Jake you definitely feel better. The two sides returning to negotiations put the floor under a floor less decline from the last weeks and months. The two sides being together will hopefully stop the titfortat race to the bottom that both sides were engaging in. 8 thank you alix thank you a much for joining us, jake. Still with us on set is tom naratil. Your clients, what do they say . What is their forecast on trade . Tom if you take a look at it globally, 70 of clients think that the we will get a resolution to the conflict within a year. That be optimistic. I think what they are really looking for is progress. As long as the discussions are continuing, as long as there are gains along the way they will continue to have faith that eventually there will be a resolution. I think what is important for both sides in this is that in a perfect deal, that is certainly better than no deal. That is probably just the reality of a compromise we will see over time. So when they put the oneyear target on, which i agree would be quite aggressive, if it just continues with incremental changes, is that enough for your clients to feel ok . Was that i think we need to separate what makes people feel ok with what will drive the markets. It goes back to what we were saying before, underlying economy in the u. S. That is strong. Good job formation that is going to occur. Significant amount of cash in the sideline and people waiting for a pullback. Its almost as if it has been continuing on and that continues to mean grinding higher along the way and this anticipation of the big event may exactly reflect the prices. Does that alix also then mean that investors are neutral when it comes to capitalistic investment into china are they discerning because of it . As we have mentioned before, i think that those with the exposures are comfortable with them. You do see decisions around things Like Health Care so that they can diversify away from some of the risks that they have to u. S. China trade conflict directly. Alix all right, tom naratil is sticking with me. Lets get an update on whats making headlines outside the Business World with Viviana Hurtado. Thatna donald trump says he plans to nominate a new trump nationalas director of intelligence. Dan coats announced he would leave the office on the 15th, meaning that chinese and american negotiators would meet again for a few days of talks in shanghai after a speech last night last month. China had indicated plans to purchase american agricultural goods and the u. S. Is still weighing whether to ease restrictions on huawei. Today the Prime Minister, Boris Johnson and his brexit cabinet to be in its first meeting, they said they will meet every day on october 31. Michael goat will leave the sessions and he said that leaving without a deal is the most likely outcome. Global news 24 hours per day, on air and on tictoc on twitter, in more than 120 countries. This is bloomberg. Thank you so much. What are your clients fox about brexit . Thoughts about brexit . Tom it is an issue out there that clients are certainly concerned about, certainly those that are closer to it in the u. K. Are more concerned about it. What i would say from our cio standpoint though is that we have been overweight on the british pound and the reason that we do is that we think this is a part of the negotiating process. New Prime Minister staking out a in this pointon in time. How prevalent is that view . Based on the move in sterling today, id say thats a view thats were isolated. But it may be the right faint and conventional wisdom as the better choice. Alix tom, its been great to catch up with you. Thank you so much for joining us. Tom Huawei Huawei joined us from tom naratil joined us from ubs. Five big tanks named in a class action suit in alleged rigging. We will break that down, next. Heading to the bloomberg terminal, tv , click on our charts and graphics. This is bloomberg. Viviana mrs. Bloomberg daybreak, this is bloomberg daybreak. Coming up in the next halfhour, the braithwaite ceo. The Saudi Arabian chemical giant having its top worst quarter in a decade and net income toppling almost 70 . Sapphic is set to receive a report from the worlds used oil producer in the process of finding a 69 billion majority stake. Shares jumping to a record high after the company confirmed ,alks to acquire the definitive the deal expected to be 427 billion, saying that they will issue shares as part of a transaction with holders receiving just over one third. The bloomberg lp parent of competes with them to provide Financial News data and information. Tesla stepping into the streaming game. The ceo elon musk announcing the trimers will soon be able to stream netflix and youtube from in car displays within a few months. This option would only work with the car not in motion. Im Viviana Hurtado and that is your Bloomberg Business flash. [laughter] alix that sounds safe, very safe, not risky. For remember when the cars first a member you pulled on the dvd screen and it was such a big deal. Now you can stream. Alix when you want to watch a tv show every 10 minutes in traffic for three seconds . Stop and go, stop and go. [laughter] streete things that wall is buzzing about this morning, first we are going to talk about five big banks facing a 1 billion fx rigging with allegations of foreignexchange rigging and then reigning in the corporate sociopaths. Obligated to act like sociopaths, he proposes governance rules that could fix corporate america. Women out earning men, women taxpayers earning more on average than their male counterparts. What . Joining us now is shelley and sarah. Here first with the fx rigging suit again. Is this number 12 million . Where are we here . [laughter] themere are quite a lot of but this one in particular the European Commission had already than 1se banks more billion and its now a classaction lawsuits are you have investors speaking up against the banks and what they have done. The idea is that the lawsuit funds, pension funds, Asset Managers may have missed out and because they did, they should be paid because of their losses and because of certain acts in the u. K. s will say that anyone who says they had can prove they are missing out on gains can be folded in. Thats the interesting thing about this lawsuit, there are some rules in place that if you are not in the eu, you can join in. U. S. Investors could tack on. It will be interesting to see if the losses start to mount for the bank. Alix i wonder if it is easy to prove this kind of thing. The eu has already been cracking down on this, the u. S. Is cracking down on this. I bet there will be some losses but in the grand scheme of things these are not huge amounts so at the end of the data really money paid, but how much is questionable. At we have still got a ways to go. Years. Story, absolute love this, it comes from the new york times, dealing with an export for lawyer talking about what it means to be a ceo in this world and how to fix it. Sociopaths is how he describes it. Remember, he wrote too big to fail, probably spent a long time with these lawyers. A lawyer to aig in particular during 2008. What the lawyer in this story that hes talking about wants to do, at the end of the day he calls these guys sociopaths and he wants to get them to rewrite their bylaws to make sure that they behave more ethically. Why thats a debate im not so sure, but it is harder than it looks. The reason he calls them sociopaths, what they really have to think about for their company, its making money. Putting the Company First before anything else. Not really thinking about ethics, the community, or the environment. Where there are some concerns is this into theite bylaws, these corporations could of litigationsw over and over again. But we have seen a push in the industry. Think about environments, social and Government Funds in the etf world. We have seen a boom in this space so people are thinking about it absolutely. Companies are not really incentivized about every corporate stakeholder and hes making the point that Elizabeth Warren is, as a company you should be thinking about your entire atmosphere. There cannot be any more Erin Brockovich moments, right . You cant beat worry you have to be more worried about the Community Around you and it is something we havent seen. Specifically these ethical rules, the relationships with employees, that was interesting. Relationships with communities. Like the Aaron Brockovich moment. Relationships with customers and the effect on environment and future generations. Think about it, we have the bare lawsuit going on right now thats already in action. Case, its nowst like 87 million. Its worth the incentive. Alix exactly. So, apparently women millionaires are topping men on average. For real, true . It depends on how you look at it. [laughter] the way the data looked at it, they are looking at irs data from 2016, a couple of years ago. If you look at the amount of woman that made over 1 million compared to the men and you take the average paycheck, the average for women comes out on top. 2. 5 million compared to 2. 7 million for men. But if you brought in the scope and the amount of women making 500 thousand dollars, eight times more men still make over women. 00,000 exactly. And then over 5 million . Its even more men. Its telling you that at the higher end of the wealthy, its still not heavily female. Looking at the worlds billionaires, there are even fewer. They are unicorns still. Interesting. Its literally like one million to 5 million we are crushing it and then we peek out and we stop . [laughter] better, the gap is narrowing. But you can very much look at data any which way you want to get the narrative that you want. Its getting better, but its still a big difference. Alix i find it interesting that its this big push to cater to william women millionaires. They live longer, the have their own money, there are all these products we need to have. No wealth manager is looking at the women in the world are now and not saying that you are our demographic. Owning theirare own businesses now and there is a time where we are seeing more women rise to the top. Last week, finally the last company in the s p added a woman to its board, so thats something. Going going back to the prior story and talking about sociopaths the environment [laughter] when you think about people pushing for ethics, it goes back to diversity on womenowned boards. [laughter] guys, thanks a lot, really appreciate it. Coming up, russias opposition crackdowns, a russian prominent opponent exposed to a chemical substance while in prison. And if you are heading out, dont miss out, but tune in to Bloomberg Radio from across the u. S. On the Bloomberg Business app. This is bloomberg. [laughter] alix here is one family in, the most Prominent Russian Opposition Leader exposed to an unknown chemical substance in prison after a weekend of protest that got ugly. Joining us from moscow now is greg white. What is unusual is you have 1400 protesters actually detained. Walk us through what happened. This was probably the worst of it in terms of the detention demonstrations we have seen in the russian capital since 2012 when there was a wave of protests after the boot and return to power. What no one really expected this political season was for it to get that bad but we have had City Council Elections in moscow that are not particularly germanic affairs but this time opposition candidate seven trying to get on the ballot but were blocked. So protesters came out on saturday, a wonderful, sunny saturday afternoon in the capital, faced with a heavy Riot Police Presence and they wound up with, depending on whose account you believe, over 1000 people detained. Its certainly more drama than we expected here. Does that tell us that putin is in a position of strength in that he felt like he could do this and not look at . Or that its a weakness position where he needed to crack down to consolidate his power or his communication . Well its a kind of combination of both. At the moment its sort of city they appear to be run by city officials and police at the moment. I think they thought they could manage the political challenge that they had of trying to keep the opposition off the ballot in the elections in september for city council, but the way that it played out with the candidates being thrown off the to manyor what seemed like trump up allegations of violations, they thought it was not right. It generally seems to have tapped into a sense of discontent among people broadly as the authorities are taking their concerns seriously. Its certainly not a grand political threat to vladimir putin. The police were able to clear from massive rioting or damage. I think of both sides it underlines the extent to which people are feeling a simmering discontent here with local authorities but at the same time it also, they needed the Village Police to put down the protests at the current levels alix . Alix did we learn anything about the russian economy . I think certainly you have to view this in the context of five years of straight decline on consumer incomes and economic this yearng sluggish, is doing worse than expected and i think that people after that burst of patriotism after the annexation of crimea and the conflict in the ukraine, its faded away and people are much more focused on issues at home. Thanks so much. Really great to see you, greg. Coming up, im joined by mark rosato and lizzie on. This is bloomberg. Alix countdown to the fed. What is good enough for President Trump . Does the fed deliver what the doves want . China and the u. S. Prepared to talk again after a breakdown in trade talks. ,he u. S. Team has to shanghai while sticking to its redline. Pfizer,ll combine with a move which could trigger more consolidation in the financials in the pharmaceutical space. Welcome to bloomberg on this monday. David westin has a much deserved day off. In the markets, do not expect any dramatic trading ahead of the fed Rate Decision on wednesday. As in be futures only up two after closing on a record high friday. Eurodollar is 1. 11. Abruptly stronger dollar. Stronger dollar. Fruit going nowhere. Time for your morning brief, a look at the busy week ahead. Today u. S. Trade representative Robert Lighthizer and u. S. Officials traveling to china for the firstrate meeting since may. Tuesday, the boj Rate Decision and earnings from apple and bp and wednesday the fed Rate Decision along with chair powell News Conference. Thursday, the bank of england Rate Decision as well as earnings from barclays and general motors. Friday we get general earnings from exxon as well as chevron. U. S. Trade negotiators heading to shanghai to resume trade talks three months after negotiations broke down. No shortage of things to discuss. On the agenda, trade deficit, and issues, and other enforcement and enforcement. Amy join me is amy, head of great to see you. Who has the upper hand since talks broke down in may . Amy that is a great question. Both sides are trying to demonstrate they have more leverage than last time around. Ofy do have the headwinds Economic Data in beijing and washington, d. C. That look at lower gdp rates in both countries. China in the Second Quarter of this year has its lowest gdp rate in more than two decades. I think u. S. Negotiators continue to believe they have more leverage to get china to the negotiating table and get something done. What they find in shanghai, where the sides are going to meet this week is that the chinese do not want to look weak and so they will push back against any kind of look of giving concessions to the u. S. Side. Goodwill gestures are happening in advance of the talks. On the u. S. Side, the Commerce Department said it would issue licenses for American Companies to continue to sell to wall way as long asto huawei they do not impede National Security concerns. The chinese side has said they are buying soybeans and will allow the companies to buy additional ag products with lower turf rates. That is intended to bring goodwill. Alix im glad you brought up china and where they are in their economic cycle. The 12 month change in their china credit impulse is slowly turning positive,. You can look at it both ways. They have not pumped a lot of orey in, therefore they can, two, they are not going to that takes away their investment power. What is the best way for investors to look at this . Amy it could get either way and the Chinese Government is very concerned about the impact of over investment. The Chinese Government has said they will not spend their way out of economic concerns. They will be more conservative and try to incentivize the private sector in a way to continue to invest in the economy. The premier, just last week, set we will make it easier for private Sector Companies to operate in the china market. That is talking about Chinese Companies but also foreign investors. Alix when you take a look at where the u. S. Has a hard line, where should they keep a hard line . I am at President Trump challenging the wto and say not every economy should be developed. Where should they dig in their heels . Jonathan the chinese side is listening closely to what u. S. Negotiators say this week. President trump has not raised the specter again of those additional 250 billion in tariffs. That is verythat is very positie chinese side. Going into the election cycle in the United States President Trump not want additional headwinds for the u. S. Economy. That is a positive thing. Where the u. S. Side is not going to lessen its focus is on longterm structural issues that foreign investors, including American Companies face in the china market. Ambassador lighthizer has been incredibly consistent in saying we want to address these issues. This week in shanghai, both sides are going to be talking about more purchases of american agriculture and trying to find some way forward for a shortterm deal. Unfortunately, this broad, overarching trade deal that we first envisioned looks less and less likely as both sides face pressure, but hardened views in both capitals. For the u. S. Negotiators, i think they want to see the start of a process. Secretary mnuchin said we do not think we will have a result in shanghai, but we look forward to welcoming the chinese negotiators back to washington to continue the talks and hopefully have a shortterm deal. Alix soybeans agree with you. They are up. Amy celico, thank you very much. While be the trade wind for the market . The ubs ceo joined me in the last hour and heres what he said. , aboutwill see clients 70 say we will get a resolution within one year. That could be optimistic. What theyre really looking for is progress. As long as the discussions are continuing, as long as there are gains along the way, they will continue to have faith that they will be a resolution. What is important for both sides is that an imperfect deal is still better than no deal. Now is markg me rossano and liz young. Mark, the market feeling in these 48 hours. What is it . Mark i would say it is wait and see. There has been a lot of press coming in. The expectation is that the fed is going to cut, so a lot of that has been preston. There could be disappointment. Whether it will be 25 basis points or 50 basis points. China and the u. S. Will continue to drive the commentary. The Biggest Issue is what we push back on . Heard, when you are in the wto, there is no way to cross from developing to developed unless the country decides. Why would you ever decide to become a developed nation based on the benefits you have being a developing country . Alix sort of Like Congress cutting their own pay. Nexthow do you look at the two days in terms of trade talks . Liz i look at it as the market is not paying attention to trade talks. We are so distracted by but is happening with the fed, those will drive us through this week and next week, we do not expect anything debate to come out of any anything big trade related. We see more talking, more shaking hands, more saying we are getting there, everything will stay in a positive note, but as we heard earlier today, we still have the tool that we could put tariffs on that additional jump of goods. We know that and china knows that. I do not expect that to happen anytime soon. Along inwill muddle the markets . Will it be status quo . Is there significant upside if there is Movement Forward . Think we are coming to the end of these positive surprises. The law of diminishing returns is real. How much bigger does the next stimulus have to be . How much bigger does the next push have to be based on the fact that were in this area of air pockets and there is fear in terms of when is the market going to turn around and say what is next . Thoughcutting even the Economic Data is relatively positive. Are we doing it to answer a Global Market or to feed the dogs . To feed the doves . The market has priced in a lot of different expectations and the biggest risk is we do not meet those expectations. The market has priced in a cut by the fed. If that does not happen, the market turns down and we need Something Else that would support it, whether that is earnings were positively on trade. I do not know that there is enough that could happen with earnings or trade that could pop up nonmovement from the fed. If we get a cut from the fed, because weld see still have healthy economic, bee still have healthy Economic Data , you would see support to asset prices, at least through the third quarter, and that if we get more positivity on trade, or shortterm deal, then the market could continue to stay supportive. Alix i am trying to talk about trade and all we want to do is talk about the fed. Two months ago we cannot avoid talking about trade. Young willo and liz be sticking with me. Another third of the s p report earnings this week. Apple could set the tone. That is next and this is bloomberg. Viviana this is bloomberg daybreak. Pfizerpliance plans to combine with mylan to form a generic drug china. Mylan investors would get more than 40 . We are told the deal could be announced was announced today. London Stock Exchange shares jumping to a record high after the company confirmed talks to acquire infinitive. The llc says it will issue shares as part of the transaction. The parent of bloomberg news, competes with repetitive. Refinitiv. Chinas Oil Purchases from saudi arabia increased 64 . Shipments from russia and venezuela also increased. This comes as the worlds exporters plug the shortage from iran. Thank you so much. It is the secondbiggest earnings for the s p. 166 companies will report results, including 75 of the Energy Sector. Thank you so much. Phillipsevron, conoco over the course of the week. Still with me are mark rossano and liz young. I want to start with oil. What can we expect when oil prices are going nowhere and investors do not date capital investment. What happens now . Mark big oil will have to come out with shocking news. Shocking in terms of earnings strength, controlling the hydrocarbon supply chain, you want to see chemicals, you want to see that refining margin. At the end of the day, that is where we are seeing value. The problem is i do not see Oil Prices Going higher. Countriesonly three that are currently with a pmi above 50. That does not speak well for demand. The imports exports continued to fall across the globe. I think therell will be a lot of pressure on the demand side. Alix are we seeing that kind of pessimism reflected in what you see in earnings . , theearnings broadly market is doing the same thing you did in the First Quarter and punishing negative more than rewarding positive. We are expecting earnings in the Second Quarter to come in 2 growth, which would put us in an earnings recession, because we were. 3 in the First Quarter yet the market is up. It does not make any mathematical sense. It tells us a lot of this rally has been driven by macro headlines and expectations, not events. I am nervous that from an earnings perspective, risks are skewed to the downside. What sector has the biggest potential for rewriting earnings expectations in the back half . Liz a lot of sectors have the potential to rerate. We have done a lot of under promising and over delivering. The issue is similar to what i said before. Even when we overdeliver, the market is care. Guidance continues to be under pressure because of trade, because of cost, and because of Global Growth in general and a demand issue. There is not that much room for things to get much more positive. If you look at one Earnings Growth is expected to be for the year, only about 2. 6 . We are well below average for the year. The market continues to think things will go well. We expected to be back end loaded. Not even getting to 3 growth is disappointing. Alix is that we wind up seeing in relation to oil . That lackluster growth . Mark the Energy Sector has been under pressure for how many years at this point . The fear is you have to stay within capex, you maybe one of even see capex come down and stay within cash flow. We saw on netflix, we saw what happens when you have negative growth. I think the tech sector could come into trouble given where there is the rewriting, where the multiples are. Should companies be trading at 100 times . Probably not. What is the right number . Do they have a Business Model . Yes. Is it strong . Yes. But where you get the rewriting to get the stabilization. With inou deal relation to a trade that makes sense but has not worked . Liz the growth versus value trade has been difficult because in this market of your program, you are protech. If you are provalue, your profinancials. Is a sector plays. Are one ofancials the only sectors of the deposed positive growth. Six of 11 sectors are looking to post negative growth. You have to be choosy about where you are investing. I still like financials. They are there to support the market. They are going to be an economically cyclical play. They are better capitalized in financials. You cannot have no exposure to financials. If you have to have some, you have to have u. S. Financials. I think they are on a healthy path. Alix any thoughts on that . Mark it makes sense if you think about where there will be investment or wrote. They are or growth. They do not have the exposure to negative rates these other companies have. If you are running a benchmark or have exposure to benchmarks, would you rather u. S. Banks are european banks . Where would you have the stability with Deutsche Bank and the other issues that keep cropping up. China has a certain amount of issues. We have another bank bailed out. It is where you want to place money and i think u. S. Financials would be the better spark. Alix mark rossano and liz young are sticking with me. Make sure to tune in later this week for commodities edge. I will be live from the Trading Floor in houston coming up thursday at 1 00 eastern time. Coming up in this program, visors unit that makes sex and viagra visors unit that makes xanax and viagra merges with mylan. This is bloomberg. Alix time for bottom line. We will dig deep into three company stories. Joining me is Brooke Sutherland. I want to look at heineken because the heineken cfo was on bloomberg and heres what he is a about input costs. The input cost is something you see coming because you hedge if youre talking about aluminum , which is the most important raw material for us in terms of amounts. You hedge one year in advance. We knew the hedges were less favorable than the previous year. Alix the trade war trickles through. Brooke this is interesting because it is not directly from tariffs. Heineken, the problem was the aluminum they sourced in brazil. This is more of a currency story. They buy the aluminum and dollars. A significant drop in the brazilian currency and they cannot prepare for that. They hedge to make up for it so theyre not seeing the benefits. The drop in the price of aluminum over the last couple of months. Alix than there is also the trade war. Brooke it does not help with sales and weak demand in europe they are blaming on whether, which i do not buy. Alix what was the ice cream thing last year . Unilever said it was not hot enough . Brooke it was too hot. Alix the Second Company we are looking at is takeaway. Com. Aey have agreed to terms for deal to create a bigger takeawa y. Com. What is that . Brooke i think it is a scale play. If you have more Delivery Routes can begraphic scale you out amazon it over. They do not have a lot of overlap. Takeaway was in the u k before. They sold their assets because they cannot find a path to growth. Is this going to be a solution . I dont know. Alix there are no margins in this game. It is all about scale. If you cannot get the numbers, how do you make money . Brooke that is a great question and the price is not out of this world. Uber eats is a big player in the u. K. , i do not know if we have seen the end of the story. Alix lets go to mylan and pfizer. Pfizer merging its generic business with mylan. My question is who else needs to merge . Brooke this is a unique situation. It reminds me remember pfizer trying to buy allergan and they were going to do a similar deal and merge to the higher growth assets, and then you have the lower growth generic asset. This is a winwin situation for both of the players. I do not know if you have that exact dynamic any world but it is a great deal for pfizer. They get a load of the new company with debt, and take the 12 trillion and invested in assets while getting rid of their less attractive products. For mylan, it gets it out of the holw. Europeanan has a good presence. Brooke mylan was also the distributor of epipen. They are giving mylan significant control over the board and investors do not have the highest opinion of mylans management skills given the companys struggles, so that dynamic is curious to me. Ill be interested to see if theres any push back down the road. Alix and here is debt. Brooke figure that out while you try to make the generic drug play. Pfizer,so in terms of will they buy other stuff . They are in the middle of a big acquisition. Brooke this is refilling their m a capacity or their investment capacity. Which way they go remains to be seen but they need to refill their pipeline. The benefit of this merger is the growth they have will be more obvious to investors. These will not be dragged down by the generic and Slower Growth business. You have to keep feeding the beast and pharmaceuticals. I think that is what they will be hoping to do. Alix Brooke Sutherland of bloomberg opinions. Thank you. Great to catch up with you. , the market expecting a 25 basis point cut. Will the fed dove deliver . This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. I am here, but wheres everybody else . We take a look at the markets, and nothing is happening. Probably will not until wednesday. S p futures flat. European stocks go nowhere. The ftse the outperform or because sterling has continued to get hammered. The cable rate down. 6 . It is a mixed dollar story in the g10 space. Not a lot of movement anywhere, with the exception of the cable rate. To 10 spread a little bit flatter. Not a lot of movement in crude. The u. K. Is sending a second tanker to protect its fleet. Viviana hurtado is your first word news. Viviana President Donald Trump says he plans to nominate a loyalist, john radcliffe, as director of national intelligence. The texas republican will replace dan coats, who announced he will be leaving the office august 15. At least eight people were killed and at least six or injured in a series of our wakes in the northern philippines. Seismologists are reporting almost 200 aftershocks. The government is promising three quarters of a Million Dollars worth of a to the stricken province. The u. K. Has deployed a worship to the strait of hormuz to help after commercial ships weeks of recent threats to oil tankers in the region. Officials are meeting with their counterparts in iran to ensure freedom of navigation. 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. Im Viviana Hurtado. This is bloomberg. Alix thank you so much. Protests continue in hong kong over the weekend. China condemning the violence. A spokesman for the Hong Kong Office says it has gone far beyond the scope of peaceful march and demonstration and undermines hong kongs prosperity. No Civilized Society under the rule of law would ever allow acts of violence to take place. Joining us from hong kong is karen lee, bloombergs government reporter. Where does this leave hong kongs relationship with china and the west in the middle . Karen this was a major step from china. This was the highest profile comments we have seen from them in eight weeks of protest. It underscores the hong kongs government struggle and chinas struggle to quell this leadership this Leaderless Movement as it sustains momentum into the summer. They had strong words, they did say they were evil and criminal acts committed by radical elements, and that is more likely to inflame protesters anger. We are seeing protesters say they will come out over the next couple of weeks as the sustained as this is sustained well into august. At this point it is unlikely it will do anything major to change the dynamic of this protest. It was interesting to see it today. Alix thanks so much. Reporting from hong kong. The fed begins is anticipated meeting tomorrow. The question is even if Jerome Powell can give the market what it wants, will it assuage President Trump . We have a gentleman that likes raising Interest Rates in the fed. If we had a fed that would lower Interest Rates, we would be like a rocket ship. We have a gentleman that loves quantitative tightening. They really slowed us down. There is no inflation. Where are a lot of interest and it is unnecessary. The fed has not been of help to us at all. We have a gentleman that likes a strong dollar at the fed. We are not playing on a fairfield. We do not have a fed that knows what they are doing. Eventually, he will do what is right, perhaps. Alix pressure being applied. Morning make it easy for manufacturers to sell product. With low inflation our fed does nothing and will probably do very little by comparison. Still with me are mark rossano and liz young. End. E what is at the they would do too little. 25 basis points, 50 basis points maybe not enough for President Trump. Liz i do not think we will get 50. I could be wrong. Theres a subset of people who think we could get 50. 50 would be a signal we are in an emergency situation. The ship is not sinking at this point. I agree there is little inflation in the system and we would like to see more inflation. I do not know the 25 basis points will drive inflation. What 25 basis points will do is tell the market jay powell will be here for us when we need him. What i do not want to happen is for us to start a rate cutting cycle when we are not anywhere near a recession. If and when we do get to a recession, we need to have all of those toolsrecession, we neel of those tools, and with rates this low we do not have a lot of tools. Alix talk about the 50. This is the odds of the fed cutting by 50 basis points. Volatile itis how has been as the market tries to get a handle on it. If we just get the 25, is that in assets is that in essence three rate increases over the next year and a half . Is a view you will get a continuation of 25 basis points, 25 basis points, and then we will start seeing easing. As they keep coming back data centric if they are data centric, why are we coming to begin with . But they are. We have seen what happens when the market has a temper tantrum if you do not deliver. I think the fed has to deliver. It has to give 25 basis points are you will see a negative reaction. The bigger problem, as we go forward, is going to be what the toolbox looks like. We have seen the ecb and the doj. The toolboxes nearly empty. What is next . I think that will be a big issue orwe start easing too soon what happens when we do have that turnaround and we need more assistance . To that point, Jonathan Golub of Credit Suisse spoke to bloomberg. What her expectations for what the economy is doing . It is expected to slow down. The fed has to be anchoring on that. The fence real issue is not inflation, it is the fact that the short end of the curve is inverted. They need to fix that. Alix can they fix it . Liz they can fix it temporarily. I want to go back to something Jerome Powell said at that end of last year or the beginning of this year it takes six to 12 months for anything they do to break through the economy and for them to see what effects it had. Here we are, more than six months after the real statement from the fed. I would not be surprised to see the make a move but then not do much because they want to wait and see what happens. Maybe theres a chance they think they went one hikes too far so they are race that one, but then wait and see through the end of the year. If this is effective, if they do cut, i think theres a chance they do not, but if they do cut they want to see if it is effective through the end of the year. If it is an inflation comes back through, this might not be the beginning of a cutting cycle. We could see one cut and maybe get back to a place where we are thinking about hiking. Alix that is a bold call. Typically you will want to do the carry trade. Is the carry trade alive and well . Mark it has come under pressure but i think it will open back up. That is one of the issues where we heard trump talk about a strong dollar. The problem with the market is there is a natural bid for dollars and you are seeing that in terms of negative rates abroad. Alix how much of that is Central Banks and Interest Rate differentials and how much is Something Different . Mark there is a mixture of both. The differentials are coming back into the play in the sense were you have germany printing at 20 basis points, italy at sub 3 , greece at sup 2 . There is a certain amount of safety. Plus you have 13. 7 trillion in debt now a negative yielding and a big problem in terms of u. S. Dollar denominated debt. You have this buyer. I would love to see rate increases. ,hat would make me happy because it would make me feel they are data centric. We have seen what taper tantrums look like. Alix to round it out, if you take a look at gdp, the economy is holding in pretty well. What else do you like . Liz because the economy is holding well, and we are in the expectation of getting a cut, you will see industrials do well, you will see Consumer Discretionary do well, things that are economically sensitive. What i want to tell our clients to do is to barbell that rest. I do not want to say nor the middle, but you want to have something that if we get a cut and here support from the fed and other Central Banks, that will still take off. Things like i. T. , discretionary, the higher beta place. On the other hand, you want to have things more insulated from price volatility. If we do not get anything meaningful from trade or even through to the third quarter, you will see some shopping is in price after the fed meeting. Alix liz young of bny mellon. Mark rossano is stepping with us. U. S. Growth was stronger than forecast in the Second Quarter. Well take a look at how that is forecast in businesses that move good. Craig fuller will be joining us in todays follow the lead. You can interact with charts using gtv. Ketchup on analysis, and save the chart for future reference. This is bloomberg. Viviana im Viviana Hurtado in the hewlettpackard enterprise greenroom. Coming up later today, the mexican president. Heres your Bloomberg Business flash. Harlow group is winding down its 4 billion Energy Credit business. Executives top bloomberg has learned the remaining team will stop investing in the pull and manage out the rest of the portfolio. Carlisle team has invested in energy and power companies. Companies that divide Genomic Health for 2. 8 billion. The move is to bolster its cancer detecting capabilities. The company focuses on the Early Detection of cancer. Isomic health commercializing clinical oncology tests. Johnson johnson says it will find a lawsuit that says the company put a cancer warning on its baby powder products. The company is pushing back on the Texas Law Firm that has called for the warning. The new jerseybased health care conglomerate faces more than 14,000 lawsuits. They accuse the company of hiding the health risks of baby powder for more than 40 years. That is your Bloomberg Business flash. Alix time for all of the lead, a deep dive in the stories making headlines and moving markets with insights from industry veterans and insiders. Today we will look at the trucking and freight industry. They are showing mixed signals about the economy. Mike mckee has an overview for us. Michael the left him our friends were with us, i show this chart and it showed a problem in the trucking and freight industry. As the fed gets ready to make a decision on Interest Rates, the picture is more mixed. I put in airline freight in yellow, but we do not have as much updated data. Carshite line is railroad and the blue lines overall freight shipments. As you can see, a mixed picture. Railroads were down. They are back up. Are we going to see a turnaround in that as well . That is a big part of the calculation the fed has to make, especially as they tried to decide whether or not a rate cut will boost the economy. One of the arguments jay powell has made is that keeping rates low helps the marginal sectors of the economy, helps people who are less educated. You might see that in trucking wages. Trucking wages have not kept up with overall average hourly earnings. Theyve been increasing, but trucking wages have not moved up as fast as overall wages have been going. The yellow line. The blue line is the number of truckers being hired. That has not boosted the paper truckers either. One of the problems with that is we do not need as much manufacturing as we did before. You can see the blue line is manufacturing capital utilization. The white line is overall capital utilization. We are not using as much factory capacity as we used to. The white line is the average and the blue line is the average for manufacturing. We are well below average. Does the economy need help or not . That is the question for jay powell and company wednesday. Alix thank you so very much. For more on that exact topic, were joined by craig fuller, freight ways ceo. The Company Provides news and commentary on the market. Mark rossano is still with us. That was the setup does the economy need help or not . Craig it has been an interesting year. Trucking as it compares to the last couple of years, this is the roughest year in the last five years. Volumes have been down but we have seen currency signs at the end of july. We have seen for the first time in three months the july volume numbers, in terms of freight demand, are higher than they have been for the last couple of months. We are seeing potential turns in the market and seeing signs the market might be turning around. Alix to take a look at where rates are now versus 2018 and 2017, give us perspective, and does it matter what products you are moving around, how does that work . Craig if you think about trusting, trucking is ultimately howmmodity that is based on much it costs to move the truck over a certain distance. Pricing is set by the supply demand metric for the economy. What has happened is that last year there were a lot of truckers that entered the industry and that has had a drag on spot rates. We have seen that. The refrigerator market has done better than the other sectors of the trucking market. Flatbed has been anemic. ,latbeds have been rough particularly since the instruction and Energy Industry is not using as much Trucking Services as they have in the past. Mark i would be remiss if i do not Say Something close to our hearts. When you look at 2020, you are taking road diesel and putting it onto a ship. Looking at the input costs, how will that affect the diesel market and how will that drive input costs for things you are looking at . Craig it is a story that should be talked about more in the domestic trucking market alix . To be clear on what that is, it is new rules on tankers that have a low sulfur fuel oil. It will siphon fuel away from truckers. They will have to pass to get it. That is the narrative. Craig it has to do with the ultralow sulfur diesel, which is the standard diesel used in the United States. Because of that there is a finite amount of refinery capacity. That is the demand. 4 Million Barrels a day of diesel that will have to be diverted from the ul st market into the Global Maritime industry, which is equivalent to 80 of u. S. Demand. It is significant and could raise diesel prices by as much as . 25 to . 50 a gallon and that could dramatically impact the trucking industry. See based off of that, you any impact to some of the companies that may not be able to pass that cost compat be able to pass that cost on . Craig the industry is a lot of small businesses. The large carriers, it is only a fraction of the industry that is publicly traded. The carriers typically tracked by analysts are able to pass those costs on. They are able to mitigate that and they buy fuel. The smaller market, the smaller carriers will get washed out. We seeing bankruptcies happen. Theres a direct correlation to diesel prices that cannot be passed on. Is thats advocate a good thing in that youre cutting capacity and have more irregardless of what the economy is doing . Craig i think so for the companies that are wellpositioned. They will do better on the broader market. 2020, assuming the consumer holds up and all Economic Data suggests it is, 2020 will be a good year for trucking because you are able to churn through some of the capacity getting washed out at a time when volumes are softer. We are seeing improving signs as a relates to the broader sector. The smaller guys will continue to struggle because they do not have the Pricing Power the larger carriers do. Mark as we saw before, it is a tale of two cities. We see issue in terms of trade, we see a lot of pressure in terms of air freight. Domestically, we have a stronger economy, we have unemployment at record lows, which is when you see freight rates start to get supported because you are afraid moving. Can you touch on if there could be any issue coming back if we have an issue abroad in terms of International Trade . Craig one third of the trucking market is tied to trade directly, imports or exports. It has a significant drag. Dragrly 2019, that is what the volumes down the freight market. Chains anded supply so companies were not investing as much in things that Trucking Companies moved. Moreinly, as we have stabilization in trade just because we are in an election cycle and perhaps there are other things to focus on, that may mitigate some of the pressure. Companies will start investing in capital. Do like like mark intermodal more than some of the strzok from the coast . Craig intermodal is struggling Companies Move their facilities to areas closer to the consumer, then what you are seeing is the intermodal demand start to drop off. And strong dium that is what we are seeing. A secular change in the market. Alix great stuff. Craig fuller of freight ways, great to get your perspective. Mark rossano is sticking with me. Coming up, Carlyle Group winding what that means for private energy companies. More on what im watching. Break, tune to Bloomberg Radio on sirius xm channel 119. If youre driving to work, you do not have to miss it. This is bloomberg. Alix heres what i am watching. The Carlyle Group is winding down of 4 billion energy business. Sonali basak is with us. Mark rossano as well. Walk us through what we know. We know their winding down about 4 million of reddit on. It is significant. They are not the only ones that have been hurt in this space, but this is related to does go people departed that have been there since 2010. In 2015 when they raised the second fund it was laced with a lot of fanfare and at a time when oil prices were plunging. How long can the stress last before you start to make some money . Want to talkson i about this is because if you want it down you have to sell it , and i assume a lot of that would be private Energy Company debt and that will kill companies. Mark youve already seen the pressure start. Youll a lot of the money getting in work even though you have oil prices coming down, prices coming of 45,000 an prices coming of 45,000 an acre. Now you have trying to bid at something half that. You have is a significant amount of pressure across the debt structure. Where we you invest . You are seeing this issue coming across where exxon is back to nation building. They will be the vertical integrator. Where we get this deployed . Sonali Carlyle Group recently made investments that it be adjusting to see how they get out of. They agreed with diamondbacks to do 600 million in texas. Alix that is a good point. Mark rossano and sonali basak, thank you very much. That doesnt for us. Coming up, the open with jonathan ferro. Jonathan from new york city, the countdown to the open starts right now. Jonathan coming up, equities at record highs ahead of the busiest week of the earnings season so far. You was officials heading to china to face trade talks since the g20 truce in the fed poised to cut rates for the first time in a decade. Decision time two days away. With 30 minutes until the opening bell, good morning, here is your monday morning price action. Record highs at a close friday, we cling to those alltime highs with futures up by a single point. The bond market is down to points. To bee pound is starting par with cable. Down one full percentage point and a little bit on brexit later in the program but would begin at the big issue, the fed poised to join the global cycle. We see the fed lining up to do a rate cut this week