Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170501

And 11 30, the u. S. Treasury sent to auction bills ate before we get to them that it looks like the government will not shut down after all. We are joined by kevins rule. Kevin cirillo. You they can only get by doing these one week extensions for about two or three more weeks. Tosome point, they will have pass a longer one. This is a shortterm extension. There are many folks here in washington who believe they can get by with these one week extensions for much longer. I think he definitely proved a political calculation on friday that he would much rather get the government open. You are absolutely right. On several of these issues, he had to move to the middle. As that continues, polling suggests his base is still supportive of him. Jonathan alongside him from washington, managing director at kbw. I want to begin quickly. We had these conversations around the Government Shutdown. What does the extension tell you . Republicans have a majority. They do not have control of congress where legislatively you still need 60 votes. Republicans have 52. Theyre going to have to compromise with democrats to get past issues through congress and one is the budget. That is difficult and this environment. Polarized. Is highly i think the country is in a difficult position and republicans are trying to figure up how to manage their way through it. What is the signal for markets . The reaction is modestly positive. Even though republicans signaled they would not shut down the government, they were there was none of this posturing that you expect politicians to do in order to take advantage of the situation. They been clear they would avoid any type of shutdown and we are getting positive reaction from the market. I think it speaks to the degree of skepticism. David does it tell us anything about this president s ability to get his well with the congress. What does it tell us about tax reform, health care . You have a president and in lot of senior staff who have never been in government so this is all new. In terms of tax reform, i think getting the budget finished is a small win. A mourning process on how to work with congress and both parties so i think they will take lessons from this and applied to tax reform. A slight positive. To where i wouldve said on thursday, i think investors should feel a little bit better about washington and getting a tax bill done by the end of the year or early part of next year. Vonnie how deeply is the market now ing right david how deeply as the market discounting right now . If you look past the election, you had this performance Infrastructure Companies and weve seen that pullback somewhat. Back a halfy given to two thirds of the game. Even a very small victory like this, i think. Heres not much success our view at this point is any victory is upside. Positives us more of a viewpoint. You look at the earnings so far. With the exception of the first to r, mostly it is hard if you look at politically versus what is going on with the areomy, earnings themselves so strong today. In the u. S. , were tracking roughly 7 sales growth. Those are the best numbers weve seen since 2012. Our expectation is that stocks are attractive. Vonnie can expect at some point to have real fiscal reform . I think investors are better aboutm less optimistic big comprehension being passed, but that is not all bad news. Financial sector. Administration comes in. Newhe year goes along and regulators are in place, we are expecting there will be modest reviews of the doddfrank role and i think that is generally positive. Getting take, comprehensive bills, i think in this environment it is very difficult. They are not doing a 180 from butobama administration, the policy environment has improved and that should bolster evaluations Going Forward. Best jonathan thank you very much for joining us. We will be sticking with us. Tom keene will sit down this wednesday with former venture ben bernanke. That look out for that live. Youre watching bloomberg. Bloomberg business flash. Fox is making an for Tribune Media. The company lost twice as many subscribers as forecast, still dishes forecasts was better than expected. Jumped the sony highest and 22 months. Sonic could have record earnings this year. In the last couple year, the onpany has spent more gaming, cameras and chips. Jonathan continue diverges between the soft measures and hard data. Us, senior strategist Michael Mckee. People and a lot of point towards the gdp of last week. Is that a story for you . Fourthh we have the quarter seasonal, it is the gdp spendingthe consumer numbers. Since the trump election in november, Consumer Confidence content sort Consumer Confidence has soared. The fed is going to watch and see if that turns around in the second quarter. Fortunately for them, mays not on the table. Jonathan over the last couple , a whole lot of that. Really where the soft it has been it is unsustainable. Some reversion is expected. Data isthe consumer this big tailwind. Also, a piece of that was a large inventory drop. I think in terms of Going Forward, you can expect to take a step back. Back to equities and earnings, really earnings is the hard data for equity prices. The Morgan Stanley economists are expecting north of 3. 5 . Vonnie in order to get the earnings david in order to get the nings, you need to people the people to spend the money. If you are actually going to spend what you earn to realize those capital gains. That effect seems to be waning in little bit parade we did have some good news on the business side. It is the consumer that is week right now. The three and a half percent growth. David this economy is largely dependent on the consumer. Probably, there is some waiting on that. Also, the demands on the consumer side is really important. Jonathan we have some of the data there. In the price index. Upyou want earnings to put while margins are going to be compressed, it is the prices are they . Absolutely. At the end of the day, there are two ways to growth revenue. I think the fact that inflation has picked up, that helps the boy inside. There is pentup demand and someately, there is investing and longerterm. The most significant is the Federal Reserve cost index. They tend to follow the employment cost index week has the question is are we get the Inflation Numbers they are looking for a therefore to look at those wages and see if they continue to rise. Then, that tells them the story they there forecast on is holding. Isthe most important thing not what they do, but what they obviously have to recognize that things slow down. We believe this is a transient decline. David how influential is the language . I think the big story has been fiscal policy. Policy, iarsley think the market really centers is if a policy stake is detrimental. Everyone is talking about the tax reform, obamacare, infrastructure. We dont have any of that. Thank you for being with us. Interviews. Line of fargo. Be live at wells much more than that. This is bloomberg. David apple and facebook are set to release earnings this week. So with us to discuss overall zach. We are, you talk about earnings already. Take us beneath the numbers. Are we seeing strength in tech . Last week was fantastic. Very broadrall, a leap. I think there has been driven growth over the last several years, but it seems like it is broadening out. The really cyclical sectors has beens being able to grow their earnings. Is that a referendum on trump or is this underlined economic factors . It is the latter. This recession in the hole industrial area. We think there is a recovery of this and aggressive measures taken to really firm up of their costs. Jonathan lets talk about the Earnings Report we have seen. 45 of that was accountable by five big Tech Companies. The optimism has been concentrated. Does that concern you . You get into these antitrust questions which are just starting to enter the dialogue. The tax has been able to grow make a cap taxes have grown earnings organically. What we see is a broadening out of corporations. Jonathan he turnaround in said amazon was a safety play. He wanted to capture outside. Theyve got the numbers behind them. Saying thisf youre is a crowded trade come i think the answer is yes. At the same time, these Companies Need to deliver results. There is risk at some point. Jonathan thank you very much for your time. Coming up, Prime Minister mays. From new york, youre watching bloomberg. From new york city, lets take a look at the market action. In europe, everyone pretty much on holiday. A look at the futures market. Out a secondueeze week of gains. Futures up around 2 10 of 1 . It looks like we will get a spending bill with u. S. Government to remain open through september. At 73. Yen that is the story on the markets. Lets get you up to speed on some of the headlines. In washington, republican congressional leaders have given into democrats over a spending bill. Are betweenations 1. 4 joined dollar measure. It would cash diego, a fire at it pool party killed one person and wounded six others. The suspect was described as white and the victims were black and hispanic. K, theresa may is not off tradef her talks deal negotiations. Global news, 24 hours a day, this is bloomberg. A german newspaper commenting on a to our meeting wednesday. This is going well already. Im not optimistic to begin with. Jonathan this morning, the Prime Ministers Office Coming out saying they are not familiar with the account. I want to turn to bloomberg editor john fryer. A Germany Center comes out with their own account of what happened. What is the story . The article pointed out the fact it was the tone of the conversation. Think the takeaway is the juncker side is spinning to the german press. Juncker talks about his genuine wask and how he underestimating the complexities of the negotiations ahead. Theresa may, according to this report, doesnt seem to be recognizing the fact that britain used to pay that. By all accounts, if the report , they have noted gotten off to a good start. Jonathan it brings up a couple of issues. The Prime Minister wants some secrecy. Discussionparallel in the commercial relationship that will take place in the preceding years. Who is going to get what here . I think the eu started that question. Of the issues discussed if the negotiations are going to proceed, there needs to be a certain amount of confidentiality on both sides. Ofhink theres a sense anger. This is to a certain extent how business is done, especially in brussels where you use the track. I think the u. K. Side will be very upset that this came out. David no doubt they are upset. Argue it is not necessarily a point to prove anymore. These are not political points that you need to score at this point. I think if you were her, you it isue it is a not a massive downside, but also there is a risk for democrats masslesss scottish that is going to help their side of the case. It will swing both ways, but the upside there is a certain upside. Kingdom the united coming out and referring to her jong may. Kim the other side said it wasnt always like this. Morning, theis reports absolutely fascinating. That tony and some shape or form is making a comeback. Theirind of influence they have on the United Kingdom . And he did come out with an intervention if you months ago. I think outside of the london media bubble, he does not have what he might like. In terms of what people talk about on the as monument of us is a victory is, hes pretty far from what really concerns voters. We really appreciate your time, especially when london is on holiday. If theresa may comes up with know she wille we mayace the kim jong moniker. The u. K. Has been one of the best weve had year after year in the last decade or so greece, cyprus, italy, spain, and now france. We think theres more opportunity for investors. It is still looking painful in the United Kingdom at some extent. Looking at europe right now, weve heard this story before. Things are starting to turn and it is politics after politics is an you need to see Something Else besides cheap markets. For the first time in a decade, we are seeing a good earnings season in the indiana state. Provisions have been more positive outside of the u. S. Including europe. Theres Something Else inside evaluation. David we always hear about german companies. Where are we given all of the uncertainty . If you want to play and accelerating Global Growth story and want to play to a multinational company, chances are you are getting a similar customer base. Maybe you are getting more exposure. Youre getting a cheaper price. We are still favorable towards multinational that are domiciled. The French Market showing the risk and price. I think theres opportunities because of the political uncertainty. Jonathan what is the more pronounced theme for your . Cutprice sale or improved fundamentals . Weve seen both of these happening together. For some in the years, it was the european consumer is going to come back. Increasingly it has become apparent this is a better year for you and thought talking about u. S. Companies that are relatively focused, youre getting the benefit of that as well. When it comes to european equities . These things we had to add to financials. We have been increasing that slowly over the last 69 months. The rest of europe does not look as distressed and upside. You are taking a risk there. Electionget past the later this year. That should ultimately benefit the banks. Up, tony coming cousins the plus live from adel the ceo of said p. M. Eastern2 30 time. U. S. Treasury secretary seed mnuchin steve mnuchin. Not to bloomberg is in . Spoke nott indication that a takeover is on the horizon. Still, the record amounts of cash in hand could be enough to manage a transaction with a want to billion dollars price tag. Industry index fell to a sixmonth low. Economy unexpectedly rose in the first three months. Fate of the furious was top of the box office for the third week in a row. It took in more than 19 million. In three weeks, it has sold almost 1 billion worth of tickets around the globe. Jonathan time now for todays trading. A big week for data. To take us through the numbers, here is matt poser. I think the most important thing today, consumer spending. We kind of are no with that is going to be like. Here is thekey manufacturing report at 10 00 a. M. That is where the search and sentiment has been lately. We want to see if that continues. Jonathan every now and then does in session on the hard data meet the soft data all . Come down or he we move up . That is kind of what we are waiting to see. We should starting best start to see that pick up. If we continue to see Strong Manufacturing numbers, then that probably gives us a little more confidence that we will see pick up and consumer spending. Jonathan out of the data last , what is more important for the Federal Reserve . Uh pressure and they discount the First Quarter gdp . I think thats right. Over the last several years weve had so many problems in terms of quirks they are trying to work through. Looks likeat we saw oneoff factors due to spending related to the election, utilities due to weather. That should all bounceback. I think the fed is looking if the data Going Forward and thinking we are still on track. Onathan no News Conference within the statement, what will you be looking for as soon as it drops . I think people are talking about do they put something in the statement regards to the Balance Sheet. They want to unwind that later this year. Is that something theyve been talking about . If you get that in the statement, it could be sort of the nothing we are typically used to. Jonathan the Federal Reserve will come out with their plans eventually. Talk to me about the independency between the reserve and their plans to minimize him toeat in their plans minimize the Balance Sheet. The treasury is going to have to decide what to replace those with. The treasury might issue shortterm bills and that might have a marginal impact on interest rate. Always appreciate your time. Thank you so much. Mena coming up, mark to mark camano will be joining us. Ceo. Wells fargo this is bloomberg. Maybe it is fox that trying to acquire Tribune Media. They are reportedly teaming up with black stone. Here explained why they are so , paul. This is about getting scale in the television business. Owners were talking about consolidating. The real catalyst is there is a republicancontrolled fcc in washington. Industry ripe for consolidation. To gete is looking bigger and sinclair had been the most dominant player in terms of m a and consolidation. They were considered to be the top buyer for tribune. David why do people want to earn more of what is supposed to be a dying business . The big change for the Television Industry has been greek transmission retransmission revenues. Stream a second revenue that theyve never had over the 70 years of their existence. David and those dollars have to get split. Thats right. They have to pay a tribute back up to the network. As you can imagine, they are always looking to get better leverage of their network partners. Brian nick is still with us. What is going on with emergent acquisitions . A slowdown and one of the reasons if you are looking to make an investment or acquisition, you probably had some expectation there would be continuity in all likelihood. Beenad, the rules have thrown up in the air. Regulatory flood is going to take time. David you talk about tax reform that make this deal possible, they dont need congress to get this done. Even if you think the legislative road is going to be locked, there are still deregulation. That could go to things like financials. The same thing with media. David you are saying energy, financials, maybe . Video i think so. If you are not a big believer we look at the tax bill passed, where else is the market underpriced . The on we believe in david thus far, we are behind were last year in terms of m a activity . It is going to depend on what happens with some of the performance we see. Also, what kind of progress we see legislatively. Tohave businesses unable acquire businesses. If the rules are going to become clear until the Fourth Quarter, it is tough to see how we can project a big pickup. It makes more sense to stay close to home base and wait to see. Onathan thank you very much always appreciate your time. Bigng up, do not miss a lineup of interviews right here on bloomberg television. We will be live with interviews from tim sloan, steve mnuchin, and david solomon. Do not miss the conversations. All of that coming up right here on bloomberg television. Up 27. Are firm, you are watching bloomberg. Jonathan congress cut the deal, but at whose expense . Prime minister may insist she is not in a different galaxy in says a deal with europe can be struck within two years. Lets get you up to speed on the market action. Futures firm this morning. At 229. David lots of Economic Data coming out today. At 9 45, market u. S. Manufacturing followed by i send manufactured data after that and 11 30, the rest treasury is said to auction 33 billion. On lets get an update whats going on outside the business world. To u. S. Is considering a range of options against north korea. Mcmaster said the u. S. And in 10 ago, a man at a pool party. Police say he killed the suspect after using a gun on him. In washington, house and Senate Negotiations project most of trumps wishlist. Republicans vowed to eliminate hundreds of regulations aimed at curbing regulation. David if you want to know why takes 1. 1 trillion to get the government through september, we have demand to tell us. He is kevin cirilli. How do you spend it . This budget deal closer september around the same time were expected to the debt limit. I want to pull up what is in this budget. There is a 15 billion down payment on the military and also a 2 billion increase for health research. Theres also 1. 5 billion for border security. And much more bipartisan deal then perhaps folks anticipated. There isnt a money for a wall or ban on planned parenthood, not a cut back on obamacare subsidies. Wasnt this deal always available . I think it is a political consolation that they wanted to. Ot have a Government Shutdown there are a host of other priorities that are sure to set the stone tone including tax policy and health care. They are saying this is something they could have by the end of the year. David we will check back with you later. Injure overrtfolio Portfolio Manager over at pimco. What do you make at that of that . I think markets expected no shutdown. They are still looking forward to Something Different in terms of fiscal policy. Theres a really good story on number news showing all the ourwe invest in highways and medical agreement are all aging. Markets want to see progress in areas that will boost so we can produce more goods and services over time and have a stronger economy and this is not something weve seen yet. Jonathan the words you used is yet. Optimistic they will bring the infrastructure to plan through anyway shape or form . Willre optimistic there be an infrastructure plan, not an aggressive one to boost productivity. In the 1960s there was the interstate highway system. In 2009, 50 billion was spent on infrastructure. It did not bring in a new systems. Maybeou should expect is or 15 10 billion billion. The direct spending will be so not in our economy, optimistic the government will get it right. David monday morning we are hearing and criminal when we talk about whats going on over at the trump administration. How will the market responded and how will the president respond . If all hee respond can get is a criminal itrovements question mark is better than nothing. Markets have for some time has dealt with dysfunction. Look at the Dow Jones Industrial average. It seems it is the invisible hand of Corporate America than the heavy hand of government been guiding markets. Of peoplea lot looking at what is happening in d. C. Is that a wrong approach . The Federal Reserve would like to move it higher. There was a good piece of data friday to indicate that may be the case. It is the employment cost index. Since it is the best 2007. They will show probably a 4 . Ain yearoveryear seem a bit of underway. Nothing big we still have the productivity gains to boost demands and services. As you look at the market, are there still signs of complacency around . With the break even on the 1. 9 , that isar the market saying the fed will be short of its goal. Almost a half point lower. We would suggest the inflation rate likely up 2 . We are basically given up on the 3. 5 growth . It is very difficult to achieve because there are not as laboruman beings in the force. A lot of people are retiring. Productivity would typically grow at two. It looks like the low twos are still well intact. Optimistic about it, especially corporate profits. New dont but against the normal. Jonathan we talk about the inflation component. Bonds, 30 basis points. Do you have to look at the economics versus a fixed income market . There is a technical element. We will see that this year with the Federal Reserve. Americans the fed says thanks very much. We want to hold our securities constant buried at the end of year, they will take the payments and say thanks very much. Yields will probably creep up and it is 4. 5 billion dollars Balance Sheet. Coming up, tom keene will be sitting down for a conversation with the former fed chairman, ben bernanke. You watching bloomberg, tv. Jonathan theresa mays plans a trade deal are realistic. For more, im pleased to say bloombergs executive joins us now from london. The conversation come almost exclusively around. Committee story. Sideteresting that neither seems to me denying it. You had juncker ahead of the European Commission and it seems like both sides were talking over each other. She was very dismissive of the would have tou. K. Hand the exit bill. Judging from the reports, shaking theirut head and deeply concerned that the british dont understand the terms of the negotiation. Certainly, not a good start. Juncker calling Angela Merkel the next day and saying theresa may lives in another galaxy. These are not negotiations. These are negotiations about the negotiations. Wendy the real negotiations begin when do the real negotiations begin . Sachs are making their plans to move staff. These reports just accentuate u. K. We might see the crashing without a deal. Everything we think we know suggests theresa date does theresa may does not want the u. K. Crash. It is possible everything we are seeing is posturing. If you were hoping these negotiations would go smoothly, then you would probably be disappointed. They counter this as pretty much bad as you would have feared going into these negotiations. Over the weekend, the takeaway was they can all agree they want the exit bill paid because they have skin in the game there. To the trade negotiations, that is when we sanford say no, we dont want you to take all of the banking. Gethat when things start to 27 . Titioners against the there is certainly some room for maneuver there. And its interesting as look at some of the noise coming out of brussels. There are going to be deletions on the eu side. Theres also recognition on issues like trade they will be keen to get trade as quick as possible. There is the reaction overall the eu does seem more united than they have been about almost any other issue over the last four or five years. Jonathan running us now, tony from pimco. Joining us now, tony from pimco. Does it matter they will be distracted by the politics . Issues like that matter for economies and risk. It is something that cant be measured so when faced with uncertainty, theres dish engagement. Capitalists to simply stop doing what capitalists do. They are simply wheeling and dealing and trying to make a buck. Is the risk asymmetric in the hand the u. K. And the continental u. K. Investing in assets. The global story matters and essential to it is china to a great extent. 11 million. Plus, a hundred billion dollars of new gdp. Globaltters is the because the big destination for ist they tell us it important to see strength of their. We would bet on stability for the rest of the year. Haseems that the president propelled to maintain stability there. Look for stability there. Matters as far as the concerns, the key question is who pick up the dinner tab . Maybe they went dutch come as they say. Coming up, some things you really dont want to miss. We will be live from the milk. Nd global conference we will also have much more. This is bloomberg. David we are hearing all about passes. What about in your business . Bit nothere is no debate. Index has huge turnover. 40 for europe on average. Market, is about 20 to 1 . , theyll this churning have to have a lot of knowledge. Usendly, a love new want to. One has to have great expertise and understand the cash flows. Finally, theres things that bond managers do that are different. Know where andual issue ages or the price moves up because it is aging . The fiveyear becomes a fouryear. Activeuances mean being and it matters a great deal. Ofyou bring up the ideal churn. Walk me through the churn. Rates years, the interest and activities have gone up. U. S. Government had ran large buffet budget deficits. Driven by the issues of treasury. One has to say you increase the allocation because there are more of them. It is important to be watching what is going on. Jonathan thank you for joining us. Up, head of Merrill Lynch will be joining us. The data coming up next from new york. This is bloomberg. From new york city to our viewers worldwide, bloomberg daybreak. Lets get you up to the speed on the market action. Breaking Economic Data in the United States. Onures up 45 on the dow, up the s p 500, a holiday across much of europe. If you switch up the board, looking at the dollaryen trade, up 2 10 of 1 . Risk on. A weaker japanese yen story emerging. The brexit data comes in the United States. Lets begin with year on year, loyd in line with month on month oyd in line personal income, a little bit softer than the estimate at 0. 3. Personal spending for the month of march comes in dead flat. The downside surprise at 0 for the month on march. The median estimate was 0. 2. The bank in london, the personal income story, for suspending much softer. David good news given the gdp numbers from friday. They have them fall off the table. Jonathan true story. And on the core as well, a lot of people are talking about the easter skew. The idea that we had a year on year figure, not so comparable to april of this year. David and of course that is what the fed is likely to be looking at later this week as they have their meetings. Running is now from his offices in new york is mark cabana, bank of america Merrill Lynch head of short range prodigy and michael pond, barclays head of strategy. That start with you, your addition to these numbers. This is essentially just a little bit more detailed from what we got on the quarterly numbers on friday from the gdp release. Spending came in soft. It can soft again today. Just confirming that. So not a big difference from expectations but importantly, growth is not was not great in q1 and the inflation data is going the wrong way versus what the fed is looking for to trend towards this 2 target. Jonathan this is march. Get me to may. What does the picture look like now . I think what might was describing, things have often soft and somewhat. For q1 gdp, they are likely going to continue to look forward and have their forecast and thoughts on policy. I think the fed is still somewhat optimistic although this data certainly does give them a little bit of pause. Jonathan they are optimistic but should they be cautious because they certainly are cautious as well . That is the key going into this weeks fomc meeting. They likely wont signal that june is off the table but they wont say it is a done deal year. There is a lot of data left to go. The speeches are dismissing the weakness as a oneoff seasonal impact. There is a lot of data. You have to receive it starting with todays auto data. Jonathan bringing up the Federal Reserve, the month of june. Lets be sit lets be specific about the month of june. If they want to be technical about Balance Sheets, june needs to go through. Doesnt it . For june, we do think that the fed is going to look to put the Balance Sheet in play. That would put the fed funds target between 1. 50 and 1. 25. If the did want to get the Balance Sheet in play they would want to go in june or september and then think about putting the Balance Sheet in play in december. We think it is a little bit more likely that the fed will perhaps pause in june, given some of the recent soft data we have seen. Think about going to december and putting the Balance Sheet in play early next year. David the fed tends to focus on regents laois and employment numbers more than other things. How do we explain the apparent rise in wages and the dead flat on personal spending . Why are people spending money if they arent getting paid . That is a great question and i think it is a bit of a question for overall markets. We are seeing some improvement on the wage side. Probably feeling quite good about that. However they would like to see it transition into overall personal spending, retail Sales Activity, auto Sales Activity and if they dont see that, they might be more cautious about raising rates in the near term. David what do we expect to get from the fed this week . Not a whole lot. They dont want to signal in either direction. They dont want to panic over the soft data but they also want to give themselves some flexibility in case the recent profits continue into may and early june. Jonathan lets talk about the of ice coming from barclays the advice coming from barclays. The inflation premium short up last week. Rates could come up as well in that regard. How is that picture going to evolve versus the data . Some of it has to do with longerterm policy. The market got excited in the in the fall but with trade policy, fiscal policy, so far there has not been a lot of movement. The markets have basically backed off that excitement that we saw in the fall. There is plenty of potential for the reflation trade to come back on the table but so far, it is in pause mode. Jonathan we were speaking to jonathan byner of Goldman Sachs Asset Management. Then we had the rollover, and now we see the complacency, signs that inflation is concerned. Do you share that . We think in general the market is cheap already. Markets are cheap already for a baseline forecast. For cpi in general. Moving a bit above 2 . So already, they are cheap and that provides some positive option alley on the potential for a strong move up from policy induced inflation. David what are you anticipating . Two more rises this year from the fed . Two more this year. We think the fed may view the data we have had so far leading to june somewhat cautiously, given the slowdown we saw in q1 and the personal spending and activity data continuing to be week. They might want to think about taking a breather and ensuring the activity data is moving in the right direction. The economy is sufficiently strengthening to allow for further rate increases later this year. We also think that maybe we will see a bit of the stimulus come back on, perhaps a little bit of a reengagement of the trump trades as we do expect to see more progress on the tax reform and potential on the fiscal stimulus for Infrastructure Spending. We do think that will allow the fed to continue raising rates twice in september and december and think about putting the Balance Sheet in play in q1 of next year. I was going to say, june is a close call. We think the fed will be responsive to that. David let me give you a hypothetical. Lets assume we hit the end of this year and we dont see the fiscal stimulus. What happens with the fed at that point . One more rise . Certainly it is possible. They are ultimately going to be dictated by the incoming data they see. I think the economy is showing signs of greater underlying strength without stimulus. I think they will be quite happy about that and i think they will certainly look to raise rates if they can. That said, some numbers have dumped in fiscal stimulus expectations into their outlook and if it looks like we are not going to get anything they could be ratcheting down depending on how the economy will rebound next year. Jonathan im going to call in our director to do something quick. Lets put both of you in a to box. Yes or no question. Mark cabana and michael pond. Mark cabana first. Out of the Federal Reserves june meeting, are they going to hike . Yes or no. Are baseline is no but it is a close call. We think they will. A to will be Strong Enough over the next month and a half to get them there. Jonathan can they normalize the Balance Sheet or begin talking about it at the end of the year . Actually put out a plan without being a significant market disruption . I think they can. The indication they have done so far with regards to their thinking on the Balance Sheet will likely continue and i think that should give the market plenty of time to adjust. And not result in a taper tantrum similar to what we saw in 2013. Jonathan michael pond . Absolutely. May have already prepped the market by the end of this year and early next year. They are trying to not Impact Market conditions. Jonathan michael pond of thelays, mark cabana of comerica Merrill Lynch. Lets get an update on outside the business world. This is emma chandra. In washington republican congressional leaders who want to focus on health care and tax overhauls have given into democrats on the spending bill. House and Senate Negotiators have agreed on a 1. 1 trillion budget measure that would keep the budget the government in operation through september. It rejected most of trumps ironies including money to build a wall. President trumps chief economic adviser says he thinks republicans have enough votes in the house for the obamacare replacement bill. Gary told cbs news there were be a vote this week and provisions of the Health Care Bill still are not clear. The Kennedy Space center in florida. Spacex launched a sensitive mission for the u. S. Military. The falcon nine rocket carried a satellite into orbit for the National Reconnaissance office. Nine minutes after launch, its first stage returns to earth, maintaining the vision of making space travel increasingly affordable. This is the companys fifth Successful Mission of the year. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. David coming up, brian belski, bmo Capital Market investment strategist. Later, live from the milton global conference. Can griffith, the founder and ceo. That is at 2 10 p. M. Eastern time today. This is bloomberg. This is bloomberg daybreak. This is the hewlettpackard enterprise greenroom. Coming up at 11 40 a. M. Eastern time the u. S. Treasury secretary Steven Mnuchin live from the milton global conference. Now to your Bloomberg Business flash. The u. K. Has warned facebook, google and twitter to improve their monitoring of hate speech. A panel of lawmakers searched to consider hosting the hate content a crime. The panel reports the companies are shamefully far from doing enough to deal with illegal and dangerous material. Facebook agrees it could be doing more and says it is working with partners to solve the problem. In japan shares of sony jumped to their highest in 22 months. Toullish Earnings Report led analyst provisions that sony could have record earnings this year. In the last couple of years the company has put more emphasis on gaming, camera chips, and finance. Stock has doubled since 2013. Shareholders of Warren Buffett meeting this weekend in omaha. Cash pile hasn some of them dreaming of a huge deal. There is no indication that the indication is on the immediate horizon but it could conceivably be enough to manage a transaction for the 100 billion price tag. That is your Bloomberg Business flash. David still with us are mark cabana of bank of america and berkeleys michael pond. Lets start with you. There is a lot going on in the last year. It is hard to remember how much is going on geopolitically. Thinking back to brexit and then the trump election. We have a French Election this coming weekend. What effects the markets the most of all that you political you have seen recently . I havent even mentioned north korea or syria. Clearly there was a premium in the treasury market as result of the first round of the French Election. We rallied 10 basis points and that got taken out of the market pretty quickly with the results coming in at the polls expected. This sunday, again, the markets are pretty complacent and the polls indicate they should be but you never know what could happen. David there is not a lot of positioning going into the election this weekend. Jonathan there have been, in the first round, but that got taken out quickly. At this point the polls are Strong Enough that the markets have become complacent. Jonathan just thinking about the whole situation right now and the risk off tone for markets, why should an election in france actually change the Price Inflation here in the United States . Was, aresue in france we still going to look at europe . Are we still going to have a euro a year from now . What does that do to Financial Markets around the globe in growth and inflation . There is definitely a liquidity premium in treasuries. Jonathan lets explore that further. To end up back with a french franc you need lepanto in and a parliament behind her. They would have to vote through a referendum. There are a lot of dominoes. Why are people so antsy about something that is actually right over there and very, very unlikely to happen. Small probability but big impact. You have to weigh those. While the probability was pretty unlikely that all of those things wind up in place one after the other, the impact, if they did would have been pretty significant across global Financial Markets. David at bank of americaMerrill Lynch, what do you take into account with deal political risks . Which ones are on your radar screen . You certainly have to factor those in. As michael was suggesting, they potentially large impact of the French Election was something the market needed to focus on. And potentially think about putting some hedges in. Was somewhatket comforted by the fact that the polling in france was somewhat representative and i think that is probably how they are viewing the second round of the election as well, feeling like the polling validated the results we got in the first round so we should probably be teed up for a macron victory. We wont realize the worstcase outcome of potentially reversing away from the euro. We are certainly watching that. Other job little to relevance, north korea and syria, we have to be mindful of although it is very difficult to discount how large those events could ultimately be. But i actually think that is one of the biggest sources of policy uncertainty, what is happening domestically. How likely is it that the republicans are going to advance an agenda that they laid out . And that the markets really responded to after the election of donald trump is president . We do still believe that the republicans have a lot of incentives to try and advance their domestic agenda. The fact that health care really wasnt passed when it was initially teed up, created a lot of incentive so the republicans need to move on tax reform and they understand they do need a win and that is ultimately going to be a driver for us to see some type of legislation move forward on that front i the end of the year. From whatscaled down republicans initially hoped for but we should see a bit of tax reform, stimulus provided for lower tax rates and potentially something on the fiscal side as far as Infrastructure Spending goes. Especially if we can put some of the dollars offshore back onshore. Also if some of the funding for that could be diverted for Infrastructure Spending. If that is the case that should be a nice settlement. David explain something to me. The giblet glands are exciting, there are a lot of cannons being shot up, but the market havent done really well released. Recently. Given all that is happen over the last year. By ability across markets continues to be quite low and i think that investors are just not really wanting to position or pay up for any type of clear geopolitical event. It is uncertain how likely it will ultimately come about. We had a surprise in the French Election. I certainly do see them across markets, quite a bit higher. But for right now it is difficult to position around north korea or syria. It is especially challenging to know how much of this is just verbal altercation versus the potential for meaningful actual military or some type of action jonathan . Thank you very much for joining us. And of course, michael pond of barclays as well. Coming up, Capital Markets chief investment strategist. Later, we go live to the global conference with a fantastic lineup of conversations including bob diamond, the Atlas Merchant Capital ceo and of course the former chief executive officer of berkeley. Barclays. This is bloomberg. Jonathan it is halftime for firstquarter earnings with more than half of the companies in the s p 500 having reported. We will hear from apple, facebook and tesla to name a few. Here to take us through the Earnings Report, gina, Bloomberg Intelligence keep chief u. S. Equity strategist. Right to have you with us. So far, pretty solid. Quite a better than expected. 14 year on year growth for the s p 500. Expectations earlier this season were from nine. Even at energy which is skewing the numbers like crazy, earnings for us at about 10 . Expectations were for five and a half. Revenues are a little week. A lot of that is energy but even excluding energy we are looking at 2. 8 Energy Growth Revenue Growth. That is very slow. ,onathan with expectations up the First Quarter comes out and we do this. They are not doing that. Why not . Theyre only cutting them a tiny bit. A lot of that, i think is the First Quarter beat was so strong relative to expectations that they are not expecting magnificent pace of growth through the year. The reality is most of the leading Economic Indicators are pretty solid. Industrial, which is a good proxy for broad sector growth in the United States, is strong in the s p 500. That is a big surprise for a lot of people. You is earnings could actually fall but they are rising year on year. The earnings outlook is getting a little bit better. We are starting to benefit from that bottom in Energy Prices we saw a year ago. We are seeing broadening in growth categorically. Those are pretty good signs but analysts are not quite over that hurdle where they are just at least stable. David there are some sectors where the revenue is growing better because you said earnings are growing but not so much revenue. In the subsectors we are seeing revenue. Eight of the 11 economic sectors are actually beating expectations for Revenue Growth. Most of the sectors are producing Revenue Growth as opposed to beating decline expectations. Longer. St it is not be 6 average you like to see over a long period of time. Instead it is 2. 8. There are sectors like material where Revenue Growth is 80 beating expectations. Health care Revenue Growth is pretty strong. Industrial Revenue Growth is pretty strong. Tech Revenue Growth doesnt look too bad either. Those earnings numbers are 20 year on year. Really a story of revenue being better than expected but only marginally so. David earnings are much better than expected. Is that a matter of cost cutting or a matter of Financial Engineering . We are still compiling the numbers on share buybacks for the quarter but so far it looks like the vast majority is cost cutting. It is costcutting that happened over the last year. That incremental increase in Revenue Growth improved the bottom line growth rates a you get this operating Margin Expansion as a result. You get a tiny bit of Revenue Growth. There are still share buybacks. That is still part of the story. Jonathan lets get specific very quickly on how important the earnings for a select group of companies could be for the Broader Market when you take the nasdaq. Our conversations we had had about how the return concentrates around five companies. So when you get a report card from apple, facebook, how important that be for the Broader Market . It is very important. For the Broader Market, breadth is improving. It is a misnomer that the entire markets are be driven being driven by a single name. Brett has been improving breadth has been improving. That is something to keep in mind. Ofathan jenna martin adams bloomberg. Always great to get your insight. We have 34 minutes away. Futures, a little bit firmer for new york. You are watching bloomberg. Jonathan Congress Cuts a deal as trump cuts his demands. The bipartisan trillion dollar spending bill designed to keep the government open through september. Reading the tax reform tea leaves, Vp Pence Says it could add to the budget deficit with that. Ic growth offsetting no shortage of Market Capital this week. , followedn facebook by payrolls this friday. From new york city, a warm welcome to bloomberg daybreak. I am jonathan fire Jonathan Ferro alongside david westin. David how does that work out for you . Jonathan the bank manager says no. Futures up five on the s p 500. Switch up the board. Heres the cross asset. Yields higher by a single basis points. A weaker japanese, dollaryen climbs. That is the story across assets, lets get you some individual stock movements. Lots of media movers this morning. Dish network shares are popping higher after the company put up paul sweeney what paul sweeney is calling a modestly disappointing quarter, a miss revenue estimate. Losses were big again, double estimates. Paul sweeney says that has to do with competition from cable. We will be digging into more about why the shares are higher. Turning to other media winners, Tribune Media soaring in the premarket, up 8 . Fox and blackstone may be teaming up to acquire tribune. The business view on thursday, paul sweeney says that while Sinclair Broadcasting is in the mix, that Fox Blackstone partnership could be much stronger because of blackstones deep pockets relative to cash. Finally, twitter is popping higher in the premarket, up 3 after the wall street journal yesterday reported twitter is teaming up with bloomberg to create a 24 7 streaming news network on its social media platform. Details were not disclosed but more information will come later today from a joint interview with bloomberg Founder Michael bloomberg and twitter ceo jack dorsey. David thank you very much. More from washington today. The government will stay open at least for now. At a cost of 1. 1 trillion. To take us through the deal we are joined by chief washington correspondent kevin cirilli. Kevin, is this a victory for the democrats . Victory somewhat of a for the democrats, particularly because this budget does not , so to any wall funding speak. There is 1. 5 million in this budget for securing the u. S. Mexico border. Lets pull up more numbers about what is in there. A down payment for military funding, that is something that President Trump has advocated for as well as 2 billion in increased for medical research. I think when you look at this, the administration and President Trump opted to keep the government open and avoid a shutdown on the eve of his 100th day in office. This will keep the government open through the end of september, around the same time that there will be a debt ceiling fight. That could roil some members of the conservative base. That said, we are now hearing that they are going to be trying to pivot to other legislative priorities including health care and tax reform. David what does this deal tell us about health care and tax reform and other things the president wants to get through congress . Is it more likely or less . The 1. 1 trillion budget they passed does not include revoking or repealing parts of the Affordable Care act or obamacare so what it is looking like is that any type of significant reform on obamacare is going to have to come from the Congress Passing separate legislation. The sources i am talking with tells me that Vice President mike pence is saying they could Pass Health Care by years end. That was seen as a walk back of sorts but they are now still eyeing some type of legislation to be moved this week. David our man in washington, kevin cirilli. Jonathan joining us from theyapolis, brian belski, call an the s p 500. Always good to catch up with you describe as a tugofwar between the earnings versus policy. Who comes out on top . Earnings do. We had a good week last week in terms of fundamental results from companies. At the end of the day, we are fundamental investors and our main theme, heading into 2017, was overweight analysis and underweight rhetoric. And the press and everyone is doing a great job, scaring anybody about what is coming out of washington but at the end of the day, the stock market is up almost 12 since the election and everybody remains so negative. I dont mean to be johnny our marketecause target is below where market prices are. We are entering into a bit of a slowdown. We think we are going to have more sideways to slight a little trading in the summer months but as fall gets going and we get more clarity with respect to the Affordable Care act and when tax reform becomes a reality, i think we could become a little bit more bullish with the pedal back going down with respect to the gas. Jonathan im going to read a really negative, pessimistic, hyperbolic headline by brett over at bloomberg. Stocks rise on congress deal. Its not pessimistic. It is factual. Things are going to be pretty boring. Is coming up with new narratives all the time. Not much has changed. Blame the sell side. Mean, listen. The issue that we have with the sell side is that i think a lot of senior analysts havent been senior analysts for very long. Not the this week actually signifies the start of my 28th year on wall street and the problem that we continue to have with sell side analysts, a lot of them went away from the credit crisis and they went to the buy side. There is a real lack of perspective. Lot of, remember, a these sell side analysts have only been in the market for the last 10 or 15 years. All they know is america cannot lead, Interest Rates go down, credit, credit, credit, commodities, emerging markets, they dont really know how to do fundamental anymore. I think what ties into what is happening in washington is that coos analysts talk to or Investor Relations people and are talking to ceos that have forgotten how to grow their companies anymore because they have only been doing it cutting costs and building Balance Sheet, buying back stock because the role has not been there because we havent seen reform. Monetary policy has driven stocks. Tax incentives and things like that for things to grow. Until we actually see what the tax numbers are going to be, companies dont have the incentive to grow again. We are kind of in this malaise between what is going to end up happening, civil reform, and Companies Still being managed in a very defensive way. Analysts are only doing what they have been taught to do and to listen to company management. David take us to the fundamental numbers that you have studied. We just had a manager here who said, as you look at Earnings Growth, there is some real Revenue Growth but it is fairly modest. It is really more costcutting. That is exactly what you are saying. If you look past this quarter, where do you see the fundamentals driving further increases . Great question. Drew and i worked together at Merrill Lynch a long time ago so he had very good points. We look at things like valuation and Earnings Growth and liquidity and leverage and operating performance, the large cap portion of the market from our lens still looks best relative to the small cap we would like we would rank midcap third. When we look at fundamentals with respect to the u. S. Sectors , we continue in areas like financial, health care, industrial and material. Boldve been longstanding on the technology sector. We missed it because we thought repatriation would put more pressure on these stocks. We actually think technology companies, so far, in 2017, people have been hiding. And when things slow down as they do during the summer months , Technology Company earnings in the summer months are typically revised lower. We do think there could be weakness in technology this summer that is providing for a better entry point. But by far the favorite sector in america is financials because we believe the majority of investors around the world are dramatically underexposed and they are going to miss the big trade in the next 10 years which, from our lens, is clearly Wealth Management. As Interest Rates had higher, investment rates are around the world are going to have to sell their bonds and come back into equities. That is a profitable business for these bigbox retailers with respect to the u. S. Financials. Stocks like bank of america, jp morgan, wells fargo, are going to be the ones that we think are going to do the best. Jonathan lets wrap things up quickly. 2350 is the year and target. Why the competitive is him . Relative to the expectations on the street . Well, we have a process and a discipline. We have longstanding models that have been expressly accurate with respect to the market. We dont raise our numbers just because the stock market goes up. The majority of our competitors raise their numbers in january and february. We have been kind of treading water here as of late. On a nearterm basis, we are headed into a seasonal period where things are slowing down. We will raise our numbers of the fundamentals dictate. If we get a full back from the markets and it is going to accelerate into 2018 then we will raise our numbers. At this point we dont know it yet. Jonathan it is so nice. Belski, bmo Capital Markets. Looking forward to the conversation coming up on this program. Soft versus hard data. After a week of divergence, preparing for a slew of economic reports coming this friday. Later on, we are live from the global conference, a fourstar lineup throughout the week. Including former barclays chief executive officer. That is coming up at 9 45 a. M. Eastern. New york, you are watching bloomberg. David this is bloomberg. I am david westin. In recent months soft data has been on the rise around the world. The hard Economic Data is lagging behind. We might now be starting to see this hard data soft and soften. As we get to the city economic supply, they track very well and then in the month of april that white line has been blowing down while the bloomberg has been going up. Bill with us is brian belski of bmo Capital Markets. And Michael Mckee also joins us. Michael, how about this . How worried should we be . If i am a stock market investor i would say wait and see. We have seen a couple of months of weakening data. One bad jobs report says it means it is going to continue or is this the First Quarter affect that we have had for the last couple of years . It is too soon to tell. A lot of what happened with the stock market is hope else on fiscal policy that hadnt been carried through. Maybe that is what is going on. Jonathan the stock markets have held up nicely between do have these economic surprises turning down. When the fundamentals come, how concerned are you . Well, again, michael mentioned we are entering into the seasonally slow period in terms of forecast with respect to orderly earnings. They look to us like we are starting to see some semblance of physical response earnings potentially peaking in the Fourth Quarter of 2017. We believe we need to see some answers and we dont disagree that the market rally due to increased confidence. And now we need to see some of those measures actually occur. Again, the citigroup surprise index is a decent index. We look at it all the time. But nearterm, we are not going to overreact with normal seasonal patterns slowing down from a longterm perspective as trends improve. Heres a question for the fed and for you as an investor. We saw last month a disappointing cpi report and a disappointing cpe report. Inflation just not taking hold. One way to get corporate profits up is with inflation. Do you think we get any inflation . Do companies have Pricing Power . Companies have Pricing Power. There is some with respect to some foods and we know there was a tremendous amount of rising power with respect to drugs and pharmaceuticals heading into again, inflation, we think, over the next several years is going to be Wage Inflation as jobs continue to grow. If you are making more money you are going to spend more money and we know that the American Consumer in terms of personal consumption expenditures may be spending money but they are spending money differently. 10 years ago, they would go to 10 Different Stores now they are being much more concentrated in how they are spending their money or they are spending their money in different ways when they are not that to not back tuition or on their house. So the American Consumer is saving more money. They are much more conservative than they were 10 or 15 years ago. That is a strong secular change that you have to force change. Some of that change is through companies becoming more aggressive and spending more money on Capital Equipment and learning to grow themselves again and not just by that stocks. Jonathan is that going to affect the Consumer Price tolerance . They might be making more but are they willing to pay more for the same items in a couple of years time . Right. I think, again, we have to start feeling better and stronger about america. We start to feel better when we see job growth and we see the economy not be at two or 3 . The slowest and most boring economic recovery in the history of recoveries and i there are people on oh street in lincoln, nebraska who still think we are in a recession and are acting in a very defensive way on the consumer and corporate front. Again, we need to take this newfound confidence with respect to the stock market and translate that into business. That is what the next couple of quarters are about. Given the fact that they are so defensive, that is why we think this summer could be bumpier than most people are positioning for. David what you are saying is exactly what President Trump would be saying. We are going to be bolder, talk three and a half percent growth, 4 growth. But is there anyone that plausibly believe that we are going to get 3 growth anytime soon . If you say to that person, i have good news, 1. 8 growth, they are not going to be clicking their heels. 1. 8 is so exciting. Nobody believes it. And nobody is publishing about it because we are so afraid to be wrong. We dont want to be right. There is no High Standard of deviation analysis out there because we are all managing the need because we have seen so much shrinkage in the Financial Services industry, especially on the institutional side, that we dont want to make these big bets anymore. That is why we are in this malaise with respect to the stock market and that is why we have said all along that we would not want to be an etf investor right now. We want to be an actively traded Portfolio Manager, stick to our favorite name, 35 to 40 stocks, market goes up and you peel a little bit off. That is how we believe that you are going to be able to provide for your clients, especially when stocks are driven by fundamentals. David part of that im sure is how well they are managed. Teamseos are management but they also need to have a good underlying business. What sorts of businesses does it make sense to invest in . Those companies that are deriving great cash flow with cash flow they are going to be able to continue to grow their earnings or go by other companies or buyback stocks or by that dividends. In america we have Great Companies that have been overlooked over the last several years as the majority of industrial sector performances come from those areas that really Garner International growth. We believe the material sector in america, paper stocks, steel stocks, aluminum stocks, will rebuild america. These are companies that have the cash flow. We already talked about financials and how financials are the most misunderstood, feared sector in the world. We always say investors should never base their investing on fear. It then on the health care side, jonathan rob brian belski, you are with us. We are continuing to count down to the cash open. Coming up on this program, the top performer since the u. S. Election has suffered withdrawals recently. Why brian belski is still betting on it. That is next. Later on, bob diamond joining us live from the milton global conference. From new york to our viewers worldwide, this is bloomberg. Jonathan the best performer since the u. S. Election running out of steam. Financials have led the way since the election of donald trump. On prospects of the regulation and accelerating u. S. Growth. The rally has started to stall, leading the election leaders in the last two months. Still with us is brian belski, chief investment strategist. Great to have you with us. The line that sticks out from you is that overweight analysis and underweight rhetoric. For the rhetoric around financials, it has been positive and it remains positive, doesnt it . From a longerterm perspective, i think it does. Especially on the regulation side of things. We have said that the 16 year bull market and compliance is over with respect to financials. It hasnt been since 2001 that are businesses changed the medically. A lot of that has been for the better. But i think there still remains this negative respect to Financial Services which we toieve ties to the steep work in america. We need to rebuild credibility and rebuild confidence for investing and stocks. Financials is a big part of that with respect to the nearterm failures of financials. It is all about the nearterm interest rate. What we have been trying to talk to investors about, again, looking at stocks from not just over a couple of months. But several months. You buy financials because of how they are run as an industry and how they are going to grow longerterm. From the Capital Market side of things, from the traditional deposit side of things, from the Wealth Management side of things, which again, we think is going to drive things longerterm. Jonathan lets talk business. You talk about the bull market being over. If that is over, do i want to own Goldman Sachs . Back of america . One small bank with 10 different branches . What kind of Financial Firm do i want to own . I think you want to have exposure to a lot of these financial companies. Insurance companies in canada, from our outlook, look better than Insurance Companies in america for a couple of reasons. For valuation, number one, and for number two, they have greater exposure to the Asset Management business. In terms of the bank, we like the big box retailers for Goldman Sachs and Morgan Stanley, but with a b and t and even suntrust, because of the trustic growth, we have a bank like First Republic as well, so you want to have some exposure across the board. Jonathan brian belski, good to catch up with you. Thank you very much. Counting you down to the opening bell up next on bloomberg daybreak. Futures positive, up 36 on the doubt. Up five on the s p 500 after a capital week of gain. On aoff of the positive note. You are watching bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Julie from new york city, from our viewers worldwide, i am ferro. N the dow jones is up. After two weeks of gains, the positive sentiment out there , sixgh april, the Nasdaq Record highs of the close in that month alone. Futures are positive this morning. Some big earnings from apple and facebook. Yields hig are higher. Er. Lets get you the cash open. Abigail we are looking at a modestly bullish open for the major averages with the dow in the s p 500 slightly higher. On pace for nasdaq another record close. The month of april was impressive for all the majors including monthly gains and for the dow, the best five out of the last 60 pretty much a nice bullish stretch for stocks. Turning to movers on the open, apple is higher by more than 1 . They report on tuesday and investors are expecting them to report a cash horde of 250 billion saying that investors can also be hoping that will translate into a higher dividend. Western digital is down about 1 over a downgrade at jefferies. Finally, autodesk is up nearly 2 due to an upgraded Morgan Stanley. Its suggesting this stock and climb higher by at least 30 . The analyst over there thanks the Free Cash Flow potential is strong on a sticky customer base. Jonathan thank you very much. Joining us now from chicago is bi b onkyo the echo anco. Us stocks like a highly paid free agent in sports . Draft thishe nfl past weekend and every stock investor like to think that just think of them as a general manager trying to find an undervalued jim. This market is more like the guy that pay 25 million for an established superstar. Usually, you overpay for those guys but in this case, its working. Its working because of what we saw with earnings last week. 190 S P Companies reported. And it was great. Almost 80 of them beat estimates. The overall yearoveryear growth rate and earnings jumped to 12. 5 from under 10 just a week earlier, even 9 growth of you take out the volatile Energy Sector. So good with earnings numbers last week that companies are now reporting positive guidance and the year end numbers are the year and estimates are starting to tick up. The biggest benefits is market has right now is the pleasant surprise we saw with earnings. Got 130 one Companies Reporting earnings this week and usually as you get further into the cycle, the disappointments build an natural reaction is to hold off on bad news but even of its just a mild disappointment, earnings are powering the market higher. Jonathan does that analogy resonate with you . The expectations for the companys yet to produce have come lower. The bar is in theory higher but when analysts are constantly marking down the expectations for the expectations, it seems relatively easy. You work so extended in the earningss system with Tech Companies left and consumer staples. Consumer discretionary could be a risk later in the earnings season and i think that something to watch. The consumer has obviously been weaker than many had expected in the First Quarter particularly for auto sales. Look there if youre looking for signs of weakness but broadly, i agree. The earnings season has been phenomenal particular for industrials. On thelet me push you analogy. One difference between bluechip nfl players and whats going on now with earnings is you invest in that player because they will bring more revenue in either in ticket sales or tv revenues. What im told about these earnings is they are driven by costcutting. Its great to cut costs and will get my earnings up in the shortterm but in the long term, thats not good for my business. , thats truetent but we saw within the data that revenues or topline sales for the s p 500 companies is growing at about 6 . S pine sales of all 500 companies is 11 trillion which is 2 3 of the economy and thats booming. The works at oz to some of gdp data and other things we have seen and thats not unusual. Costcutting has definitely helped. Dont discount the idea that revenues are moving together. Are only one good quarter worth of earning so does not necessarily mean the next quarters will be good but every journey starts with a first step. We have a good quarter going right now and the market has responded positively in the last 10 days or so with a big jump and we can go from there. Is Revenue Growth across the board or are there particular sectors that are growing their business . It is concentrated in the Energy Sector because a year ago, the price of oil was under 30. The Energy Companies are now getting that yearoveryear 50 or 60 andt they are seeing a huge bounce but even if you take out the Energy Sector, revenues are growing at a decent pace, about 5 yearoveryear without energy and thats not too bad. Jonathan why are you long utilities . Thats a as utilities, play on Interest Rates. If we were to pivot to Interest Rates a little bit, i think they are going lower. I said the economy is doing better because of earnings but the problem is, so many people are so short that there is aged again take Short Covering going on the bond market and that will for bonds and utilities follow with those. I think rates will be lower into the summer and i think that will help the utilities. Jonathan have you seen that flow story developed for the bond proxies . Inyes, we started the year pretty good shape would bond yields doing higher and financials were doing well and then financials got creamed when bonds fell. If the yield is going to continue to move, you will see a lot of volatility in financials and real estate. How do i view the long utilities trade . Can you be long utilities and still be long financials questio. I think its a hedge against financials . Utilities work best when rates go lower. Those two can work as a hedge against each other and very nicely. I have a bloomberg user that says the authorization for stock buybacks is down and there is research out of Goldman Sachs at that says the boards are worried about extremely high valuations. Does that square with what you are seeing . Cheap. The market is not it is highly valued. Its like paying 25 million per year for a picture. You expect a lot out of it and we expect a lot out of the market. For the moment, we are getting its way understand that boardroom mentality that valuations are high and this is not a cheap market, its many years of the bull market but for the moment, it is working. Jonathan is there any correlation between the buyback authorization and early last dimon comed jamie into the market and buy a big chunk of jpmorgan stock and it ripped. Is there a correlation . There certainly is. Buyback authorizations rise through may and then stop and then accelerate in the fall. Is that coincidental . Im not so sure. I think buybacks of been a big part of the rally in stocks. When we look at the data, operating earnings excluding the shares are tracking 11 for the First Quarter so thats pretty strong even excluding the share count reduction. Sallie mae, does that resonate with you . The problem with seasonality, if you want to sell in may you have to by september. What people like to do with seasonality is they say this is the time to sell but when it comes time to buy, we dont buy. Id tend to discount that because we dont use that right. The other thing about selling in mae is that if youre going to invest over the next 20 or 30 years, it probably works to sell in may but to pick anyone year and say this is the year that may will work, you are just guessing. Jonathan always great to catch up with you, thank you. We are about nine minutes into the session this monday morning. Futures are positive as well as stocks and a move by about 1 10 of 1 on the s p 500. Positive again on the nasdaq with a record high close insight. From new york, you are watching bloomberg. Up at 1140 a. M. Eastern time, u. S. Treasury secretary Steven Mnuchin live from the milken global conference. We want to go to the milken david conference in beverly hills, california where eric tasker has a special guest. Erik i want to welcome bob diamond. Most people know you as the former ceo of barclays. I will begin by talking about barclays because sadly once again, its topical. The current ceo has landed himself in some hot water with british regulators. He try to uncover the identity of a whistleblower. The attitude on this side of the atlantic seems to be a matter of big deal, so he ran a witchhunt that the reality is, in the u. K. , it is a big deal. Can you help people understand why . Jeff has beenhink a very solid chief executive at barclays. I think he has brought to light that there is a very strong platform in retail and commercial banking. Hink he has made it clear barclaysed here, capital is the top european competitor to the u. S. And he will have to work through this it he has done a trip a terrific job of leadership and i think hes the right person for barclays now. Erik the Regulatory Environment is different in britain. One of the ways it is different is that british regulators can a clause for ceos if they deem him unfit to remove debt to run a bank, they can remove him. If he has the support of barclays board, do you think there is a risk the regulars would do that . Thinkjess is fit for the job and is the right person for the job and i would leave it at that. Its hard to project yourself into those discussions. Erik brexit is a headache for weditional banks because, as now know, several of them have to move thousands of people to offices in the eu to be able to continue doing what they do in the european union. How do you look at it . Do you look at it differently because youre are no longer part of that world . I think brexit will create far more challenges than people expect today. Of therehe chances being disruption in the market is very high. If you think about the european thanks, the big three french , the italian banks, the size of their derivative books in london and most global banks have been using london as a Clearing Center for their derivatives for decades. There is an infrastructure am regulatory infrastructure. If they get to be a subsidiary or their passports are taken are tens of billions of capital required to support those books. On the other hand, you take those derivative books back to italy or germany or france where there is not the infrastructure, the clearing infrastructure or regulatory infrastructure, is just one of many examples that people have not thrown through. Brexit will be very disruptive. Erik do you see a lot of dislocation . Emerging theo be view that maybe european banks have hit bottom and the Capital Raise the Credit Suisse is doing may be the last recovery step out of the crisis. I take it you dont see it that way. We see great opportunity in europe. When you think about banking and you think about european banking where two or three decades, we have been thinking about global is good and universal banking is good, the model that things a today is not global, its national or regional. The model that seems to be working is not universal in terms of product, its focused on selectivity. How do we react to that question mark we acquired a bank in greece. That . Do we react to we acquired a bank in greece. We think that focus on selectivity whether its in retail and commercial banking or in what we traditionally think of as investment thanking is probably the more appropriate model today. Wouldnt do in europe what you are doing in africa which is building a Pan African Bank . It makes sense in europe but its african. His africa the right choice for a global bank to acquire banks in africa or for an african bank or middle eastern bank . Its a regional play. It has the focus on selectivity and africa focusing on retail and commercial banking. The unitedation in states, banker regulations specifically seems poised for an easing. Will that create opportunities for you to make investments here question mark our first two investments were in u. S. Financial institutions. South street securities is the leading standalone repo business. U. S. Treasuries, agency mortgages, it has grown substantially since we invested. I think the u. S. Platform is very strong. We have also had opportunities for some of the larger Insurance Companies who are looking to take risks out with the higher capital requirements. We think the u. S. Is a great place to be investing. Erik im trying to get a sense from you as to where. Youve got capital to allocate, do you want to allocate it more here or europe or in africa . Our primary focus is looking at the u. S. , u. K. And europe and we think it will be kind of 50 50. The u. S. Has an effective Regulatory Environment. You can get things done pretty quickly. In europe, the opportunity, as you said, were at the point of capitulation for many european banks. If we can resolve the issues around nonperforming loans, many people are focused on the banks in italy the economy in italy needs strong banks. They need banks that will be investing, banks that will be lending but until we get the nonperforming loans off the Balance Sheet, that will not be happening. Erik great to see you, thanks very remind. Thats bob diamond, the founder and ceo of Atlas Merchant Capital live at the milken global conference. David thanks very much. Coming up later, we will go back the milken global conference for an with United States treasury secretary steve mnuchin. Live from bloomberg headquarters in new york, this is bloomberg. Jonathan from new york citys, lets cue up to speed. And of on to the the session. The dow has gone slightly into negative territory. The s p 500 is up after two weeks of gains. The nasdaq, six record high closes. If we keep these levels, we are on course for another record. The nasdaq is up by 25 points. There is a big week for wall street and earnings. On tuesday, apple will report earnings after the bell. Wednesday, earnings from tesla and facebook and we hear from fed, the Rate Decision and friday is the payroll report. David joining us now is paul sweeney, director of north American Media research for bloomberg. Is the meeting this week report that 20th century fox and blackstone may take Tribune Media away from sinclair. Is notderstand it, this the only consolidation we will see . I think we will see more in the television business. Nationalthe association of broadcasting last week and all the talk there was about m a being driven by what they expect to be continued deregulation of ownership restrictions across the radio tv sector under the trump fcc. David this is a different kind of consolidation like we would see would at t and time warner. Its all content. They are not looking to buy tribune for content. Looking for distribution and the cash flow coming from the traditional tv business. Tv business in the u. S. Is always been good but over the last four or five years, it has become a very Good Business because the tv stations have an able to charge Cable Companies or retransmission fees which creates a second revenue stream after advertising for local television stations across the country and that has been a very positive. It has made tv groups want to get even bigger so they have been pressing against the ownership limits imposed by the fcc. The ownership limits so far but how much is because we are hearing there will be listening . Under the trump administration, the fcc has said they will be very aggressively rolling back a lot of the ownership restrictions. They already reduced quickly the uhf discount which is an owner which is an ownership restriction cap so you can get groups like sinclair and others could control may be 6080 of the country in terms of distribution. Help me with something on saturday night, a big boxing fight. I was sitting here in the United States and i want to watch the boxing so ago on twitter and im looking for streaming. In periscope, i find a full hd feed of whats being aired in the United Kingdom for free. What will these guys do about this stuff . That is a big issue. Consumers like you are consuming more of their video content outside the traditional broadcast and cable tv bundle and getting a direct over the internet. Is a big issue for media come by so of the responses is lets get a good or, lets get stronger. Thee can compete against Big Internet Companies like google and facebook. Thats why you are seeing the strategic move for more consolidation on the media front. David you also see some people paying a big time. Theyre paying real dollars for things like nfl rights. We have learned despite all the proliferation of media options, sports is still the dominant viewing john route there. Is still the dominant viewing genre out there. Jonathan im happy to pay for it. Thank you very much. 26 minutes into the session. The nasdaq is on pace for a record close. Pretty much flat elsewhere. You are watching bloomberg tv. Vonnie i am vonnie quinn. Oliver welcome to bloomberg markets. Vonnie we are live from bloomberg world had court is in new york. We will cover stories in paris, detroit, and los angeles but first, breaking Economic Data in the United States. Abigail we have two pieces of breaking Economic Data and we are looking atmisses in both cases. Relative to iso manufacturing, the index came at gasquet minute 54. 8 versus the survey at 56. 5. Its a bit of a miss there with weakness but relative to Construction Spending in the month of march, a little below the survey which had called for a gain of 4 10 of 1 and now its down 2 10 of 1 . We are looking at