David in washington, today is the day for health care. When the house representatives are slated for a vote to repeal and replace obamacare. For all the details we go to Kevin Cirilli. Kevin, they are going to have a vote today. Do they have the votes . They think they do but who knows . Paul ryan has said he is not going to bring a vote unless he has the votes. Thatndications suggest after yesterdays introduction of an amendment by representative upton which would be in a billion dollar increase to preexisting condition clauses over a fiveyear period , that will be enough to win over moderates. Concerns show that whatever bill they get, it hasnt been scored and it could radically change once it gets to the senate. David last time we played through this, we had a lot of problems politically because as many as 24 million americans would lose their Health Care Coverage. How many will this time . There is no way to know entirely just how much but the concerns amongst the people im talking with in the house is that once it changes in the senate that it is going to have to be scored again no matter what. It is coming from the white house, pressure from the white house led by President Trump himself, making direct calls aroundtheclock, trying to get people to get on board. He wants to move on to other items and he has also put pressure on Reince Priebus to directly work with lawmakers to get this through. The thinking among some conservatives is perhaps Reince Priebus isnt the person to be whipping votes because of his relationships with some members who were dissatisfied with him when he was in trolling the Republican National committee. David it will be pretty embarrassing if they didnt get the right vote count. We will come back to you later on. Lets go over to the senate side. The he became ambassador to china, max baucus spend 36 years representing his home state of montana, including as chairman of the finance committee where he was at the center of obamacare. He joins us now on the telephone from dublin with his take on what the new plan would mean for Health Care Coverage and for the budget. Welcome back to the program, investor baucas. Good to be here. David you know this backwards and forwards. How much of a repeal would this be . How much would they undo of what you did . Certainly, turning medicaid payments and entitlement programs to block grants is going to result in the loss of about 24 Million People s Health Care Coverage. Ive got to tell you there are a lot of pieces in this. There is a reason why president from said this is harder than he thought it was because it is hard. All these pieces have to fit to stand the test of time. My view is they are not going to schedule a bill unless they are quite certain they have the votes. But certainly, for ryan and a trump it is a win and a huge loss for 24 million american 24 million american people. It is a huge transfer of wealth from the sick and the for. It is an outrage. The high risk pool is not going to help with preexisting conditions. It may on the margin but it is going to significantly in danger and jeopardize people with preexisting conditions. David lets pick up on that preexisting condition. This is something President Trump has been explicit about. He gave an interview to bloomberg saying we are going to protect people. Take us through the high risk pool. They have a different approach to you. That is correct and i dont think that the president has trumann asked bess trumanesque. Different states are going to approach it differently and certainly, the mark conservative states the more conservative states are going to be the most unhelpful to the sick and to the poor. It is really a tragedy. David take us to the politics. You were such an effective politician for so many years. Last time we have the cbo score and it came up with a 24 million number and you saw a republicans really get a lot of pressure from their own constituents. What will happen politically to have toblicans as they give us a score . When members go home they will get the same reaction from the people that they represent. This is being rushed through right now so that, theoretically, people let home wont be as outraged because it has already passed the house. Add to that, most provider groups are opposed to this. The american medical association, the hospital association, the Major Medical groups, the major providers in health care are opposed to it. The main reason is because this damage hurts people who will end up having Poorer Health care. These are groups that have adjusted to the last seven years, to the passage of the aca. And here we go again. The passage of a different bill creates so much more uncertainty for them that they dont know quite how to handle it. Is, people are going to lose coverage. Asy are going to be sick or this is a huge transfer from , kids, and low income folks and giving it to the wealthy. The markets took the last failed Health Care Bill in stride. What they really seem to care about is tax reform. If it does go through, do we learn anything on how the republicans can push tax reform through . It will be similar. Namely it will be something rammed through, something that does not see the light of day, something that is not transparent, something that does not include a vast array of Interest Groups that have to be consulted and worked with to get something passed. Both health care and tax reform, in my judgment, given my experience as chairman of the finance committee, only work when there is come from eyes. When you work across the aisle and with different groups. Takes a lot of hard work. Sometimes it is shipped a bit differently, sliced a little bit here and added a little bit there, and after a while you get a result that passes and is enacted into law. I have to tell you, i worked hard on health care and tax reform. That is the only way it works. When you try to jam something through, it is unsuccessful. Basically because there are lots of components and parts in it with unintended consequences that always come out later. David finally, there is a different kind of compromise in washington between the house and the senate. If this gets passed in the house, it does not mean it is going to be law. What is likely . What is really likely to come out of this once the senate takes it up . It is going to be much more moderate than the house passed bill. Dont forget. House majority leaders can push through any measure he wants. The Senate Majority leader cannot push through any measure he wants and that is for two reasons. One, it is the rules. The senate rules still require 60 votes to break a filibuster and probably any Health Care Bill that is brought up separately has to pass that 60 vote. And nothing similar to the house bill will pass the senate. Add to that, the senate is more moderate because the senators seats are not quite as secure as house seats. House seats are secure because members of the house run several times. In the senate, you have to run in a whole state and not just a congressional district. People in Interest Groups nationwide tend to focus more on senators. Now, low income groups, democrats, health care groups, are very upset this is happening and they are going to put a lot of pressure on senators. You will not find the Senate Nearly as receptive as the house is. Jonathan that was ambassador max bacchus. About getting reelected and how difficult it might be. David one of the problems in this country my opinion is a lot of politicianss main job is to get reelected. Jonathan coming up tomorrow, and allstar lineup reacts to the u. S. Payroll report. They will be joining us. That is coming up tomorrow from new york city and washington, d. C. From a beautiful new york this morning. This is bloomberg. Jonathan to our viewers worldwide from new york, this is bloomberg daybreak. Lets go through the market action. Futures up around 54 points on the dow. One third of 1 on the s p 500. Risk on with a weaker deveneys yen. 1. 13. Yen spiking to the euro is former is firmer as well. Marine le pen making a mark in yesterdays tv debate with Emmanuel Macron. Core government bonds saw for across europe and here in the United States. Treasury yields higher by two basis point at 2. 34. This after the fed maintained its approach for Monetary Policy in a statement yesterday saying that week growth would not derail the hikes in 2017. Running is now is the ceo of principle Global Investors and bloomberg have reported reporter matt basel or. This line here, fundamentals underpinning the continued growth of consumption remained solid. What are they looking at . I think we didnt learn a lot about the fed yesterday. We kind of expected they were going to be looking through this week First Quarter data as they have over the last several years. The gdp trackers said they are looking at 4 growth so they are confident this is just another statistical quirk to deal with. On the inflation side, we do see core inflation starting to roll over and that introduces more uncertainty. They do get one more report before the next meeting in june. Jonathan what kind of report is going to derail the plan to get two more hikes in for the rest of the year . Core inflation was 1. 75 a month ago. Then it dropped to 1. 5 . That is a significant drop. If you see another look down that can be significant. This is removing accommodations. Jonathan and they are removing accommodations even if they hike in september. That is actually just moving towards a more normal Monetary Policy for this stage in the economic cycle. They are positive about the economy growing because of wage levels, because of the payrolls. The payroll numbers will be carefully watched. Any indications on inflation and on wage rates will be carefully watched in the runup to june. I think on balance, june will see a rate rise. But in the First Quarter gdp was a shocker and the interpretation of that is quite important. Alix im glad you brought up the gdp because we are usually looking at wages. Is that not the right indicator . Is it Consumer Spending for the Second Quarter retail sales . 7 inay well be, the the quarter is related to the lack in confidence among some parts of the consumer economy. I am concerned, for example, in your previous segment you were talking about the house looking at the Health Care Bill. It is not still those 20 Million People plus or minus of health care. Hat will hit their conference the feedback through the economics of some Economic System of such that you could hit Consumer Spending. There maybe a hint of that in the First Quarter gdp. David i was curious, we are going to look through it, but there are other data points, where there is Consumer Spending, auto sales, there are several. Why did they say, we are not changing our mind but there are some indications. This is a continuation of the same story we have been dealing with since november where we had this divergence between the soft data and the hard data we have been talking about. The soft data still looked really good. The confidence surveys, the ifn surveys, so we really should be seeing the hard data starting to pick up any day now. What is turning down at the moment, could very well reverse. We are still on the cusp of that question. David how long have we heard that soft data should bring the hard data up . How long can you keep investing and making decisions aced on what should happen in the future . The soft data will only be reflected in the hard data if the administration makes progress with the Positive Side of their agenda. If they get moving on tax reform, really moving on deregulation, it will work out whether they are going to split up the big banks are not. That is important. The hard data will only catchup this agenda. I think if this gets mired down in congress, the hard data in the soft data may go down together. We have to be watching and expanded funnel of doubt. Inen the plans that the ministration has. Jonathan the looking at two faces those statements yesterday. One is on the Balance Sheet. Tom keene caught up with ben bernanke yesterday. This is what he had to say. Ofthe fed has released a lot projections of what they think it will do and it depends where they decide to end up. I think the best guess is Something Like four or five years after they begin the process of unwinding, to give back to some kind of sustainable level. Jonathan that language, is there going to be an ultimate goal . The optimal size of a Balance Sheet . Now that is not in the cards. I think the desire is to get going with the process, knowing it is going to take a while wherever they are going to. This is something that we have been wondering about. Jonathan just very quickly, when this Balance Sheet process normalization, whatever they are going to call it, does the bond market remain calm . Do we get a 2013 scenario . If they do it carefully the market will kind of zone it out. It was one trillion before they started qe on the Balance Sheet. They started going back to one and a half or two. We dont know but it will depend on market conditions, how much they can unwind the sheet. Jonathan thank you very much for being here. David Jim Mccaughan will be staying with us. We will be talking with sen. Orrin hatch of you talk. He is the chairman of the finance committee at the center of attempts to Reform Health care and the tax system. Live from new york and washington, this is bloomberg. This is bloomberg daybreak. I am emma chandra with your business flash. Shares of facebook are lower in premarket trading. Revenue growth will fall after it limits the number of ads it will show on newsfeeds. That overshadow the news that facebook that firstquarter Sales Beat Estimates. The Worlds Largest beer maker posted earnings that beat estimates. Anheuserbusch was led by corona brands. It was helped by costcutting after its record acquisition of miller last year. A surprise increase in firstquarter profits for hsbc. The ceo was able to stem the revenues decline after six years as a british bank. 12 , we spoke with hsbcs bso. Would be to say that i a happy man if i could closeout 2017 right now. The 3. 4 percent Revenue Growth over the course of 2017, we are standing very good in the First Quarter. That is the guidance we are holding for the market as we move into discussions with investors over the course of the next few days. Since he took over as ceo, hsbc has left 18 countries and almost 100 businesses. That is your Bloomberg Business flash. Alix for more on european banks, Jim Mccaughan, Global Investors ceo. European banks have rallied in the last two weeks. You buy them because yield curves are getting better, you buy them because of valuation or you buy them because of growth. Which is it . I think you buy them because of recovery and survival. Capital at lack of so many european banks. They never fixed it after the financial crisis like u. S. Banks. They needed more Capital Raising. It is finally happening over the last 12 months or so. That Capital Raising is important. There are some vulnerable european banks. That wont be particularly true if there are signs of a euro breakup. If le pen were able to pull off an upset over the weekend that would be bad for the euro and therefore for the banks. The french franc outside the euro would be devalued. Similarly, if the italian politics turned out early next year and you see advancement by the opposition, they are antieu and it might be like a le pen win in france. I dont think le pen is going to win that the banks are vulnerable to instability in the eu. You are betting on survival, lower ratings, and prospects normalizing. I dont know whether that is going to happen or not. Alix hsbc still has five years of profit declines to get past with the question of growth. If you look at hsbc is that a on asia . And a bank that has primary business in europe . I think it is and the fundamentals of hsbc are different from the european bank. They are a global bank with a strong business in asia. One of the things they highlighted was that they benefited from the weakness of the dollar. The other currencies doing that, or the emergency markets the emerging markets doing that, from the easing financial conditions in the u. S. They are still a marketplace to a large extent despite. Jonathan looking at the european lenders from country to the mostwhere has work . The italians . French . Germans . Where do you see the most work done in the Financial Sector . To repair the balance . France and switzerland. Obviously the Deutsche Bank capital is important but there are a lot of banks in germany and they are not particularly strong financially. Italy remains the week one. Weak one. The new rules on Bank Resolution under the ecb mean that bondholders get to buy in. Well, those bondholders are not going to be easily bought in. Jonathan Jim Mccaughan, always great to catch up with you. Of bob but Michael Michele of j. P. Morgan Asset Management. Jonathan from new york, you are watching bloomberg daybreak. I am jonathan ferro. Futures are up, up about. 3 on the dow and s p 500. The s p halfway through the week and more, driving another week of gains, a third week of gains. Switching up, dollaryen drive tire for six straight days, the longest win streak. You have to go all do it to october 2016 for a streak like that, up 112. 93. Poor government bonds across the world, including europe and here in the United States, u. S. 10year at 2. 34. And brent just flirting with the 50 mark. That is the story in the markets. Elsewhere, here is emma chandra. Emma in washington, it is highstakes for House Republicans. They plan to vote today on a delayed plan to repeal obamacare, although there are still doubts as to whether or there are enough votes to pass it. Measures were added to attract moderate republicans. The house bill still faces uncertainty in the senate. President trump is set to ease restrictions. Towill sign an excited order give churches greater leeway to engage in politics. Say the taxaders code restricts free speech. Just a pseudobefore the french president ial runoff elections. Anddebate between macron Marine Le Pen produced angry exchanges, but it did not help le pens longshot chances. Won how the chronic macron won the debate. 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. Jon . Jonathan thank you. For more on the election, lets get to bloombergs caroline conan in paris. Did Marine Le Pen turn things around . Caroline she did. It was like watching a boxing match, jon. It was macron on pretty much every subject. On was actually better however, she seemed very confused about her plans to leave the euro, saying the french will go back to the fr anc, but the International Transactions will still be done in euro. Debate, andy brutal moderators hardly got any word in. Jonathan caroline connan, as she said, you have moderators, and they barely spoke for the whole thing, you just had them backandforth, backandforth. Caroline, head of sunday, her following the solid base, for her to go beyond that makes any inroads to get the votes from the other candidates who have now dropped out. How difficult is that going to be . Caroline it is going to be quite difficult for her to come back and to reassure because this was the last chance for her to appear as a president , and she appeared angry and aggressive, and macron did appear as the calm one, the patient one, the one giving details and numbers. Bring look at how people to the debate, 15 Million People in france watch the debate. 62 said macron was the most convincing. Even Marine Le Pens base, 12 said macron was more convincing. Interesting an number from the melenchon voters, 2 3 of his actually felt that macron was the most convincing as well. Jonathan from a beautiful looking paris, caroline connan, thank you for a much. Michele, j. P. Bob morgan Asset Management head of global fixedincome. You sit down to a beautiful dinner and just assume that this is going to be smooth sailing forual maccallum Emmanuel Macron . Bob no, was bloomberg tv david good answer. Bob the markets of always filtered of it toward a macron victory. Jonathan a question whether redenomination risk was a permanent feature, and my colleague asked a question this morning as to how fun it is to just accept, it just wont materialize the approach in the european market. Yesterday it did, but it is very unlike to materialize. Bob i think there is some degree of truth in that. I do not know how far this is going to go, but i would go along with mark on this one. Alix the story before the first run as you will get a pop in the euro, a pop in markets, and boom , you will have a selloff. Is that the story this coming monday, or has that story changed . Bob i think i would speak to the spread between france and germany was about 80 basis point some even a few days ago was in the mid50s. We are at 45. We think you will see a bearish narrowing of that spread come us all yields will private and maybe what will head into 35, 40, so it has been saving. Again, if you go back to the first round, if she took about 35 of the vote and one bank the first round, we won the first round, we might be in a different position, but markets have factored in probability. David so macron is likely, what do you do at that point . Because she does not really have a party, right . How do you get things done as president once you are president . Believe he haso been watching the Trump Administration and seen all the problems that can occur if you dont move very quickly to try to build a coalition, a willingness to compromise alix and if you do have a coalition and the party, it does not necessarily mean anything. Bob well, there is some debate whether there is a coalition, but i think he gets it. I think micron works very quickly from all the different coalition. You are right he is an independent, so he has to build success, have a vision, and if plus of the60 vote, it is hard to argue that he does not have the mandate from the people. David exactly, he will have a mandate, but a mandate to do what . He had a clear reform agenda that he wants to implement. Ma we certain what crons agenda is . Certainly it is a vote to be proeu and remain in the eu, so how do you make that work for you . In the press at a lot of Financial Institutions are shopping around for places on the consonant to move out of london. How does he get involved with that . Of theseu entice some big Financial Institutions to move to paris, for example, instead of other locations . What do you do about tax policy . How do you make that fair . There are a lot of things he can tackle if you build that coalition. Jonathan paris is not on the list, bob. We want to talk about that. Looking at the data, the excitement about what will happen with european equities, do you need friends to reform at all to get european equities to outperform u. S. Equities for the rest of this year . I dont think you do. Bob i think it would be a nice teller. I think it would be like trump onomics. Forget about gdps. When you look at First Quarter earnings, they have been surprising to the upside. In europe in particular, you are seeing good Revenue Growth. I keep saying that europe has gone through the classic emergingmarket adjustment where the currency has dropped so dramatically it has made them super export competitiveness. Alix what is the best trade, the . If you look at 10year bunds, they are short five basis points. How do you encapsulate that data once you have the Political Risk . Bob from this point in time, you go progrowth, proinflation strategy. In the last couple of months, the markets have gotten a twist, and they have challenged everything and has gone too conservative. You are seeing that in a lot of survey data. I think this is where you want to unload your core european bonds. They are too expensive. I think you look for bond investors, you do look at inhyield issuers, you look the bank hybrid securities market, and yeah, it feels like activities do have some room. Jonathan in europe, it is already incredibly tight. Many would argue on the back of the ecbs actions, to you really think credit spreads in europe can get tighter . Bob i really do. And youre right you always need credit to perform well before the economy comes along. One of the transmission mechanisms to the real economy lets not forget the ecb still has unbelievably accommodative policy in place cheered we just take for granted that negative central bankers are commonplace. Aat is highly stimulative in company where country where companies are generating higher Revenue Growth. Dont forget, they are still in the market buying bonds, so they will backstop. Alix peter pratt saying that today, saying any change in policy should be gradual and that you really want wage growth to be stronger. So they will not go anywhere materially anytime soon. Bob no central bank once their fingerprints on the next recession. Alix fair point. Bob michele of jpmorgan, you are sticking with us. Up next, rick rieder will be joining us. Plus later, ed yardeni of Yardeni Research will be joining us about what the biggest risk is for the market. This is bloomberg. Emma this is bloomberg daybreak. I am emma chandra. The chairman of the Senate Finance committee, senator orrin hatch of utah, is speaking with us. Now to bloombergs business flash. Oil prices boosted results from crude production. That profit helped validate a purchase of the ge group. Shareholders claim the company spent too much at a time when oil prices were falling. Society general has paid 1 billion to settle a bribery dispute with the libyan investment authorities. That reverse a trial that is set to begin today in london, and it felt like drop in socgens First Quarter profits. Electric car tesla is assuring investors the higher weighted model three sedan is on track to begin production of your that is an attempt to mitigate concerns that ceo elon musk is burning cash to bring the car to market. Be teslas most affordable car, and production is expected to start in july. That is your Bloomberg Business flash. Declining market, everything is pretty much moving, but take a look at what has happened with brent. A stones throw away from 50 a barrel. It was one penny away. You have got oil, but you name it, you have got rebar, iron ore, copper, what is happening with commodities right now . Bob a couple of things are going on. If you look at the chart, they had a pretty nice bounce following the trump election and all of the dialogue on the infrastructure side and the consumption. Fadedow seems to have from the market, and investors are rightly skeptical about that. The second thing that has happened is everyone has looked at china, and china had a Fourth Quarter and had a pretty good First Quarter, and they went back to the traditional infrastructure. When you look at the data, i would not say things are rolling over, but they are flattening a bit in china, so everyone is concerned about what a consumption and demand will look like an emerging markets. The take a look of bloomberg here. China gdp versus the bloomberg commodity index. I would definitely all this somewhat of a rollover, especially with the china gdp lower. The question for the declining market is this a slowdown, or is this a pause . What is your best guess . Bob it is whatever the chinese policymakers want to make it. [laughter] alix if it is a pause, you not want to buy if. It is a roller, that is a different story. Bob i think you do buy. Pretty goods still investment on consumption china. Lets not forget on the oil side, you do have opec with Production Cuts. You still have supply can be controlled in the u. S. Alix sort of. [laughter] picked up a bit, particularly in the emerging that tells me of we are forming a basis here i am not too concerned about the downside. If we are right and if the fed is right that the First Quarter was just a transitory slowdown, we should see adjusting growth, and that will put some wind in the sails of commodities. Alix there is a dissension between oil and iron ore. Do you distinguish between the two . Bob we do. If i think about the energy construct, i am ok with that. Our forecast is that we still think 60, 65 is likely this year. So we are out there, we are still fairly aggressive, and we see that the supply demand can be in balance. I think only the industrial metal side, for example, you need one of two things to kick in you either do need some additional consumption coming out of china, or you need to see nt try tostructure spe work its way out of the administration through congress. Everyone is a bit skeptical on that. China says things are voice to be just fine and said he until then because president she really wants it to really wantedt xi to be stable. Within a new at administration, new leadership under xi, are you concerned about what could happen to commodities after october . Bob we are. Certainly, you have to keep an eye on how that congress is formed and where you go from there. Maybe by that point in time, we will start to see some of the trump policies come through, you will see some stimulus, and lets not forget, we started out earlier by talking about europe and in the u. S. , growth looks ok. They are in upward trajectories. Into theot get too commodities come place here. Jonathan who is in the driver seat President Trump or president xi . Bob i think President Trump, to be honest. I think the chinese have done what they could and what they should have since the financial china passednd if that baton to somebody else, it is the u. S. We have the ability to strip down Corporate America to a new level. It is time to invest again and get moving. I think some of the more productive policies do work their way. Jonathan with that in my stomach and you take a bearish view on treasuries without taking a bullish view on commodity . Oh without question, and i am somewhat amused by house treasuries are stuck on this 230 to 260 range. It is boring for all of us, and the specs move from an extended short position to now an extended long position. But apart from everything that is going on in the administration and distorted First Quarter gdp, the fed is draining liquidity from the system, and they are quite clear about that. They are on the path to something that looks more normal. Wheres miles away from even a zero real yield at 2 , and then they start draining down the Balance Sheet, there goes that last leg of support that has kept treasury prices i think relatively inflated. Alix ok, bob michele, j. P. Morgan investment. Check out tv. You can watch us online, click on our charts and graphics, interact with us directly. You can click on the charts if you miss them throughout the program. This is bloomberg. David this is bloomberg. I am david westin. Facebook is far exceeding what analysts predict for revenue and profit, but they also warned it may not be the same for the rest of the year. Facebook coo Sheryl Sandberg said they are changing the number of asked to improve the quality of ads. Sheryl we have said that ad load is up from a few years ago, and we have been able to do that by improving the quality and relevance of the ads. Where we are focused is continuing to improve that at quality and relevance. David David Kirkpatrick is the author of the facebook effect. He is a friend of the program. Welcome back. Great to have you. Great number some of they had some mornings, and the stock did not go up that much. In fact, it went down and came back up. David k there are so many questions, yet they continue to steamroll ahead with extraordinary power. It is easy to put the questions to the back of your mind and say, wow, these people have so many fields still to conquer, and they do, but there are gigantic questions facing the longerterm future. David the biggest one being . David k what is their social role. . You have a commercial entity that is becoming to some degree in every developed country, in most countries except for china and north korea, the platform for freedom of speech a company. Ok, that is a massive responsibility. We have heard they are hiring new monitors, etc. That is really good but the challenge that is going to entail overtime to keep from offending the world as unfortunately they have been doing lately fake news, donald trump, suicides, the murders these things are real. Theyre going to accelerate, and ultimately, there is no good answer. David has facebook accepted that they are a Media Company . Said,n the old days, they we are just putting it out there, other people are responsible for the content. David k that is a dual answer for her will deny that they are a Media Company, but they are now accepting responsibility for the content more and more, which zuckerberg has been told by stepping forward and saying how seriously he takes this issue with this extraordinary 5000word essay that he published a month or two ago said, we know we have this responsibility to her he still says, we are not a Media Company, so it is a little contradictory. David and they are adding a lot of people for that purpose. David k most people did not know they already had 45 hundred, which actually sounds low to me. They have 500 people just in germany monitoring disturbing things and german. So i think there could be more if you add up all the contractors that are working parttime or fulltime for them, at least 7500 once they complete this new hiring, but it could be more, it will have to be more. Alix you have the slower as growth issues your you have the issues you spoke about. Are we set up for a big risk if they cannot get this under control . David k not in the short term. They are fine in the shortterm. Growth Revenue Growth might slow this year, but what they found is user growth grew so they had more people to ads t plusto sell they haveo more traffic from, the same people. If that trend continues or both of those trends, they will be doing fine any nearterm. I think they will go over well to billion users soon. That is all good for facebook. But they still have a challenge that no company has ever faced, which is they are the de facto platform for information. They will be like the government, and that is a really big role. Jonathan always great to have you on the program. Coming up next is rick rieder, black Rock Investment officer of fixed income. From new york, you are watching bloomberg. Jonathan if at first you dont succeed, you try again. The Obamacare Repeal goes to a vote. The Federal Reserve did its best not to make news, shrugged off week growth and left open for a rate hike in june. The gloves come off i had of the second round of the french election. Le pen releases a barrage of attacks on the front runner Emmanuel Macron. Heard someone called the candidate of savage globalization. Alix i dont know what that means. Jonathan this is how we set up this morning. Field withhe everything, the exception crude. Alix time now for your morning brief ahead of the jobs report. We look at initial jobless claims, costs, and productivity. Retailintentions for coming in, the worst since the recession. You have factory orders and durable good orders. At four clock, President Trump meets with Malcolm Turnbull in new york. Jonathan there is another subject in washington today. Health care. S speaker ryan was to bring a new bill up for a vote today in the house. To explain, we have our chief washington correspondent Kevin Cirilli. Kevin i would love to be a fly on that wall for the meeting. I just spoke with representative mark meadows, and he told me that they do anticipate to Pass Health Care today, and the consensus among republicans is they do have enough votes. I also spoke with a senior aide 12 nold me they anticipate o votes, more than enough for this passage to advance out of the house. There are still concerns among republicans that should this bill get out of the house, it which are medically change in the senate, and that is where all eyes will be. David the senate is a whole different story. Bigger ryan and President Trump have their mojo back and they can move on to tax reform . Kevin it is all about momentum. You are right. Should they have this policy in after a bruising battle politically, they would head into the recess and begin turning their attention to other items on their agenda. Yesterday, wednesday to markup would repealat significant parts of doddfrank. Reform as well, and all of this gives them the momentum to move on and gives President Trump back some Political Capital he lost early on. How shortterm with that Political Capital the if the senate does not pass it and it comes back . What kind of Political Capital does he gain . Why is it such a rush to push this through . Aides agree of with your sentiment and say what is the rush . Why not take more time in order to craft something, especially when moderates are at risk and 2018 with the midterms . Officials would rather negotiate with the senate than with the house simply because of the way the dynamics of the Lower Chamber of the house of representatives are set up. They feel they will be able to talk with levelheaded folks in the senate, which might be easier. But you are right, this is a legislative body that is more moderate and should change the bill as it advances out of here. Baucus was at the center of what became obamacare. He said he expected the house does have the votes to pass that new bill. Probably the house has the votes. They will not schedule a bill unless they are certain they have the votes. It would be a win for ryan and for 24nd huge loss million american people. Is the chiefs now of staff to senator max when the heavy lifting was done to get that legislation through congress. He is now a partner in the holding group. Welcome back to the program. You must look at this and see a lot of your handiwork being undone. No individual mandate come in no employer mandate come on subsidies across the board. What with this bill do if it became law . Some extentknow what it will do because we had a cbo score on an earlier version. 24 Million People will lose their coverage, many of them through deep cuts to the medicaid program. Others because of the fact that the tax credits will be less generous. Others because it would charge older people more than younger people, so there are a host of reasons. We know that. The we dont know is what impact of this new amendment will be on the legislation. As has been reported, the cbo thenot done what is called score, the vibration of this legislation, which is something that always happens with a hes of major legislation. It is extremely odd to move ford with legislation that impacts sixth of the economy without a proper a violation. One reason is they are concerned the answer they get back is that this bill will hurt coverage numbers even more. Why thisunderstand would be difficult to see this undone, but isnt this lesson draconian than the bill that did not get enacted . It is even more taccone in. This would give states the option to waive essential Health Benefits, give them the option discriminate to against people with preexisting conditions. The provision on essential Health Benefits could drive the coverage numbers down even more because the Congressional Budget Office will only say that somebody has Insurance Coverage if what they are buying provides them actual coverage. If you buy a policy that does pregnancy or hospitalizations, the Congressional Budget Office might say that is not coverage at all, and therefore the coverage numbers may go from 24 Million People to something larger than that. David it does leave it up to the states. We dont know how many states would do that. There is in this new proposal that has come through, 8 billion appropriated to subsidize the problems you identified him as so there are actions taken to ameliorate the effects of this. Sure. Of the experts out there say the 8 billion is insufficient for what could opt to nottates do conditions. Isting most people who looked at the say the 8 billion would not be adequate. David is there a fair point to de that obamacare would have to be changed anyway . Andere eating through money subsidies faster than we thought we would, so something had to be done anyway . Spends a lot of time thinking about the healthcare system, and stakeholders agree there could have been changes made to the aca to make it work letter, but better, but the cbo said that if congress did nothing and simply let the law continue to play out without the sort of damocles hanging over it that the Insurance Markets would continue to stabilize, but with the continued drumbeat over repeal, threatening of not paying costsharing payments to Insurance Companies, that has led to a lot of anxiety in the Insurance Markets and has made it a more unstable program. David you also work on taxes. As a practical matter free at the house to move ford on tax reform . Some money for the u. S. Government that allows them to pay for some of the reform they are talking about . Not save money. It reduces the list that republicans would have to make in doing taxes. David it cuts the subsidies. Yes. Money. It gives them way it does. Hat it clears the calendar for House Republicans to start working on tax reform. They will run into the difficult challenges as well. It is complicated endeavor in and of itself. Alix great to see you. Thank you for coming down. I want to highlight some breaking news. Brent crude falling below 50 a barrel, but if you look at intraday basis, the did touch the lowest level since november 30 last year. You have some technical selling, but nevertheless, u. S. Output increasing for an 11th straight week, the highest since august 2015 come as opec has to contend with. Jonathan the Market Holding up, future still bid. Coming up tomorrow, an allstar lineup of guests reacting to the april jobs report. All joining this program tomorrow. Dont miss that coverage right here. From new york city, you are watching bloomberg. Alix the fed stayed the course yesterday. Gdp weakness as transitory, but set Household Spending rose only modesty, but fundamentals remain solid. Rick ofus now is black rock. What did you learn yesterday . What you said about it being transitory is significant. We think the employment tomorrow will not be as high as expectations, but the employment dynamic for the fed and otherwise is still amazingly strong. I think the fed has than a good job communicating recently. We think they will go three times this year, but i think you could even get a fourth move. I think the fed has articulated that this year. The number tomorrow will suggest that june will be the fed will move in june assuming it is not a terrible number, but i think they well communicated where they are today. This communication from the fed, i never thought we would have this conversation, but core pce, if we get another reading, that could be a stumbling block for them. You bring up a point that is right. Core cpi still running well above two, but we think it has peaked, but still above average. Earnings are still high, but core pce is below the fed target. Im certain that that would tell you they look at all the numbers , with the trend is, and i think they were right when they said the risks around inflation is symmetric and you are close enough to that 2 target to keep them on their path. Rolled over,de has brent below 50, metals rolling over as well, how do you call that view into the idea that treasury yield should be higher . A couple of things, some of the nearterm data has been u. S. , certainly in the and i think you have to respect that is the case. There are some other factors of play as well in terms of oil and particularly productivity in the u. S. And output has been impressive. That has weighed on nearterm inventories, but you have to factor in some of the nearterm data has softened. You look at, when by the weight European Growth is pretty impressive, asian growth is impressive, Global Growth is still on a good path, chinese growth is still on a good path, but some of the recent highfrequency data is softer. I still dont think we are in the symmetric around where the fed is going, and that rates can move moderately higher. They will not move that much higher. Alix you are in a tough spot to make the case for Global Growth. Seeing thatot trickled through two other Asset Classes . Commodities are supposed to be Global Growth indicators. The world argue economy has changed in such dramatic fashion, which youve talked about on your show, the traditional inputs in terms of how you think of a Global Economy, including iron ore, when you look at facebook, google, apple, amazon, the World Economy is shifting that some of those core commodities well important for the world and area i would argue different to review see that in terms of equity prices and what sectors have done well. , globalthe economy economy is still operating at a good pace, but a shift in terms of what drives it. A have moved from manufacturing goods oriented economy toward service oriented, and i think that is why some of the commodity data would have been devastating and prior cycles, but is not today. Thethan we have gone over Structural Forces that will keep a lid on treasuries. This week, we heard from the treasury. Dealers aboutng whether they have appetite for ultralong debt. The feedback has not been good. Treasury, i set on the Advisory Committee for a long time, and i thought there right at this week is really writeant right up up this week is really important. It will pull from the 30 year, the strips market. You can do more funding and ultralong, but maybe you get Something Like 10 billion to 15 billion a quarter out. The market is just not that big. I thought with the Advisory Committee laid out about doing 20 years to fill in the yield curve and get more duration, i thought that was more impactful and thoughtful. Im sure they would do a piece of the ultralong treasuries, but if you said to me day in terms of our investment paradigm if they do 50 year treasuries will it have an impact on rate exposure, not significant. Is the best case for doing a 50 year. Why is Steven Mnuchin talking about it. To thee is some efficacy argument that pension funds, Insurance Companies need long dated assets. There is demand. That they fulfill it through investor grade corporate issuance and treasury, but there is some demand on the back end of the curve. Funding infrastructure in the long end of the yield curve is the right way to do it, so there is some benefit in that. If you do 30 or 50 year issuance in terms of how you think about your assets against your life italys, not terribly profound. David isnt that the irony . The reason this came up this because it was tied to infrastructure, the longerterm bonds, and now it is untethered and out on its own. Thats right. I think you could do some. I dont think in the grand scheme of things the amount of the treasury issues and the maturity of their maturity profile would not create that much of a, but nearterm with the market because there is a lot of duration with the market would have some impact, maybe,ut we are much more focused jonathans point is right. With the ecb does is more important because so much demand , and japan, is coming from overseas today. Jonathan bill gross is showing of tomorrow. Alan krueger is showing up tomorrow. Lets get the estimates. 190, where he sitting in blackrock . We think the numbers will be good, but maybe lower. Bit topping in terms of Economic Data. If you said to me higher or lower to 190, i would say on the lower side of 190, but a number that can keep its fed the fed on its path. Alix hes going to the beach. Lets not pretend. David thanks so much. Ill be joined w by senator orrin hatch on taxes and health care. This is bloomberg. Jonathan shares of facebook lower, warning Revenue Growth will fall. That overshadows the news that firstquarter Sales Beat Estimates and the number of monthly users rose 17 . Joining us now is paul sweeney. Weve heard this from them a couple of times. , iscapacity constraints that is what is bumping up against facebooks ambitions . Thate company has warned we will limit the amount of additional hats we put into the facebook feed. Thatwill additional ads we put into facebook feeds. That would limit growth. That there are other big platforms, insta graham, messenger, each at or near one billion users. Can they start monetizing those platforms that can offset what is slowing growth on the core facebook side . Jonathan incredible levels of growth still. They spent over 22 billion and have not started to get any return on that investment in terms of growing revenue on that platform. The question remains to what extent can they monetize those platforms . Can they do it in such a way as they did with facebook . Running business week a great piece. A scientist who said, the best minds of my generation of thinking about how to make people click ads. That sucks. Places like google, facebook, coming up with ways to get people to click on ads. It has been out west to Silicon Valley where people are going, not wall street as it was in my generation. What theyre trying to do on the social media platforms is what can they do and what kind of environment can i create to mass a huge audience, and how can i monetize that audience, sell ads, get them to buy things, by a rumor get a car and take a slice of the revenue . Economy driving Silicon Valley and the broader economy in general. Jonathan always great to catch up with you on the program. Stock down slightly in premarket. That is the world of tech. Tomorrow, reaction to the jobs report. We will have bill gross joining this program. , futures are city. Id, up. 25 on the dow you are watching bloomberg. Jonathan from new york, viewers worldwide, you are watching bloomberg. Moments away from a data dump in the United States. By 0. 23 onbid, up s p 500 and that al. And dow. Are trading lower, brent below 50. The euro stronger, the yen weaker. That is the story of the fx market as the data drops in america. The trade balance never, the ,eficit never than anticipated 43. 7 billion. The previous number revised to 43. 8 billion. The survey was 44. 5 billion dollars, so slightly narrower than anticipated. Initial jobless claims 238,000, grinding lower, multidecade lows. That is the print. 200256,000 was the previous num. I want to hone in on that unit labor cost and weaker productivity. The last quarter was revised higher, but now. 6 lower, costs of 3 , are we looking at substantial inflationary pressures . Looking at deceleration in Economic Activity during the First Quarter of the year. That is against the backdrop of the relatively healthy employment numbers. That is boosting labor costs numbers. We are not looking at a wage price spiral in the data. There has been some upward drift in inflation from rental rates in health care costs, but we are looking at spiraling upwards from inflationary pressures. Layoff intentions and retail with the highest since the recession. Can you make a distinction between broader economic weakness or are there pockets in the economy of weakness . Running atan economy trend, see you are have these ebbs and flows. When youre running close to trend, these movements dont move much one way or the other. Wherean environment markets are in a sideways trading range. I think that continues right through until we figure out what will happen with fiscal stimulus. Alix weve had equities and bonds telling us difference stories. Does that mean the on market and the hard data is correct . When you step back and look at how the economy has been performing, which you see is rolling recessions, rolling two Different Industries at different times comes the overall economy. We have had a rolling recession rolled through the Energy Sector , and that depressed earnings, so we had an earnings recession, and that is over. Rollingre having a recession going to bricks and mortars retailing. Inre are 16 Million People retailing and 7 million and manufacturing, so retailing can get really hammered here. The next rolling recession is in. Ffice autos and it all, maybe 2 growth. See howw its hard to this thing picks up to 3 . David auto sales are off, but what about housing . Where are the bright spots . He only place was cyclical need for production. We have under build homes. We do have snapped back in the formation household formation rate, declines in vacancy rates, so the could be something there. The category of people most likely to be buying these homes are also the people who still have the most that, i. E. Student loans, and they cant get out from under that problem. Unless we can generate stronger employment growth, stronger wage growth, given the opportunity, or more lacks reddit conditions, we will not get anything other than this gradual upward creep in housing. Thee is nothing in the data toes you houses are about to roll over, but there is also nothing in the data that says it will add substantially to the economy going forward. Drops,n productivity labor costs rising, you say the fed should not be hiking. What is the feds role . Environment, advanced economies are under the potential rate of growth, high debt levels outstanding. Beenederal reserve has pushing the envelope more than they should. I think the Federal Reserve should try to let this economy get some upside momentum. What they are doing now is keeping that from happening. The front end of the curve is fully price to raise rates in june. The back end of the curve is expensive relative to the front end. Likely to move to the upper end of the range, to 20to 60. When we go to 260, it affects mortgage rates. Jonathan isnt the . Ultimate solution to productivity wage growth i look at the productivity situation and wonder what chair yellens role is in that. I dont think she has won it all. There are structural issues, cyclical issues. As far as the fed chairs concerned at this point . What has happened in productivity is the secular shift within the industries that are driving the economy. To economy driven primarily by health care. If you look at the employment numbers, you look at the spending numbers, it is all healthcare related. Health care has horrible productivity. You are seeing that reflected. That me jump in. Manufacturing productivity is hero and an annual rate over the past five years. You canook at a chart, almost see why trump got elected, because of her since china joined the wto, capacity in the production areas has been flat, and that has coincided i think there is something to the idea that companies have not been spending on productivity at home. I agree with you. Services economy has a productivity issue, and always has, but that is one area where we can get some improvement. Alix talk about productivity, the Energy Sector has not performed really well. The impact on the rest of the economy with bringing down oil prices is an ongoing positive for the u. S. Economy, for the Global Economy. Alix when you look at your base case in terms of growth, rolling recessions, and the fed, have you constructed a portfolio on that . It sounds like you are buying treasuries and going back into utilities. I dont have a problem holding onto treasuries if you bought them right, but i think we will be in an environment where inflation will remain structurally hello for many years low for many years. I kind of look at the stock market has long good buy. The longer we can conclude this expansion will last, the longer the bull market will last, even though violation is no bargain. Jonathan you will be sticking with us. Thank you for joining us. A check on headlines outside the business world. We can cross over now to emma chandra. Emma House Republicans promising percent in years to repeal obamacare. Today, they will get a chance to vote on their replacement plan. They say they have enough votes to approve the measure and send it on to the senate, even though there is some doubt about that. A new admin and has won the support of moderate republicans that would add money to help pay for people with preexisting conditions. President trump is ready to ease restrictions on religious groups, signing an executive order that gives churches greater leeway to engage in politics without risking their tax exempt status. Philip will prince step down from public life later this year. Prince philip will be 96 in june. Buckingham palace said he will attend Public Events until august. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Emma chandra. Thank you. Tomorrow, a great lineup of guests to react to the payrolls report. They were all be with us to go through the numbers. Live from new york, this is bloomberg. Next coming up in the hour, senator orrin hatch of utah. Thats at 9 45 eastern time. Jonathan we are three days away from the second round of the french president ial election where Marine Le Pen will go head to head with Emmanuel Macron. Last night, a debate, le pen coming on the rhetoric, saying it was severe. She said i want to wake up the french people. Joining us now from paris, a fantastic debate for those of us outside france. France, thosede policies are very serious. In any case, france will be , she said it will be governed by a woman, either me or angela merkel. Is that resonating . Youre seeing two visions, one proeuropean, and one who wants to close borders. Marine le pen has been attacking Emmanuel Macron for making france dependent on germany, dependent on angela merkel. She even called Emmanuel Macron the vice chancellor of germany. Before we had 11 candidates. It has come down to two, and ofy have said the base Marine Le Pen a strong, but going nowhere. For her to make inroads, she needs to take votes from the other candidates who have dropped out. Where are they coming from . She is trying to lure fillons voters. Polls, oneo the third of those who voted for the republican could go for Marine Le Pen in a runoff. She would also need a big split who voted inoters the first round for the communist backed candidate, but last night, she sounded too , according to racist to the camp, and two thirds of those who voted said Emmanuel Macron was the most convincing. Could seeing abstentions reach more than 20 to 25 , but would still need 5,000,002 six main votes to win this election. , theren final question are two rounds to this election. The first round turnout was solid. In the second round historically what does that look like and how might that play into her favor . We are seeing a turnout of around 80 , 80 participation in president ial elections. Higher, sayns are around 50 , there is a small chance that Marine Le Pen could be elected, but according to Bloomberg Intelligence to a not only would she need a high abstention, but also need to voted forof those who the communist backed candidate in the first round. Jonathan solid reporting. Thank you very much. He coined the term the bond vigilante. It will be on my tombstone. Jonathan they have been killed by the ecb, havent they . Bond vigilantes were relevant in the 1980s and 1990s, every time there was an inflation scare, it would rise and slow the economy down. They have not been all that vigilant. I think you are right, the Central Banks have been far more important, certainly since 2008 than the bond digital antes in determining Interest Rates and the shape of the yield curve. Jonathan how does that complicate the situation when you look at assets in europe, where if you look at the situation with the general should be nowhere near the levels they are now. We are saying that now. 12 years ago, the ecb was lowering Interest Rates with quantitative easing and impose negative Interest Rates. Are economy there was sluggish, but the past year or so, it has caught on strongly, and so now it looks as though the ecb should be backing off just the way the fed has started to back off. Jonathan one of the worst centralbank decisions in the eyes of many people, with rate move at the ecb, an ugly at a time when the economy was rolling over. He was being vigilant about inflation. Do think the institutions have been conditioned by that . At this point, that is history. He is gone, and mario draghi came in and it did not take him long to say we will do whatever it takes to keep the euro together, and he has succeeded in doing that. These two men gloom scenario said the central bank is just kicking the can down the road. So far, so good. Maybe there is not an end to this end game. Maybe they are kicking down the road has worked, and life goes on. David if that is true, why is that true . Inflation, growth, things like that, what structurally has cause that . Everyonee of you, me, around this table, hardworking americans, europeans, asians, and we read the headlines, trump, fiscal policy, washington, health care, but meanwhile, the rest of us are doing the best we can. I keep looking at the u. S. Economy and say look out well we have done look how well we have done despite washington. Even europe despite all of their policies. I think you are right. We can go back historically and say Central Banks made some mistakes. I dont know that you are i would have avoided those mistakes. It is a tough job, but it is central monetary planning. It is not a free market when it comes to the credit markets. Playingen you wind up this, centralbank convergences what you are describing what is the trade for that . In terms of the dollar, the peakedhas privately and we are seeing the euro strengthening. The yen may be a different story. I think it will be a stronger euro. Alix great to see you. Thank you for joining us. Dont miss our special coverage of the french president ial Election Results on sunday on Bloomberg Television and radio. Terminalve a bloomberg. Check out tv you can watch us online and click on charts and graphics. You can ask us a question and we will do so in the segment. This is bloomberg. David this is bloomberg. If you want to read on commercial real estate, the company to ask is as so green sl green. Joining us is the ceo mark holiday. One of the things we hear is that when it comes to residential space in new york, it is over built and soft. . What is the situation with commercial real estate it is much different. It is a different story driven by strong fundamentals in new york city right now. Placeentals have been in for the past 56 years, a lot of privatesector job growth in our market, a lot of that is office using. That is what we care about most, 45 millionemand square feet of gross demand a year is keeping rents in new york rising and keeping buildings full. Alix what are the metrics you look at, occupancy rates . Cost per square foot, but also the rent levels. Rent levels are key. Those rent levels are for us last year of 28 samestore. Date, 21 percent, indicative of a healthy market sector. Rents, so samestore increases. David what about art and sea levels . Levels . Ancy we reached a high as a public company. The occupancy in her portfolio was 97 . Alix is there any hesitancy because they dont know what tax reform will be . Contrary, when the notion of tax reform got put on andtable in november, obviously more recently, i think businesses were excited about morerospects of having discretionary cash to invest, to say, to spend in the city on business expansion, growth, and combined with regulatory reform, which seems to be coming in some shape or form, the tubing early the think comes Financial Sector in new york which makes up one third of total demand, more ambitious and comfort about the prospects of growth. Stories about companies closing, the rents are too high, arent they . Isnt that the story here . When they look at their real estate portfolio and have to cut back, doesnt price have to adjust that new reality in new york . In retail. Switching from office to retail. I think there is a different story to tell in the kind of retail we deal with, high street urban retail. There is a scarcity of that product. Retail is constantly evolving and changing, so that is nothing new. That is the retail segment. Pasti look passed over the four months, we have signed record deals with nike, line friends, and a deal with nordstroms. Marketre recent deals at setting rents, so rents have skyrocketed. There is no question they have local golf, but compared to what you read about in here about in the rest of the general economy, strip malls, destination most, a much different story and retail is balance within our portfolio. Alix are you going to buy more Retail Properties . And 2016. In 2015 we fully expect expect to . Jonathan it is the second act and an effort to repeal obamacare. Aoductivity falls the most in year as growth in the United States weekend. The fed keeps the june rate hike on the table. The commodity market continues to believe, brent crude below 50 for the First Time Since march. From new york city, good morning, good morning. 30 minutes to the open in new york. You are watching bloomberg daybreak. Up. 2 onrmer come the dow and s p 500. Switch up the board, risk on , 2. 3with yields higher five, dollaryen grinding higher for a sixth straight session. We are up. 1 . That is the story across assets. Rally, youisk on dont feel it in commodities or facebook. Warnings about slower ad growth, but the Investment Community did not care. Multiple analyst upgrades today. Q1 sales were up 49 . That overshadowed any kind of warning on slowing ad growth. Tesla also taking a minor hit premarket, reporting a wider loss. Revenue did beat. Revenue did beat. Elon musk says model three output is on schedule for late 2017. Revenue growth coming in at 3. 7 beating estimates come a better sales and the u. K. , also earnings experts are up 12 , but the cfo thinks brazil will get better. 4. 4 ,ales light, down by the budweiser brand still struggling stateside. It first you dont succeed, try and try again. Speaker ryan brings a new bill to repeal and replace obamacare to a vote in the house. Here to take us through this and handicap the likelihood is our chief washington correspondent Kevin Cirilli what are the chances . I asked speaker ryan. He declined comment. Top aides suggest they do have enough votes. I put this question earlier to representative mark meadows. Believesirectly he Health Care Reform will pass the house of representatives later today. Some timeicipating between noon and 2 00 p. M. When the vote will come. Earlier, President Trump tweaking out that at no will leave the obamacare market place in virginia because of the aca and the way it is set up. Now all eyes turning to the senate. It will look significantly dinner once the moderate Upper Chamber known as the senate gets its hands on it. Last month when they tried and failed, it wears perceived as speaker runs package. David how much has the white house been involved in this together version . Very involved. I spoke with several senior officials over the past couple of days. They have told me that reince hasious Reince Priebus been directly working with lawmakers in tangent with President Trump himself working the phones all week to muster enough votes. Right now they anticipate at minimum 12 republican no votes. Last night, Vice President pence, who candidly lawmakers prefer to work with, was also on capitol hill meeting with republicans to wrangle enough votes, but the Vice President given his background as a former lawmaker himself seemingly understand the dynamics of bit them Senior Administration officials. David i love it when you give us a whip count. Joining us now, our guests. I want to begin with you and ask you the following, we have had the attempt at a vote before and a series of investors around this table saying how critical it was. It doesnt feel that way this time around, is that accurate to say . A lot of the positive trends in the markets were happening before the election. When you look back to the fall of last year, we had a Global Recovery going on around the world, and that was going on with the absence of political action. Thatuick thing i will say is confirming that recovery in the First Quarter is earnings. The s p 500 come 80 through reporting season, 14 yearoveryear earnings rope, and more notably, 7 sales growth year over year. Why that is important, the s p is a largecap index and is reflective of Global Trends. 30 of sales come from overseas comes to the fact we are seeing that higher sales growth is reflecting that Global Recovery. Jonathan the market is thirsty for this vote to go through. Im wondering if you can tell us where the pressure is coming from and what is the rush . The pressure is coming through fundamentally from the members themselves, as well as the president. There are two reasons why they want to do the aca reform before tax reform. First, there are strains in the system and they need to be asked if people will maintain coverage. The second has to do with tax reform. If the tax structure is gotten rid of, it is anticipated that the budget baseline is lowered by as much as 1 trillion, and if that is the case, you can achieve more aggressive tax reform. One of my thoughts us morning for investors was simply was that this is good news for tax reform because it keeps it on schedule as a late 2017 at earliest event. We all know that focuses on tax reform. Almost . 20 of every dollar spent in the United States is spent on health care. This is a must of fifth of our economy. Maybe we dont know what the real consequences are, but potentially couldnt this affect our economy profoundly . I think so. That is an upside scenario. Morgan stanley anticipates the tax cuts at the beginning of 2018, so that will be positive for Consumer Spending, where we have seen a lull, and positive capex cycle. Alix what kind of good days . Is it just getting it done . Especially the concessions we had to see in the Health Care Bill and cr . It is getting it done. Thats the fundamental benefit for tax reform. If you consider the windows congress has to achieve things, and right now the earliest tax reform can come up is in the mid to late fall timeframe. Acthave the Affordable Care , reforms in the house today crowding out other things. That is good news for tax reform timing. Alix from a market perceptive, ofsnt matter if it is 28 15 , just matters republicans in the house can get together . It matters greatly. Has anything aca to do with 28 or 15 . Our call has never been 28 is likely to happen. Our call is 20 on Corporate Tax reform. That has been confirmed by a number of leaders. I think the house ways and Means Committee chairman brady even does not cut it or restore the competitiveness the United States needs worldwide, so they are clearly going for a much more aggressive tax reform than a number like 28 . Jonathan i understand the importance of the sequence, but to davids point, health care is 1 6 of this economy and has not been scored. Can you tell me that is a mistake or not . Strategy toave this taxes to speaker ryan and his leadership team. What i will say is that they have been trying to get this done for forfive months now. They have always said that when they have the votes they would proceed, and they are doing that. The second point i made for investors this morning is relevant in which is no one should think that whatever the house bill ins of being today will be the final version. What you will see from the senate is a more centrist version that is probably more inclusive and firmer for people with preexisting conditions, and that is going to be much closer to the final bill and something i think the white house will probably support. This has been a difficult process going through and will continue to be a difficult process, but the bottom line is they are moving on it. Jonathan always great to catch up with you, sir. Coming up tomorrow is the countdown to pay rolls friday with an allstar lineup right here on bloomberg tv. All that. Cting to from new york, counting you down to the market open, you are watching bloomberg. Alix the data drop showed a mixed picture, jobless claims that a threeweek low, but weaker activity in the First Quarter, down. 6 , pulling the most in the First Quarter any. Ear as labor costs rise got the weaker q1 gdp print, then the fed saying it is transitory. Then you get this data today. How do you understand that looking toward . This data is noisy. It moves around and fluctuates day to day, month to month in q2, we are seeing 3 to 3. 5 growth rebound. In the First Quarter, we had a slow tax refund season. Use salt law and retail data take a plunge. You are starting to see that normalize. You will see this snap back in the Economic Data this quarter. Alix labor costs rising 3 in the First Quarter, are we seeing wage pressures starting to exert pressure on inflation, or is the rise Something Different . Wage growth is one part. It is also the commodity picture, oil up 100 year over year as having an impact on inflation. In, 3 weightlow growth yearoveryear, which is high. Jonathan productivity low and capex a significant issue come up where and the economy will we see serious issues around capacity constraints . Where will it be . 76 ,pacity utilization is so you can make the case you need at that which more capacity. Corporations have been operating extremely lean and profitable. Today, we are finally starting to see that topline Revenue Growth, which is a function of Global Growth accelerating. Where everyone is focused on geopolitics and trump policy, but we are seeing a Global Economy driven by europe and emerging economies. Jonathan what if the fed is wrong . Our base case is the fed tightens in june in september, but as we talked about, the fed has been tightening conditions since it with qe in october 2013, so the economy and the world has going on just fine. Jonathan do you believe this is tightening . The markets not typing at all. You still think this is tightening . It is tightening in the conventional sense. They are raising rates and we are seeing on the margin credit indicators, loan growth on the commercial real estate site or the auto side, they are starting are seeing so you some tightening, critically those areas in the economy that experience a deshaped recovery. Vshaped recovery. David ultimately the growth has to come from the domestic economy. The consumer is 70 are that is an excellent point in the Global Trends are more and packed full to economies that export and industrial base. The u. S. Is 70 consumer, more domestically oriented. When you look at u. S. Companies, the s p 500 is a global index with dirty percent sales coming from overseas, so the Global Trends are more and packed earnings than for our economy. Depends on which company juppe. If you look the overall u. S. Economy, either indications that the consumer is slowing down in the United States . We have a slowdown in the consumer in the first order. I think that will be temporary. There are two variables that will change that. We will see the tax refund issue normal allies and number two, policy. Tax ratespersonal cuts, that will be positive for Consumer Spending going forward. This leading up to jobs, which we get in 23 hours. What is your call . Probably 100,000 plus jobs growth, pretty decent solid gains going forward, but we did peak in terms the rate of change over a year ago, so we are later in cycle for sure. Alix with a market look . At that is a good thing or bad thing . I think the market is focused on earnings and sales growth. Alix really . I think it is an issue for sure, but you look at what is going on in earnings and sales, worsening the best earnings rate in five years. Ceos, if you talk to most they say regulations are a real problem. You deregulate, we would do better. Increased Earnings Growth from deregulation . Sectors will see decent earnings drivers, particular you financial and energy. Those of the areas most burned by the regulatory side. That being said, where we see positive economic loses from small businesses. Small business formation down 30 . That is reflection of onerous regulations and high taxes, so thats where we could see the drive. David you will be staying with us. Coming up, we talked to senator orrin hatch of utah. He will be at the center of those attempts to Reform Health care and the tax code. Live from new york, this is bloomberg. Jonathan from new york city, you are watching bloomberg. Nine minutes away from the with theell, risk on exception of one. Futures up by 40 points,. 2 , s p 500 up marginally, but a decent rally in europe, the dax up. 7 . People fading the Marine Le Pen tail risk. A strong europe, approaching highs for 2017. Youve seen this reflected in the japanese yen, a weaker yen, and the bond market, bunds backing up to almost 40 basis points, incredibly low. The high this year is 50 basis points, so yields creeping higher encore government bonds, but treasuries as well. I look at the height story, onde rolling over, now 2. 5 self 50. Is alix the reason you will not see correlation is because there is not extra cash in the market. That is something that is having a substantial impact in the last correlation. Jonathan i wonder if you can maintain that bearish view on treasuries if you dont have a bullish commodities market. How does that play into the reflation trade story, and the bearish case for treasuries . Alix lets ask the guy. He is here. Woody think about the discussion . Shorth commodities and treasuries . Areeep in mind there dramatic changes going on in the oil market. Opec said he will be a cartel again. They have been making some changes. There are still questions if they will stick with changes in how compliant they will be. Will nonopec members get involved . So the market is paying attention to these parables. , rebar, copper, nickel getting hammered as well. Why isnt that in your opinion on brent and equities . Thatlot of that is not surprising given that china has been pumping the brakes on its stimulus. When you look at what they have done going back a year and a half, it is the opposite. You saw china aggressive in terms of real estate, stimulus and other categories, and today they are slowing down, so the fact that iron ore and metals ve rolled over is not surprising. David if it is no longer a marker for Global Growth, what are the markers for Global Growth . Focused on to be fundamental drivers, the consumer in the u. S. , export growth out of europe and how that trickles down. David trade numbers are critical . Particularly outside in the u. S. As it relates to emerging economies. We are seeing trade at a 45year high, that is impactful to europe and the emerging world. Alix what we are seeing in the ix, you wind up being so negative that the shorts have rolled up because there is no more shorting to be done because we are at a 10 year low. Is this the right time to buy hedges because of some external risks . We will continue to see the vix stable, but we will see some upside prices correlated to other markets. In later stated stages, you can see upside in the market along with higher volatility, and that will be the case in this cycle. Alix you see correlations picking up . We dont. We see them lower. Think people will reward companies on fundamentals, and this late in the cycle is the time when active management in terms of the dispersion of experience across company execution, Balance Sheet allocation, that is where you see that variety in experience and outcomes. Jonathan great to have you with us on the program. From new york city, viewers worldwide, a fascinating session emerging out there. Futures up, up. 2 on the dow, three points on the s p 500. The gains muted in london. In the u. S. , out performance. Stocks ripping, higher, almost up 100 points on the dax. The banks doing well as we fade that Marine Le Pen tail risk and the second round of the french election. You see this expressed in the dollareuro trade as well. Approaching a 2017 high. The bond market as the well, up by four basis points on treasuries to 2. 36 , bunds on offer as well. Brent. Over, sub 50 on you are watching bloomberg. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. , i aman from new york jonathan ferro. Lets go through the action, futures up 39 on the dow. Just over. 100 s and p. We have been in a tight fixed basis point range through most of the week. We continue to break out of that through the morning. Weaker, down by. 1. In the commodity market, you bring up the screen on the bloomberg, the line hit red. It is up 50 on brent. Lets cross over to the commodity expert, alix steel. Alix the crude spillover is not echoing what we see in the markets. The dow was up by 26. The nasdaq is relatively flat, so is the s p 500. You would have seen futures rollover and that would penetrate throughout the equity markets but we are not seeing that relationship get. In europe, the dax at a record high, the cac at its best level ince 2008, so mixed messages terms of ecodata but that is not weighing on markets. Productivity in the First Quarter fell the most in a year. That does not go well in terms of unit labor cost. Focus turns to the potential health care votes. Reacte most likely to after aca is removed and hospitals could fall. Especially medicaid dependent stocks like molina and they may react in the same way. They stand to lose is this if there is a lot of change in the health care market, so watch these guys getting hit the hard into the open. We have been talking about what has been driving the stocks. We are looking at the risks in europe. , at, take a look correlation, the s and p implied correlation. Over the past year, it peaked at the end of june in last year and has been grinding a lot lower. It means that macro issue not reflecting in the markets and stock ticking should do better, which is why they are talking about the underlying earnings of a sale speed of double digits. Ui. Than two joining us around the table, Bloomberg Stock reporter oliver renick. Into that alve little bit. Crude is lower, but treasury yields are higher on the session this morning. It is not something that would have a lot of last year. Her stocks, the same thing. The readout from the commodity market not clear. What is going on . Oliver i was listening to the program before when you talked about the correlation of oil and stocks. Within the market, we have seen higher rates of dispersion and lower rates of correlation, which would be good for that stock environment. That is dating a little bit. You have a divorce on what is happening in equities and oil. But also, a divorce between the equity market and if you look at economic surprise index that has been rolling over, those were up and only until two months ago. The treasury side and the bond side is interesting because i think there is still hope the trump trade will continue. As you see yields move higher and the fed saying they will go in june, and they are hinting that, i think you can have an environment where yields move higher and stocks hold well. I do not think that is unreasonable, especially when you look at so many people are banking on banks and financial companies. Jonathan talk to me about the emotion of the market and really are as far as d. C. Is regarded . They are pretty negative. I travel a lot around the country and the song remains the same. People are pretty negative and concern in terms of what we will get out of this administration. Not just domestic but global issues. Testing missiles every weekend month, some people are focused on those fears. Jonathan a lot of that risk was on the japanese yen, gone, wounds the bunds for that matter, as well. The fears around france no longer there. The fears in north korea, where the ever there in the market in a significant way . All of her that is a hard immense a price anything around. That is why so many people had trouble politicizing these geopolitical events pricing these geopolitical events. Hard eventthat is a to price anything around. That is why some of the people had trouble pricing these geopolitical events. It would be a hurdle to get out of the way. Closer to june and getting that clarity from them and how they feel about the economy is important. Jonathan the situation at the moment is what is happening with crude. We had a series of investors come on the program and they talk about earnings. Talk to me about how important the earnings of Energy Companies will be in the contribution to the top line number throughout the rest of this year . Is a threat to that the commodity market continuing to bleed through 2017 . Dan mathematically, the contribution is not big. That it ist so bad very small. It was about mid to singledigit is. Alix and they are doing better than when oil was 36. Oliver energy is basically in, which means it is so cute because of the comps, it is hard to calculate trade sales growth is up 33 . With the companys rebounding, it is good for the market and i think investors that were worried about this 20142015 situation on oil and whether it would last years. In terms of moving index forward, Energy Stocks raleigh rally, it does not do much with index level. Rallythey are trying to the fact that you will see this. Do you feel the markets have rerated to that or is the shakeout enough . Downthe Energy Sector is 10 in the market is up 6. 7 and the rest of every of the world is up mid to high single digits. I think Energy Stocks have discovered a lot of this pain. Alix where is the value . People say energy. Do you agree . All of the i think the quality could be think they much better Downside Protection if we do see another leg down and i think they will produce a the commodity rebounds. Today, are key points in terms of positioning is looking at stock drivers. Last year was the year to make gold sector bets. The reason was we saw a big disconnect in terms of skepticism overvalued because we came through this cyclical downturn and nobody believed it. That was the time to make bold sector benefits and to fade aggressive valuations in sectors like utilities. We went to zero utilities waiting in our portfolios in the middle of last year. This year, we are seeing more brent. We saw technology, health care rebound, we saw materials and industrials do well. We are much more focused on individual stocks this year. Jonathan dan skelly and oliver renick, thank you. Stocks rolling over a little bit in the United States. The gains in europe not following through to gains in the United States. The biggest loser there is facebook. Alix facebook, Revenue Growth. Ill fall is there warning that overshadowed the news. Facebook First Quarter sales the estimates and the monthly user number rose. Joining us from los angeles is a security analyst. At that slower at growth warning, too, why is that . They won every single time they open their mouths that ad revenue is growing nicely. The driver is average revenue per user and that was close to 40 in the u. S. It will keep growing here and it will grow much more to radically worldwide. They are adding a ton of new members. Thego are getting phones in developing world and they are accessing facebook. I think they grow for a long time and i think they monetize instagram. They are doing smart things with instagram that are defensive, like insta graham stories, to make sure none of us instagram stories, to make sure we dont switch to snapchat. They will monetize that. Growthve had 30 to 40 and it will slow to the high 20s. There is nothing wrong with that and the stock is not trading at a huge multiple. Alix because it has to be how much of a wait and see period koreans of that . Michael for snapchat . For instagram. Michael it will be a wild. It is more getting people to do something on whatsapp. Facebook like, this same type of user and activity, the same type of feed stories, so i think instgram is monetizing rapidly. 50 will probably see 10 to Revenue Growth. How will we know when messenger and whatsapp cake in because they are not freaking grab numbers separately, somatic had to keep track of how they are monetized . Michael that is the problem with the market in general. Better companies tend to give you better information and we just guess, so you are never going to get that breakout unless the sec changes the rules and requires them to break it up separately. If you use instagram, you will see more ads. If you use messenger and whatsapp, messenger is not monetizing at all. It will take a while to develop. Asia, and we chat in messengers has not even begun to try, so you will not know until you see it in your be. Jonathan thank you for joining. This is what it means for the markets 11 minutes into the session, the nasdaq is softer, down about. 1. Everything seems to be treading water in the United States. From york, you are watching bloomberg. Emma i am in the hewlettpackard enterprise gringo. Coming up on friday, gross reacting to the jobs report. Enterprise green room. Coming up on friday, bill gross reacting to the jobs report. This is bloomberg. David i am david westin. With health care coming up for a vote in the house and tax reform, all roads are pointing to the senate. A man who will play a pivotal role is senator orrin hatch of utah. He is also the dean of Senate Republicans and joins us. Welcome. Good to have you. Sen. Hatch thank you for your introduction. David no more than you deserve. Lets start with health care the for turning to tax reform before tax reform. What is likely to happen from your side in the senate if a bill like what is being proposed makes it over there . What will it look like when you are done with it . Hope to send it over to the senate. There may have to be some tweaks to it and changes but i hope that our Senate Colleagues will realize it has been difficult for the house members. We should keep that in mind. David we had one of your former colleagues on the program earlier and he said given the 60 vote rule that he believes would apply to this, it will have to be a more moderate version you could do any to get democrats on board for it is that fair . Sen. Hatch that is fair but unlikely we will get democrats on board. So far, they have been opposed to almost everything. I do not know what the ratio errors, but theres not a lot of indication they will help us pass anything. They are mad that having lost the president ial election and they do not like President Trump, although, i think they should. He is reaching out to them. It is going to be tough no matter what. David do you agree you need to get to 60 votes . Sen. Hatch no. Well, that may be the final result, but i think there is a chance we might be able to do it in reconciliation. We have 51 votes. David the connection between one, theat least proposal in the house would save money for the u. S. Government that might be used for tax reform. How important is it you get the savings out of the help to revision to do it you want on tax reform . Sen. Hatch really important because tax reform will be a very important thing for us to do. We are ready to go on it, but there are 1000 different ideas on what tax reform could amount to. David how realistic is it for us to expect something fundamental in terms of redoing the tax code . The last time it was done was 1986. You know what was going on in capitol hill. Is it possible to get that tax reform through congress these days . Sen. Hatch i think it is. The president has been reaching out to the democrats. I hope they will reach back to him, and they hope they will work with us. Everybody in this senate and i think the house knows we need to do tax reform. We need to do it across the board so we can get this country a chance to propel itself forward and get us moving again. David you have said that there are two basic principles you and to follow, progrowth sophistication. On progrowth, in order to get growth going to tax reform, how important is it be revenue neutral so we do not run up the deficit . Sen. Hatch i am not sure it is crucial it remain neutral because i think if we can cut taxes in an appropriate way, actually, it would move the economy forward. Alan be more concerned about how you can get the economy to move forward and grow then whether or not we meet the budget neutrality. That is obviously a goal we have, but i am willing to go beyond that golub he can find a way go beyond that goal if we can find a way to it increases our ability to exist as a nation and the congress to things we think we should accomplish. David we have an outline coming out of the white house about what tax of four might look like in one of the specifics as to cut corporate rates to 15 . Is that level important or could 20 be enough to get the growth going you want . Sen. Hatch i would like to get it down to 15 . I think the president is right on that. If we could do that, a lot of these corporations would come back to america and we would get a lot more money coming into the budget then we have right now. I think the president is right. You are right, too, it may only be able to get down to 20 , but that would be a change compared to the 35 we have, which is the highest Corporate Tax rate in the organized world. It has been killing our country competitively for a long time. We have to get rid of it. David the second principle is simplification and the white house in their outline talked about addressing things like deductions and exemptions. What sorts of things are on the table . For example, interest deductibility, is that on the table . Sen. Hatch they talk like it will be, but i think it will be tough to do away with interest deductibility. People are used to it and that most everybody is borrowing it at this point. Some are borrowing in big ways. I think that is going to be on the table but i think it will difficult to get rid of that. There are other ways, other things we can work on that i think might just be as efficient and good. David what about carried interest because that was talked about on the campaign trail, not in the outline, but then i saw Reince Priebus said the president once to limit carried interest sen. Hatch , where are you on that . Sen. Hatch i have a rough where are you on that . Sen. Hatch i have a rough time on that. I will try to support the president , but all of these issues are tough issues because they involve all kinds of constituencies and we will have to look at them and see what is the art of the doable and do what we think is in the best interest of the country in the process. I hope we can get that done. It will take bipartisan effort to do it area if there is a command effort to do it. If there is a committee that can do a bipartisan job, and has been the finance committee and the senate, but even there, we are having trouble for the first time in many years. David thank you, senator hatch. He is the chairman of the finance committee and from utah. Alix check out to be go, watches tv , watch us online, click tv on the terminal. If you missed anything, you can rewatch. This is bloomberg. Alix we have stocks rolling over a bit and commodities taking it on the chin. You have gold suffering and oil front and center, brand falling to a fivemonth low, under 50 a barrel. Javier. Us is what is going on . It is the reporting season of shale producers in the u. S. It is surprising to the upside and the message indicates they will not only to leave with 50 oil but to increase production. I think that is what is behind the selloff today. We moved below the 200 day average this week and that is forcing speculators to get out of the market. Alix what does this mean for opec . And bigy look at shale oil comfortable at 50 a barrel, does that put them in more of a predicament now that crude is at 46 . Opec isin one way, meeting on may the 25th and they need to roll over the Production Cut into the second half of the avoid oil is to prices going to 40. The countries in opec cannot afford 40 oil. They are beginning to realize that the Production Cuts used by the rivals continue increasing their production. What opec can do . At some point, the question is whether the saudi oil , maybe his idea, he may not be back because he led the ministry of saudi arabia years ago, but maybe his idea comes back in opec goes back to defend the market shares. I do not think that will happen in may, but it is scenario to consider. Alix the story in the market a few weeks ago was an opec cut was priced in fully. Is it getting priced out now . Cut r i think the continues to price in i think the cut continues to price in. We have seen significant production increases over the last few weeks. There was some skepticism on the market where statistics were unreliable. We were depending on weekly numbers revised and some investors were thinking maybe weekly numbers are overestimating the increase in u. S. Production. Now, we have monthly numbers until february and so far, they are cooperating and there is no more excuse to say, the numbers are wrong. It is just that it is happening, u. S. Shale production is increasing. Jonathan how the glass, too javier, thank you. That wraps up bloomberg daybreak. 26 minutes into the session. A muted session in the United States with action happening in europe. From new york, i am vonnie quinn. Mark welcome to bloomberg markets. Vonnie from new york to london this hour and cover stories out of mexico city, paris, and washington, d. C. , westories we are following begin with breaking news on the u. S. Economy. A slew of data out this morning. Co factory orders for the month of march, a bit of a mess. The survey had called for factory orders to grow month over month, but down from 1 federer. Were looking at 2 10 of 1 . A bit of a miss for factory orders, perhaps defying the recent strengthening conditions. We also have the final reading for durable goods for the month of march. It came in slightly higher. It was