Secretary wilber ross are scheduled to meet in washington. Topic is trade. Cyberattacks. The countries, 200,000 the weekend. Other about who he was hit . We had people from Healthcare Telecom and Car Manufacturers manufacturers. In terms of france we had car to shut downad production at a number of plants this. To mitigate theres a disruption in germany on the trains and Telecom Companies reported some disruption in their services. Whenever a hospital gets thats a serious business. How sophisticated was this . Take patch out in march and put it on your microsoft, it fine. Be i think it wasnt too hard these people to mitigate once they were affected. Pretty easy to have taken some precautions that meant you were not going to be affected by this. Saw a number of companies that had not taken those precautions. Surprising. In term of sophistication of most people think it was not too sophisticated. We know thatlf, as the u. S. Oped by National Security agency. Anybody could use that tool to attacks. N one of these blame gamesing the here . Is it the n. S. A. Is it microsoft for not servicing the older platforms . Is it the companies for not keeping their systems update. The blame has to lie with companies themselves who did not update their system, or did not pay microsoft for continued older windowse xp. They seem most to blame. You did have over the weekend microsoft write a post which he blame on the n. S. A. For stockpiling these hacker tools have a large you store of these. Theyre going to get out and use them in nefarious purpose. Microsoft itself, some people them. Inting fingers at they should have updated everybody for free even if they older operating system. They did put a patch out on this ago. Onths they seem to have taken proactive steps. Its mostly the companies didnt implement the patch. Thank you very much. Joining us on. Loomberg news Manufacturing Service company. Joining them together. That mean for earnings for Thermo Fisher. Will adjusted by 30ers. Int total number coming 7. 2 billion. Cyberattacks as. Arc chandler i want to start with you on the brief investor look. Care about things like these when you read them on the weekend . View . T affect your probably not. Its important to follow these things. Theink as far as what drive capital markets, i tend not to deals. F major following the oil story, following the disappointment with the retail sales and the cpi end of last week. These stories are more disruptive. Takes more noise as the underlying trend. More noise and signal. Of what this business would mean. On the one hand, you have the fairly quickly. It doesnt create incentive for pournies who wasnt to millions of dollars into cybersecurity. I think that the you mentioned the kill switch. Thats an interesting thing. That was something that was put the malware with the intention of malware avoid the analyzed. When it was the version without the kill switch came out right away. The malware not particularly actions hadd inits effect. Mendous is it the everse . Sophisticatednot and smart. Does this mean almost anybody in their garage can do something that can really disrupt things around the world . Disturbingits very that something had such an impact. Imagine if really hackers who did not have the same mistakes these made, were tos build something the effect that have. We maybe seeing a minor wave be coming in seriously later. Do we understand the hackers . N behind these is a mass criminal organization . Group of kids in a garage executing this kind of thing . Guess somewhere in between those two extremes. Clearly they were trying to make money. Were asking for 300 for every computer that was affected. I read estimates theyve made far. 26,000 so its pretty astounding when i think about how many billions of dollars worth of damage it caused by someone in order for them to make 26,000. Professor, what industries and sectors are most vulnerable . The Healthcare Industry. I think there are several reasons for that. That theem is Healthcare Industry is a bit slower in adopting security technology. Their budget tend to be in the low Single Digits for cybersecurity. Look the financial to spend they tend fie10to 20 . One where industry is you have people coming in and want to be treated and you have criminal impact. If youre going to attack someone and you want to have a attacking the healthcare sector is one way to do that. Hasnthealthcare sector invested much in cybersecurity. This be a benefit . Theyre using things like paper and pen . Unfortunately. Theyre moving away from not movedunately, they have away from paper and pen. They are using things like windows xp which is more than a decades old. Many of these systems are not actually being attacked by the system. Targeting your this particular attack did target those operating systems. They havent been supported much by microsoft. Even though they maybe patching newer Window Systems, older Window Systems dont have to apply. R them microsoft issued an emergency old xp systems that does prevent this attack. As long as the healthcare sector use very old to systems, theyre going to find themselves in trouble when targets them. You followed the currency market. Bitcoin had a tremendous run throughout the 2017. What does this mean for the future of bitcoin when it gets associated with criminal activities . Just becausesue, somebody has a value, doesnt mean its money. Working with some other people about the real test for me would be a country willing to accept bitcoin as tax payments. We come up with definitions for money. The hardest one can you pay your taxes . Which is part of the origins of money. Can you pay your taxes with bitcoins. Far you cant. I think to talk about, its too too volatile. The problem too, we talk about float. And free people aret lot of hoarding them and not trading them. Sense. S that denies the Critical Mass ofded to make a means exchange. The more you hoard it, the less networkingill have effect. Coming up on this program, income, will be joining us for full hour in 50 minutes for from new york city, youre watching bloomberg. China is fading with retail asset. N fixed rising only 6. 5 in april from a 7. 6 inlier compared to march. Joining us from hong kong is chief agent. Whats the message that comes last 24 data in the hours . Biggestorld second economy has slowed down. Missed estimates but downs. Rable slow it goes to story, perhaps 1st quarter growth has been the peek year. With china slowing down, thats not a great thing for the world economy. Strings over in china, really get a hold some of the leverage. Pushing up bonds yields in a significant way. Market fallouthe together with the data and message for investors outside of needs to take note of this. The underlying message is theres still something of disconnect what were seeing. Betweend quite a jolt bond and stock market. Time, the same robust. Still remains the real estate sector is holding up. Factory prices remains positive. Story something of a slow down rather than a slump. The disconnect between market and economy remains in tact for now. What do these april numbers tell us about the rest of the year . Particularly in light of that coming up in october . Thehis is where we get to crux. You can sit back and say the down andoint to a slow activity. The credit data wouldnt tell you that. We know its a core priority for them. It came from president xi himself. Pivotal change in china. Like any economy in the world, government will deliberately slow economy down too much. Even if activity slows down and reign in some of the risks and defaults, the economy will meet target. Growth the question lot of people have, do they have control over if. Housing praises tell prices tell us . Quiteyre holding up well. They cop to defy expectation of crash. Expected they might have a wider Ripple Effect on the rest of the economy. That didnt quite play out. To get a grip quite well. Right here and right now, china is in charge to some extent. Out. Till has to play with the fed and dollar. That would put pressure on flows. That could be a significant game changer for china. To give us his thought, well back in Marc Chandler. Were very preoccupied with much worldwideow by china . Ven weve seen the market become coupled from china. Chinese had the worst performing world. Arkets in the i think the real story is how much the market is watching china but not doing anything it. T capital outflows have slowed. Traction in the chinese and foreign Asset Managers now. We have to wait until june that big hurdle were watching. Real question becomes, does the global synchronized growth story anyway . Its tied through the commodity channel. Oil. O much through china biggest import of Oil Surpasses the u. S. Which affects the australia dollar, new zealand, canada south africa. We see it through that channel. Now. Seem immune to the major parts of the world economy. We saw installation and the bifurcated data. The weekend, president xi pledged 78 billion in financing. In order to get that done, china markets and capital accounts. The effect of that is the weaker data weve seen. That struggle that china is going to have to deal with. Goes to the hard watch they trying to achieve. They trying to pull off everything at the same time. Bottom line, no matter what headline we see having to with, they will not step away and allow the economy to slow too fast. Not going to step away and allow market volatiles weve away. They set out core target and priority like the one you year they will go long way achieving those. Changes on the front. L those are the kind of big external factors we should watch. Fascinatings me when we talk about china. The big difference how we talk u. S. I would put out a scenario of the u. S. Economy. Pointslk about the data states. He united when i bring up china, the beponse i get is they will okay, they can control the situation. Control the situation . Isthe idea is that china more of command economy. Think theres a healthy skepticism. Theres a skepticism towards how much you can have a economy. When they talk about leaving globalization and free market, much do you place on that rhetoric . The rhetoric is important. Offers a stark contrast treasury secretary mnuchin to distance himself from protectionism. High level of rhetoric propaganda. When u. S. And u. K. Takes a step back, other countries takes a step forward. Curran, thanknda you for joining us from hong kong. Chandler will be staying with us. Well hear from the man sheparding the tax through congress. Live from new york and from washington, this is bloomberg. This is bloomberg daybreak fisher agreed to buy pantheon. Is 7. 2 billion. Diagnostic and testing. Quipment an. Morgan agreed to buy Office Building in dublin. Finished. Ng isnt yet according to a person familiar willthe matter, the bank pay about millions of dollars for it. The bank is expected to relocate several thousand warks from the u. K. Thats your Bloomberg Business. There. If if negotiations go badly, they thousandseveral people. It could be in dublin. We dont know. You do when you try to put your kids in school for that . In italy this week, g7 finance chiefs wrapping up their three day meeting. Laying the ground work for the summit in two weeks time. Relationship with u. S. Counterparts steven mnuchin. Saying the u. S. Would do whats best for itself. Want to be protectionist, reserve our rights to be protectionist. Not free and fair. Great to have you with us. Talk to us about the environment talks. These g7 how well down this message from the United States goes to the italy. F likes of the u. K. How well received it is . Question ishe whats the message. If you talk to the other six ministers in the g7, they would tell you, were hitting roadblocks here because pushing for free trade and declaration against protectionism. Mnuchin. Lk to steve you, we dont believe theres free and fair trade. Too. Ve to see that the problem is, the Trump Administration really stuck on trade imbalances that they say. Stuck on the trade deficits that some of the other country and the surpluses. Marc chandler is that a good thing . I dont know. Comes tohe problem what do they immediate by fair trade and free trade. Supported the u. S. And fostered the wto, the world organization. The u. S. Does win cases. We win about 85 of cases we wto. To the whats interesting, mnuchin and u. S. Asying to cast revisionist power. Wto, theo, free trade, imf, world bank. The Trump Administration and mnuchin trying to cast u. S. As revisionist. We dont agree with this part this world. Our is whats throwing off allies what did they achieve . They did talk a lot about fundingurity and counterterrorism efforts. Thats where they spent most of the communique and what well hear about. Marc chandler you are speaking with us. Rick rieder weighing in on global growth. Happening in china and auto debt. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. From new york city, youre daybreak. Loomberg as we kick off a Fresh Trading week. Up about. 2 on the dow. Three week of gains followed by a bit of softer week last week. Week of losses on monday morning equities. In global the data point of last week seem be that weaker than expected core cpi. Up for apeople different trajectory for the rest of 2017. Yield lower over the last couple of days. Its meant a weaker dollar for days now the with the exception of dollar yen. Euro dollar high, cable rate higher. Again. Oach 110 all over companiesents and around the world have started to against upper hand unprecedented cyberattack. 200,000 computers were affected. Are back to normal after being paralyzed friday. Factories resumed operations. North korea warns new rocket Large Nuclear warhead. To test launchts yesterday. It could hit u. S. Forces on the of guam. The u. S. Ambassador nikki haley state ofhes in a. Aranoia saudi arabia and russia wants to extend Oil Production. Want to reduce global to average. Expressed our satisfaction with that has been largely achieved. Want to be ine we terms of reaching the five year average. Nationsand the other meet next week. Onehank you aig named one of managers in the business to become the new ceo this is seventh ceo that weve seen in aig since 2005. Bring some he can stability here after that higher costs andted claim quarters. S in seven joining us from london for javier the oil story is blas. To have the saudis and russia halfg out week and a before the official opec meeting is pretty staggering to me. To cuth they would have and how long to dent those inventories . At thehey continue current production level through the rest of the year and first of 2018, they are confident theyll be able to bring inventories down to five year arch. Same thing they said last year. Mber of six months well be able to do this. Now theyre saying we need do it. Nine to its all because of share production. Depends on what Oil Producers are able to do. Is quite skeptical on opec. Seeink the market like to more evidence. Six months,last u. S. Shares wiped half of opecs cuts. Much market share does opec and russia stand to lose to nine months . Next well see shell oil the next six to nine months. Be ther, this time could biggest enemy for opec weve seen. Libya production is also increasing so is nigeria. Libya, nigeriar and u. S. Shared production, you millionmore than barrels a day. Market share that russia and losing. Abia will be are there other market share issues . Fight between these two, the chinese share i find this interesting that it was announced in beijing. Was the significance of this . Its an indication that russia and saudi arabia are going to play along and theyre not going to tray to kill each other on the chinese market. Its aboutbe logistics. Need to meet ahead of of peck and these were the easy them were atoth of the same time. Theres a bit of message. It. Uld not over read me understand one thing. Whats in it for russia . Let opec get on with it . Saudi arabia need High Oil Prices to get the budget down. [indiscernible] thanks so much. Happening. T its down with us Marc Chandler us on set. Oil, 40,take a look at 60, whats your call on energy stock . Think we have seen a massive recovery in energy ofcks overall coming out that massive price cut. I do think that the ones that are still hear and ready to go a lot of upside any addition to the price. Praises. What we always want to think about what is the implication on broader economy on those Higher Energy prices. Biting into consumer wall. Well have to see how this plays out. Little skeptical that were going to see anything higher 55. Ficantly that would be a big move. Definitely for sure. And youree a deal seeing wti still below 50 marc, how does that feed into the inflation story . You have oil thats not going to 50 . Ble to sustain above we usually think of the u. S. Sensitiveate market to the oil through inflation. Were seeing that become coupled. The yield is fairly low. That 55 a barrel for oil. We still have its going to drive treasuries. Theyll see that again with the pce. Driving up u. S. Inflation has been a shelter. Those prices beginning to come off. Were likely to see lower core inflation, maybe lowest for the we get the pce. That will offset this raise of prices. How does that work from the feds point of view. Oil goes up, the other prices are not coming up. The fed really looking at the that intersection ability of sustain labor growth and inflation. One of the things we keep looking at, it is puzzlingly low now. Question is, are these transition mechanisms that we figured rules of law. Are they working differently days . Is there something new about the economy with labor mobility. The dotcom situation. Theres so much pressure on wages. You wonder if anything will flow through to labor. Upit doesnt end up showing in labor, eventually, you can look at core versus nominal. Actually matter that much. Ga thedont get that broader economy, it will be a problem. Downside torginal cpi. On the Market Reaction suggesting it was something else. Weaker. Ar is what was the big read from the data. Is it trajectory of things over months . Few theres inflation measures. Ofday we got University Michigan consumer confidence, where they have inflation long termor the inflation. Thats back to a cyclical low. U. S. Ook at the shape of yield curve. All these things pointing to a economy mightu. S. Not be getting the lift we thought. Anne, i want to come back to this question of the consumer. By of u. S. Economies driven the consumer. Is it rake that when oil prices go up, really the consumer does much . End when it came down, we did not see a big jump up in Consumer Spending . We did some research on that. Big mystery. Was a big puzzle. I guess the question we keep asking ourselves, we think about be putting risk capital to work. What changed a little bit in this economy. Its never always new. Some does seem different were exporting. Importing much. Point. Marc chandler and anne lester, both of them are staying with us. Week well be focusing on tax reform. At 1 30 on bloomberg market, ray lahood, former u. S. Transportation secretary. Hes going to be joining us here washington. And in this is bloomberg. She was hitting hard on the selling herself to the german electorate as force of world. Ty in the appreciate your time. Thank you very much for joining. The fronthave noticed page this weekend, just big buy europe. Ers its a crowded trade. Does it make a bad trade . Dont think so. I saw that headline, thinking weve been buying europe ourselves. Thats a unique position that weve got. Europe has done enormous amount this year. Up almost 17 year to date. Think it lagged so far behind the u. S. Although its come a long way, room to go. T more can you close the gap entirely . What kind of incentive youre looking for. Historically no. Looked lagged a bit. Inlook at where they are recovery, they are definitely behind us. E years confidence coming through. Its to us a much more market. Ve politics weighing on the big cause. Have the euro moved in line with that is this still face from the upside . Upside. Space to the i think that the big focus now ecbeally in june at the meeting. Speculationt of they will change its forward guidance. Earlybe buying assets next year as a Federal Reserve shrinks its balance sheet. Looks like to first time the futures market, first time speculatorsrs the are net long euros. They made the switch in a big way. They got some room to run here. I think the dollar comes back. Heres what i dont take a lookas you at the average survey, euro 3. 8 will finish about below where they finished on friday. Whats the catalyst . To seel continue incremental build in europe. I dont think its way. D in yet all the there are people you see the technicals is supportive. Buying. Ee more we are all talking about this and professional investors like us are long euros. I dont know that many investors are. Is there risk premium still in the euro . Is. T look like there not because of the politics this year. The story you guys covered was german election, which i agree is a bit of a surprise. That merkelthought would win come september. Remember what happened earlier populace where the almost won the presidency. Collapsed. Ernment is thats the next big hurdle. Populism has been defeated so far in europe. Likely defeated in germany. Not only inl risks austria. Waited on the sidelines, theres some big gains through europe the first five months. Need to worry about austria. Get your head around where we are in this nationalist wave that could be one of these assets that dissolve the globalization. We see any country in europe, we any to be attentive to country that take where is populace can win. Still very important. Youre positive on euro . Populisms a downside, a risk and european financials are the other. Woods . Y out the i think populism by far is about. T were worried that and brexit. There will be more factors that bubbles out of brexit in consequences i think the market nobody knows how this will work out. Uncertainty will be markets. A bit on the is one of the largest economies in europe. Its finally now getting going. Put a lid on it. What do you like the best in europe . France continuing to look very strong, germany is always a favorite. Back to your point on financials, we do think theyre broadly how the woods. Italy would be the one potential soft spot there as well. Great, thanks so much guys. You. Chandler, good to see anne lester of j. P. Morgan. Check out tv go, you can watch online and click on charts and graphics. This is bloomberg. Year. Was huge last language]ng foreign chinas reliance on imported oil is over 60 . Means that almost 300 million tons of crude oil every year. The u. S. Has very rich oil and gas resources. While china needs to diversify its imported supplies. American crude will certainly be one of our options as the u. S. Loosening its restrictions on oil export. Tois important for chain expand the natural gas ratio in primary energy risk from 6 to 10 to 15 percent in the next to ten years. Would you consider investing in u. S. Energy terminals . We are interested in in u. S. Lng projects. Now that america lifted lng. Ictions on if there are opportunities in building natural Gas Processing plants and transportation facilities, or investing in lng will definitely consider them. Withpc chairman speaking bloomberg. You have a ton of Companies Lined up to trigger lot of investments in lng. Theyre not waiting for the money. Direct waiting for the investment, theyre waiting for the demand. Theyre not waiting for the cash. Without that, it doesnt matter what china wants to do. What the United States wants. We have u. S. And china trade deal. Its not to allow them to invest in the capital structures. Thats what i want. Open question. They want to secure their supplies in a meaningful way. That a National Security issue. Oil. S more important for the question is demand and the money. The question for the next, up next here from new cio. Rick rieder blackrock from new york, counting down to the market open. This monday morning, futures are firmer. Up. 2 on the dow. 500 by as on the s s p tenth of one percent. Treasury markets stable. Up by a single bases point. A ten year. Youre watching bloomberg. Hackers take control of more than 200,000 computers in at countries. A global cyberattack exploits a internet. Treasury secretary Steve Mnuchin on trade, president g lays out a frame work for chinese globalization. From new york city, good morning morning, this is bloomberg daybreak im Jonathan Ferro. Markets this morning, futures firm. Snapping back up to a marginal losses. Treasury yields up a single bases points. Catching a big break. Newrance will announce its prime minster. Home buildereases sentiment. You get flows who is buying and selling u. S. Treasury. U. S. Commerce secretary wilber will meet in washington to discuss trade. Businesses and governments startinge world are off the week trying to assess the damage done by the cyberattack. To give us assessment and tell next, wewhat might be turn to jordan robertson. He is Bloomberg Technology reporter coming to us from washington d. C. What do we know about today . Any worse today . They come in the office and they turn on computers and they go down. Sure. I would say its almost better this week than it was last week. Thats the result of one cybersecurity researcher in the who effectively flipped the kill switch on this malware through a lot of research and luck. That means people are still getting infected and gettingtions are still infected today. That this mechanisms malware used to spread has been disabled. Attackers trying to the malware. In many ways, its been improved. If im a ceo, whats my first call to my i. T. Person . Dont have to worry about it . Do i say, we really got to get stick . The first call will be to i. T. Manager to say, if you deputy fix this over the weekend, youre fired. The thing that happened friday, is a wake up call. Its over used term. Friday was for installedwho hadnt this microsoft patch, which is available two months ago, theres some legitimate reasons that right away. Everything that happened on friday was a wake up call to any we got toer to say, fix those machines. The legitimate reason Many Organizations dont issue these patches, they run custom softwares. Machines. N cripple things like atm machines, equipment, police systems. All of these machines are critical and run critical functions. Theyre not updated often. Sometimes for good reasons. Over the weekend, everybody updated if they have the ability to. Unless if theyre running windows software. Whats fascinating about this reach. The extensive reach both geographically how it went across healthcare and automakers. How limited the upside for the risk takers. If you think about the hamilton of money they received ransom. Will that deter people from trying to do the same thing . Youre right. Of money theyve taken is a total bust. When you think about 40,000, to pay thebe enough guys who developed this malware and launchhe malware the attack. All that creation takes money and body. No way that 40 grand is enough. With that being said, the of this worm,re the fact that if one person in the organization opens this replicate it can easily. T your network thats attractive to people. One of the historical precedence is the worm. Which several years ago, it pcs aroundmillion the world. Those pcs that could have a fix. The fix was out there and people hadnt installed it. Upside potential large to these attackers. Their problem is, the cyber tourity community is on them. Theyre watching them. This is cat and mouse game thats happening now. I would say in many cases because of the attention to this gives the advantage to the defenders. Great stuff. Thanks so much for the reporting. Joining us now is Rick Rieder Blackrock ceo and adam meyer. The lastened over three days enough for companies to invest even more in cybersecurity . I hope so. The scale and scope of this theg and the fact that patch has been around for over a month now is certainly of people need to be paying attentions rick n your world, does this matter . Everything else in the world is incredible. In termswont matter of the broad market. It started develop more of around the world. You think about the world we live in today. Everything is at our fingertips terms of data. All the information flow. React when it comes significant, markets then all of a sudden reacts. Is in the new world that we live in. Great ne of the this is where the bulk of the money being spent . 100 across the entire industry. Is the crux what you do. Looking at the situation, blame game here microsoft, for not providing the servicing for the older, or is it the companies themselves for take responsibilities . Theres blood on everybodys hands when it comes to responsibility. The thing to focus on is making sure that people understand what stopneed to do in order to this from continuing. Theres vulnerable systems out there. To ensure that stops. Are, im a ceo, chance didnt learn how to code. Im in the from silicone valley. Assess im doing enough . Have there any rules of thumb . At . Should i be looking i dont know theres any rules of thumb in terms of spend it should be. Wholistic having a program and youre being proactive. And having appropriate resources and having a good game plan. You cant plan for this. Things like table top exercises and things you can do the i. T. Team but also the executives, spokespeople, the pr team in these types of situations as they occur. How good is this for Cybersecurity Companies . Are licking their chop this morning . Throughouten working the weekending about mothers day for the guys perpetrated this attack, some the Law Enforcement find them and the and at the end of the weve been struggling to make sure customers are informed to prevent able these types of attacks. Theres technology thats out stop thesecan help attacks. Were working around the clock. Adam how do you help the Industries Like healthcare whos systems are so critical they dont want to take them offline. Help them Going Forward . Thats a problem for significant time. Of theres lots of technology out there. As that mysuch company built. Does require reboot or shut down. Having shut around down. Soadam, i hate to be dramatic, whats the worse Case Scenario here . We heard from our reporter, you had the kill switch was hit on friday. Companies responded very quickly. We havent had a how much amount huge amount of pay out. The worst case snare joe are the copy cat. As you start to see these attacks that have other payloads beyond ransom. We need to be came. Theres still a lot of systems out there. We need to stay on top of each new threat. Over the weekend, we saw a couple of new threats yesterday that started coming out. Tore paying close attention that. Adam thank you very much for joining us. Adam meyer. Rick rieder from blackrock will us. Taying with well discuss tax reform with bill simon. From new york city, youre watching bloomberg. Daybreak. Bloomberg Thermo Fisher agreed to buy pantheon. The price is 5. 2 billion. Comes to 7. 2 billion including debt. Is one of the equipment. Er in backs off pace last month. Estimates. Missing retail sales and investment also afteress than expected the economy strong first rter, chinese policymakers thats your Bloomberg Business flash. Sticking with china, the bond on. Its grabbing the attention of traders. The yield surged to a two year high last week. Blackrock coi is still with us. Were seeing china addressing this issue on mainland. Weve seen the commodity market. Mainland bond market adjust and then nothing else. Why . You have to put it in has happenedhat here. One of the big surprises this year, is how strong chinese been. Has we started off china running at a pace well up into the high sixes. Now youre backing off those levels. Was running up six. Its something markets will changes dramatic where we were. Were coming off a base that was in terms how strong we started. The dividend weve had from growth for the risk rally, you still think its there . Thing thats interesting, ive been in this business for of focus the amount is 42 ofve, china growth in the world. Its the all and growth of commodities. Its something that has to be on the top of your mind. Growth has global been exports, particularly asian amazingly strong. My sense is, its going to slow from the heady pace. Pretty good levels. October. Through we like emerging markets. If you like emerging markets, focusedto keep one eye on china. It slows graduate, lets assume. At the same time, you pointed disproportionate. Can we afford even a moderate in china in growth globally . Whats going to pick up the slack . The consensus is u. S. U. S. Growth is pretty good. Well talk about that. Clearly the u. S. Is system disappointing data, i would to. E u. S. Looked you got to Pay Attention to, theyre such a big part of trade,trade and asian commodity trade. The u. S. , i think the u. S. Second half of this year, people comfortable with the u. S. Growth. How much of the slow down in simplyrate in china is to get the arms around the situation . Th will it work . Debate about tightening policy. They slowed down the depreciation of the credit growth. The debt level is way too big. They slowed down the rate of growth. It will be something thats important. Down. You start bring it as lonas long as you keep growt, is a huge country that grown in extraordinary ways over the last ten years. Credit too big. Its not question whether the credit growing, what is the used for . Ng there are less productive ones give them real problems down the road. How are they doing directing are places . It in the right one is, china done pretty over capacity in number of industries. They trying to ring out some of capacity. Production keeps up, you can still do okay. And the debt these soes Government Entities that is too big. Creditors, lot of the put in Wealth Management productings. Too big. Too big. Ystem is as long as you keep growing and as long as the government it, theyre going to push pull around policy. Art. S a fine so far so good. This year, its something you it. To keep an eye on do you bay the sell offs in debt . Dont buy tremendous amount in terms of on shore and debt markets. Something we look at. Markets. T the credit we dont do a tremendous amount markets. Tes funds. Bit in [indiscernible] no. Were comfortable with merging markets. As long as youre in a range, things are okay. It starts to slow dramatically and we think significant. Exports keeps coming out. As long as u. S. Is growing at a pace, which it is, there are places something thats hugely important. Coming down. Inflation comes down in places like argentina and brazil. Policyt holders means can be easier depending on where you are. Were quite comfortable with that. Theres a bunch of reasons. One thing about this that people dont recognize versus 20 or 30 parks , emerging down dramatically. Not in the merging markets. As you make your investments do you discriminate between commodity exporting countries and commodity importing countries . How you think about how diverse that economy is. In places like mexico, it totainly have sensitivity oil. Its a pretty darn diverse economy. When you scale the amount that you have. Today, we have a bit of exposure to russia. Something we dont generally to. A large exposure we feel comfortable where oil is. Its provided some value recently. Be in and outll of. The more Diverse Economic in mexico, even in argentina today, that we feel more comfortable in terms of the durability. What about in turkey or india. Commodity prices come down, as thesed getting hurt on export side . Thats a great point but very distinct. Two very different countries. India is one of our favorite holdings. They are the primary beneficiary. Got a great demographics. They got reform taking place. We like india a lot. Its one of our favorite holding. Turkey is a bit of a more dynamics around the political dynamic. Its not one of our favorite holdings. Rick rieder of blackrock will be staying with us. Coming up, Congress Finally turns to tax reform this week talk about the powerful chairman of the house ways and means committee, kevin brady of texas. This is bloomberg. Oil prices getting a nice bid today. Saudi arabia and russia wanting to extend the Oil Production of 2018. Rter spokeudi Energy Ministry earlier in beijing. Both of us expressed our that that has been largely achieved. Large reduction in inventories. Were not where we want to be in reaching the five year average. Goldman sachs is increasing likelihood of cuts. They say Compliance Needs to stay high. London, javier blas. Compliance the key. It stay high for the next nine months . It had been very high. Unusually hay. High. Complains 50 . Iance saudi arabia has been cutting promised toan they do. Goes,nger production cuts were now talking extension of of march ofend 2018. A lot of their compliance in the half of the year were forward oil field. Its going to be more complicated. I think saudi arabia is that numbero keep down. Wont be saudi arabia keeps below the target to compensate for production from all the member countries. Paint you a picture here. In the next nine months, you have u. S. Shell production ramping up. They wind up stealing mark share. The saudi ipo. Then you have a market share akin to 2014. Is that what were looking at . The markets now. This is very similar to what happened with Central Banks when they cut Interest Rates to zero. Next . S . Hat is the exit strategy youre rake, come middle of can go back to price war. Thats one of the reasons the satisfied with opec. Articulated what is the exit strategy of this production cuts. Hoping that the demand will be growing and it would make room oil. He extra what russia want to become executives on the mark team . Do that . Ey want to the russians need High Oil Prices as much as the saudis need. Why the saudis need higher oil prices, one they need it for reasons. They cannot cut. Need to sell ipo. Prices. High oil putin would like to have an economy that is in shape. Are aligned. Can say that saudi arabia is trying to help Vladimir Putin to power. Thank you very much. In it forr whats iran. Iran, they cant pump anymore. They are maxed out. Theirl get more for prices. I like the point you make about russia. Last time, putin stayed mum for a while. We didnt know what putin was thinking. Announcement, hes into the cut. Thats a huge shift coming up, chief u. S. Economist. Then later, ray lahood, former transportation secretary. From new york, youre watching bloomberg. From new york city, youre watching bloomberg daybreak. Markets. Start of the futurings and quarter of one dow. Nt on the after a week of marginal losses. A situation, yields pushing higher about two bases points. Through much of friday. Energy. Out foods and ignited a little bit of weaker dollar story. Friday carry through to monday. Euro dollar pushing up third one percent. Story in europe, tale of two macron about to name his prime minster in france. To discuss london is Bloomberg International editor. E lets begin with germany. Low votes regional seem to be giving enthusiasm put chancellor. Behind its more than enthusiasm. Incredible up quite momentum behind her candidacy. Just eight months ago, theres people questioning whether shell run for a term. The refugee crisis really hurt capital. Her own party will be struggling. Remarkable turn around as weve seen from merkel head into september. Many people outside of europe so what. Saying, chancellor merkel is one of regions. Was time last year, that actually not in the cards in a big way. To add this much momentum. Coming fromessage her party that seems to be resonating so much with the voter . You have to remember the well. Y is doing thats always good if you running for reelection. Has recognized the wing. On her right she was quite tough on law and order. That sheof recognized herself needs to change a little bit. Rhetoric about of the bringing in refugees from syria and elsewhere. She fine tuned her message. Theres a fundamental thing that she is still after all of this time, manages to be extremely popular. John is she letting in as many immigrants from the middle east . Has she trimmed her sale . The policy, shes changed her rhetoric. Really happened there, the surge, the push of refugees from the middle east has drastically down. Agreement with turkeys to allow to stay infugees turkey. The push from the outside has slowed down. The main reason why its not as burning issue now in armany as it woul would have bn year ago. Talk to me about potential front runners. Looking forr hes in a prime minster . We are expecting announcement any minute. One. Ent heard that names is too good to check. Real challenge here, you have to is the president from very young untested political movement. He does come from either of two major establishment party. Put together a majority after the parliamentary election. If he cant appoint a prime minster who is capable majority in the parliament, he can be a lame duck president. Behind him. Ntum french president is bit like in only push youran policies and ideas through if you can command the national assembly. Hes going to need to economicts to get to reform. He himself came out of socialist government. Hell look for the Republican Party to give him a prime minster. That will open up a lot of options after the assembly elections. He can potentially do a deal Republican Party on the center right. You will be sticking with us that break of prime minster of france. Rick raider of blackrock with us. Like in new york. We had more clarity on the german election. You . Are almost exact opposite where we were a year ago. European rates and were playing alongside to this dynamic that the cb will continue to buy and buy a month. On we are largely short but pretty small. Rates willropean grind higher. Ecb will start to evolve their policy. Are some of the credit markets we like over there. Risks. Some of the bank from straight rates perspective, are opposed to where we used to be. The rate levels today with germany in the low 40s on the rates perspective and france in the 80s. No value. Much lighter and least favorite rate wise. Shortterms of being rates, you can say the same in u. S. Why do you have a little bit you bring up a point. Be. Convicted do you want to how large position you want to have today. The technicals are the technicals, 60 billion is a month is a lot. Even if they evolve and they start it taper the program down, we think beginning of next year. A lot. Ill you underwak underweight it. Think about taming. What keepingart of rates down, theres upside equity side. The where you can actually make some upside data. Right. Int is points on tenes year German Government bonds. Be it willto grind higher. To 80, moving closer. You think about that level. Think about where germany is as you describe growth and doesnt make any sense. Real rates in europe where the economy is operating and germany is operating. It is just a straight technical ecb. Tion driven by the if we had to guess talking treasuries and they were anticipating the benchmark yield, how can the European Market continue to rally in ten year bond yields double . Starting point youre talking about it crazy. Were at beyond emergency conditions in terms of where move bonds up. What is a more stable dynamic. Ary its good for equities. Same thing in the the u. S. Moderately hayer, thats no impact i would argue. Equityeconomy and on the market. All of this is driven off the ecb. What is your best guess when well see that movement start . Theres been lawmaker rumorsy about the deposit rate. Its not in june, theres a german election, you wait for the german election. I certainly think they change the dialogue as you get into meeting. Ember up at the target. You could see it in june. Is the market prepared for it . Lily hood itlike will croat an opportunity . The rates are low. So beyond where the fed was that youre distorting Interest Rates. The key for the ecb, is taper tantrum. When you distort rates that planehow do you land the softly federal that gamble. Faster. Nd to go down veryre going to be deliberate and through a longer period of time. The debt in european governments high. Think very good on in the term of he manages this. To make sureberate the markets dont react much. Threat of point, the be delicate to remove stimulus, will assess risk balance at the june meeting slow down. Were not going there any time soon. Were going to see a change of Risk Assessment in the middle sayhis year when they balance of risk have changed. You get that out the way. View, yourioned your conviction what will happen with the rates mark. With credit in europe . They think about calibrating portfolio. Where they thought we were in the the cycle. I imagine were going to think around inte way europe. Spreads are that tight. Conundrum. Where we are today, if you look at european credit, its not bad where government rates are. That being said, youre Funding Companies at the wrong level. You think about my senses, rates start to move up, credit spreads wide. Not normally what happens. Banks havecentral been buyers of credit, you start to take some of that demand pressure off. Do i think credit holds in reasonably well . I do. I think youre Funding Companies are aggressive levels. Rick rieder blackrock will be staying with us. Well be talking about what we tax reform. Rom we have representative kevin brady of texas from ways and means committee. Live from new york and washington, this is bloomberg. This is bloomberg daybreak. Hewlettpackard green room. Former u. S. Transportation secretary on tax reform. Chief wrapped up their three day meeting this weekend. Laying the ground work for the weeks time. O improving relationship with a mnuchin. Terpart steve saying the u. S. Would do whats best for itself. Dont want to be protectionist. Rights to beve our protectionist, to the extent that we believe that trade is fair. Ee and as i said, our approach is to balanced trade. Some confusion the last time many ofuchin met with these individuals of the g20 level. G7 level, does that confusion still exist . People on bard with the message now coming from the United States . It sames almost as if the United States getting more on the message thats g7. Ng from the they try and avoid any confusion initially by taking trade off official agenda. Its not part of the finance track. Ministers that deal with that. It became part of the conversation. Arrivedas Steve Mnuchin at a meeting on friday morning, u. S. sexcited about the trade policy. They just finished the deal with goods. N beef and other he announced that was a great administrationmp after just over 100 days in office. They talked about how important it is to boost trade. Growth. Essed inclusive i wonder whether this reality check is welcomed for some level. Of the g7 the communique for many participants, people read it. Really look at it. It was just a piece of paper with some words that didnt mean whole lot. You get in the mix to disrupp the situation. You guys have been protectionist anyway. You wont beay protectionist, doesnt mean much. Does that resonate with anyone in the g7 . Its a very good point. Thats how the u. S. Really sees it. Call itwould like to free trade and theyll be happy with free trade as long as they trade surplus of more a year. Billion euros the same is true with other country. Want to shake things up. It seems that the ministers are mnuchin the Trump Administration a chance to see where theyre coming from and works out. They decided to kick the actual can down the road. Donald trump fly back to italy meetings in sicily. Everyone is looking forward to hearing what he has to say and seeing how he deals with his counterparts heres the important question. The ice cream . It was amazing. I will try more when i go back to sicily. You. Think of who is in charge of these him . Ules from thank you very much sir. Blackrock still with us. Great to have you with us. Lets talk about global trade. Win of into it after the President Trump. The fears of protectionistism. Aey havent translated into real world. Why not . So, its not translated, exports we talked about earlier have been significant. Including you look at chinese exports in the u. S. Pretty impressive. They have not. Thatvent Seen Initiative would. Well continue to work on in andal agreements the tpp youlld get some probably. I take the point of better trade the u. S. For theres been no initiatives. Trade has been impressive. President having cake and eating it too. Says all these bold things about fair trade. He canceled tpp. He announced u. S. China trade which will increase trade. Look at what theyre doing, theres no lot of trade. Piece oflowed every you think about how do you translate that its really difficult. Is an art to negotiate, you lay out your end you negotiate back from there. You see that playing out. I do think, at the end of the day, we have ability to create better trade deals. We do have the ability to create think the u. S. Has been very free trade oriented. Rest of the world isnt. There whethery is we execute upon it. The opportunity is robust today. Isthats the trade, the data a different story. Cpi reading on friday, we have empire manufacturing, orders coming in late. New orders were negative territory. Manufacturing came in light light. Ces paid came in last week was funny in one way. Colt. Me out and was solid. All of sudden, reversed the way. You got to be careful one number versus the next. Taken on empire, because it gets in the manufacturing, its something that we follow. Data, those numbers just bit. Tle those numbers are volatile. Wie got we got numbers from philly and chicago pretty strong. You have to look at that and way, new orders were softer but it was pretty good in chicago i believe in as well pretty good. To have take this economy, we its going to do okay. Second quarter gdp twos. N the high soft data has been extraordinarily high. Empire andthese philly and chicago and etcetera. My sense it will come down. The hard data is pretty decent. There. L bit optimistic rick rieder of blackrock, you are sticking with us. If you have a bloomberg check out tv go. You can watch us online. Us directly. This is bloomberg. This is bloomberg. Rick rieder of blackrock still u we want to talk to him abot auto credit. Rough comparison, whats going prime. Uto sun home mortgages back in 2006 and 2007. Particularly focusing on the of fraud. It approached one percent. Autoad a problem is the loan subprime . Look at thehen you conditions here, because of the size of a mortgage versus size loan, it tends to be much lower in auto. Toy need their cars to get work. We have reduced a lot of few reasons. For a you have a dynamic today where the Lending Conditions have gotten too easy. The fed needs to keep moving. Argue some of the conditions have been too easy. Second, used car prices have under pressure. You see the rental agencies that leasing,ced their their size of their fleets. Used car prices are soft and seasons too easy. Weve reduce quite a bit. Create the same system like mortgages did. France president s macron named Edward Philippe as the countrys prime minster. This ahead of the parliamentary elections next month in france. Wants to govern that election, he has to gain ground. Named hisent has prime minster slight move to right of center. Rick back to auto loans for a second. Exposure. D your we saw wells fargo dialed back as well. Autos . Go beyond does it tell us something about the credit cycle . Not really. If you said what are the soft points in lending today and where have Lending Conditions gotten too easy. Say in the subprime auto place. You see the incentives on new cars. That zone that kept new car sales up. See parts of the commercial Real Estate Market a bit. Retailing that you got to be careful about and malls. I would say outside of that, not seeing those stress points. The household, United States household has deleveraged dramatically. The Financial System deleveraged. Thats one wont be a crisis. Weve takent exposure to. You got to Pay Attention. My guess is, new vehicle sales will continue to be soft on the back side. Onalways great to have you the program. Good to see you. And ceo andresident founder. , wells fargoer chief equity strategist will be bloomberg tv. We are positive 46 point option 46 points. Kicking off the week in bond follows, treasuries pointby a single bastes bases points. Pushes 110 once again. Jonathan hackers take control of more than 200,000 computers in more than 150 countries. A global cyber attack. Steve mnuchin keeps the g7 guessing on trade, a framework for chinese led globalization. Oil pushes russia and saudi arabia to extend supply cuts for nine months. From new york city, good morning and welcome to bloomberg daybreak. Im Jonathan Ferro alongside david westin and alix steel. Rude catches a big bid switch of the board and get to the commodity market. Wt i looks like this. Up by over 3. 5 . The dollar just a little bit weaker against the euro 5. 4 . By. 4 . You have futures popping. We are seeing a little bit of movement. Aig up by 1 in the premarket. Company names a longtime insurance executive as ceo. He is the seventh ceo since 2005. Aig has lost money for four of the last seven quarters and had a revolving door of ceos. Deputy to hank greenberg. In theory he returns to aig. A little bit of m a happening. Price 7. 2eal buying Thermo Fisher pantheon. Pantheon makes ingredients for drug manufacturing. In premarket, tesla off by 2 . Bullperennial downgraded the stock. Increased competition by amazon apple, they raised their cash burn estimates over 3 billion from 2. 3 billion. Ull turns a bear. To assess howry much damage may have been done to their companies by the cyber strike that hit 200,000 computers in 150 countries. Jordan robertson is bloombergs Technology Reporter coming from washington, d. C. What are the companys most likely to be hurt by this . Most consumers running standard versions of windows will not be affected by this. Microsoft does automatic of dates. If you are running an ordinary windows computer you are likely not going to be effective. The organizations affected are the ones that run custom versions of windows and have custom software. Thatavent done a patch microsoft issued back in march. There are somewhat legitimate reasons for waiting. Happened on friday a lot of those reasons evacuate. Any company especially hospitals, banks, atms, the devices we are seeing are ones that are not updated that often because they perform critical functions. Orid is this a basic move does it require real expertise and resources we dont have . Tend to think of these patches from a consumer perspective. You click a button and the machine updates and works as normal. Organizations have to a lot of testing and validation. That is not to give companies a patch. This was a critical update. Thats how microsoft labeled it in march. If you are using windows , a lote to run your atm of those devices run older versions of windows that were not patched until this weekend. If you are running a patchable version, you should have burned the midnight oil this weekend to make sure they were protected. Alix thank you, jordan robertson. Where now joined by steve, a Cyber Security analyst. Steve has a neutral rating on the stock. How much money are we going to see flow in from companies to these Cyber Security companies . We are going to see a bump in spending. We are going to see renewed focus on securing against advanced threats. I would like to point out that a patch would have solved this but there were probably over 200,000 pcs that have been affected and many more would have been affected if the kill switch had not been found by the researcher. The patch wasnt available until two days ago. Companies will need to look at a lot more than patching their pcs. Toy will have to look advanced threat protection. Ffered by the leading vendors endpoint, network and email. Some of the vendors poised to benefit are the Technology Leaders in those respective sectors. Has been having difficulty competing with palo alto and checkpoint and cisco. Therefore is to benefit from this attack as well. Email will probably see proof point benefit from this as well. Jonathan where is the increase in spend coming from . Financial firms have been all over this for years and put a lot of money toward this kind of effort. Where is it going to come from . Has been a spending priority across the board in a lot of verticals. Broad basis pretty we have seen a little bit tosening of money flowing in security investing after the u. S. China accord in the u. S. Was signed in september 2015. 2016 security was still a priority. The urgency decreased somewhat. Across all verticals you will see recognition that companies have to keep up with hacker tactics by investing in the most advanced securities from the Technology Leaders. The sector that was particularly vulnerable was health care. Systemse such critical that they do not want to go offline even for a second. Is there a specific company that works with the Health Care Company that could benefit from this situation Going Forward . The leaders in the technology are pretty broadbased horizontal companies. I dont think looking at a vertical is going to give you an in on the right investments. The way to look at it is to look at the Technology Leaders. Broadbasedo be a sense of urgency to invest in these technologies among security as akeep priority. You will see that across all of the verticals. David it doesnt have the hallmark of a big nationstate doing this. It looks like just about anybody can do it. These companies you mentioned, who has the capacity to scale up if this causes a fundamental shift in the investment spending . I think the technology across the major attack vectors are the ones you want to look at. No single vendor has ace over bullet. What you see the leading companies that want to protect themselves, they invest in a layered defense. They invest in the best technologies that suit their needs across the major sources of infection. Pcs, large vendor is the leader there. They protect their network in that area. The leaders are cisco, Palo Alto Networks and checkpoint. They are recognizing email as being the initial attack vector and they are the emerging leader there is proof point. Alix can you help us quantify the amount of Money Companies will have to spend to really upgrade their Cybersecurity Network . I dont have numbers at my fingertips. Survey after survey is either the top or one of the very top spend category for companies and that will continue and i think there will be a renewed urgency for companies to invest in security as a result of this attack. Jonathan great to have you on the program. All this week we are focusing on tax reform. P. M. Eastern, 30 the former u. S. Transportation secretary will be joining us. Count you down to the opening bell on bloomberg tv. This is bloomberg. Jonathan mrs. Bloomberg daybreak. Im Jonathan Ferro. A name you appear a lot in philippe. Edouard he was named frances new prime minister. By carolynjoined from paris. Talk to me about how this is going to broaden his appeal going into the parliamentary election in a months time. Washe name Edouard Philippe on everyones lips here in paris. He is 46 years old. He is from the centerright. That means Emmanuel Macron can you areo those people republicans. He has experience in parliament. He is a new face. He is not very well known in france. He can manage to get the majority that Emmanuel Macron desperately needs in the Parliament Elections in june. Jonathan unlike the rumor mill. It was not christine lagarde. The story for me as he is gone for the centerright. I understand that broadens his appeal. That makes sense. For those on the left that out it for a man whose roots are in the socialist party, what are they going to get from the president himself now that he has leaned to the right . Because heteresting has already tried to break up the socialist party. Now hes trying to break up the Republican Party. Really trying to identify himself as the center. His challenge will be with different members of the government. He will have to mix with some people from the left wing. Those who voted for him will come from the leftwing wont be disappointed. Ofthink the defense minister president hollande could potentially stay in the new macron government. The leftwing would like him to have a mix between the leftwing and the centerright. Juppeo know that alain who ran against Francois Fillon buthe republican primary lost, Edouard Philippe was the spokesman of alain juppe. He was a very popular figure among the french people. Jonathan last week we heard from manuel valls looking to get behind macrons movement and party. Are we seeing more defections from the traditional parties ahead of the parliamentary elections . Nominatedl macron has 450 of the nearly 600 candidates in the legislative election. Spacerying to leave some to have some agreement to possibly welcome some socialists, some republicans in the legislative majority. Jonathan thank you very much. Joining us now is macro risk advisor ceo. Buy europe or fade europe . Is still it is still by uy europe. It has gotten past one of these big hurdles with respect to macron winning. There are still plenty of risks in the market. Draghi the policy that has implemented is actually starting to bear fruit. Inflationing better data and money is actually coming into the equity market. Jonathan lets talk about how crowded it is. Berenson has a front page that suggests the front page was europe. Uy if it is that crowded, does it matter . A big focus for us is understanding how and why these trades get crowded and what the Tipping Point is. Crowded trades tend to get unwound in a hurry. The fact that it is on the cover barrons we are trying to find something not as rich as a treasury bond or the u. S. Stock market. Alix where does the money come out of . The riskfree asset. When you look at the incredible discrepancy between european equities and german bunds its nominally 10 years yielding 40 basis points. Germany is printing 1. 5 inflation and growth. Deal by allbad propositions. It comes out of the riskfree asset. Alix the great rotation was supposed to happen here in the u. S. That didnt happen. You had equities and bonds move in tandem. Its a really important question. It is paid to be along both stocks and bonds. Thinktake a step back and about equities and the riskfree asset. Both of these have rallied significantly. That one would be the funding vehicle of the other. A lot of it comes back to centralbank policy. There is nothing more distorted than the european sovereign bond market because of mario draghi. Does the inflation data start to force his hand to pull back . Its probably too early. You have this Virtuous Cycle where equities can be allocated. David cash may be the ultimate riskfree asset. Is it possible the flows are coming out of cash sitting on the sidelines . The opportunity cost of holding cash is very high. Qe, is the stated goal of to make hanging on the sidelines increasingly painful. Risk is being allocated to the institutional framework that makes it hard to sit out. It is very hard to be skeptical when volatility is very low. And assets are moving higher. Its very difficult to be a skeptic. Thats where holding cash becomes increasingly challenging. Curnutt is staying with us. Coming up, we will your from representative kevin brady of texas. Thecommittee takes up subject of taxes later this week. This is bloomberg. Alix oil getting a nice boost today. Saudi arabia and russia want to extend Oil Production cuts through the First Quarter of 2018 to reduce global inventory to the fiveyear average. Goldman sachs increasing their likelihood of a cut. They say Compliance Needs to stay high. Isning us on the phone senior strategist at oppenheimer. How deep of a cut do we need to see . The same level for a longer period of time. I dont think extending the count this year will be sufficient. We will have to see beyond 2018 for saudi arabia to get oil prices high enough to coincide of the national oil company, aramco. Alix will they cut ipo and then pump . They dont want to go back to when oil prices were at a 15 year low. They need Stable Oil Prices to begin with. They need oil prices to be sufficiently high for them to meet Different National obligation. Not to hide to bring additional production in a major way. Right now shale production is going to increase provided that we have 50 oil. The oil industry continues to cut costs and bring down the breakeven point. It is about 55 today. It used to be 75. Three years ago it was 95. Now the industry is more resilient to lower oil prices. Alix this shows what the oil curve looks like now versus a month ago. A month ago is the green line. The orange line is what it is now. By three has rerated dollars just in the past month. The back end of the curve is now sitting around 55 a barrel. What does the back end need to get to to take out the hedgers and finally have sustained backwardation in the market . Factors are a lot of getting into the pricing of oil right now. We still need to go back to fundamentals and basically shale producers are going to dictate Going Forward where the floor is going to be. Not where the ceiling is going to be. Is in the u. S. Offshore and these are the companies that increase Capital Spending. The minute they see 50 oil or higher they will hedge most of their production to take the risk out of the price formula. In my view we are going to see lower for longer, but not forever. The Industry Needs 55 to 60 oil to replace production. Companies have not increased Capital Spending despite the recovery, the partial recovery in oil prices. Because most of their new projects are very long term. They need to make sure that it ,s not once you Start Building you dont want to be surprised after you complete the project that all of a sudden you have 45 oil. Is need to make sure 65 oil stable enough to encourage longterm Capital Spending. Jonathan thank you very much. Extended nine months because they are working or not working . David they need to keep the price up. Alix saudis have a lot of internal demand in the summer. This will actually be a cut. It wont be a maintenance jam. Aramcon i love the marketing story. From new york, the opening bell coming up next. This is bloomberg daybreak. These days families want to be connected 24 7. Thats why at comcast, were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Johnathan moments away from the opening bell. Lets get you up to speed. The dow is up. Of on the s p 500. Last week a marginal week of losses that contain the story this mine that will get a lot of ,its on the bloomberg i imagine the etf cybersecurity members, about 40 of them, that etf in a free market up by about 4. 5 . Out the board. In the bond market, we look like this the story for crude, were approach 50. Lets get to alix steel. Alix not a big bid in the markets. Rush both of the the indices shaking off a fall. Buying after seeing oil up almost 4 . The nasdaq a little firmer up by five points. You also had the ftse and the dax setting record highs earlier today but have backed off from that level. Not the same exuberance that were seeing in u. S. Markets. Lets look get some of the individual names. You have the men take men mantech. Were00 computers plus affected. The kill switch was found early on, but nonetheless, will companies have to spend more in order to beef up their cybersecurity and how much will they spend . These are the questions. Talkingarket, i love about it, the lack of volatility. Yet another way to think about it. , downue line is the vix under 10. The white line, basically a call that winds the rtn up shorting the vix. The higher goes, the more you are betting, meaning the lower the vix failed. You wind up making money if you short the vix. Buyatter how cheap it is to vol come it is not paid out. When and how does a reverse . Literally, just the second, credit suisse, equity, 20 or low. Thend the lowest since summer 2014. 20 is around the table, dean curnutt. John manley joins us as well. Always good to see you, john. What explains it . It . Explains is based on a replicating strategy. That strategy is in trading the underlying asset. When the underlying does not move, the options are worthless because the delta hedging strategy makes less money. Lets put the vix and context. Therealized volatility in last two weeks is 3 . Over the last six months, it is at 6. 7 . You did not just go back to the prefinancial crisis period, yet to go well through it. 25 year low in sixmonth realized volatility. What is making realized volatility so low . I would point to flows. Bill gross once called share buybacks corporate qe. I would call the new corporate qe chapels vanguard fund. He is getting stuck with 1 billion a day. The money has to be produce. He is not doing any research. That is indexation. The flows are dominating everything. Johnathan are we blaming vanguard for low vix . Ion the wrong guy to ask about that. There are a lot of things going on i am the wrong guy to ask about that. There are a lot of things going on. It makes you wonder how much it really matters what goes on there . For the stock market, were in a situation where the flows are good, the fed is still pretty accommodative. The earnings are Getting Better and the valuations are on the low end of high. It is not outrageous. It is not a bad environment. David is the structured is taking in a sense, regardless of whether it is low or high, it is not moving anyplace fast. There is not a lot of delta. They are suppressing a lot of the volatility. We have the fed, the biggest of the Central Banks. With the boj and ecb, they should not be underestimated. Even as the fed takes back accommodation, it does in an incredibly market friendly telegraph way. The concern i have is the fed it is a must the third mandate, which is not just price inflation,visavis but assets. As they try to prevent a financial crisis, they lived through this system being attacked by the assets themselves. They have created so much stability that traders are forced to lean on the stability. This has been the best sharpe ratio trade that has been experienced by markets in a long, long time. Youre talking about sharpe ratios, risk versus return, so north of what you would realize just from being long on the stock market will stop this is being able to generate return without ever at least in the last five or six months ever expressing a down day. Alix do you want tobuy vol . You want to because it makes sense, but you cant because it doesnt make money. Something is going to happen. The past is not the future. I think what is happening also, people are expecting something bad to happen. I remember once the mayor of hoboken said, as we all know, hoboken is the worlds bestkept secret. When you know it, how can that be . A lot of people expect problem so when something pops up, all right, we thought that was coming. Alix you have this low vol environment and the nasdaq hit an intraday high. You wind up having the s p a stone throw away from the record high. What is your base case . I think health care is one that we find attractive. Part of it is my own experience. Andhave an agent population new technology. The government going to get more interventional in this. ,echnology i would like to buy but i have to focus on the businesstobusiness stuff. Basically, new things. I think the economy is Getting Better. As a gets better, im not sure i want to own every cyclical, but i think you start to move in the direction. I think that is where the incremental change comes. Johnathan blame vanguard for where the vix is. What is a mean across the index and within it . And talking but the fundamentals as a sector, should we be having these conversations anymore if the money is ultimately going to flow into the index and get distributed across the sectors evenly . It is an open but important question. For the active manager who is paid to evaluate the fundamentals, decide when to get in or out based on those fundamentals, when the flows into indexation are so dominant the price discovery visavis fundamentals actually gets compromised, then i come back to Central Banks. The as a classroom which there is the least price discovery is the sovereign bond market. The gorilla in the room around the world has bought a lot of paper. It continues to suppress volatility and outcomes. Johnathan and Price Sensitivity is always a problem. Great to have you with us. John manley, well to see you good to see you. A session that looks like this, lets get you up to speed. The nasdaq, another record high. We grind higher on the dow and s p as well. For our viewers worldwide, youre watching bloomberg. Coming up at 1 30 eastern on bloomberg markets, ray lahood joins us to discuss tax reform. David westin. Ever since President Trump took office, we have heard about tax reform. This week we will start to see action when there are hearings held in washington. The chairman of the powerful committee, kevin brady, joins us now from the woodlands, texas, from his home state. Welcome back. Good to have you. Take us into this hearing you will start on thursday. Start with that. What sorts of witnesses are you going to be calling . What are you looking to hear in those hearings . Goals for this effort. One, we wanted tax code built for growth, literally designed to grow jobs, wages and the us economy and leapfrog america from 31st in the world and Tax Competitiveness into that top three and keep us there. This hearing is all about growth. We will be listening to Business Leaders talk about the competitive environment they are in, what it takes to actually grow those jobs and wages, and were going to open it up. This is part of a coordinated effort between the house and the white house and senate where we begin to open up our ideas on how to grow this economy in a big way and make sure the American Public can listen in and be part of this conversation. David i know you will be thinking about what youre hearing, the change of things, but there are a couple of planes already that ready. You and the speaker ryan have got a plan that has been on the website for some time. We have the outline from the white house. Or do those sync up . Where do those sync up . I described this as being about the two plans about 80 in sync. Rates are on the critically important because of what our competitors do worldwide. Making sure our tax code is redesigned so we can compete with those new tax models on the road today is critical. Making sure businesses can invest with confidence that jobly drives main street growth and productivity as well. On the family side, simplifying the code, lowering the rates, really making it easier for families not just to file taxes, but to keep more of what they earn. We start with a very Good Foundation there. David mr. Chairman, start with the rates you mention. You and the white house agree you have to cut them a lot from 35 . As i understand it, you are at 20 and they are 15 . What will make you decide one over the other . Is it a question of how much deficit they incur . That is part of it. We want the rates to get as low as we can. By the way, that is the lowest rate for corporations in history and for every other type of business, the passthroughs we call them, small businesses, partnerships. We lower those rates to the lowest since the 1930s as well because that is incredibly progrowth as well. So were looking to try to get both of those rates down as low as possible. We think the greatest growth for the greatest number of years comes when tax form is bold, when it is balanced within the and it is permanent. Those factors will be part of the discussions we have at the white house. I think is important for all of us to go into the discussions with our best solutions of the open to finding a way forward. David youve always wanted to be bold and cut the rates. Why didnt you go to 15 in your plan . What will determine which you go with . That was part of the discussion as well. Ours balances with a net 10 year window and a 20 year window as well because of this. We think history shows the most growth for the greatest number of years comes when tax reform is permanent, when businesses can count on this rate and the designs, and they can make those investments longterm with certainty. So that is what we took into our discussions. And we will have those discussions with the white house and our Senate Colleagues as well. David you want to make them permanent some people can predict based unpredictable rules. That does require you also have a border adjustment tax in or provision. You come out strongly in support of that. Do you need that in order to make them permanent . View. Do, and my more importantly, he knew that because the current tax code favorsjobs overseas and Foreign Workers and products over American Workers and product. We are proposing equal taxation for the first time of all products and services in the u. S. So it does not matter where it is produced or who produces them, they are taxed equally. That is a big change from where we dont expect industry to pivot on a dime of a change that big. We have been listening to our local businesses and job creators. Were going to bring new solutions to the table with the white house. Yes, because our competitors wet us today with low rates, think it is important ago straight at our competitors like china, europe, canada, mexico. David talk about that competitiveness. The repatriation of the money held offshore, what df to do to fix that . The other is in versions. The incentive to actually move your headquarters offshore. How do you fix that problem . On the first, what were proposing Going Forward, permanently, but the tax rate to bring your earnings back to reinvest in the United States is zero Going Forward. We propose sort of a bifurcated rate, 3 plus, 8 plus, for the prophets already overseas for you to bring those back as well. On the inversion issue, you need to do three things very strongly. One, with the lower the rates to be competitive. Secondly, no longer taxing worldwide. That allows our business is to deploy their capital where it makes the most successful. Borders, that eliminates not only illuminates every tax incentive to move your jobs were research or headquarters overseas, it actually traits very strong permanent incentives to bring those jobs, this research, those patents and headquarters back to the u. S. That is why we continue to make case for border just ability because it is so key to ending that march of jobs and headquarters leaving america today. David to make the numbers work, are you going to have to illuminate the business interested action eliminate the business interest reduction . In my view, yes. Theres a Growth Driving it, not so much the dollars, because today, as you know, there are dozens of ways to finance your acquisitions, your operations, your other activities. The tax code favors 1 borrowing. We are proposing to take the tax preference for the source of funds and apply it to the use of funds, which is full and unlimited expensing. We know when businesses invest in buildings, equipment, software, and technology, it drives productivity, drives main street job growth in a major way. I think that tradeoff may be the most progrowth provisions in this tax code. We know look, this is a big change from where we are at. Were looking at the issues our businesses have asked us to consider, including grandfathering existing debt, like have Going Forward so there is certainty for businesses that borrow a lot as well. I am confident with that type of swap, thats have of tradeoff, we can grow the economy dramatically more over the coming decade. David youve a powerful position, but i know you cannot control all of your colleagues. If you were to give your best test guess about tommy, thank you to be on the president s desk for signature . Great question. I think the important factor here, the white house, the senate, and the house have agreed to Work Together on one thing will unified tax reform plan. I think that accelerates this activity. I think our goals should not be focused so much on the month, but the year, which is this year, 2017. A lot more work has to be done. Tax reform is the challenge of a generation for any congress. We do have a lot of work to do, but im confident we can finish it this year. David mr. Chairman, thank you so much, congressman kevin brady. Coming up later today, ray simon. And bill tax reform on bloomberg markets. Alix the other bloomberg terminal, tv. Interact with us directly. You can click on representative brady talking about how tax and gete 80 in sync the details. This is bloomberg. David this is bloomberg. All this week, bloomberg has given over to tax reform. We will have hearings on tax reform thursday in washington. We just had a discussion with congressman kevin brady. He said it is all about growth. Do we want to tax code billed for growth . Literally designed to grow jobs, wages in the u. S. Economy and we want to leapfrog america from 31st in the world and Tax Competitiveness into that top three and keep us there. David joining us now is joe parry perry. Welcome to the program. The congressman was surprisingly candid. As you look at the proposals a speaker ryans office as well as the white house, what are the most important factors for you . In order to have a progrowth plan, you need to make sure the rate is lower. That is tricky. I believe it is all about the math. If youre going to limit itemized reductions for most individuals and lower the rates, you could potentially end up in rate for higher net worth individuals. I really think it is all about the math. Chairman brady said he wants this to be permanent. Essentially, it has to be revenueneutral. That does require eliminating a lot of tax expenditures. You wonder how it is going to be paid for. The repatriation at a lower rate actually, if it is progrowth, why not have a rate that is two fold . One, if youre going to repatriate the money and stimulate the economy by having either jobs, additional jobs or capital expenditures. You could have a 12 rate if you bring the money back or 7 rate if it is tied to some type of job creation. In the last time it was repatriation, it basically does the plan is basically said it really did not create jobs. David as a tax accountant, do you say, this is a full Employment Opportunity for us . Not really. First of all, simple vacation has to be a means to any tax legislation. Board adjusted tax i think will maybegh to continue with, some type of tax that will help at the border level reduce the amount of tax that is paid by corporations. You really have to help the various people in order to sting the economy. David you mentioned some litigation. So to commerce men brady. Is that good news or bad news for your business . That postcard, i think that is the way to go. David what is realistic to expect coming out of washington . I think what President Trump has done has started the ball in the first offer. The way the math, in order to balance the bill in a progrowth plan, it is very important to think about what the math is going to be. In order to make it permanent, you might do it over a phased. Of time. John of england that wraps up this program. 26 minutes. Lets get you up to speed. Alltime high on an intraday basis is about three points north of where we are right now. From new york city worldwide, they give very much. Bloomberg markets is next. Youre watching bloomberg tv. Fun ago this is bloomberg markets. Mark this is bloomberg markets. Vonnie here are the top stories. Governments and companies are starting to gain the upper hand in the massive cyber attack. We will talk with one of the lead investigators helping corporations fight back against the hackers. Commodities, oil prices are jumping a saudi arabia and russia say they are in favor of extending the production deal another nine months. Is it just talk or will the parties actually reach a firm agreement . The new president of france as and a prime minister. Edouard philippe. We are about 30 minutes into the trading day in the u. S. Julie we are seeingun