Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170626

Give speeches in portugal. 5 15 this afternoon in washington, President Trump and give s Prime Minister joint statements from the rose garden, right after their meeting at the white house. Day, ur top news of the theresa may finally seals the deal. Youve got sterling advancing his morning after the u. K. Prime minister struck a deal with Northern Ireland. Or more, were joined by ben stills of Bloomberg News editor who joins us from madrid. Us. Thanks for joining what kind of position does this leave theresa may in now on his week where theyre going to vote on the queens speech in house of commons . A modicum of ides after ty for theresa may a rough few weeks since the election t. Means shes going to have the support from this irish party, which will allow her to prove program on thursday and at least begin the process of putting her government in place. Alix good news on monday, but the weekend was pretty tough for theresa may. You have the sunday times tories want to cellor fill i am hammond take over. As those rumors still percolating throughout the. K. . Ben i think this is going to e a kind of constant back drop for may as long as she remains in power. E election result really destroyed her credibility, i , nk, with much of her party and the main reason for keeping moment is e at the march to do with the fact they were not in a position to take on the turbulence of another rather than ection any actual support for her. Vid the reason most of us are focused on this side of the atlantic is what it means for the brexit negotiations. Ow firm is this majority going to be in terms of really Brexit Issues that come up . Ben thats a good question. The deal has been very specific as far as we know the details kind of oint are still emerging. The deal is to give theresa may brexit on the legislation. That said, the tory party is , and divided on europe the election result is going to ruptures traditional within the party, which brought thatcher, really meant the end of cameron. Theresa may is going to be ealing with a very, very turbulent parliamentary party, s she goes through these negotiations. David thanks so much, ben stills reporting from madrid today, for Bloomberg News. Those on what complicated u. K. Politics may mean for theresa mays plans i must be hungry. Stinche. Ned by bob really, the question is, what es this mean for brecks knit theres been so much uncertainty, bob. Are we getting through it at all, or is it still all in us . T of bob i think were getting through the uncertainty in of the shortterm shock to the marketplace. Weve seen that over the the italian bank rescue, the relative stability ow in the u. K. Politics. But i think the bigger issues till lie in front of us, and that is, what kind of a deal can they negotiate . I still think the u. K. Is not situation, because they, in fact, are a major importer of goods from the u. K. From the u. E. One of the things that gets and bout immigration Everything Else is that the two export destinations for e. U. Products are the u. K. And the u. K. U. K. Is a close second to the u. S. And i think if the deals dont get done as we go forward, hear a lot from European Companies to their government that is we have a ot at stake here in terms of export markets to the u. K. We dont to want lose those. Economic there are arguments that suggest that the k. Has some standing in this negotiation. David we dont hear much about that, actually, certainly from the european side. Is that because we havent got tonight question of the tariffs and the trade yet . Ght now were dealing with european citizens in london and the price that they have to pay to get out of it. Dealing with kind of the highprofile issues, but we avent got be to the nittygritty economic issues. When it comes down to it, i think the issues are very, very particularly for european exporters. Alix at 9 30 eastern, theresa to lay out the rights of citizens, 3. 2 million so wanted to look at the details, but the response from europe was not very positive. How did you read theresa mays interpretation of this as a fair and good deal . It negotiating tactic . Are europe and e. U. Just that far apart . Bob i think we have to assume that everything at this point is a negotiating tactic. Very good. Everyone says bob well, frare their perspective. I think were going see this forth, back and forth. The e. U. Doesnt to want give anything up front. They want to be very aggressive. They dont to want make it easy in case. K. To leave it creates expectations that others could leave also. But its a much different issue who are in the common currency and the u. K. Isnt. I think thats kind of a false issue. I think these are negotiating stances, and as we economic to it, the realities will set in for both sides. David its not the economic but this first issue, the european citizens, and what rights they have in the u. K. , indicator whether people are going to be pragmatic or a matter of principle. Whether the e is European Court of justice will be able to decide the rights. Weekend, you had david days saying well have rbitration, youll appoint a person. Thats a sort of pragmatic solution. The European Union goes long be that, may that encouraging . Bob it could be encouraging, but i think the one thing we careful about is that this is i think this is probably going to go into overtime. Extra time before playing european football. Dont think theyre necessarily going to get this done in two years. So knowing each little nuance see now is going to get dragged out, potentially enegotiated down the line. Alix whats fascinate sergeant lack of reaction in the market. Implied volatility of sterling, and you can see the it really peaks, financial crisis, scottish referendum, and three months to the e. U. Referendum. Increased a little bit, but its low. Is this the world were in, the same thing with the u. S. , where headlines, talk about them, but then when youre a trader you ignore it . Im afraid we have this settling in for the summer. I was just looking at voluntarily at this timity, seven. Er these are very, very low levels of implied voluntarily at this timity, which just suggests not a lot of convictions in the marketplace. There are some positions in the market that i think are going up. Et squared the market has been bearish the dollar, a little bit too llish, the euro, and i think the mexican peso. But other than some position squaring, it doesnt seem like of catalyst out there. David wer that time and time with various assets, theyre trading within a range, whether its f. X. Or bonds or stocks. Whats the cause of that . S it the fact that the central bank has interviewed so much on the monetary side . Bob i think a lot of it is and lick ccommodation liquidity. Think whats happened over the last two or three months, which is important in terms of ow volatility and market direction, has actually been the slullishness of inflation. Its not just in the u. S. , that in the en eurozone, and, of course, japan. But with inflation coming down just extends it this visibility of how long the central bank is going to be le to maintain this level of accommodation, so i think what we had was markets that were going up for catalysts into this period, whether it be, you know, the u. K. In tion, or it was going on the Financial System, the french elections, Italian Financial system, and what gotten is those hurdles have all come down, and at the same time, weve gotten this bit of a slowdown of inflation, which has everyone saying, wait a second, the go on bank could another three months, six months, with these policies, without any major changes, and changes that are catalysts, the market volatility and market movement. We continue to see investors call for shorting on bonds. I mean, the latest is blue bias management saying theyre want to go short. Theyre overvalued. They said theyre overvalued, they think the 10year yield is going to rise because inflation is going to pick up, oure going to have more fiscal easing. Its the same story, and investors keep getting the timing wrong. The going to change dynamic . Bob what could have changed ould have been tighter markets, labor markets, the product market, and higher inflation. Gotten is weve lower inflation a little flucky ere in the u. S. With Telecom Charges and the like, but now weve added a big drop in oil prices, which is going to bring Inflation Numbers back down again. Core Inflation Numbers are pretty well behaved. We keep waiting for these tight markets to produce higher inflation. It. Not getting i think that gives Central Banks more visibility. E. C. B. Is going to have to make a decision probably in september about what they do for their asset urchase program. I think they kind of wish they did you not have have to make a september, because theres no clear evidence that they need to tighten policy. But theyre probably going to make a decision two or three months in advance, because it does end at the end of this year. Really think its this little sag in inflation thats the market a reassessment of all these asset markets. Equities, ans is with any kind of growth, continue to get bid up. What do i always tell you . It all has to do with oil t. Didnt take bob that long to me that. He confirmed it. Bob, youre staying with us. Gorsky, Johnson Johnson chairman and c. E. O. , will be joining us on business, tax reform in d. C. Chief he staff bucks Financial Officer will join us as well. This is bloomberg. Italy will commit will clean up two failed banks after months of talks with regulators that friday. Brussels punting and left the decision with italy after the banks aid that the two were insolvent. After an emergency cabinet prime in rome, the minister told reporters that there was no better alternative the bailout debris. Alternative better than this debris . From the point of view of the stability ies, the of the Financial System . I wish the people who criticize would tell me what a better alternative could be, because, frankly, i dont see it. Alix joining from us milan is dan. Winners and gh the losers. Who took the hit on this bailout . Dan obviously italian taxpayers are going to take some of the hit on this. Big winner is bank intesa. The countrys second biggest bank. Has wide distribution throughout italy. Its market presence in this northern region, one of the in italy, was slightly weaker than its biggest rival. Dictated essentially the terms of this operation. To find taly tried other private investors to partial state, private solution, that didnt happen. Intesa came forward with an that practically guaranteed that its capital ratios will remain unchanged. To maintain its dividend policy. They might even be able to nerate eventually some profits out of this to help boost its balance sheet. Alix and what about the senior versus junior shareholders . Walk us through whos losing there. Well, the senior bond holders are going to be protected. There also will be some eimbursement for the juniors as well, particularly small retail bond holders. Be some reimbursement there. Intesa has said it will help gap on that. Protecting senior bond was a priority in this transaction. David dan, why did italy get its own . S on it was all about having to go through brussels, european clearance. Goes off on its own and bails out their bank. Dan well, im not sure if on its own is completely accurate. The e. C. B. Came goes off on its out friday night and declared that these banks essentially were failed fail. T to and then when we quickly got the approval, the signatures of other regulators, the. S. B. , and then the European Commission last night gave its sign off to state intervention. Italy, its belief is that it ollowed the rules. Whether or not this was the tension of european regulators rewrote the rules, and in an attempt to bring Banking Union closer together, that remains to be seen. David thanks so much, dan. Of italian banks has been hanging over europe for some time now. Oining us to give us his broader perspective is the global strategist for amherst. Hat about this more global perspective . Whats talk about italy first. S i hear it, these two banks are the 9 only ones with trouble. Whats yet to come . Bob i think these are the two forefront een on the for the last 18 months. And it was clear that something had to happen. But i think, you know, as your colleague mentioned, this has roader implications. This was a situation that should have fallen under the. Ropean banking regulator i dont think in the midst of these, beginning of these they ations for brexit, wanted a distraction by having another negotiation and one cation going on with of the big members of the euro. Quickly that they just sort of, you know, did away with the rules, said you with it yourself, because they didnt want any potential conflicts. Italy and ween brussels. N a sense, i think this is a setback for the banking Regulatory Environment in becomes a that if it real big problem, just push it back to the local government. David exactly. Stand now . After the financial crisis, they had a resolution of together, sort of like here, that was going to take care of the europeanwide system. They have a crisis, oh, dont Pay Attention to that, then whats left of regulation . E bank bob thats a very good question. I think that part of this was this was a problem that had been brewing for years, long before this regulatory into place. Put i think it does raise a very important issue as to and eanwide sharing Regulatory Oversight versus if theres a problem, the problem local to the government. Now, in this case, its very anageable. Italian nominal g. D. P. Is about trillion, so 17 billion if its the total amount, if they even use that much, a little 1 of g. D. P. Thats very manageable. Instructive t is that when you come up to this really kind of the first situation where something, where maybe the second we had spain, where something happens, it gets pushed back and you recollect let the local deal with it, because they dont want to deal with the political implications potentially losing deposits, investors losing on their bonds, so it goes back to rather olitical issue than an economic issue. Alix you look at the markets, over re seeing a rally in italian stocks. But if youre an investor, how do you parse the difference . Be that perspective, youd better off buying shares or ebt in some bad banks, mediumsized bad bank in italy, capitalized, tronger bank in spain. Bob i think thats where you get into the minutia of the but certainly im sure there are some investors who think a portfolio be a er banks might not bad investment. But again, youve got to spread your and diversify risks. But clearly this sets a the ent that you allow local political government to get involved in these issues, an overarching European Bank regulator. Ix i dont know, im like what . Come on. You just youre kidding me his. T david bob is going to stay with us. Johnson , alex gorsky, johnson chairman and c. E. O. , will join to us talk about changes at his company and what tax ealthcare bill and reform could mean for his industry. Live from new york, this is bloomberg. David this is bloomberg. The global Food Industry has been teeming with change, and loebs third point added to the churn over the weekend, when Bloomberg News reported it had purchased a 3. 5 billion stake in nestle, the argest food company in the world. Here to take us through why dan loeb is interested in nestle it may means is ed hammond, who broke the story. Joining us from london is from bloomberg intelligence. Bob is still with us. Ed, first of all, break. Lations, for the take us through it. Why did dan loeb make this big acquisition . Acquisition, is in his own words, because he thinks this is a rare opportunity of having a huge ompany, which is still a really con glom late in terms of brands, where theres get big y to divestitures, raise ton of money by doing sales, and eturn the money to shareholders. He also think i think hes knocking on the door. s have a new c. E. O. Who shown a willingness to be a bit more progressive and change the direction of the company. Loebs plan is i come in, i work alongside this guy really improve this monstersized company. David as you point out, they headed in this direction. What does he have to add . He has is he at has very specific thoughts in terms of things that he can ivest. He mentions in this letter loreals stake, which the worth about 25 billion. Talks about them lifting their debt ratio, its much lower than some of their peers, and more broadly making divestitures. At we dont know yet is what loeb is going to ask for. Who the is guy advising him on this particular process. He was previously involved in sara lee. Experience in europe. It wouldnt be a huge surprise as a board ed him member to push through the changes. Tom really speaks to the fact a t the Food Industry, package Food Industry, is really struggling. Whats going to be next for that group . Not just nestle thats come under fire. The previous speaker is absolutely right. Hes pushing on an open door. Whole reason that nestle hired Mark Schneider was to actually change the culture business. I think the whole of the european is global and has to exactly the same, because a lot of small local Companies Share in the Food Industry. Food has always been local. But in the last few years, its shape. Aken the organic growth isnt there at the moment unless these change the way theyre growing their business. Best hich companies are positioned to take advantage of that, and which are worse positioned to take advantage of hat . Duncan i think hes got a rong market share, and nestle, to be fair, is global number one and probably leads top 10 Fastest Growing food markets globally. In a good position to drive itself the next few years. Some specific areas where its strong, but obviously got some weaknesses as well it needs to address. Two large the european players. Eryone else is really pretty much niche compared to those in the european market. Obviously you have to pick your battles and choose where you and where you can divest aggressively to actually keep the volume growing moving forward. David what is triggering all of this . Unileverheinz issue that percolated out about six onths ago. Whats triggering this . you see these huge companies, kraft, union lever, you can keep going on, they dont have a ton of growth. Push into o this what we call health and show s, but theyre all the exposition. Theyre looking for new ways to ep expanding these businesses. And i think one thing thats eally interesting here in this situation, and moving away from that, the new c. E. O. Theyve hes the first outside nestle noiment over a century. Shows us how entrenched this company was until very recently. Not alone. Union lever, same situation. What was interesting, bob, to loeb tends e, dan to invest in u. S. And japanese equities, and he dent this time. Flow ort of speaks to the weve been seeing in europe. You look at the bloomberg here. This is the inflow into europe eve seen. Just year to date overall, its like over 20 billion flowing in. Here do you feel like we are in this rotation . Out of just had data germany, the Business Climate index, the assessment of rrent conditions in germany, in june, the highest ever since unification. Strong clearly is some momentum in europe. And i think this is spilling over from germany into the rest of the eurozone. And that means that there are opportunities potentially for forward. Ng so when up to the get into those opportunities is not when growth and the numbers are all there. You really want to get in there on the early side of it. Might have been the arly, early side of it, but as your flows chart showed, investors have been moving money back into europe. Think that reflects expectations about growth. And it does look like its reasonably seasonable. So, you know, the currency has been relatively cheap earlier get in good you currency levels. You have Growth Potential thats coming close to that of the u. S. Theres a lot to say for moving into undervalued ssets in europe. Used to loeb is doing this in the United States. Not so much in switzerland. Easy is it to get done . Ed its a really good question, and i think everyone trying to find out as much as possible. Hat we know is this switzerland changed their takeover rules quite ubstantially because there was a lot of resistance. In new things. One of the key things on that is that you have mandatory terms of every director to one year, and all directors need to be reelected again. Its a much more shell, lot of europe. Nestle re seeing stock right now at an alltime high, up 40 . Guys, thanks so much, duncan and ed hammond, good to see you. Up on where we stack this m a monday. Youre seeing a little bit of. 2 nt in futures, up by over in the u. S. You see euro stocks getting a up. Bid but victory really belongs to the italian equity market, up lmost 1. 5 on the day. The ftse 100 also able to rise higher as well, as prime may finally sa gets a unified government there, creating a deal with the democratic land union. If you switch up the board, look at whats going on within the currency market on the back that news. You have sterling up well, it was up earlier, and now its flat on the day. 10year italian bonds, one of europe erformers in right now, as yields move down. Goes nowhere, and crude able to hold on to gains fact that pite the j. P. Morgan slashed their price forecast. W lets get an update on whats making headlines outside the business world. Emma is here with first word ews. Emma minister indian prime will visit the white house today but few people expect that expect breakthroughs on immigration. His likely to lobby the president on manufacturing. Mitch mcconnell faces an embarrassing defeat over the healthcare bill. There is opposition from at least five republican senators who are demanding big changes to the legislation. He cannot afford to lose more than two republican votes for the bill to pass. Rio tinto is backing an offer for their assets. The bid was raised to almost 2. 7 alien dollars. 2. 7 billion. They want a greater certainty that the deal will be approved. This is bloomberg. Thanks so much, with health care at the top of the National Agenda this week, we turn to the company that perhaps more than any other is identified with the leadership of the sector. Johnson and johnson does just about everything with annual revenues of 75 billion. Alex gorsky is the ceo and joins us now. Its great to be here, thank you for having made. David lets talk about the changes that you are effective way. You just have had the biggest transaction and the history of billionany am a 30 acquisition. Tell us about why that was strategically important . Does it change your direction . A continuation of the path we have been on the last five years. We are proud of the performance of the company and have been able to grow faster than the sectors we compete in. Launching about 15 compounds over the last six or seven years, many of them transformed into billiondollar blockbusters. It makes a difference for patients. As we look at different areas where there are great opportunities in terms of medical need, we thought we could add synergistically to give performance to johnson and johnson. Actelion was a great opportunity for us. When transactions like this fail not because of the finances or the strategy but because of culture, its typically the thing that gets in the way. How will you combine these cultures question . When we look at different opportunities, we look at where there is a need and where can we create value and where is an opportunity to be synergistic with some of our existing compounds based on a therapeutic area, whats important is culture. 50, 35 or 10ook at year time frame, we have a track record of integrating companies around our culture. Fact, we find its important to add product to our portfolio but more important are the people we bring in. A great example is dominic caruso, our current cfo who we acquired as part of the senecor acquisition years ago and thats a critical element and youve got to get that right to make sure the acquisition is successful. David where is johnson and johnson headed in terms of strategy . Where will you be 10 years from now . You arent even in oncology 10 years ago so that was a major shift. We believe in our diversified model. We think it has been a major reason for our performance. You can look at it financially 5, 10, 15 years, we have been able to exceed most of the major indices. Is isne of your business challenged and not having a diverse portfolio, it allowed us to reinvest and bring about innovation and get the corporation on a growth trend. The pharmaceutical group and particular think back eight years ago, we went through and 8. 5 billion spending period. Instead of doing a big acquisition, we invested in our and launched new compounds and our pharmasset and our pharmaceutical division is ranked in the top five. It starts with compounds that make a difference with patience. Patients. Expertisereat r d being applied so we are really pleased. We will continue to look for compounds in the areas that make a difference and drive our business. David lets talk about specific drugs. Darsalek, how important is that to you . We could not be more excited. If you look at the data, this is a difficult condition. Somebody whos know has multiple myeloma. If you look at the recent data that it can be used earlier, thats one of the keys. Yes, you have to get a drug approved that the ongoing investment we make. These are not products in and of itself, its only its almost a pipeline within a product. We are excited in oncology where we find new combinations of products as we gather more information to offer more applications. And johnson is a very big company. How material could something revenuesalek be to your picture . Its a very substantial impact. Wet a couple of weeks ago, featured our pharmaceutical business and we were able to take everyone through the pipeline with nearterm opportunities. We think products like darsalek will be bigger than other new product launches you might see in other companies. We are continuing to invest in that area. Weve got a great team of researchers. They have a strong core competency and the other thing is we are always looking for additional compounds to add to our portfolio and our track record of being able to identify early signs and then ring that in and apply it with her expertise, its been an example. Remucaid is a good example for you. You are starting to see some the klein in that business. What do you anticipate . There has been some decline. Incredibly proud of the performance. We understand the generics in the marketplace. Thats one of the reasons why a company like Johnson Johnson, 9 billionmore than per year in research and we need to replace those compounds and the only way we continue to be rewarded is if you follow the rightip process and provide the right clinical data. Bio similars are not generic. I think we demonstrated weve got a broad portfolio of other compounds in this area. Products are also not interchangeable. If you combine that with the strategies we have in place, we think we will manage it well and we could not be more excited about our portfolio with these compounds and others we will be launching in the nearterm. D tod do you expect remucai be a significant player in five years . We expected to diminish but we continue to invest because we are excited about the additional compounds we will launch. Between now and 2021, we expect to have over 11 compounds submitted all of which could have over 1 billion potential. David thats quite a capital investment. We think that has been a smart investment on our part. Alex gorsky, Johnson Johnson and johnson, he will be staying with us. Next hour, we will speak with scott maas, the starbucks ceo. This is bloomberg. Emma this is bloomberg daybreak. Coming up, and interview with the bmw ceo at 11 00 a. M. Eastern. David this is the week when Senate Republicans have committed to voting on their version of a Health Care Bill. To talk about what the legislation could mean for the Health Care Industry, we have the johnson and johnson ceo alex gorsky. You mustve spent some time taking a look at this. Bill became law, how would it change the Health Care Industry . Sayirst of all, i would that our thinking is representative of this major challenge we have of to provide of providing highquality health care in a sustainable way. We have been talking about this for a number of years and whether it was the Affordable Care act or prior to that. Now is are seeing challenge of demographics in the United States. Think weve got a lot of slicing and dicing to do. Its our hope that we find some kind of light partisan approach. Likely for they next 1020 years, this is something we will have to be working on because its so important. David you said sustainable. If you look at obamacare and the house version of the bill in the Senate Version of the bill, do any of those realistically promise we will bend the cost curve . Its Something Like 17 of gdp we spend on health care . Its really critical. We are just entering the critical phase when you look at demographics, the number of people sick the five and older. 65 and older. Based on the population and when you turn 65, you consume about 55 and seven times the amount of health care you did before. I think its about how we get that right balance to making sure we are ineffective and efficient. Its 20 of our economy but at the same time, how do we make rewardard innovation and dont compromise quality of care for so many patients who depend on it. Alix what if the people cannot afford supplemental insurance or medicare becomes less generous . That affects you and thats why its important to get this part of the bill right. Its our hope that by working across a number of the different parameters they are working on tax the subsidies, the credits, the different qualifications, providing more flexibility at the state level when you talk about the amount of dollars, and talking about 20 , we know there are areas where we can do a better job and it will be critical to focus on those areas. Area they arer focusing on in washington, d. C. Is tax reform. What is the priority . Tax reform is critical for us. For us to get rid of some of the in the Way Companies are going to be based in for us to be more competitive globally, its essential to work hard with them. Our Capital Allocation strategy is focused on what our strategy is. Tax schemes can change over time but if you look at Johnson Johnson, whether its 10 out of five years, we look at dividends first because our investors are depending on us. Thats after we have invested in the business in the right way which we do. Over 9 billion in research and development than we make sure that after that we are looking out for new technologies that we can acquire. 50 of our innervation innovation, we source from the outside and we make sure we make smart use of that. We do the acquisitions, we make sure we do them inappropriate and tax efficient way. David you say tax reform is critical so explain how that is . Effective tax rate is just over 20 . Tothe tax rate comes down 25 , does that change johnson and johnson . The more important issue is the flexibility it gives you for capital deployment. You want to make sure that companies are making investments based on the inherent value of the investment, not on the particular tax scheme. In versions are taking place because companies are being rational based on the text rate. For us is howe competitive you are on a particular acquisition. If a Company Coming out of your can pay a lower tax rate versus us, it may preclude us from being able to acquire Great Technology for the future. Scenarios there other where Johnson Johnson could be put at a distinct disadvantage . It has not been a significant issue to date but it concerns us as you see these gaps widen. Systemd like to have a where we have a more competitive rate but we would have more flexibility and more mobility to ultimately deploy that capital in the most efficient way possible. Not necessarily the absolute level of the tax cut you get in d. C. , its the fact you get something done which makes you more competitive overseas . Yes. Alix what about the labor market . We are not seeing a big rise in wages. How tight do you see the labor market in your company . The labor market in our sector is tight. There is clearly a lot in science so were always competing for the very best scientists, the best commercial Marketing Talent in the world. People find Johnson Johnson attractive for many different reasons. Its the Company Culture and the Career Opportunities we represent. We find we are still able to attract the best talent. Like everybody else, were always competing. Alix how would you describe your unit labor costs, rising . We have seen it to be fairly stable. Can beain categories, it somewhat higher but overall, we seem to be fairly stable for the last couple of years. At a time when we see the administration in washington reach renting just retrenching with environmental to restrictions, can the private sector step in and shut it to try to advance some of those interests . I think you are seeing changes happen in these areas regardless of the government. We have a 75 year commitment to make sure we are always doing things to specifications for the moms and as that user products and their employees. By having a progressive policy like family leave of up to 17 weeks for men, women, thats what allows us to attract of and, focusing on health wellness. In areas like the environment, we think we have a strong track record. We have set Ambitious Goals and we will already reduce our of resources by about 35 by 2020 and we want to go 80100 by 2050. We think thats the right thing to do but its Good Business for us as well. David on top of that, you have the smell of johnsons baby powder, what more can you want . Alix we like that. Thank you so much for joining us. We have a bloomberg tur terminal and you can check out bloomberg go. If you missed any of this interview, click on it and watch it again. This is bloomberg. David this is bloomberg. Senate republicans have given themselves a deadline of this week to vote on their version of a Health Care Bill. Here with the latest is our chief washington correspondent. They came out with a bill last week, they needed to lose no more than two votes and four republican said no thank you and now they have added a fifth. They seem to be backwards. Its like political deja vu all over again. It was like covering this in the house of representatives when it failed and then they passed it. The same thing is happening now in the senate. In theonservatives Senate Already said this bill is not conservative enough. Senator rand paul, senator ron johnson, senator ron ted cruz moderates and senator dean heller, they are saying they have a lot of frustration and the cuts to medicaid planned parenthood. Senator dean heller is the one to watch. Hes up for a tough reelection fight in 2018 in nevada. He will be facing staunch opposition from the left and the right. They will try to pressure him one way or another. David he is a good example. Is this real or horsetrading . He might go along on health care if they do something for him on Nuclear Waste in his home state. Ande is trying to negotiate see what bargaining chips they may have. Muchhite house is very engaged in the state of nevada particularly with senator heller and it will get interesting this week. The Nonpartisan Congressional Budget Office will release their budgetary scoring either today or tomorrow, most likely later this afternoon and when they do that, people like senator heller will be looking at those numbers to see how many people potentially could lose health insurance. No one heading into a Midterm Election wants to vote for a bill that will kick people off of health care insurance. That will frame the entire midterm debate discussion. David who is doing the horse trading . Senate majority leader Mitch Mcconnell. There is frustration that is palpable on capitol hill with the lack of white house engagement. Some people actually like that. They like that the lawmakers are able to go with that backandforth. In the sense of a political strategy, thats rather white house is driving this to pressure senators like dean heller to get on board. They are very much engaged in the politics of some of these key voters. Mitch mcconnell wants to have a vote by the end of the week but therell fail, the only be more pressure to get something done before the august recess. David i dont envy them their job to get this through. Every time they add a vote on one side, they lose one. Up, term limits coming the Morgan Stanley chief global strategist will join us on globalization and later, scott mas from starbucks will be joining us. In the market, its a calm day. Italian banks stocks are really taking the spotlight in europe. This is bloomberg. Alix a big sigh of relief Prime Minister theresa may strikes a deal with the Democratic Union in Northern Ireland to keep her grip on power. Italy bells out to failing banks and markets are waiting for the cbo scoring of the Senate Health care bill as republicans defect. Bloombergcome to daybreak on this monday. Alix it feels like a slow news day. There is relative calm in the market. S p futures are slightly up. Afterng is slightly up the news that theresa may has finally been able to form a government. The 10 year yield is going nowhere. Time for your morning brief. Goods ordersurable for the month of may. Around 1 00 p. M. , European Central Bank President mario draghi and ben bernanke will gives edges speeches to the ecb forum in portugal. President drop in the indian Prime Minister will give joint statements from the rose garden after their meeting at the white house. In the meantime, alix its been 17 days since the election in the u. K. Theresa may struck a deal with the Northern Ireland dup party. She says for more, we are joined by Simon Kennedy from london. Is this certainty . 327 seas, what kind of certainty does this give her . It gives her certainty through the rest of the week which he is happy and out about for now. On thursday, they will vote on the legislative program she unveiled last week and now with 10 lawmakers in the dup, she should be able to carry that through. It has lent some certainty to her much needed credibility she lacked in the aftermath of that election. Will does this say she continue to be the Prime Minister over the next few years . It remains anyones guess. Plotswspapers full of within the conservative party as to who might replace her. If she wins the vote this week, she will continue for a while and mabel and maybe get to brexit talks. She could be challenged in another election. She might limp on for a little bit longer like through the summer and after that, we will see of someone challenges her. David is there any indication the brexit talks may be held up because of whats going on in westminster or are they proceeding as if nothing is happening . They began last week and are proceeding ahead. G the nextiscussin round next month so it will be a cycle of every four weeks. They will all meet and negotiate and then go away and work on what they have decided. This afternoon, theresa may and parliament are laying out her plan. Its a sticky issue beyond brexit with european leaders saying at the end of last week that her first proposal fell short and they stripped some of that. Going to be an issue for the next few days. David thanks so much for joining us. The chief joined by global strategist for Morgan Stanley. He has written a cop rants a book on Global Economic and geopolitical trends. It has just come out in paperback. Welcome back to the program. Its good to be back. Suggest we get too far into u. K. Politics but one of the things you have written about in your book is globalization, whats going on with the u. K. Versus europe, part of a larger trend you see moving away from globalization. Even though the recent state of Election Results has been more favorable even in the case of france, i still feel the appetite for having global trade deals and more global is nottion, i think that coming back. Can look at the last big push for globalization. Over the centuries, there have been waves of globalization from followed by the pendulum swing the other way. They tend to last for a while. Think this is a multiyear, possibly multidecade trend and i dont see reversing anytime soon. Swung too faras in one direction and now there is some pushback. How can we tell how much of this is pure rhetoric as opposed to different patterns in trade . Have we seen any concrete action taken anywhere . If you look at the number of protectionist measures that countries are taken, we have seen a big increase in protectionist measures across the globe. That continues to go open and thats not just the western world. We look at the nations that are taken the most protectionist measures and most of them are emerging nations like india and russia. China. E example of we have seen a definite increase in protectionist measures that countries have taken since the Global Financial crisis. Alix it feels like you might decrease buttion regionally, its a different story. Trade within asia has been able to pick up as though china and u. S. Have butted heads in the same thing for the eu, they are more united than they work six months ago. Still veryrue, its much my nation comes first. Macron is considered a globalist by many people. He also focuses more on the interest of france and there is much more regionalization in terms of france and germany together. I believe this shift is happening but in terms of what of nations have done so far, look at the number of protectionist measures that countries have taken this decade which is far higher than what we have seen in the last two decades. Brexit,ets go back to it was pointed out that the u. K. Is one of the principal trading partners with europe. When you have u. K. Companies and European Companies saying we are going to lose money, may it correct itself . That should slow the pendulum swing but the direction is clear. View globalization through trade but it also has to do with money flows and people flow. The other aspect of globalization that i speak about has to do with capital flows. Look at how capital flows have dramatically shrunk between nations in the post2008 world partially because banks are not willing to lend much across borders because what they faced in 2008. This is not just about trade. Its about capital flows and people flow. Look at the immigration flows into the United States. Those have slowed down significantly this year. They say getting a visa coming to the states has become extremely difficult. Its true for many countries in europe so if you look at the flow of people going from the emerging world to the developed world, that has slowed down significantly this decade. Its not just about trade, its flows. And also people and all three fronts, there is a market slowdown. I feel happy and cheery with that. Will bep, scott maw joining us on his business as well as what d. C. Reform means for him and starbucks. This is bloomberg. Italy committed as much as 17 billion euros to clean up two failed banks. Outfinance minister spoke after an emergency Cabinet Meeting in rome and told reporters there is no that her alternative. Alternativea better than this decree from the point of view was supporting families, the two banks, the savers, the stability of the Financial System. I wish the people who criticize me would tell me what a better alternative could be because, frankly, i dont see it. Alix we are hearing from the bank of italy Deputy Director would that a full bail in have been bloody for the government. Right now, the country is in a time of transition and the process is put in place to avoid a shock in the market. Interesting commentary. We go to rome for more. The rhetoric this morning is how do taxpayers how did taxpayers get on the hook again . Do you believe this is just a transition . Choice come a precise choice by the Italian Government and the bank of italy not to hurt senior bondholders. The two venetian banks, too small troubled has been a place for a long time and it your ago, it was decided to put together the private rescue plan. Liquidation. This its an alternative to a resolution which would have involved bibail in. They do this because a lot of the bonds are in the hands of retail investors. Bear the have to losses and there could be political consequences. There is also fear of contagion across the system. Is afterate question 17 billion euros, is this the price to pay for the fear of contagion or is it too much for italian taxpayers . Alix is there another mediumsized bank that the ecb says will fail . Is there another one like it . Thats exactly the question. For a long time, we feared there would be banks which were too big to fail. Now we have discovered that in europe, there are banks that are too small to bail in. In italy, there are few other banks which are small which are having issues. The question which i think investors will ask is what will happen . Will we follow the rules of the have beenion which trumpeted as a major achievement by the European Union over the last few years or will we see once again this decision i the single resolution board which was supposed to take politics out of the resolution decision, they will say this is not for us in his bank is too small. They want italy to decide what to do with it which is a question that will be on many investors minds. David many thanks to you. To help put these developments like the italian banks into a broader global perspective,ru shir sharma is still with us. You talk about depopulation and deglobalization and deleveraging. Look at Financial Institutions like the italian banks, this is not the only banks in trouble. How big a problem is this for European Growth overall . I think its getting better. We have seen the european region improve. Haves in europe in general come up quite a bit. This reminds me of the u. S. Financial system five years ago. They still have not given an all clear but deleveraging has taken place. I am optimistic about european Financial Institutions and banks. Alongk this is further and deleveraging has taken place in europe. They are in a position to reform their Balance Sheets like the u. S. Did earlier . Things take a long time to play out. I think the european Financial Institutions are in a position to start lending again and we are seeing signs of that. Across the developed world, there is an easing in and in in lending standards. The Biggest Surprise over the past 12 months has been how well the european economy recovery is. Its backing a 2 growth rate this year which is a good outcome for europe given its poor demographics. There are over 20 billion in flows into europe. You see the headlines from italy but you also hear germany worried about what this means for the Banking Union. Does this make you want to invest more or less in europe . Europe is picture is coming off a multidecade low. And itsews flow important but the Bigger Picture is that the European Economic recovery will gain momentum. Marketfrom a financial standpoint is coming off of lows so these are positive trends which are likely to keep the momentum going in europe. The european financial have been coming out of this in the lending standards are easing which means there is a great ability for them to lend Going Forward and we have seen evidence of that in terms of the Growth Numbers of europe over the last three quarters. Alix thank you for staying with us. David we will talk with a starbucks chief Financial Officer. Live from new york, this is bloomberg. David this is bloomberg. Today is the 25th year of starbucks being listed on the nasdaq. The companys chief Financial Officer and executive Vice President will ring the opening bell downtown at the nasdaq today. He joins us now in advance of that so welcome to the program. Thanks for having me. Give us a snapshot of how far starbucks has come in 25 years. Its a day for celebration for us. At the ipo25 years in 1992, we had over 150 stores. In five states in the United States we had about 100 million of revenue in the company and we went public with a market cap of 250 million. Today we have over 21 billion of revenue last year, over 26,000 stores in 75 countries, we have over 330,000 people who proudly wear the green apron for starbucks and their market cap is north of 85 billion. If you invested 1000 at the ipo date and held it today, it would be worth nearly 200,000. Its a big reason to celebrate and i want to make sure we celebrate the people who work in our stores. We call them partners at starbucks because they participate in a significant way. Its because of their dedication and hard work that we have been able to build this company to where it is today. That alls fair to say of us have met some of your partners at some point. Where thesense of challenges are . Who is the competition . Where do you see challenges ahead of you . Retail in general is a troubled area. Init has been a big shift physical retail for sure over the last several years. There has been a Seismic Shift in the retail environment and it reaches far beyond the holidays to be pervasive as to how customers interact with retailers. We think a retailer today to be successful has to provide some sort of experience for the customer, something beyond just selling or serving a product in the store. Theus, its been about experience with a sense of community in our Starbucks Stores in my place where customers can come for a little while and connect with our baristas. Its something we are extending further with the Howard Schultz focus on the front end of the business, reviews or reserve stores. The other thing a physical retailer has to have is a digital connection with the customer. Opportunity and the connection with digital, we have been leading the way therefore number of years with almost 40 of our transactions, of transactions on our reward program so we have been investing significantly there. Samestore sales were down across the board in the last corner and you had to revise down your earnings but on the call, you say growth has started accelerating in april. Where do you see the most growth . For us, it has been about the morning daypart. Where we saw the acceleration is we wrapped up the quarter and victim ofut being the our own success in mobile ordering and pay and it has grown at double the rate. We have added improvements and got training in the stores in a rolling out Additional Technology for managers and partners and that is starting to have some impact. When you look into the future, the real Growth Opportunity for us is in the Digital Investment i talked about. Its about understanding what our customers want and when we and when they wanted. Thats growing. Our Growth Opportunity is significant in china so we have 2500 stores there. Its our Fastest Growing and we have a fantastic growing Leadership Team in china. Its among the best you can get anywhere in the world. That is been a big growth area. The third area for us has been around food. Had 1 or 2 on food but recently, lunch has become a big opportunity. And we2 of food growth are doing a test in chicago of a new fresh fruit fresh Food Opportunity which is off to a great start. Of all of that is dependent on past performance to get through at a certain rate for you to invest more . Is really our growth reliant on tax reform. We are watching with going on in washington. Our tax rate is about 34 and we have plenty of capital and ourings to work across o growth opportunities. If you look at china and digital, when those Investment Opportunities come across my desk, they go to the top of the pile and we fund those quickly because they are our most significant payback within the business. The ceo from Johnson Johnson said tax reform is critical to his business. Is it not critical to yours . Its something we are interested in. Are we reliant on it . No, but Corporate Tax reform with a lower tax rate, easier to repatriate cash, we are of all that of its done the right way. David how much cash you have overseas and at what would you do with it if you could repatriate it . We have about 1 billion overseas and if we brought it back, we would invested in stores in the u. S. And growing manufacturing capabilities. Pounds of coffee we roast has doubled so there are many places for a stew investment capital. Alix talk about the labor market, is it tight for you . The labor market has tightened up but we have not had significant problems attracting and staffing or stores. We really have a differentiated employment experience for our people. We call our people partners like i said before. Even beyond that then if we have at 20 hourslth care long before the Affordable Care act and free to wish and twostate university for so we have been able to attract and retain the partners we need and they have done a wonderful job serving customers. Alix how quickly our unit labor costs rising . There is some increase given the wage changes. Seattle moved to 15 per hour to driven cover that additional efficiency and we are watching that carefully. In wages andor benefits across the markets, we are well above minimum wage. Me a broader view. It the Federal Reserve would ask you why arent wages going up faster, what would your answer be . What we have been able to do is continue to be able to staff and retain labor at rates that are well above what you see in the industry. I would focus specifically on that retention rate. Our turnover runs about half the rate of the industry average and thats critical. This is not a Quick Service transaction. Truly a differentiated experience, truly a connection that many of our customers have every day and our people do such an excellent job, we need to provide the right type of benefits in keeping them employed with us. Ceos have a ton of cash cfos have a ton of cash in the guidelines but are not putting it to work because of uncertainty in d. C. That does not seem to be true for you. Do these things factor into your business at all . We work closely with this Administration Like we worked with the last administration on many topics. It is very important how those things play out for us. Goes, we investment continue to open more stores this year than we opened last year. Our budget this years 1. 6 billion dollars which is higher than last year. We haventinue to grow, a significant amount of capital Deployment Opportunities and we see that continuing in the nearterm. Alix thank you very much for joining us. About twokets, we are goods, away from durable s p futures are slightly up and the ftse and italian stocks are making a nice rally. Another aspect of the market is you are seeing a stronger sterling and the 10 year yield goes nowhere and oil is getting a little bit of a boost. Downle goods, a big miss, 1. 1 . You also have durable goods for april revised lower. If you back out transportation, its rising 1 10 of 1 . I cant find anything that feels good about this report. You also have the Chicago Fed National activity down in negative territory. Losingyear yield is you some steam with a little buying coming in. The dollar is rolling over a touch and if you look of the futures market, its pretty. Teady nonetheless, the story is that the ecodata gets a little softer and what does that mean when the hard data rolls over as well . David it doesnt sound like people are investing which is what we hope for. Alix apparently starbucks is. Today, bmw commemorates 25 years since they announced construction of their first full manufacturing plant outside germany. Matt miller joins us from south carolina. I am and the is you are down there. Matt i am close to tennessee. Why are you down there . You are right about the investment, bmw has put eight billion dollars into this plant since it started 25 years ago in they will have the celebration today. But are releasing a new x3 how important is this plant to the u. S. Economy and how important is the was economy to this German Company especially considering the risk that has developed between donald trump and the german carmaker . Bmw was true phil carters overdue here. Export and its a big business for the germans and the u. S. Economy as well. Alix this is what we are taking a lookout, Martin Shkreli whos headed to the Eastern District court in brooklyn. He is going on trial today for the fraud of potential investors. He is wellknown because he was the one who raised drug prices over 5000 and one of his companies. He got a lot of heat on that and has named himself a biotech man. On trial for something very different. Apparently, he requested a meeting with the fbi in 2016 to find out what the government was up to and self incriminated. The trial is about him taking stocks from a Biotech Company and using them to pay unrelated debt to investors and hedge funds. He walked into the courthouse. David normal you dont walk in and talk to the fbi. Alix the lawyers were not there but now his lawyers say he is confident he will be cleared of all charges. Why not hire a lawyer . Lets get back to matt miller. You mentioned the relationship with the Trump Administration, it seems to be focused on balance of trade. Fact, doesnt bmw help in the balance of trade . What i will talk about and a couple of hours, a board member in charge of production and i will interview the ceo later today. Kruger has met with donald trump and Angela Merkel at the white would assume they have discussed these things and the president understands how the balance of trade works. I will ask kruger how those meetings went and how he is getting along with the president. Since then, since that meeting when you would have thought they it buried the hatchet, understanding among bmw contributor to the was economy, donald trump says he finds the germans very bad. A meeting in brussels i believe that they are selling millions in cars millions of cars here and he was to put a stop to it. We will ask mr. Carter what he thinks about the president s position. Millions of cars they make but how many are made in the United States . Xtt they make all of the series in this factory. Or6, it you see an x5 was built right here in south carolina. Maybe donald trump does not like seeing them on fifth avenue but they make them here. David great to see you. Thanks for joining us. For more on global trade, we talk to Ruchir Sharman . Runningald trump was for president , he made bold statements about shutting things down including unilateral tariffs on chinese goods. He seems to have backed off of that. Was there more bark than bite when it came to trade . I think so but there is a different agenda. Its fascinating about the fact that how the market and people have gone on. Its interesting to speak about donald trump and if you look at whats happening in the marketplace, i think the conclusion they have reach for now is that there is very little which will change in terms of policy. You just have to move on. Is why ison i get there no trump slump and why have things not been affected . Politics uses money to move markets but the impact has been very little over the last two months. Alix whats the biggest driver of stocks in the u. S. . Terms of money remaining cheap and liquidity is easy and also, we are seeing and earnings earningsfter the sharp that the market took over the last couple of years. Thats a basic factor. In terms of the rates being so low in money is easy, this is a very important factor thats keeping all asset prices elevated. Some of our work shows there has in u. S. En an instance history were all Asset Classes have been simultaneously expensive. In the past, there has been up double in some Asset Classes may be stocks in 2000, property in anyonet you dont have asset class but everything is simultaneously expensive. This tells you that the easy money conditions is a fundamental driver of whats going on out here. Alix you see that with value and growth. You can say they are both expensive in the u. S. Where is the biggestmisprice. I think there is a miss pricing across Asset Classes. All asset prices will be impacted. Thats what makes this more difficult. We could isolate parts of the market in the past. You could say thats were a bubble is forming. Now it seems more synchronous. Accommodative Monetary Policy help . Typically, you only get bear markets during a recession. As Economic Activity continues and money remains easy, they put asset prices higher. When you get an economic downturn, you will have a huge selloff in all Asset Classes at a big bear market. Market the ninth bear market will be a 50 drawdown but as long as activity remains on an even keel and money remains easy, the natural tendency for stocks is to keep grinding higher. David 50 . Alix good stuff, stick with us. Lets get an update on headlines outside the business world. In london, premised or theresa may has reached a governing deal with Northern Islands Democratic Unionists. Their help on key votes in parliament. The two sides agreed on a dress something for Northern Island and winter fuel payments for the elderly. Concluding this wideranging agreement, we have done so on the basis of the security of our nation, building prosperity for all and supporting an exit from the European Union that benefits all parts of the United Kingdom. Emma details of the agreement between the two parties will be a bush shortly. Mitch mcconnell faces the risk of an embarrassing defeat over the obama care repeal bill. He faces opposition from at least five republican senators who are demanding big changes to legislation. Can afford to lose to more he cannot afford to lose to more republican votes. A Nobel Prize Winner has been released from prison. He is on medical parole. He is chinas highest profile political prisoner. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Coming up, an interview with former Arizona Governor jan brewer at 1 00 p. M. Eastern time. Live from new york, this is bloomberg. Emma coming up, in interview with the ceo of bmw, Harold Kruger at 11 00 a. M. Nestles is hitting a isord high after download courting the Worlds Largest company in this is the biggest bed of his career. Ed hammond joins us now and its interesting we make a big deal, 3. 5 billion but a typical bedford dan loeb is not that large. Jeffries is saying that shareholders do not want to count out. Its the biggest bet hes made in terms of the shares. Something has been misunderstood he has a small stakes a what leverage does he have . He knows you need a small number of shares to get stuff done. They want to put people on the board and then a comes up in a meeting with the company. He has a small position that he has more than enough to actually push for meaningful changes. Alix he wants nestles to sell its stake in loreal and get a buyback in a profitability target but that does not sound bad. Why would nestles not want to do that . I think they want to do those things or consider them. Who hase a new ceo shown a willingness to be more progressive so there so if there is a sense hes knocking on an open door. The loreal share is the biggest issue. They can return some of that money to shareholders. Loeb has brought in a guy who is a big deal in europe. He knows this space so he is someone who will clearly be instrumental to this and work alongside daniel low. He may even end up on the board. David how much have we heard from nestles about this . Already tried to change the company but maybe he is not that resistant. Right, he isats an outsider at nestles. He is the first guy they hired from outside of nestle to run the company. The companyn within is like a company in itself. Im sure he did not invite in daniel lowe but maybe its good to have someone who wants to see these changes. David what do we know about the other holders of nestles stock . Is it likely he can recruit other shareholders to support his vision . Its early days and is not clear if he has spoken to other shareholders. He has spoken to the company and it sounds like there have been discussions. They said we dont need to make a statement on this. Whokey will be whether loeb is the fifth largest shareholder as to how many other shareholders he can get on board. Alix why are these companies such a target for activist investors . They are big. They are conglomerates. We have seen a structural change across industries. General electric is a perfect example. Been a company that does everything does not work now. They need a much narrower market. There is a trend of getting big as mrs. S to break up where there is not an obvious synergy. Alix good reporting, thank you so much. Check have a terminal, i out bloomberg go. This is bloomberg. Economicis a class of nationalism the indian Prime Ministers meeting with President Trump and trump tweeted that he looks forward to welcoming him. Important strategic issue to discuss with a true friend. Sharman. Th us is richir they are both the picture of economic nationalism so what will be the upside . I cant remember the last time a visit by the indian head of state in the United States got absolutely no attention. I am happy we are talking about it. There has been very little interest in this. I think theres partly an understanding that big things will come out of this meeting because of the fact that on trade, the two have different agendas in terms of the way they stand and what they can get out of this. I feel its more about symbolism and the Trump Administration has moretic concerns to think geostrategic lay. Its the kind of stuff you would expect to be discussed at these currently,tings but given the variety of the Trump Administration that this visit is not really something which has been given much thought. David to what extent are concerned thats the United States is stepping out and china is stepping in . The reaction is likely next. Happy by theery attention being given them by china. In general, in Southeast Asia in particular, there is a lot of unease about the u. S. With and what china is doing. Its also about the chinese rollout. A lot of countries in southeast would really like the presence of the United States more but for now, they have to deal with this reality. China is a regional giant and china wants to flex its muscle in the region. Investments have done well but is that because of the strengthening of the dollar or because of fundamentals in the emerging markets . Its a combination. We have not seen any flows go crazy. The dollar is undoubtedly a big factor. If you could take the one single most important factor, it has to do with the dollar because whenever it weakens, emerging market assets start to outperform which means there is less more liquidity. That, you have seen a growth rebound in some of these countries and some of them coming back from the dead. The other thing is that china is not really blown out. If big concern last year was china would have a financial accident and that has not happened. Valuations have gotten so depressed for emerging markets of the beginning of last year but no valuations but no and thens are good dollar is temporarily week and thats giving a tailwind to emerging markets. If you look at it today, the index weighting of fixed stocks in the emerging market is higher today than it is in the United States. Thats an important shift. Emergingok at the markets, its getting more concentrated. Space,emerging market acronyms are popular now. Latin america is all about brazil, argentina, and mexico. Do you see that . Is there more of an Investment Opportunity in asia . Not this year. Last year come you have the likes of brazil doing very well seems asiaear, it oriented. The tech heavy markets are doing well. Breadthth is getting narrower. Its a shift about weighting of technology and thats filling up the entire asset class with a relatively new development. Alix really interesting, a pleasure to have you here. Coming up later today, we will cover the joint statement between the indian Prime Minister and President Trump. This is bloomberg. 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. Tthats why at comcast,t to be connected 24 7. 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. One big bet. The thirdlargest investor effort investment effort from them. Investors wait for the cbo score of the Senate Health care bill as the sector clients to record highs. What will lead the next leg of the rally . It is a question causing division on the street. Strategists are picking sides. David welcome to bloomberg daybreak. I am david westin alongside alix steel. Jonathan ferro is off today. Alix, how are the markets looking . Alix a lot to talk about, but the markets themselves are not seeing a lot of movement. Of a biding get a bit it theresa may can get her party to continue in the government should we do see yields moving slightly lower by one basis points. Despite Morgan Stanley slashing estimates, crude getting a bit of a bid. Lets get over to abigail doolittle. Abigail good morning, everyone. Lots of wheeling and dealing this morning. Higher on the news state in the company. It could help the company with thevolume growth and company overall. It could also put pressure on other consumer goods companies. We could see more action in this space. We have store capital hired by 9 on the news that Berkshire Hathaway has taken on a 9 stake. This is a commercial, single tenant realty. We will keep an eye on this to see if there are more gains. Finally, taking a look at maritime. The beach chairs are down, because the wall street journal has reported that frontline has decided against purchasing the company. Any m ae is not doing activity right now. Alix thank you, abigail. We do have some breaking news for you. The debt the chairman of searls fund management, he is stepping down from daytoday management. He will invest his own money at the office. Role as debbie chairman, he has said that his son as deputy chairman, he has said his son has done fantastic work. He wishes him success in his ventures. It is not just one umbrella investment strategy. He may still have a hand in liquid investments, but it is not quite so brought anymore. David it seems similar to the move his brother jonathan made a few years ago. He will also manage part of the money in the family office, but it does absolve some of the authority. Alix we are talking about m a. We do see the state being purchased in nestle. How much more kia in investment investment we could see in that space. The white line here is north america. The orange line is your. Both have rolled over is little bit, so the question is what will reignite the m a in that sector. Grouping we are bringing back in our guests to join us on set. Brian, where is the action going to be Going Forward . Here isnk the decline presenting a lack of perceived opportunity. It is the same thing that Portfolio Managers has to. Restle with moving forward, this actually might be a leading indicator for more capital expenditures, more investment in the economy, more Companies Looking to do internal out expansion. I think the companies that would benefit the most from that would be industrials possibly technology. Those are the areas where i think there is more potential Earnings Growth. About a lotwe talk of the uncertainty from d. C. How there is not enough capital being put into work however, we have heard word that that is just not true. What is your thinking when it comes to m a investment as to what is happening in d. C. . We still have a lot of questions on what is going on. We have the Health Care Bill supposedly coming up this week, but even if it comes up next week, Mitch Mcconnell is working hard to get things past. That could be a positive move just to show that things are happening in washington when all we have had is just promises. A lot of questions about where is the beef on any concrete proposals. One thing i do get concerned about, especially with europe, is how crowded the trade has become. D,is news with nestle is goo but everyone is talking about how where you need to be right now is your. We have seen how much the euro has rallied this year. Everyone is on one side of the boat. It it rolls back over, it could have an impact on some investments over there. It is important to the little bit careful here when you get to extremes, much like what we saw at the beginning of the year. Everyone said the dollar would go higher in the eu higher and the euro would go lower, but the past few months have been the opposite. Lookingf you are a ceo for growth, and you have a 2 growth in gdp at some point, dont you have to consider at some point some consolidation or acquisition to get your growth going . I agree with that. There is a very positive aspect to that. Another thing about washington, and i have been saying that this will take much longer for the stuff out of washington to take place. But, at the same time, no matter what donald trump does, when the Midterm Elections come along, the republicans will have to have some concrete a compliment take place. Accomplishments take place. Something has to happen. Going back to 2 growth, with that where are you going to get that internally . Where are you going to get that based solely on the consumer and other aspects of the economy . I think this m a activity will have to pick up. And things like that, you have to maximize what you have. You cannot do that relying on the economy. David we have come out of a earnings recession here in the United States. In order to continue the growth in earnings, what fundamental gdp growth has to be there . You need mergers and acquisitions or things like that . I think this is going to be a big week data wise. At the end of the day, these are big, developed economies, and most of the growth is going to come from the consumer. That was lacking from the United States in the First Quarter. The european consumer has started to come online, but that is a story that has lagged for years not just quarters. Im looking for a turnaround in Consumer Behavior and finally seeing spending matching those High Consumer confidence numbers. They are improving in europe as well. Consumer stocks is one area we like. Consumer discretionary, because we see the turnaround in the u. S. And the improvement around the world. Alix do you feel there is a lot of cash on the sidelines . Tax reform is a big guilt. If you thought we were going to have tax reform or progress towards tax reform by now, you are looking at maybe the earliest at First Quarter of next year. Possibly not even until after the Midterm Elections. We do not even know whether congress will look like after that. I think there is a lot of weight and see going on with companies and investors. I get asked all the time why werent buffett is spending all this cash why Warren Buffett is spending all this cash, and you just have to look at how high the market has gotten. For anrs may be looking opportunity, a pullback to put more money to work. Upwardspoint, an catalyst would be some kind of news on the tax reform or comprehensive tax reform. Market,oking at the many are thinking d. C. Is just noise. It will really be all about earnings. Earnings estimates in the u. S. Have risen slightly this year. Usually, it is cut. The you think we will see a cut in earnings estimates for the back half of the year . If so, what sectors are most vulnerable . The obvious one is the oil sector. A lot of the estimates people have been very careful at the beginning of the year to not include tax breaks out of washington. They thought they would, but they did not include them. They would come up, but they did not include them. The big upsurge with the Energy Sector is just not going to come. With the earnings estimates, i worry about what we have here. I do not want to be overly cautious, but earnings in 2016 the s p 500 for that year with the same they were in 2013, almost exactly the same. Yet, the stock market went up 20 . That has to do with liquidity that a lot of that has to do with the liquidity that Central Banks provided. Then, we had a five quarter earnings recession. Yet, the stock market went up about 3 . Because of central bank liquidity, the earnings went down like this if they are going to come back up, then they have to play catchup. I think it is really hard for us to take Earnings Growth and say it will be Strong Enough to take the market considerably higher although it will provide a kill with. I do not think it will be as positive provide a tailwinds. I do not think it will be as positive as people think. David coming up, and interview with curled cruder at 11 00 this morning with Harold Kruger at 11 00 this morning eastern time. That will be done by now miller. This is bloomberg. David this is bloomberg. I am david westin. Senate republicans have given themselves a deadline at this week to vote on Health Care Bill. He with the latest on their prospects is chief washington correspondent kevin cirilli. Hows it looking for Senate Republicans right now . Kevin they have set quite a tall order for themselves that is for sure. People on the conservative movement are blocking like senator ron paul, ted cruz, mike lee. They are saying that this piece of legislation is not conservative enough. Conservatives are saying it is not conservative enough, saying that they promised a full repeal of obamacare. However, also the moderates are raising concern about this when it comes to the cuts to med icaid. There is issues about the defunding for planned parenthood as well as not enough funding for opioid addiction and ways to combat them. Take a look at the senator from nevada, he is up for a tough reelection fight in 2018. He will be facing a tough political battle ahead, and he will be facing paying he will be paying close attention to the nonpartisan cbo score this afternoon. David kevin, thank you. Always good to have you on. Alix we talked about how the drama in d. C. Is not acting the market. We see some volatility across Asset Classes here. The blue line is the vix. The white line is the sfx. These are all extraordinarily low. Brian nick are back with us this morning. When you look at the lack of volatility in the market, i am not asking if you want to buy but how but the vix, do you hedge the headlines . I think we are seeing a convergence that was not entirely expected. I think you are seeing relative Interest Rates frozen in time. The u. S. Has done a little bit worse, and we have seen Interest Rates fall a little bit. Europe has done a little bit better. The best day of the year when volatility was not low was the day after the first round of the french president ial election when markets in europe were at 4 and were at 2 over here. So, there have been many of these oneoff events that tend to drive volatility higher for a passesd then as the day the effect wears off. I think we have seen more stasis this year when it comes to expectations the more disappointing and the Economic Data being better than expected in europe. Fromhas kept the euro breaking out in one direction or another, as well. Alix another reason for this climb higher i feel is the rise in real yields. What is going to be the breaking point for how far and fast real yields can rise before check things out before it shakes things up . That is hard to say. Worthing that is considering is what is going on with the fed. Even today, we had president williams talking about how we had to normalize both Interest Rates and their Balance Sheets. At some point, people say they will let them rolloff, like when you take away a big buyer in the market but when you take away a big buyer in the marketplace, it is a simple supply and demand thing. That might get Interest Rates to move a little bit. Volatility has gotten so low, because, as we have moved along, a lot of the sectors have become rather crowded. The Technology Trade in the u. S. Where we saw a hiccup a few weeks ago. Stocks are european going higher. Crude oil is on the negative side. There is a potential that we could finally see some changes trades, and ifd that happens we should see a big pickup in volatility which people are not expecting the summer. David is it possible that the fed might actually prefer there to be more volatility in the marketplace . We have a quote where he said, we cannot member a time where we saw liquidity across these Asset Classes. There seems to be andy reid silence in volatility seems to be an eery silence in the volatility. During the crisis years, they do not want the asset prices to go down during the crisis during thes years, they years, they do not want the asset prices to go down. We had it under directed we nterrupted rally in many Asset Classes except for oil since the election. Believe it or not, we might get a fed that is going back to what we used to get in the 1970s and 1980s. When things got a little too overheated, they would take away the punch bowl. Im not saying there are going to do that in a major way, but they might be a little less accommodative owing forward. I think that might create a problem for risk assets. It does not mean we will have a repeat of 2007. The last time we do not have a 7 or 10 correction in a calendar year was 1995. So, they are normal and healthy, do not be afraid of them. David i have heard that alix i have heard that for so many months and for so many years. Brian, what is your take . Have you see it playing out . How do you see it playing out . The opportunity cost for holding on to your cash is rather high. That that is tried to take that away little by little. They are trying to make cash and little more attractive. Make cash a little more make cash is little more attractive. Think about what looks overvalued. What has run past the point of fundamentals. When i see my twoyearold son on the playground, i just worry that if he does fall it will be worse. That is one of the reasons we are going into the second i try to do careful parenting to prevent that, but with your portfolio, you have to worry about what has had the best run in the past five years . That would be the u. S. Equities market, and it is only in the first few months of this year that we are seeing that change happen. We are happy to be overseas even though there is more currency risk and Political Risk overseas. Right now, you are being compensated for that while i think these u. S. Hit values are as high as they are going to go. Alix thank you both for sticking with us. Coming up, President Trump and indias Prime Minister will give us statement from the rose garden after their meeting at the white house. That will be at 5 15 p. M. New york time. This is bloomberg. Alix value versus growth. Here is the value versus growth index. You can see underperformance again. It is a short battle between the two. It has really contributed to the whiplash in technology stocks. Citigroup stocks are still in the books. The tight labor market should lead to a more cyclical rotation in values. Nick. G us still is brian where do you stand . It is a stock versus flow dynamic for us. Consumer discretionary is one of our favorite sectors. If you look at what we are adding two, they are adding value to financials. Alix matt . I tend to agree with that. If you look at the runs we have had with technology stocks, if you have older than 42 years for three years, you have 200 to 500 returns. Why not take some of those chips off the table . If you are in nvidia, you are up 500 . If you take off about 15 to 20 of what you own, you sell about the cover you cover the costs of your investments. When it take some chips off the table . The market,o time but you should still manage your portfolio and investments on a regular basis. Alix what you do with that cash you just raised . I can i think you cannot look for a value area, but cash is retaining a whole lot. There is a little bit of it is ok to have a little bit of cash on the sidelines. Will be helpful in volatility picks up, which i think it will. Alix you are adding the value that growth is consistent. Where you wind up thinking about the rotation in biggest asset . Where is the biggest risks . One of the biggest rotations we have seen this year with individual investors is not exactly of international but off the sidelines of international. Incomefund lows, taxable across the board. Also, international, over 100 billion has moved into International Equity funds. This year, i think part of that is just chasing the recent test performer. In the u. S. , it feels like it is more recently out of tech and into banks and energy. Iti makes the point that you will not be guilty say goodbye to growth until you have 10 year yield taking a run. What level you have to watch before doing a more serious rotation evaluation . Just to get back to 250, i think it is important. I think the economy will be firing on more cylinders than it is now. We still have 275 as a target for the 10 year. If that comes, then good. You will see financial stocks in particular doing well. That will also be correlated with somewhat Higher Energy prices if we have the economy heating up around the world and in the u. S. Value could make a little bit of a comeback as long as the tenure gets to 250 or above. Alix as long as. Brian and matt, thank you. You will both be sticking with us. The opening bell is up next on bloomberg. You are taking a look at s p 500 futures up. Alix this is bloomberg daybreak americas. Moment away from the opening bell. On this monday morning. Dow jones futures bid, nasdaq futures up by five cents of 1 , s p 500 futures up by seven points. In other Asset Classes, the dollar is weak or, lowered because of strains in the pound from earlier. We are waiting for the Prime Minister of the u. K. To speak at the house of commons outline plans those rights she will expand to citizens. We will bring those headlines as they cross. In the bond market, pick up in the 10 year. Of crude holding onto 4 10 1 . Lots of talk today, not a lot of movement. Abigail . Abigail were looking at gains. Dow and s p 500 up by a quarter of a percent, nasdaq up more than 4 10 of a percent following weekly gains of all three averages from last week. Some bullish followthrough, despite Economic Data. Something that could be a play, oil as you mentioned. It is up for a third day in a row after entering the bear market from the february peak. We could see relief rally and investors looking at the nearterm technicals. And the supply got that has been dogged oil. We have chesapeake energy, halliburton, and many others trading higher. That will help the trading action today. On the year, the energy is the worst sector paired up but it does not seem to be hurting the s p 500 or u. S. Stocks versus european equities. Take a look. Yeartodate chart. In blue, we have the european index, and yellow we have the s p 500. We see that for most of the year the s p 500 has been outperforming with the brief exception around the time of the french election. Now we have the french now we have the s p 500 back on top. Breaking news on the supreme court, taking the case on the religious objections to the samesex marriage. They will be stepping back into that. And corporate whistleblowers, orders coming out and i 30 a. M. They have passed pentagon on a guncontrol provision. These are cases that will be heard and decided next year. Most important, theyre stepping back on the question of the samesex marriage once again. Alix interesting. We looking check of the headlines as they cross. With us we have brian and matt. Joining us is oliver renick. So we of brian who likes the european equities, matt says there has been a lot of movement in european equities and i am worried. Oliver, take us through what has happened with the european equities. Oliver what people are focusing on when they look at the economy between the u. S. And europe, they look at fundamentally the Earnings Growth and what youre seeing is a nice rebound from the corporate profit plan in the s p 500 british look abroad, i think s p 500. And look abroad, i think there is potential growth. You look at stock 600 and it is quite a bit more. Looking at basically trailing 12 month levels that are higher, significant way higher than in the u. S. If you look at the forward 12 month price earnings, when you have the expansion, it goes down about 18 times earnings and it is agreeable to concede to see the gap. Alix and brian, you are the bowl. Bull. The optimism of where we will be rerating, it is there. Brian it is more the case in the u. S. Inwill not see a slowdown earnings in the u. S. , 8 have a deficit should be good this year. But we will have better growth in europe it not to knock on the corporate situation in the u. S. , but we are looking at that in europe. We will be going in and providing more stimulus. I think the chart you showed that had the s p 500 outperforming does not account for the fact the euro has a strengthened. The underperformance you have as a u. S. Performance, the dollar has gotten stronger. If we are not likely to see the ato to better for the year, least it will stabilize and we will be a more equal footing. So i think the dollar weakness could be a tailwind, European Central bank stimulus, which i think will continue for the rest of the year will be a tailwind for europe. It is already calling on more for tile points fertile point in the cycling to be will have acceleration and Economic Data and gdp growth in europe as well. Alix just to get your take matt, i know youre concerned about flows, but inflation is hot in europe. You want to say go along equities . Why is that not the trade over there . Matt one thing we get worried sorry,is when we im o one bank just got bailed out in spain. We have two more tyra banks getting build out this two more 8iron banks getting build out this morning. Maybe i should not be as worried, but the one thing that all, that everything that brian and oliver talk about i agree with, but sometimes when you get positioning in the market and too many people i was out of the boat, it can come out different than people realize. At the beginning of the year, one thing, i was pounding the table saying the dollar will not go higher like everybody thinks, Interest Rates will not go the way everybody thinks, because the positioning is too far to one side of the boat. And as one customer said, fundamentally i do not he gave me on the reasons i was wrong, and i said those reasons are there, but sometimes when everybody gets too far to one side of the boat, it is interesting, brian talking about the dollar. It has been weakening for six months. Something i have been looking for. And most people were not at the beginning of the year. What we see now is the dsi index, we have bullishness into the single digits, around 7 in the dollar. And the euro, it is good completely over owned. So if you get a shift in those things with too many people on one side, no matter what the fundamentals are we can see a shift lasting for not just a couple days, but for a couple months. That will change, that will upset a lot of people. So again, i do not disagree with anything you are saying, we can continue to see the of performance in europe, but i worry that with too many people, with the crowded popular trades it may not be quite the lock people are looking for. Alix and as we debate europe versus the u. S. , we are waiting for theresa may to address the house of commons and lay out her plan for eu citizens staying within the u. K. You have a live shot of the house of commons. And we have anna edwards, who is in london. She joins us on set. Great to see you. What are we going to hear from theresa may today . Anna looking at the speaker of the house of commons with the preamble, but the u. K. Prime minister is set to unveil more details of the rights that will be given to the eu citizens who will be living in the you cap to brexit. More than 3 million eu citizens living in the u k and will they have the same rights as nationals to health care, school and those things . That is one of the things we need to hammer out over the brexit conversations. We heard highlevel plans on friday when she presented to the other leaders in brussels. Now we are looking for details. Said what ise eu being offered is not enough. Exactly. Will this be more details of her existing plan . We heard over the weekend from david davis who said there is arbitration already, instead of going to the court of justice, is she reviving her bid . Anna we will see if there was more work gone into it or if there is more details, because the eu 27 said they want the court of justice to have a role in determining whether people are able to have a say on what rights they have. Alix thank you so much. Theresa may now taking the stage. We will listen in. Prime minister may for eu citizens who have made the lives in our country. Mr. Speaker, the council follows the formal start of the negotiations for the United Kingdoms departure from the eu, as well as marking the First Anniversary of the referendums that led to that decision. In the referendum, the british people chose to take back control of our laws, money and borders. To restore to this parliament and claim our sense of national selfdetermination. This government will fulfill the democratic will of the bridge people. Referendum,ker, the the referendum was not a vote to turn our backs on our friends and neighbors. Indeed, as we become more nationalistic in our outlook and as we build the global bridges we want to see, we will continue to be reliable partners, willing allies and Close Friends with all Member States of the European Union. We want to work, we want to work with one another to make sure that we are all safer, mere secure, and more prosperous through our continued friendship. We want to buy each others goods and services and trade as freely as possible, and we will continue to celebrate and defend the liberal Democratic Values that we share and protect those values that are the foundation of our freedoms and way of life. In short, we want to build what i have described as a new special partnership between a confidence, selfgoverning Global Britain and all of our friends and allies in the European Union. Mr. Speaker, that is the positive and constructive spirit in which my friend, the secretary of states, negotiations last week. And it is the same spirit in which the United Kingdom made a full conservation to all the issues at this counsel, including on security, migration, change and trade. On security, i think our European Partners for their condolences and resolve in standing with us following the appalling terrorist attacks the u. K. Hasnt suffered in recent weeks. Those attacks have seen citizens from across europe tragically killed and injured. They have also seen our citizens standing together in some of the most inspiring ways. At london bridge, we saw a spanish bank or tragically killed banker tragically killed as he rushed to the aid of a woman. We saw a man fighting off the terrorists. And these moments of heroism show how far from divided such attacks on our way of life will ever serve to strengthen our unity and resolve. But mr. Speaker, these attacks also show that we need to respond to a new trend in the threat we face, as terrorism breeds terrorism and perpetrators are inspired to attack by copying one another. Building on the Bilateral Agreement i reached with president macron, at this counsel i argued that we must come together to defeat the hateful and extremist ideologies that inspire these attacks. And to stop the internet being used as a safe haven for extremists. When one third of all links to propaganda are shared within the first hour of release, it is not enough for Technology Companies to respond reactively to extremist content on their platforms. The Council Agreed to put pressure on these companies to do more to remove the content automatically, and also to ensure that Law Enforcement agencies can access data. This was a significant step forward and we will continue to Work Together with our European Partners to combat this evil, to defend values, and keep our citizens safe. Onning to other issues, migration the council recommitted to the copperheads of approach that the u. K. Has advocated, dealing with the drivers of migration while doing more to stand stem flow. At this summit, i confirmed a commitment of 75 Million Pounds to meet urgent humanitarian needs in the essential mediterranean, while also facilitating voluntary returns of migrants making the journey. On trade, as the u. K. Lead to the European Union we will be forging trade deals around the world with old friends and new allies alike, but this will not undermine the eus trade agenda. It is not even in competition with it. As long as we remain part of the eu, we will continue to press for an ambitious trade agenda but can deliver jobs and growth across the continent. That is what i did at the council where there was a focus on the work toward it deals with japan, mexico and south america countries. And on climate change, the Council Reaffirms the commitment of all Member States to fully implement the paris agreement. The u. K. Has already reaffirmed its own commitment and ive expressed my disappointment to President Trump that he has taken a different decision. We will continue to make the case to our American Allies to think again. Mr. Speaker, turning to Citizens Rights, the eu citizens make a valuable conservation to our United Kingdom, to our economy, Public Services and everyday lives. They are an integral part of the economic cultural fabric of our country and i want to be clear that we should protect the rights. That is why i initially saw an agreement on this before we triggered article 50. It is why i am making it in immediate priority at the beginning of negotiations. Mr. Speaker, that agreement was difficult, because we must protect the rights of u. K. Citizens living in eu Member States too. At the council, i set out some of the principles i believe should underlie the agreement. There was a positive response from individual leaders and a strong sense of mutual goodwill in trying to reach such an agreement as soon as possible. So today, we are publishing detailed proposal to do that. Let me set out the key points. Certainty. Ant i know there has been anxiety about what would happen to eu citizens at the point we leave the European Union. Today i want to put that anxiety to rest. I want to completely reassure people that under these plans, no eu citizen currently in the u. K. Lawfully will be asked to leave at the point to eat uk leaves the eu. In the any eu citizen u. K. With five years continuous residence, at a specified cut out they will be granted station. They will be treated as if they were u. K. Citizens with health care, education benefits and pension. While any eu citizen with less than five years residence who have arrived before the cut off date, will be able to stay until they have the five years residence to apply to race for status. First, the cutoff date will be the subject of discussion, but it will be no earlier than the date we triggered article 50 and no later than the date that we leave the eu. No families will be split up. Family dependents who join a citizen here before the u. K. Exit will be able to apply for status after five years. After the u. K. Has left the European Union, the eu citizens with settled status will be able to bring family members from overseas on the same terms as british nationals. And there will be no cliffs edge, therell be a grace. Of up to two years to allow people to regular allies their status. While the citizens that arrived after the specified cutoff date will be allowed to remain in the u. K. For at least a temporary time and may become eligible to settle permanently. And the system of registration that the citizens go through will be streamlined and as light touch as possible and we intend to remove tentacle requirements currently needed to obtain permanent residents under the eu rules. For example, we will not require anybody to demonstrate they have held company of sickness insurance. And we expect this to be extended on a reciprocal basis to nationals of norway, iceland and switzerland. And an agreement on citizens hts will apply getting applied to the entire United Kingdom and gibraltar. It is without prejudice to the arrangements that exist between the u. K. And the island. We will preserve the freedoms that the u. K. And irish nationals enjoy in each other states. And our citizens will not need to apply for permanent residence to protect entitlements. Finally, the u. K. Will continue to export and operate the u. K. Pension and provide associated Health Care Coverage within the eu. We will continue to protect the export of other benefits and Health Care Coverage where the individual is in receipt of those benefits on the specified cutoff date, and is subject to negotiations we want to continue to participate in the European Health insurance so cardholders can continue to benefit from free or reduced health care while on a temporary stay in the you and vice versa eu and vice versa for those in the u. K. This is a fair and a serious offer. Our obligations in the withdraw thety will be binding on u. K. As a matter of international law. We will incorporate commitments into u. K. Law, guaranteeing they will stand firmly by our part of the deal. Our offer will give those 3 million eu citizens in the u. K. Certainty about the future of their lives, and a reciprocal agreement will provide the same certainty to the more than one million u. K. Citizens living in the European Union. Mr. Speaker, one year on from that momentous decision to leave the European Union, let us remember what we are seeking to achieve. We are withdrawing from a system of treaties and bureaucracy that does not work for us. We are not redrawing withdrawing from the solidarity that we would we share with neighbors. As a confident nation, we know that it is not just our past that is entwined in the fortunes of friends and neighbors, it is our future too. That is why we want this new special partnership, and that is why we approach negotiations with optimism, because a good deal for britain and europe are not competing alternatives. Path to the best single a Brighter Future for all our children and grandchildren. That i believe is the future of the british people voted for, that is the future i want us to secure and i commend this statement to the house. Alix that was the Prime Minister of the u. K. Outlining her plan for what the eu Citizens Rights will be in the u. K. Anna edwards is with us. And brian as well. Did we learn anything new . Anna no, giving more detail on what she told the eu 27 on friday, but really, maybe a slightly different emphasis. What was interesting, no mention of the European Court of justice, but they just didnt there is an alternative there is an alternative. But jeanclaude of the European Commission, we know he has a different view. The only thing we do not know, the cut off date. She gave the same range. And it is expected to be open to be part of the debate. Interesting, the tone she was using. It was friendly. That has not always been the case. We want you to say that the message was clearly directed at the 3 million eu citizens in the u. K. Alix what is your basic case for the u. K. And brexit . What weve been working at is the cost of being underweight in the u. K. They go to relieving the uncertainty. Those eu citizens employed by companies, at least operating in the u. K. , they need certainty as well about will the employees be allowed to stay, what type of taxes to worry about, so, and what is the incentive for those companies to place themselves in the u. K. Moving forward with these roles in place and this is the only one that will be ripe with uncertainty for how the brexit will be negotiated and what it will mean for the cost of doing business or the desire to do business in the u. K. Anna, so good to have you. Ian, great job. And health care back into the spotlight as the Affordable Care alex we spoke with gorsky. We have a lot of slicing and dicing to do. And it is important we find a bipartisan approach. I would also say that likely for the next 1020 years this is something we will need to be working on because it is so important. David joining us is michael turney, a healthcare analyst. Good to have you. As you heard him say, there is slicing and dicing still to come. We do not have the cbos going yet, but asng out you look forward what are you putting into your analysis of Health Care Stocks as far as the law. Michael there are a couple of moving pieces, the bill that is focusing on coverage. Medicaid has been the area very much in focus. Outside of the bill, you have focus on drug pricing, something that factors into my view of the world in terms of the companies affected by the drug pricing changes, the pharmaceutical chains. So Going Forward, between manufacturers as well as the potential players, you will see more work on the half of them trying to rein in the pricing as much as possible, given it is a hot button topic across the country. David as you look at the range of possibilities, divide it up. You have insurers, hospitals, providers, pharmaceutical companies, said who stands to win or lose the most depending on what comes out of capitol hill . Michael i think to make it a winner loosen area is unclear win or lose scenario is unclear. It could be positive or negative for different groups. Looking at groups especially outside of the realm of Traditional Health care, the ones that tend to benefit, companies that distribute in nontraditional markets. And one of the underlying things i have been focused on personally relative to what is going on with the bill, it is technology. How do you take the information that has been spit out of the recent government regulations going as far back as the hightech act, which was part of the original stimulus in 2009, and use it to deliver Better Health care outcomes. We are focused on coverage right now, but we are not focused on how you take the data and turn it into Better Health care. David and the administration should focus on this. That is one thing theyve done, Electronic Medical records for veterans, they are touting it. But when you look at the possibilities, the direction seems to be to take money out of what was planned for medicaid. If you take the substantial money out from medicaid, who is that likely to hurt . Michael the key focus for medicaid is anybody that is tied to volume, anybody benefiting specifically from people walking in the door and people picking up prescriptions, people getting procedures are the ones that will be seen the most potential seeing the most potential income of the harm, so to speak. Along those lines, the pharmaceutical distributors are the ones that are volume related businesses, so if this was to go through depending on the moving pieces that is one group that could have some incremental drops. So on that front, even though you have Medicaid Expansion over the course of obamacare, you have not actually seen that massive Inflection Point in the overall script volume growth. Alix michael, thank you for being here. David . David approaching 10 00 and we are going over orders of the supreme court. Most important, they did not rule on the travel ban. But they did say they will take a case that actually was a challenge to an arizona law about protecting people, it was a cake baker who did not want to bake a cake for two people getting married of the same sex. They said they would take a doddfrank whistleblower provision that was challenged that protects against retaliation. And a lot more coming up. Alix great stuff. 25 minutes into the session. Here is where we are. 500lly underway for the s p as well as dow jones financials ones, financials and tech leading the way. This is bloomberg. Vonnie from new york, im vonnie quinn. Mark im mark barton. Welcome to bloomberg markets. Here of the top stories we are covering. Major political stories ruing on both sides of the atlantic. We are waiting on key cbo scoring on the gop Health Care Bill. President trump will talk trade and immigration with the Prime Minister of india. Prime United Kingdom minister theresa may says she will guarantee the rights of eu citizens under u. K. Law. She seals the deal with Northern Irelands do you pay allowing allowing her to stay in power. A 3. 5 billion state in nestle. Force nestle to sell its stake in lor