Transcripts For BLOOMBERG Bloomberg Go 20160525

Kongcurran is in hong wanting to know when the fed will raise Interest Rates. Matt miller is in berlin. Lets begin in greece. Finance ministers have reached an agreement that will allow aid to be released to ease the debt burden around the country. Marcus joins us live from athens. Aid disbursement means greece will not face a massive payment crunch to the ecb in the summer. Theres also some extra money that allows it to stopping down taxes are about to rise. Its not going to cause jubilation on the streets. They can expect a little bit of stability over the summer. Jonathan thank you. David are you wondering when the fed will next raise Interest Rates . Chinese officials will ask their u. S. Counterparts about the timing of the next increase. Curran in honga kong. When are they going to ask this question and where . Good morning. It shows how nervous chinas leadership is of the looming fed rate hike. Issuelan to raise this when diplomats meet as part of a strategic economic dialogue. A rate hike matters for china because it would put pressure on the yuan. It could Spark Capital outflows from china. It brings back all the problems we saw toward the end of next year. China wants reinsurance from the u. S. Official that they will Telegraph Well in advance any move that americans they are even going far as to say they would prefer a move in july rather than june. Vonnie despite a 62 billion dollar offer being rejected, they are still says it can get a still says it can get a deal done with monsanto. What can they afford . A number ofaring analysts put out numbers. Jeffries is saying they could afford 140. Another firm saying they could afford 145. Clearly shareholders were not sincewith the idea at all it started being talked about may 12. The stock has fallen considerably since then. David more job cuts coming at microsoft. They are trying to undo the last major acquisition. Selena long joins us from hong joins uselena wong from hong kong. This is microsofts latest to cut costs and it is not working. Last year they announced 7800 job cuts. Off itst week they sold future phone unit. Really downsizing this lagging part of the business. this is a strategic move to back off of cell phones. Rate. This is another move to pare back. Its a smaller part of the business that it has been in the works for a while. This has been a long time coming. Its another step. David thank you, selina wang. Session in bullish new york. Ook at the ftse up the dax pushing as well. German Business Confidence out today. Since 2016. Thats encouraging. It points to a market in journey germany as well. Let me show you whats happening with wti and brent crude. You see what it means for the fx market. Both pushing that little bit higher. Dollar cm y. Thesee it at the bottom of screen. Worried about a strengthening dollar, trying to get ahead of the curve just maybe. China is just going to ask the u. S. Trade, when are you hiking Interest Rates next . Lets check in with abigail doolittle. Apple received a setback in india. The government is requiring apple to source components locally if they want to open apple stores. In other news, Hp Enterprise shareholders woke up to find themselves wealthier by 8. 5 billion. All of the shares are sharply higher. Tiffanys shares are down sharply after the Company Store sales were down 9 . Sales in europe were even worse. Shares are unicredit higher. The ceo Federico Ghizzoni is being replaced. He is thought to be out of touch with shareholders. Time for first word news. In albuquerque, a protest outside a donald trump rally turned violent. Demonstrators burned tshirts. Police pepper sprayed and through smoke grenades. Protesters disrupted trump inside. Has arrived in japan. He will attend a summit of the g7 nations tomorrow. He will become the first sitting president to visit hiroshima, where the u. S. Dropped an atomic in 1945. A new report says a brexit could force the u. K. To extend austerity measures through the next decade. It says britain may face a budget deficit of 44 billion if the company leaves. That could lead to more spending cuts or i o borrowing. Higher borrowing. Coming up, yelling at yellen. Has the fed slowed growth . An economist reveals what yellen needs to do immediately. And later, wilbur ross joins us on set. Now he is putting money to work in two very beatendown areas of the market. More go coming up. Jonathan this is bloomberg. Im Jonathan Ferro. The dax is up. Futures positive in the United States. Eurodollar pretty much flat on the session. Look at the chinese currency. The weakest fix since 2011. Brent crude and wti pushing high. David the dollar strengthened to a twomonth high against the euro. And in macroeconomics founder Ian Shepherdson said it is time for the fed to raise rates and send the signal that the u. S. Economy is healing. He joins us now. Welcome to bloomberg go. We have heard the models are not predicting things accurately. You have a theory as to why that is. When the fed is so easy for so long and keeps telling us the economy is weak, it reinforces the signal that things are bad. That encourages people not to spend money. It encourages businesses not to spend money. You get lower Interest Rates for a long time and weaker growth. Banks willing to lend money credit growth is quite strong. It encourages people to inflate asset prices rather than make productive investments. The misallocation of capital means lower rates dont transmit into stronger growth. David if there were proper allocation of capital there would be more growth and more productivity. Is this why we are not seeing productivity growth . Allocating capital for things that are not very productive. We are doing more stock buybacks. Look at the price of vintage cars and fine lines. Money is free and has been for a long time. About the idea that we are not seeing any kind of inflation that is even remotely run away . Cpi is above 2 . The other thing thats important for the fed is wage growth was stuck at 2 for five years going nowhere and its now 2. 5 percent and rising. They are going to stay ahead of the game. Jonathan what about the feedback loop globally . China will ask the United States on the timing of the next Interest Rate hike from the federal reserve. These Central Banks are supposedly independent. That is huge. Independent, but they talk. , highernas perspective Interest Rates are a type of policy for china. They have been trying to stimulate their economy for the last year. They are reportedly having a word to see what they can do. Vonnie maybe they consider this the next step in the shanghai understanding. From chinas perspective the slower the u. S. Raises rates the better. What tends to happen is that as inflation pressure the ability of the rest of the world diminishes. We tend to get to the point where we just have to squeeze the domestic economy. Your theory says why we are not getting the growth we need now. If all the Central Banks keep on the course it will get worse actually. We have a here to show. Why dont you explain exactly what this graph is showing . The Straight Line shows the standard view of the world. If you cut Interest Rates growth gets stronger. The more you cut the better it gets. The yellow line shows a different idea where actually thee you cut rates line starts to move down. You are actually doing more harm than good. Vonnie when should the fed have raised them . Two or three years ago. Vonnie why are we not seeing more pronounced affects . The counterfactual is impossible. No one knows what would have happened. Morei can tell you is that qe of course as well. What has happened over the last few years is that there he has been proved wrong. We have to work out why this didnt work because everything every in the world told us the more we do the better it will get. The markets have gotten quite used to this low Interest Rate environment. Dont you worry that there would be a really negative effect on this location of the markets . I have no doubt that it is going to be the modest expectations of what the fed is going to do our too low. Disturbance. Some it boosts productivity growth because we start signaling when things are getting better. Change andty has to its going to be awkward. That is Ian Shepherdson. Thank you for being with us. Vonnie up next, a relief package that greece will get. Coming up, wilbur ross joins on said. Find out if his multibilliondollar bet on greece is about to pay off. Thats next on go. Jonathan this is bloomberg. Im Jonathan Ferro. Greece will receive 11. 5 billion in aid after an agreement is reached in brussels. The 10 year yield dropping below 7 for the First Time Since november. Us forross is here with the next hour and we will start with European Banks. Welcome to the program. Lets start with greek banks. I think this is a very positive development. It diverts any danger of immediate default on the Greek National debt. Will eventually win its war and greece will get the kind of debt relief that it really needs. I think the imf has been right to hold out for that. Also the greek banks need to raise more capital because of the increasing mp do you think they have to raise more capital . Really dont think so. They raised more than they needed to the last time around. The prolongation of this agony, will there be the resolution. That has been holding back the economy. Its hard for a bank to operate when you have capital control. They have achieved sovereign debt relief putting in all these new austerity measures some of which will actually help the economy. They said a few billion dollars will go by october to repay overdue payables that the government has owned the private sector. Thats going to be big stimulus. It will help the liquidity of great companies. Been talkingf has about this for some time now. We had another instance where they had to back off. The germans so sure will back down . If i were a german voter, what i rather write a big check on my own or let imf of the check right part of the check . Greece cannot pay all that interest and principal back so its a charade. Vonnie are you putting more money in greek banks . We are invested in euro bank. The only reason the banks have a problem in greece as. Its not like ireland where the banks went nuts, they had best real estate loans all over. Ek banks got into a pole trouble because the government blew up. David are you looking to invest more in greek banks . Have have been looking to this thing resolved because if they were going to go into another default which they could have in july because of fairly or if theple government did not pass all these measures. Bipartisan support for these austerity measures passed. It must be 30 or 40 very difficult pieces of legislation. And the coalition held up. The little majority they have held up. You may consider investing more in greek banks . We will have to see where they trade. My guess is this has been very positive for the greek banks. Jonathan lets take a look at italy. 17 total loans. The gdp is around 1 5. Are you looking at italian assets . Italy has a historic problem with the banks that is different from the greek problem. Foundations were really local political people. There lauren portfolios are peculiarly bad. Jonathan is it something you would touch . Carefully, gingerly. Vonnie you were in spain. You got out of iowa. Ireland. Im very interested in china. Thehey securitize distressed loans there with transparency and reasonable pricing that will be a very good help for the chinese. Your assessment of distressed loans in china how do you gauge what is distressed . You can see who is in trouble. Something like 10 of the loans are not covering their interest. Pretty easy to find out who is distressed. You have to figure out how to rehabilitate them. Jonathan wilbur ross is sticking with us. David coming up, how to put your money to work in the most beatendown sectors of the past year. Jonathan this is bloomberg. Im Jonathan Ferro. The dax is headed for its biggest today pop in april. Two day pop in april. The ruvell in russia advancing and the aussie dollar as well. We are on 50 watch once again. The thing im watching is what happens in china. Cn why fix overnight the weakest since 2011. Know thes want to feds next move. They are just going to ask the fed straight. David if only we could just called janet yellen and ask her the way chinese can. Tom that was such a good day to check. It was so good. David heres what you need to know at this hour. Says it is still monthent they can meet santos demands and get a deal done. As theft will cut jobs ceo pares back the companys ambitions in smartphones. Blow to apple. Indias finance minister has ratified a decision by wrap all to meet local sourcing rules if it wants to open its own stores in india. That could hamper its efforts to make india its next big market opportunity. A House Committee may vote today on a plan to deal with puerto ricos debt crisis. The measure would create a board to resolve the 70 billion in bed. Some say the bill does not do enough to protect Public Services from costs. House Speaker Paul Ryan says he is ready to end the standoff with donald trump. He may endorse trump for president as early as this week. Concerned about the split that has developed in the republican party. Tom keene is joining us from bloomberg surveillance radio and wilbur ross is still with us. Tom keene, sometimes a story comes out that you dont know whether to laugh or cry. The idea that china will just when u. S. S. Direct and chinese officials meet in the coming months, when are you going to hike next . Tom some of the silliness of this is beginning to percolate. Overweighted is but it shows the import of the ramifications if you do get a shift in fed policy. June july parlor games extremely fluid right now. Central bankers do talk. Maybe this is just sort of a followup. This is the idea of money is cheap. Ayer andback to b monsanto. It surprises me that they are talking about talking about it. These central bankers have been talking regularly back and forth. The chinesers government wants to let the world know they are concerned. Tom i think talking about talking is the start to talking so im in favor of it. I think its very tricky. I personally think its an overvalued currency, not undervalued. I disagree with my friend mr. Trump in that particular regard. If theyplicated because devalue the currency by 3 it would raise the interest bill that have a lot of dollardenominated debt by 26 billion a year. Thats a big number for those companies to afford. Thats one of the problems with lowering the currency and i wouldnt be surprised if it were one of the main reasons they have not let it go. Tom whats the firstorder effect of money for nothing . We have this gift that keeps on giving for x number of years. You have been advantaged by that. Are they going to finance that move from 110 or whatever up to 135 or higher by doing short paper at a negative Interest Rate . They will definitely finance it with some debt. Money almost cost nothing nowadays. You often wonder if companies would not be better shutting down their operations and just putting out all this negative Interest Rate. And it would be the 100 profit margin business. David that poses an enormous moral hazard because that encourages people to misallocated capital. Do you see that as you make investments . In general people are paying too much for everything. In the art market. The last few markets i have been under better on most everything. Where you bidding on in the u. K. . We dont talk about rumors. Theres a rumor that it is a rumor. Vonnie what a fair price be given steel prices . We do not talk about rumors of m a. We talk about them when we make a transaction. This lets talk about extended capacity for steelmaking globally. The u. S. Government has been talking quite some time to china saying you have too much capacity. Is there overcapacity in steel . There certainly is. China has over a billion tons a year. Domestic demand is about 700 million tons. Million tons looking for a home. 100 million of which they are putting out overseas. That is producing all these countervailing tariffs. They probably cost the eu 40,000 or 50,000 jobs. It has become a serious problem. Steel industry is both capital intensive and labor intensive. So what do you do with all those workers . And especially what do you do when theres the next problem coming down, shipbuilding in china. That is another huge laborintensive industry. Also a big consumer of steel. Chinese shipyards are over capacity already. Two thirds of their auto book runs out this year. Be a lot of new orders coming in as they are not heavily subsidized by the government. That could lead to a compounding of problems with layoffs in shipbuilding and steel. Recurring issue in china. At what point does it become social unrest . Tom i think the social unrest question is germane. Vonnie how long of an investment is the China Investment . You said distrust that you would be interested in. How long are you in china for . I dont know we are in china already. We have various Portfolio Companies at almost 20 factories doing one thing or another. We have a clean Energy Joint Venture with the Largest Electric utility in china. Jonathan that sounds like you withnvested in a situation a significant overcapacity, clean energy. Does it bother you . We are mostly in the people providing the technology. China really is the world leader in solar technology, wind technology. I think before long they may become the world leader in battery technology. Renewablesblem with is storage of electricity. Wind and solar are inherently intermittent activities. Call it something i a battery to store the power. Vonnie where else are you investing . The most recent thing we have announced as opposed to being a is the acquisition of next io, a very large chemical distribution business. It owns a very large one in china. Its a big distributor of chemicals and plastic resin. Jonathan so the source of the rumor and that is the news today. Thank you, wilbur ross. You are staying with us. Thank you to tom keene from bloomberg radio. To bloombergin surveillance from 7 00 to 10 00 every morning. Coming up, president obama landing in japan less than an hour ago. His former trade rep joins us next on bloomberg go. This is bloomberg go. Im david westin. Later, ciscos chairman John Chambers will be joining us for the Bloomberg Reichel a conference here in new york. Vonnie wti crude higher for a Third Straight day. Up inices have come recent weeks. They remain near historic lows. Joining us now is ambassador ron kirk, current cochair of the chain clean and safe energy coalition. And still with us is wilbur ross. Promotingcoalition the use of Nuclear Energy. Welker has just told us he does not have any nuclear investments. Givenives your conviction that japan and germany are pulling out completely . Think we are in a unique position with so many people in this country only thinking about energy in the context of Climate Change to reintroduce them to the Value Proposition of nuclear. Many clean and safe and americans are stunned when they find out Nuclear Energy produces 62 of the noncarbon emitting electricity. If you want to combat Climate Change Nuclear Energy has to be part of that foundation. Those that argue you should take away nuclear and substitute wind or solar, you would just be swapping out one source of carbon free electricity for another. The debate around Climate Change toes us an opportunity demystify some of the concerns. I think a lot of americans have about Nuclear Energy. David you have been a mayor and howeverpresentative good nuclear is, there are a lot of regulatory hurdles to building plants. Theres a lot of regulatory hurdles to building anything. How do you overcome those hurdles . The part of me that has been that atwants to believe some point we will look back and say, we know how to operate these plants safely and efficiently. Can we have a regulatory system that recognizes that. A valueu have to build proposition that you have to keep nuclear alive. Then you can have a regulatory system to match it. The bill was introduced in Congress Last month to try to put in frame a regulatory licensing system for the next generation of nuclear technology. Hope fully we can learn from what we have done. Jonathan what can we learn from germany . We are going to learn from whats happening in california and almost every country and state that has pulled nuclear out of their portfolio. Their Carbon Emissions have gone up and their price of electricity has gone up. I would not be surprised if at some point germany finds a way to maybe not reintroduce new nuclear but say, maybe they are going to keep some of those plants online. We were talking before about the implications of low Interest Rates. Low Interest Rates are the right time to do nuclear because of the very capital intensive activity. Building Nuclear Plants now with very cheap debt money is the best way to lock in low power costs for a generation. Its also a good time to do all public infrastructure. Should the Time Congress come together. If you want to put americans back to work, lets Start Building power and transportation. Is absolutely right. This is the best time to be doing it. David lets talk about congress. President obama is in asia. One of his agenda points is the tpp. Trade mayit appears be at a high water part in terms of Political Sentiment in washington. Is the tpp dead . Honored toing i was have been the trade representative under president obama that made the call to join the tpb, im going to continue to believe that if we can get thatthis electoral season we can find a traditional coalition in congress that just makes common sense for this country. Forwardlooking trade agreement we have and ever undertaken. Its a part of our region a lot of our customers are going to come from. I know a lot of americans are anxious about trade but the notion that we are better served by retreating from a world in which 95 percent of our customers live somewhere else is just not a Value Proposition. He seems to be pretty antitrade. I think Hillary Clinton and he sure that in common. I dont think thats a unique distinction with trump. Vonnie are you going to convince them otherwise . I dont agree with him on the tpp. I like the tpp. I think the rhetoric that everyone has in campaigns is usually quite different from what comes out of the washington negotiations. I think you have to take a lot of what politicians say as rhetorical and directional rather than specific. Jonathan you began by saying theres too much regulation to build anything. There is atand part of meeting that has been a mayor. I have committed my life to public service. Keepesponsibility is to people safe. I understand the rationale behind regulations that make sure we are doing things in a safe way. I also believe we should every 20 years or so the back and say, we have been doing this. Is there a way to make sure it so ite to do it faster doesnt take 10 years and billions of dollars to build essential and fundamental as making sure we have things like electricity and clean water. You cant wait until you find out that the lights are going. Ff back to donald trump. Yesterday it was announced that your you are going to help him raise the 1 billion. My question to you is this. You dont agree on trade. Last time we asked you if you would support the nominee and you said yes. What do you agree with him on . Why do you want him to be president . I agree that our trade agreements need to be more muscular than some of them have it in. We have made mistakes in the past. The ambassador knows some of the trade agreements were not very well throughout through thought through in the past. Some trade problems. We have a huge trade deficit. How do you deal with it. I think there are many ways to deal with it. Candidate that i have ever supported i agreed with everything they said. Have you . Its almost impossible to agree with anything that any of them says. I dont think that is the litmus test. Litmus test is, do you like the general direction. Do you like the issues the person is addressing. Most importantly, do you believe in the twoparty system . Because if we start getting into a thing where people who are serious players in either party say, i will support the party except if i dont like the nominee, thats not a party. The party needs to be unified to be effective. Otherwise you will end up like europe with these endless coalitions that find it impossible to get anything done. David as an investor, your predictability is important. Does it trouble you that mr. Trump seems to take different positions at different times . Well, again Hillary Clinton has done the same. All politicians do. I think in his case, hes very new to politics. I think therefore people ought to give him a little more running room than someone who has been in the game for decades. Now assembling a coalition of advisors around him. I think it was great that he met with secretary kissinger the other day. Hes trying to reach out to people who have been in the game and i think you are going to see more and more of that. One full disclosure. This is the only individual i have worked with and believe there has been no candidate since the beginning of the season more prepared to walk into the oval office for a job that is increasingly the most difficult in the world. Nobody is better suited for that and secretary clinton. For my support. And i disagree with her very much on the position she has taken on tpp. So im trying to help my friend. We take our candidates as we find them. Would argue there is a substantial difference in tone, maturity, sobriety that secretary clinton brings to the table than what we have seen from mr. Trump. Continue thisl conversation and get final thoughts with wilbur ross and ron kirk. Next, on bloomberg. David this is bloomberg. Im david weston. We have with us ron kirk, former trade representative. And wilbur ross. We want to get some final thoughts from you. If we are going to attack Climate Change, nuclear has to be part of the equation. And trade is a five letter word, not a four letter word. America needs to stay engaged in the world. Vonnie and he saw hamilton last night and thought it was amazing. David mr. Ross . Venezuela will be a very interesting place for people to invest but they do need a change in management quite badly. Venezuela should be a very wealthy and prosperous country and it was doing fine until it got overtaken by the communists. , cochair ofn kirk the clean and safe energy coalition, thank you very much. Wilbur ross, we appreciate your time. Coming up, we take a look at the struggling u. S. Ipo market. It could be the busiest week of the year. And later, cisco chairman John Chambers joins us to discuss his Companies Push into the emerging internet of things. Consistently inconsistent. The s p has alternated between daily gains and losses for seven straight russians. Sessions. Bayer remains confident it can take over monsanto after its initial bid was rejected. Is the drugmaker in danger of overpaid overpaying . Vonnie could this be the beginning of the end to greeces recession . David welcome to the second hour of bloomberg. Im david weston here with Jonathan Ferro and vonnie quinn. Jonathan we will head to the bloomberg breakaway conference in new york and speak with the chairman of cisco, John Chambers. Big moneympany sees in the emerging internet of things. Vonnie we will keep you uptodate with all the market moves across globe. Jonathan futures here hire. S p 500 futures positive. The ftse pushing higher by. 6. The dax surging. The biggest two day pop since april. Euro is nowhere to be seen. I will go straight to abigail doolittle. Abigail we are watching shares of tiffany and express down sharply in the premarket. Have Retail Companies joined the graveyard of Retail Companies to be hit by bearish trends in the latest quarter. Sales were down 8 per tiffany. Express lowered its fullyear forecast sharply. Thisg better our shares of telephone wiring company. Lastly the saga goes on between monsanto and bayer. Monsanto rejected the first bid. 140 andwant between 150 per share, well above the 122 bid. Jonathan the Worlds Largest planning to ask the u. S. About the timing of its next rate hike at the u. S. China strategic and economic dialogue in early june. Joining us now is ceo at the sis group. Lookread this speeches and at the tea leaves from the fed. China goes straight to the source and just asked them. What do you make of this. . If you recall at the beginning of this year, the fed and the markets can put it that at the time the hundred basis and ahike for the year chinese peg were incompatible. I believe thats one of the reasons why the fed backed off. The devaluation clearly is deflationary as it relates to emerging markets. Fed is to take care of the u. S. Economy. We think conditions are in place for it to hike. Twont know about june but hikes are clearly in the cards. Jonathan everyone looks straight to the fx market. Today the weakest cmy fixes since 2011. If this was january or february we would be looking at a market that is falling out of that. Why do you think people are more comfortable with that chart . Chinas issues in our opinion are internal. In terms of the u. S. We think that the conditions are in place if you look at wage growth. The conditions are in place to hike. Is the needth china and thectural reform decline in productivity as a result of the absence of structural reform. Theink the conflation of fed rate hike with chinas issues is probably somewhat misguided. I think china needs to focus on the reform of its own economy. David can the Chinese Government walk and chew gum at the same time . Can they manage their economy at the same time they are making onedimensional reforms that could really lead to disruptions . One of the underappreciated atmospheres aspects of reform , we say china should reform but the underappreciated aspect is the political impact. Reform will lead to dislocation and if you look at things like process, not much coverage on that in china. Job layoff strikes for example have doubled every year between 2011 and 2015. From about 200 strikes to over 3000 in 2015. That presents an existential perception of competency and legitimacy. This twoy you have steps forward one step back in terms of balancing. Vonnie whats your single best idea right now . What kind of investment . I would say that brazil is obviously overdone. T is raised for fundamentals brazil is anything but political perfection. At this point. So we think that would lead to substantial disappointment going forward. Vonnie racing you short brazil in some way . We do not short but we are not there at all. David we have had analysts say we are going to see a rampup in the second half of this year and equities will grow. I understand you have a different view. Why is that . We dont think the earnings decline we saw in the First Quarter will repeat it self. Some of the headwinds have been removed. Other hand we think those headwinds will be replaced by new headwinds. Growth whichage has a negative correlation to earnings. Growth estimates are about 6 highly back ended. Is overlyhat optimistic. In addition with higher borrowing rates. We dont see the fallout we were seeing before. We think 6 is optimistic. Group,ceo of the sis thank you for being with us. President obama has arrived in japan. Summit of the a g7 nations tomorrow. On friday he will become the first sitting president to visit hiroshima where the u. S. Dropped an atomic bomb in 1945. The imf has backed off and greek will get its next round of financially. They agreed to take steps to ease the burden on the countrys debt. France is not taking chances for this summers european football championships. About 90,000 security personnel will be mobilized for the event on june 10 which runs for a month. David coming up apple meets resistance in india. Minister rules apple must comply with their sourcing rules which would limit their ability to open their own stores. We had to mumbai for the latest. Thats next. Jonathan good day. Euro sterling is the stronger story. A stronger pound story for a second straight session. Lets get to the global scorecard. Futures firmer. Equities rallying. S p 500 futures positive. Chasing this market. Up by 31 . Eurodollar we are on 50 watch on both the wti and brent contracts. 49 a barrel. Last week apple ceo tim cook went to india to capitalize on the world that can largest smartphone market. A ruling requires apple to source 35 of its components locally. They wont be able to open those stores now. Break this down for me. There are possible ways around this but as it stands, it looks like apple will not be able to open their own Retail Stores . Thats correct. Apple needs to partner with local retort loose retailers. They source 30 globally they will not be able to open locally they will not be able to open their own stores. Vonnie they argue that they spend on the Software Part of it. Why isnt india giving them a by on the hardware part . The Indian Government is trying to encourage making in india. Their rivals are making handsets or assembling them in india, the government wants apple to do this game. Ministers Biggest Campaign so far has been on manufacturing and that will create jobs in the country. David what are the options open to apple at this point . Is there any room for maneuver . For the moment the finance ministers sort of next the plans. But the Prime Minister could overrule those objections and allow them to get exempt them from the 30 rule. Otherwise they have to look at approaching other resellers or trying the franchise model. That would allow them to keep some sort of balance in terms of look and feel but also get past those rules. Jonathan the franchise model is what i want to get to. This quote the iphone with fries. I signing a Franchise Agreement with the local indian retailer the company could get a shopfront without the foreign investment. The Business Model would look a lot like mcdonalds. In your opinion do you think that is something apple would look at doing . With a outsource the retail model to someone else . In the rest of the world they seem to have their own stores. Im not sure they would be willing to share their retail secrets and allow a third party to do it. In the event that they cant get past the local sourcing rules they might have to look at alternatives. This would be an easy way to enter with the apple stores because right now they are using multi brand Retail Stores. Sometimes competitors could win over their products. Absolutelyconn is not interested in opening factories in india so that would not be in option. Other competitors that apple could get ramped up . Apple would have to move a significant part of their Retail Supply chain to india and that would cost a lot of money. Im not sure if they would be willing to do that investment in india at the moment. Jonathan thank you for joining us. Cook on the call a couple of weeks ago was saying, this is china where it was five or 10 years ago. One of the biggest economies. The fastestgrowing in the world. It is a major issue. Vonnie im curious to know how much they spend in the u. S. We will have to find that out. David time for bloomberg trends. This is a look at the top stories terminal users are reading on the bloomberg today. Wasone that struck me Deutsche Bank. It seems like not a day goes by that there is not some story about Deutsche Bank having problem. This is about exchange currency. Year over year are down 45 . They cut their fx trading in half. Jonathan Deutsche Bank dominates the fx flow and has dominated for several years. It has now slid down the rankings. Citigroup Still Holding the number one spot. Jpmorgan comes up. The only really big European Bank i can identify that has climbed up the rankings is ubs. Internally, the market dynamics, ex tx markets getting in that david thats what i was going to say. Because of regulation i assume. The top banks share plummeting to an alltime low. That story used to be really consolidated. Now it is a lot more spread out. It is interesting because it would have been one of the more active areas but when it comes to fixed income it has been dead. Is one of the most read stories on the bloomberg. The idea that china is going to plan to ask the u. S. , when are you going to hike . Vonnie wouldnt you . Jonathan i would. I understand why they are doing this. Market would fall out of bed over Something Like that. Things are stabilized a little bit. Repetition gets you less sensitive to change and this has happened before. They dont really think janet yellen is going to give them the answer. Pulpit more of a bully to have a little influence. Speculationng up, over a summer rate hike has gold on its longest losing streak in six months. Could this be the opportunity to buy . More go is next. David this is bloomberg. Im david westin. We are about an hour away from the u. S. Open. Lets head over to abigail doolittle. Abigail we are watching shares of microsoft trade higher in the premarket following yesterdays 3 moves up on the news today. Thestock is higher of company said it is cutting nearly 2000 jobs in its smartphone unit. While straight is really loving it wall street is really loving it. Shares of tiffany and express our plunging. Have these Retail Companies entering a graveyard of retailers hit by a trend of harris retail trends. 8 for tiffanys. Higher in the premarket, die come. The telephone wiring company beat earnings forecast. Gold is falling for the sixth straight day. Joining me to discuss golds next move is the Senior Market strategy at i i trader. New york. E from thank you very much. What is going on here . We are calling this a breather right now. These markets are emotional. The market fails at 1300. The commitment of traders got overextended to the long side. A fundamental shift in the tone from the fed over the last extent days. Now the june rate hike is on the table. The market is pricing that in. We have also taken out key Technical Levels on the way down. Movehas exacerbated the that put the market below trend lines. Vonnie if we have broken through trendlines, what is the next resistance level . The market has not closed below 1205 since the february breakout. If they can close that above 1230 it can neutralize weakness in the near term from being over several and work its way back up. Not going tore is be an extreme move until you get a catalyst to do so. This was the move. There is concern we could break through 1205. For now we are looking for the market to sustain price action between 1205 and 1250. Vonnie theres a range of views of when the fed will move. If you are of the mindset that it will come later, do you stick with the gold . We have been telling our clients it is not as much about the fed as it is about yield. We do not see those going higher for longer. Bathre seeing gold take a because of the fed pricing in an Interest Rate hike. Been extremely constructive all year long and i dont think that will change especially if we hold 1200 on this move down. If 10 year yields fail to falling, goldart will be a key beneficiary. Its really going to center around yields over the next year. Vonnie what about the price of oil . Is that not a factor . Oil is a factor in that it has taken away deflation fears from around the world. Oil is testing 50. Everybody knows its back up. That has taken a lot of the concern away. We are giving the fed the power to move in june. So things like oil have come around. This is the same type of price action we have seen. We have a very weak quarter one. May is a very strong month for the dollar. 2007, the since dollar has been positive. This is not something new. We have seen the dollar consolidate higher. They still did the hike in june. Vonnie we will see what happens. Jonathan coming up, a takeover bid rejected. But monsanto says it is still open to further negotiations. But how high is the german drugmaker prepared to bid . Futures positive. The biggest two day gain on the stoxx 600 since march 2016. Okay, ready . Whoa [ explosion ] nothing should get in the way of the things you love. Get americas fastest internet. Only from xfinity. Jonathan this is bloomberg. Im Jonathan Ferro. Dayx 600 the biggest two pop since march. The dax up more than one full percentage point. German Business Confidence the highest in 2016 so far. Market, yoummodity will see brent crude in wti trading higher pushing closer to 50 per barrel. You see the crossover effect from commodities to fx. The ruble, aussie dollar, it is the Commodity Currencies leading the gain against the dollar. A really firm session ahead of the open on wall street. David a little surprising. Just under an hour from the opening bell. Lets get you what you need to go. Tiffanys is following ahead of the open after firstquarter. Ales trailed analyst estimates it was hurt by weak demand from tourists. Microsoft will cut up to 2500 jobs as they pare back the companys ambition and cell phones. Medivation has rejected the takeover offer, calling it opportunistic. Vonnie it is time for first word news, an update what is making headlines outside the business world. France is taking emergency measures on gasoline strikes that have caused shortages. Toic buying drove demand three times the normal level on tuesday. Striking workers are unhappy with labor reforms being pushed by the president. In albuquerque, a protest outside a donald trump rally turned violent. Police responded with pepper spray and smoke grenades. In washington, a House Committee may vote on a plan to deal with the puerto rican debt crisis. It would create an Oversight Board to resolve the u. S. Commonwealths debt. Conservatives say it does not overhaul order ricos economy enough. By 2400 journalists in over 150 news bureaus around the world. Isathan monsanto says it confident it can address regulatory concerns to push the deal through. Oining us is ruth david the conversation shifted potentially to a higher offer, a bigger price . Ruth absolutely. , it isng to keep in mind a conciliatory tone and monsanto is saying we think this price is not what we want but lets start talking. Bayer is saying, you wanted a higher price, our investors are nervous, so they probably will not come with a new offer immediately, but they are saying they are open. The thing to keep in mind as the regulatory risks. You have had a lot of consolidation in the sector. They are going to be looking at this very closely and i think some of monsantos concerns reflect that. David we have members of congress saying they would like it to be blocked by an antitrust. There is an negotiation going on. Bayeroes the street ellis tell us bayer could pay for monsanto . 150, and even122 in the midterm, it would be an between 120 to 150, and even in the midterm it would companies ofs this kind of size, the first stop first offer is not going to be the final offer. Raised this did get quite substantially but does this continue to be an all caps deal or could bayer come up with another formulation . Ruth that is the question where asking as well, what could they do . Could they have a stock complement . What is the break fee going to look like . A break three of about 3 and this reflects a slightly higher regulatory concern. Sitting there as a lawyer looking at the potential regulatory hurdles coming out of the u. S. , you will think this is going to be a monster of a breakup fee. David this is agriculture were talking about. This is farmers paying for seeds which typically is a hot button. Jonathan ruth, the model that a lot of analysts are using they used in the cam chinasyngenta monsanto and it to saying it has to get into the high when 40s. Do you think that is the argument at this point . Ruth absolutely, and they are pretty close to it. Saying, we want more, but we need to remember that monsanto is not a company that is doing well. They cut their earnings forecast, they are having troubles with their market in oig tina, so they are signaling in argentina, so they are signaling that they want this deal but at a price they find more appealing. Jonathan what is potentially going to be a big deal could potentially get bigger. Vonnie he will have to ask what is going to happen to basf. David everybody is choosing partners. Next, the ipo market faces its moment of truth after a lackluster start to the year. Could june see a spike in initial Public Offerings . David this is bloomberg , i am David Western David Western. John chambers joins us from the bloomberg breakaway conference, a very special guest. You are watching bloomberg. I am vonnie quinn. Job cuts are on the way at microsoft which is scaling back its ambitions in smartphones. They will cut up to 1850 jobs and take a 9 million charge. Most of the jobs will come from the phone company they acquired from nokia. Alibaba says it is being investigated by the sec over its accounting practices. They say they are cooperating with the investigation. Is of the issues reported the biggest single shopping day. Retailer markssh and spencer are down the most in seven years. Stephen rhodes trying to reboot the clothing business but got a chilly reception from investors. That is your Bloomberg Business flash. Jonathan the ipo market facing its moment of truth. June is historically one of the of the year. S could we finally see a bit of a spike . Alex barranco joins us. A busy week, have we got one coming up . Alex we do. It is the busiest week since early november last year. I will point out, there is a today,ring toward a busy day. U. S. Foods, gmf, all pricing aftermarket today. U. S. Foods was also the biggest corporate ipo of the year at about a billion. Jonathan is that a shift as you can see . Alex it is a bit of a shift. We have had a very slow year in 2016. The average this year has been one and a Half Companies to go this weekgetting six is injecting a little bit of excitement into my world. Vonnie how are they expecting to price . Are there any that will be at the top or bottom and . Alex we hear u. S. Foods is oversubscribed and they are looking to sell at 44 million. Does look like it will probably price within the range. The first it seems like investor demand is coming back a little bit, which is a good sign because if you think back to january, most investors were saying, we do not want to take a risk on any new shares. To january, itck was a bumpy ride for markets so it might make sense that investors are a little reluctant to go in. What is the single biggest determinant . Is it choppiness of the market . What determines whether companies go public . Alex volatility has been the one thing consistently on the mind since the rally in august. Now the focus turns to where the comparables are trading is that will determine what kind of valuation you can get for your company. Volatility. O the vix is the insects you Pay Attention to is the index you Pay Attention to. David in terms of price equity ratio . Alex it will depend on the company and the industry. For u. S. Foods, we looked at ebitda ineven. 2015. Some of the higher growth Revenue Companies you would probably be looking at priced to sale. They are looking to pushing this ipo at a discount to peers. That is what people will being paying attention to. Jonathan we are talking about when. If you make the decision to go public, your Market Conditions are when. Why. T to discuss the are we in a position now where the pipeline is not there and the pes are not ready to liquidate their position and do not need to raise capital, what is the story . Alex i would look at a lot of the sponsor back companies that have a lot of leverage. Those who can go or who have an urgency to go if they have a lot of debt, u. S. Foods is taking almost all of the offering and using it to pay down debt. Also, a majority of the sale of the ipo proceeds went to paying down debt. The other group would be the unicorns, the Tech Companies that can access the private markets more easily. Those are the ones that we have only seen one venture backed technology go this year and they are basically saying if we can raise equity elsewhere, why bother . Jonathan alex, thank you for being on the program. David we are going to turn from ipos to earnings. Not tiffanys brightest moment. Firstquarter sales missed animist estimates. Analyst estimates. So what really happened to tiffanys . Analysts were expecting a of 4. 5 and they came in at minus nine. I think it is a continuation of the slowing trends they saw in 2014. , and the u. S. Customer is not picking up the slack. The extent to which they depend on Foreign Tourists coming to the United States, how big of a determinant is this of their earnings . Seema it is about 25 of their revenue. It is a Global Situation that you see where people are just not spending. Vonnie obviously diamonds are a major part of what tiffany sells. What about diamond pricing . Has beenamond pricing declining so that was a tailwind but it was not enough to upset the leverage, so they still messed and earnings were still down. Jonathan citigroup to pay 250 million to settle the fixed claim. Settlement will be 250 million to fix claims. Just looking at tiffanys, talk about the fx impact in japan. At one point they had to raise prices because the yen was so weak. We have had a bit of a turn. Looking more favorable . Seema yes, and that is offsetting the stronger dollar so there was not as much of an impact. Vonnie can you see anything that might suggest the outlook is brighter . Seema nothing i can see. It is a number of different markers markets that are weak. David to that point, to what extent is tiffanys losing market share to other comparable luxury providers . Seema i do not see that their share is going down. I do not see any of them gaining sales. David is it basically a u. S. Dollar story . And terms of tourism coming to the United States. Seema i would say tourism coming to the United States is a u. S. Dollar story, but foreign markets are also still weak. I think it is the luxury customer and it relates back to what they catch what is happening in china and brazil. What is happening in china and brazil. In when it comes to the u. S. Consumer, we are not seeing a pickup of luxury sales. It is not that the luxury hurting, they are spending elsewhere. Seema i think from the earnings we have seen so far, there seems to be a trade down with higher traffic at walmart, but you saw weakness in other discretionary focused retailers. David did they indicate what they are going to do to try to remedy it . Seema q2 they are expecting epf down 5 to 10 . They lowered fullyear guidance from flat to down in the single digits. Jonathan thank you very much. Another citigroup headline. Million toying 250 settle a fixed claim. They are to pay 425 million to settle that claim and libor claims. Million. More on that story throughout the day. Coming up which country has the highest debt as a percentage of their gdp . Lets get to the markets very quickly. Of 1 and the10 dax up about one and a half percent. The s p 500 futures marching higher by nine points. A decent day throughout germany, Business Confidence this highest the highest in 2016. I will bring you the fx market, eurodollar, 111. 52. Treasuries 1. 86 is your yield and crude really picking up some momentum. Wti, 49. 22. Brent at 49. 33. Jonathan to our viewers worldwide, good day from midtown manhattan from our Global Headquarters in new york city. Global wti trading higher, higher since november 2015. Equitiesositive, rallying with the dax of 1. 5 . Futures in the , dow futures up 69, s p futures up 1 10 of 1 . Et to the other board quickly look at how it is reflected in the fx market. That is your temperature gauge for risk sentiment, a weaker japanese yen. 111. 49, up about 1 10 of 1 . Yield unchanged on a 10 year. Some decent demand on the twoyear. Yields along the curve shifted higher last week and signs have flattened just a little bit over the past couple of days. High, marching toward 50 a barrel, up by about one of half percent. It is time for battle of the charts. Abigail doolittle taking on mark barton. Mark two big words greece and debt. Greece is going to get a 10 Million Dollar 10 euro 10 billion euro payment, and creditors have kicked it into the distance that is 2018. Yes, there will be some debt relief that we have to wait another two years to get it and we do not know any of the details, which led me to think about greeces debt as a percentage of gdp. How does it fare globally compared to the other developed markets . Greeces debt as a percentage of gdp, 171 . That is the second biggest in the world. Umber three is italy, 135 number four is portugal, 129 . At of thed it, biggest developed market in the world, seven out of the top 10 are eurozone economies including greece, italy, torture goal, ireland, spain, france, and belgium. U. K. Is a mere 90 . 76. 3 . Is a mayor the company that dwarfs all other companies is japan. Its debt as a percentage of gdp 230 . Times its economy, debtealand has the best prototype profile and 33. 5 . Vonnie jonathan what have you got . Abigail i wanted to take a crack as to whether or not rates in the u. S. Would be raised soon, and we are looking at a longterm chart of the u. S. 10 year yield and dollar, going down over the last 50 or 60 years. The purpose of a trend line is to show when it starts to reverse. In the 1980s, the dollar trend started to reverse and now it seems pretty authentic. Suggesting rates may rise to support the higher dollar index. This chart suggests we could see the fed moving soon. Vonnie that is the winner for me, abigail. It is meant to be 60 of gdp, the total debt. No one is merit. No one is near it. David i am going with abigail. Joins us John Chambers joins us exclusively from the bloomberg breakaway conference. Jonathan this is bloomberg. I am Jonathan Ferro. We begin with a snapshot of the market and it is risk on. The biggest two day pop for European Equity since march. A weaker japanese yen throughout much of the session and commodities on a charge as well. Brent and wti inching towards 50 a barrel, and the Commodity Currencies outperforming in the fx market. U. S. Futures pointing higher. We are counting you down to the market open. David we are just under 30 minutes away from the opening bell in new york. This is bloomberg go. I am here with Jonathan Ferro and vonnie quinn. Coming up this hour, jonathan chambers will be joining us live. Hour for the entire we have don kelly. It is time for the three stories that matter to the market most. Chinese officials planning to ask their american counterparts when the fed will likely raise rates at a meeting next month. Find a is worried it will have a negative impact on the one and they are trying to prepare for the looming fed increase. , but it isto ask either going to be june or july. What it matter that much to china if it was june or july . Probably not a huge difference. At morganal view stanley is that we do not get the first rate hike until december, so we will see what happens, but obviously the chinese are concerned about financial conditions. When we had the first rate hike in december, and in august when the chinese were appreciating their currency, Financial Markets tightened. Chinese arethe concerned, but our view is that the fed does not hike until december. David one thing we hear repeatedly is it is not so much where the level is, it is how abrupt it is. It is the volatility, and i wonder that maybe that is not the message the chinese are trying to deliver. Dan i think more global coordination among policy members is needed on the fiscal side, so while you are right that they are concerned about policy on the monetary side and the effect on currency, we are six or seven years into this monetary currency cycle. Jonathan lets talk about coordination. , i dog at the fx market not see china moving to a more Flexible Exchange rate at all. I see them begging the u. S. To find out what they are going to do so they can straighten out their currency. Dan that is something to monitor and something to be concerned about that if you go back to the dollars pass, it , it has beenath weakening since the beginning of the year. You would have expected it to rally more strongly so i think it goes back to investor positioning. When you go into the end of last year, we had such speculative activity in the dollar it was hard to find a dollar bear. Vonnie being one of the few houses that is predicting a , how does that impact how you model a portfolio . Dan i think the one area you could see better activity if we are wrong and obviously earlier than expected rate hike is financials. Had a bit of an overweight in financials as a hedge if we do have that better than expected or earlier than expected height break rate hike. Thathan the perception is you get the steeper yield curve in the fed hikes and the financials is that how things play out . Dan if you look at the last couple of cycles when the fed did go into action in 2004 and 1994, those were periods when financials acted well so the cycle should persist. Jonathan to the heart of the eurozone debt crisis, greece getting a big disbursement after an 11 hour meeting with eurozone finance ministers. The imf agreed to make concessions for the first aid payment in june. It will be used primarily to pay the ecb. The ecb canpaid so get paid and nothing changes in greece except for a dire economic situation. We talk about doing things more fiscally. The deficits are still very big. Who has the space to move . Dan greece has remained in the headlines for it seems like four or five years. I think i was reading the article this morning on the way over and it said a major breakthrough without any concrete commitments or requirements. Ironic. Unlikely breakthrough. I think the key thing to remember here if we just take a step back is greece is a very small part economically of the eurozone. Theinner initiative bigger initiative is what draghi announced, trying to unlock the credit core. Capitalized our banks and got credit growth growing again, that is what helped revive the u. S. Economy and that is what has been lagging in the eurozone. We have looked at both household and corporate surveys. Demand for credit is high, unlocking the demand. Jonathan so you are on the draghi side of the argument . Dan we are. David do we see evidence in the marketplace that it is unlocking credit . Dan his official execution does not get started until june. The Corporate Bond part, he expanded the qe and went further negative. You are waiting until june to see whether the Corporate Bond buying . Dan exactly. To your point, we have not seen as much of an impact. Nie dan our team is mostly a u. S. Equity focus. The european debt is still an overweight when you look at their portfolio and when you look at the reasoning, you are trading at historic discounts and cheapness to the u. S. We think credit growth and draghis initiatives will get better growth going. David the third story that markets are falling today is about apple. Apple is struggling to crack into the worlds fastestgrowing smartphone market. Is saidlling in india likely to keep apple from opening Retail Stores. It requires 30 of apple components must be sourced locally in order for them to have a retail presence. The Largest Company in the world, one of the largest economies. How critical is india to apple . Dan it is a huge deal, particularly when you look at how they are going to diversify. One of the best drivers of india is the younger population. At the end of the day, i think like any other example in business, it is a negotiation. They need the brand. But at the same time, they want local components to be used. Like anything in life, i think you will find some type of resolution in the middle and they will work out some type of negotiation. Apple the kind of stock that you have to have in your portfolio . If you look at the valuation, it is still very cheap and the global brand equity is very high. David i wonder what this may tell us about india. Office on a very probusiness platform. Is this the last vestige of the indian repressive regulatory scheme . Is this going to be given up . Dan it might to, and i think you are right about modi. He has an active a lot of initiatives that have gotten the domestic economy performing but don you look at overseas, they have leverage to prop up some of their domestic sectors . We have seen the same precedent in china and with other Technology Companies that have been met with Government Intervention so it is not without precedent. David those are the stories that matter to markets now. Now we are going to go to abigail. Abigail we are watching shares of microsoft trading higher up onyesterdays big move news that they are cutting nearly 2000 jobs. Investors are cheering this. One stock soaring in the open are the shares of sorrento. Is delaying they are looking further into it and it could lead to an approval. We do have shares of medivation trading higher that said no be they would like to replace eight Board Members and are willing to increase their bid if medivation will talk to them. So far, medivation has rejected all bids. Vonnie time for bloomberg first word news. Foreigns contracted two companies to locate the flight data recorders from the plane that crashed in the mediterranean last week killing 66. A french and Italian Company will be working with egyptian search teams to provide clues. President obama is in japan after a threeday visit to vietnam and attended will attend a summit of the g7 nations tomorrow. He is the first sitting ,resident to visit hiroshima where a bomb was dropped. House Speaker Paul Ryan has told confidants he is ready to end the standoff with donald trump. He may endorse trump for president this week. Ryan is said to be concerned about the split that has developed within the republican party. Coming up, it could be the biggest german deal ever and it might be getting even bigger. Bid forst on bayers monsanto. Later, John Chambers on how he is planning to wire the internet wire has company with the internet of things. Jonathan this is bloomberg. Tempting you down to the market open, about 15 minutes before the open in the United States. Positive about one third of 1 , and equities in europe, that rally picking up. Vonnie a relief on that greek debt deal. Needed to get the market out of this . There you have it, the question for you. What is going to get us out of this . Clear political events and this year is littered with political events. We have the brexit vote in june, es reelection. You convinced the u. S. Equity market is watching these events . It definitely feels like bond markets are but it does not feel like but it does feel like the u. S. Equity market has divorced itself from those kind of events. Dan when you look at positioning some of the have,etary details we there is a negative sentiment. We think the First Quarter was perhaps the drop in earnings. We have seen gdp growth dropping into the 2 to two and a half percent range. Despite those fundamental improvements, investor positioning is still negative so that is the rationale that i point to, that Political Risk and some of these outlying events are still keeping people off the sidelines. Audience we say to the that sentiment is very negative. The market is still trading at a pretty rich multiple. Why is it not drastically lower to reconcile where we are with that bearish sentiment . Dan i think it is a matter of what was your starting point or what was your pathway this year. We had a dramatic selloff to start the year, and then a 14 rebound and really we have gone nowhere. When you look at some of the broader data, corroborating that evidence, look at flows. We have had 60 billion in outflows from the equity market last year this year. Who has been one of the biggest buyers of equities, it has been corporates. Are one ofuybacks the biggest drivers in the past few months. David if and when we find fundamental growth, where is it going to come from . What sectors should we look to . What would you put forward as your nominee . Seen a pretty violent rotation into value stocks and away from growth, or taken early away from momentum. Momentum had been a strong trade last year. I think it is more nuanced and it is a stock buy stock game at this point. We are looking at very idiosyncratic drivers at a company level. Let me give you an example. One of the attributes of the recovery has been how on even it has been. If you look at the nature of the up,very, asset prices went and who was left behind, a lot of the low income consumer. Hat is changing on the margins wage growth at the u. N. Is propping up the lowend consumer. Dollar general is one of the leaders in the space catering to that lower end consumer. It is really a stock buy stock, company by company thematic perspective. David that you are looking at the general area of lower end consumer . Dan and one of our favorite ways to play it is with the dollar store theme. Itnie why are you playing through the dollar store theme as a positive thing . Are you positive on the dollar store for other reasons as well . Dan wage gains is really the fundamental driver. Number two, if i look at various economics in areas, it could be a winwin in different areas where we have a weaker than expected economic scenario like seven or eight years ago. That was an opportunity for the Dollar Stores to take share so they were seeing consumers straight down trade down. Vonnie how far can they go . Dan Dollar General is up about 13 or 14 . The key thing to remember is they are really adding stores so when you look at their store growth, 4 store growth per year. They are upgrading their real estate. Results of this real estate retail environment calling to be a really and locations. When you look at the Dollar Stores, they have been able to upgrade the of their competitors have fallen on bad times. Fromhan dan skelley Morgan Stanley wealth management, sticking with us. Happening imminently in japan, president Obama Holding a bilateral meeting with his on thee counterpart fringes of the g7 being hosted in japan. We will bring you the headlines. The finance minister and its u. S. Counterpart having a bit of a disagreement on the fx market so it will be interesting to see how these two get on. More go coming up. Utures looking positive about nine minutes away from the market open. Jonathan from the heart of new york city, looking at futures pointing higher in wti creeping back toward 50 a barrel. Up 9 10 of 1 on the session. David still with us is dan skelley of Morgan Stanley. You gave us dollar store. It was another example of an equity you are interested in. Scientific,fisher tm oh. Ago antified a few years huge trend going on in china, transforming to a consumer economy. One of the beneficiaries we thought that would result out of that transition was health care. Thermo is involved in making testing tools for air quality and food quality, two hotbed areas in china. This is an area that china is investing in very strongly. Secondly, there is improving cyclical growth from the u. S. In revenuer exposure comes from u. S. Academic and government spending, and with the fiscal situation in the u. S. Having improved, you are starting to see a spending impulse from the government as well. David are they a u. S. Manufacturer . Dan yes. David how vulnerable are they to swings on the fx . Dan you have seen core organic growth improving so they have been able to offset the top line currency issues with core organic growth. At their recent investor day, they upped their interest their expectations for organic growth. Vonnie they own about 100 stocks. They primarily a bet on u. S. Growth . Tied se are diversity diversified. Because the portfolios are pretty concentrated, we tend to look at the Company Specific driver as their biggest catalyst. David it sounds like you are a stock picker. Dan absolutely. David any think where we are is a stock pickers time . Dan yes. Overall market valuations for the s p, 16 to 17 times. When you look at the environment, we have also benefited from very low Interest Rates. We talked earlier about the fed. How long will these low Interest Rates persist, and that is another dynamic that could affect equity growth. Jonathan a big thank you for joining us. The opening bell in the United States is up next. Futures just coming off the highs. Dow futures up 44 points, about one quarter of 1 . The rally continues in europe with the dax comfortably at 10,000 points. We are at 50 watch on the oil market. The highest since 2015. Okay, ready . Whoa [ explosion ] nothing should get in the way of the things you love. Get americas fastest internet. Only from xfinity. Jonathan Just Moments Away from the opening bell in new york city. The chairman of cisco. That interview in about 10 minutes. All about the markets. Futures up. S p 500 futures up about one third of 1 . The opening bell rings in york city, look at the performance in europe. Heading for the biggest twoday tops since march. Switch up the board quickly. Echoing the sentiment with a weaker japanese yen. Yen is a weaker japanese and a higher crude prices well. 50 watch. 1. 2 . 20 seconds into the open, but crossover to abigail doolittle. Abigail we are looking at a solid open for u. S. Stocks. The average is nicely higher on the open, in line with the global rally yesterday. Theing on the open are shares of Hp Enterprises. Shareholders look up finding themselves wealthier by 8. 5 billion after they sold its Services Segment in a continued effort to streamline. Also higher, shares of budweiser. This on the news of yesterdays eu approval of a megamerger between budweiser and sab miller, and the combined company could control 40 of the beer distribution in the world. Lastly, a look at the financials. A rally following a twoday rally in financial stocks in the global markets. Also, citibank is settling a probe. They will be paying and resolving this by paying 425 million, a small amount and offering investors certainty were there have been uncertainty before. Jonathan thank you very much. The stock to watch, apple, a roadblock in india. Tim cook was there just last week in an effort to capitalize on the secondlargest smartphone market. It is set to expand rapidly in the coming years. There is a ruling. You need a source 30 of components locally. It is a criteria that is said to be imposed on apple, preventing them from opening apple Retail Stores. John butler joins us now to discuss this. Bloomberg story. Its likely to happen. They dont comply with these rules. There are ways around it but before that, how much of a setback is that . John i dont think it is huge. Apples big problem is the dominance of local vendors. , local vendorsax doing very well. Micromax is number two, number three in terms of share. Samsung dominates the market. Apple historically has not done well. They are way down the list in terms of shares. Abigail why is apple so against partnering. We talk about they would be afraid to give away secrets. What secrets to the have is a retail store . John partnering on the retail front makes sense for them. They are still trying to feel up the market. India historically has not been a big focus for them. China has been the focus over the last few years. If you look at where the growth is shifting, Indias Smartphone market is projected to be up 25 this year. The rest of the world is low singledigit to negative. Suddenly they are switching to india. They are trying to figure out, do we partner or do we not . Cook said they were aiming at getting apple stores open. Now there is regulatory roadblocks so they have got to do a work around. It is a process. That is what we are watching here is a process unfold. David for apple looking at india, and as the chinese growth has trailed off a bit in the last quarter earnings report, the price point in india is much lower them what they are used to around the world. They have a problem with retailing. And if a problem with samsung and others being well ahead of them. Of those three, what is the biggest hurdle . John it is price. India has a very value conscience consumer. You can see it in the average selling price of smartphones in india. The average price in 2016 is expected to be 120. Contrast that with china at 280. A big gap. Apple nice to protect its brand. One of the ways to do that is to maintain price so they can go way down the scale and makes it up at the low end. Jonathan infrastructure . They have the infrastructure in india to run the smartphones in a way that apple would like him to. The fast lines . John the answer is today not really, but we are getting there. Indias networks are mostly 3g at this point. Here in the states we are 4g lte. We know the power of that. India is moving in that direction. As the networks get upgraded, you need the phones that support that technology. Apple is one of the leading vendors. Vonnie apple spent 1 billion trying to crack china. With that work in india . Might, but youre getting regulatory hurdles and some of the cultural issues. Expectations, i think its a multiyear process for apple to build its business here. David thank you very much. That is john butler. Hewlettpackard enterprise shares are jumping after the announced its merging its Technology Services division with Computer Sciences corporation. Ho one of hp one of several legacy Tech Companies trying to remain relevant. Here is tom jobs, executive editor for global technology. Take us through this. Hewlettpackard first had to split recently in the last year. I know this is like a further spinoff of that. Take us to the pattern. Tom they are systematically undoing the house that her predecessors built. They built it into this conglomeration. Onestop shop for all kinds of enterprise computing. Pics pcs here and higher in storage and other things like that. She came in and initially resisted the pressure to separate the pc business. We saw her eventually get into that. This is just one step further. Slimming down hp, focusing on the high margin businesses, storage, servers, networking. David first the pcs went off. And then she was left with a combination of explain it to us. Tom this is when i need help with my computers, installation. Its a service that is shrinking. It is something that mark hurd made a big multibillion dollar bet on when he was running hp several years ago. Buying eds. Almost 20 billion. She is saying this is a shrinking business, this is lower margin. It will be better off if we combine it with csc. Let them find some synergy. Let them find some efficiencies there. Let me as head of each pe focus on hpe focus on higher margin. She has got storage, servers, and shes got networking. These are the kind of things that are building the data centers that are moving this dated around the internet. Vonnie but we can just get runofthemill white box data centers . Tom there is no question she will face pressure. Facebook and google are building their own servers. They are not going to ive got to buy this from hp. You are seeing a much more streamlined business and she will be able to focus on that much more and our competition much more. Day its aack in the good strategy, scale is important. Not so much anymore. She says, no thanks. We expected that. What is next for the company now . Tom another company taking another retrenching in the areas of smartphones. What is next for them . Hes come in and made a major transformation for the company. He is changing the culture, making it more open, getting successes in areas like the cloud. Success in the surface pro, a bit of a surprise. Not comeet that did out of the gate very strongly, he is seeing a lot of success there. He saying im in charge of this company, i know what it needs it is not phones. This is not where the future of microsoft is. Its really in the cloud and hes really trying to change things up. Another example of a ceo saying an acquisition by predecessors no longer makes sense for us. Nokia business, forget about it. They fired many people. Finland has taken a very big hit. Nokia once constituted this huge percentage of the countrys gdp. And it is time. Ballmer, for steve what does this mean for him . Were not talking small change. This is billions of dollars here that the company has been set back in a deal made several years ago. What does that mean for him . Tom he did a lot for microsoft over the years. But it became clear towards the end that they needed someone they needed technology. A great salesman. We have all seen the videos. Tremendous legacy. However, it was time for somebody to take microsoft in a new direction. That became very clear. Sasha has come in and really changed things up. David think the semester being with us. Vonnie coming up next, cisco how his company is planning to wire the world of the internet of things. David this is bloomberg. Coming up, export import president. Watchingk. Are bloomberg. Protesters are expected to march a mcdonalds headquarters in chicago today. Child care and other lowwage workers are expected to join in the demonstrations. The nationwide push for a 15 an hour minimum wage began in 2012. Alibaba says its being investigated by over its accounting practices. They said they are cooperating. Their single from biggest shopping day. Tourists keeping their wallets closed. Jonathan president obama just began making remarks with japanese Prime Minister shinzo abe. Lets take a listen. Vonnie the meeting is happening on the sidelines of the g7 and apparently there will be a trade meeting held on the sidelines as well. A little bit of tension over the effects market. You saw that over the weekend between jack lew and the japanese finance minister. The yen has sparked this whole conversation about what is disorderly in the fx market. David when we went to the g20, jack lew was concerned about china and they can sure we are coordinating. We thought the problem was with china. And now japan and the yen are looming much larger. Jonathan a lot of tension between china and japan. There are winners and losers from a stronger dollar and a weaker dollar in both countries. They are on the opposite side of that trade. These guys have got to get together in smooth this out a little bit. There is a big foreignpolicy issue here between the two countries as well. Vonnie policymakers have succeeded in bringing back the yen. It wasnt 106 and change for a while. Think thats what one against the japanese finance minister. There was some stability ahead of g7. David now we are going to go to John Chambers. During his reign at cisco, the companys annual revenue is up to 47 billion. Now he is helping to lead the company into the next wave of growth. Theoins us now from bloomberg breakaway summit in new york were hes one of the featured speakers discussing issues facing market leaders in growth and innovation. Thank you for joining us and welcome back. John its a pleasure to be with you today. David we have talked with your current ceo about the transition cisco is making from a Hardware Company to a software company. Give us your estimation as the executive chairman. On a scale of one to 10, how happy are you with the transition . With chuck and his leadership by making the happy and so is the board. As far as transition, i would give it probably and eight and versus our peers a higher rate. I think it is appropriate having listened to president obama and Prime Minister abe from japan. Every country in the world will be digital. When modi comes to the u. S. In june to talk to congress, he will talk about a digital india. He will talk about digital manufacturing, startup economy, smart cities, etc. Our country does not have a digital plan. Where the only major country in the world that does not. We talked of the conference about about how every company, regardless of size, will become a digital company. As you move from 1000 devices connected to the internet in 1984 to 14 billion today, 500 billion in 15 years. If they period of time to disrupt or get disrupted. 40 of American Companies will disappear. It will not be global multinationals. It will be micro or start up multinationals for the job creation will occur. I think is important as a country we deal with these issues. And you have to think about your future. Question we is no are going to a fundamental Digital Transition around the world. Why are we not seeing that show up in growth and productivity . It is different, is it better . John the answer is it will be a replay of the 1990s. Think of it into areas. Think about it the 1990to insanity information age. President clinton did a good job of leading that. You created in eight years 22 million jobs, 18 growth in gdp. 17 growth in per capita income in america. Last americas get a pay raise with 2000. You can understand the frustration of the voters went from 2002 today had a 17 decrease in earnings. Every other country around the world lets use france. With a socialist government, president along hollande is growing 1 to 3 faster by becoming a digital country. They were one of the top start of nations in europe. Thealks about removing regulatory issues that are slowing down their economy. Modi is doing the exact same thing. Coming back from the u. S. , that the transition we have to make. Continueoes your plan as set out, the matter who was an expresident . John yes, it does. I have the opportunity to talk to most every government leader in the world, including our own. Focusedhope they get is not on the symptoms of trade or what happens because of trade, but of the underlying issues. They said dont treat the symptoms and take a couple of aspirin. The underlying issue is with her preschool america, get our startup economy growing faster. You will know this better than i do. They were only about 60 Companies Going public on the nasdaq this year versus normally 250 to 300. We are a startup nation. Unlike france and india, who both have a plan to restore the workforce, we dont even talk about that. The average american will not get a raise until we agree skill. His reskill it will require technology skills. Our ability to make a transition is a company, it will determine our future. I think we. Need to make up front and center on the american stage david i want to talk about reschooling of america. We come from a tree to get a High School Diploma and go work in a factory and make a reasonable living and raise a family. You look at those millions of workers who were basically losing jobs, they are not going to be only go to work in a digital startup. What will be those millions of jobs we create through this Digital World . John if i may slightly disagree, every company regardless of its manufacturing, retail, health care or government will become a digital organization. 92 of the jobs will require technology skills. While stem is important, you dont have to be able to program. Key you say here is how you apply to do your job more effectively. We thought during the 1990s a lot of critics say you wanted gdp growth. And a critics say you will destroy jobs. The reverse was true. We got the 17 growth. 22. 5 million jobs. That ought to be the challenge for the next president. 25 million jobs during the next eight years. We need to go back and reskill the American Workforce. We are doing that in france. We are doing it in india in partnership with the Indian Government. We need a reskill the American Workforce and the education system. Jonathan thank you very much for joining us. President obama has begun to make remarks with jess and it japanese Prime Minister shinzo abe in japan. The talk about trade, the disagreements over trade, they have to discuss this. The discussions around the fx market are not enough and they need to do something more fundamental. President obama moving ahead with the transpacific partnership. [japanese translation] president obama the lion city United States and japan the alliance between the United States and japan is important for the security of both of our countries. [japanese translation] obama that alliance has helped the fortified piece and security throughout the region. [japanese translation] president obama we did discuss the tragedy that took place in open our okinawa, and i extended my deepest regrets. [japanese translation] president obama the United States will continue to cooperate fully to ensure that justice is done under the japanese legal system. [japanese translation] president obama we also discussed a range of regional issues. Tonorth korea, we continued reinforce the terms and strengthen defense capabilities. [japanese translation] president obama on maritime issues, we are united in the freedom of navigation and peace of resolution of disputes. Japanese translation] president obama we also discussed global issues, including the need for issues to help migrants and refugees into the port iraq. And to support iraq. [japanese translation] president obama we discussed the role our country should play in achieving the early entry into the paris Climate Change agreement. [japanese translation] president obama im looking forward to the opportunity to visit some of our american and Japanese Military personnel that thank them for their service. [japanese translation] president obama and our visit to hiroshima will honor all those lost in world war ii, and reaffirm our shared vision of a World Without nuclear weapons, as well as highlight the extraordinary alliance that we have been able to forge over these many decades. [japanese translation] jonathan that was president obama speaking with his japanese carpet of counterpart. Vonnie lets look at the business ones first. President obama says he and abe talk about global growth. And of course the political ramifications on the president going to japan and talking about hiroshima and about poking our saying justice will be done in the japanese legal system. David the incident was a civilian, a marine veteran, who confessed to killing a local woman. The hiroshima visit is a very important visit. The first time an american president has gone over to that site. Is a very big incident for japan and the United States. Jonathan the Prime Minister saying he wants the president to understand the japanese people and how to make a nuclearfree world. Significant historically, that is for sure. Vonnie they are continuing to speak. Our next anchors will keep you uptodate that is happening. En is having trading at 110. 30. Jonathan a really firm session. We are up by three quarters of 1 on the dow. S p of about 6 10 of 1 . Nasdaq up about 27 points. Thank you very much. Bloomberg markets is next. Not the same magazine we saw yesterday. Dont fear the fed seems to be the new mantra. Daysisa the past couple of the perception has been coming around more and more that the fed is going to be more aggressive with raising Interest Rates. Stocks are behaving very well in the face of that, especially compared to the behavior we saw from investors and traders just a couple of months ago. Take a look at the bloomberg. Energy shares are leading the gains at the moment today. Along with financials,