Getting because we have a long weekend of no trading this holiday. Jonathan lets go around the world and check in with our bloomberg world news. Mike mckee is in new york. Then, a wrap of the g7 meeting. And then another warning about the cost of a brexit. Time, thetes government updates data on growth. We are joined by mike mckee who says the fed is likely to focus on bad news in the numbers. Mike half a percent growth in the First Reading of the First Quarter. That is likely to be revised up according to forecasts, but others on wall street will be focused on two numbers in the report. One is business spending and the other is our first look at corporate profit for the quarter. In the april minutes, there was a lot of talk about why business spending has contracted. As theyall companies decline, business spending has contracted. We saw that yesterdays durable goods report with capital goods unexpectedly falling. If we do not see profits rise, will be economy keep growing out a stronger face . Jonathan a fireside chat at Harvard University and a lot of people putting their weekend on hold. They fire up the barbecue and get on with it . Could. Nmike i wish i it would be more through the monetary policy, but you never know. She could Say Something that could be interpreted as sending a direction to the market. Michael mckee, Bloomberg Economics editor, thank you very much. David breaking news that came up just as we went on the air and that is Thermo Fisher scientific is going to buy fbi company. I is worth 4. 2 billion. We want to go to japan where World Leaders tangled on how to push the world forward for growth. It strikes me that there was some language in the communique saying that we need to get growth going, but they do not go as far as Prime Minister all they wanted to go. Is he satisfied with this result . Yvonne he says no really. He will still continue to talk about this crisis even after the fact that the g7 did not buy it. He cannot get the language into the policy communique. We heard from g7 leaders in havedocument that they strengthened their resilience and their economy to avoid falling into a crisis. We did see the g7 try to seek some coordination, but as you mentioned, trying to get that recipe on boosting growth remains tangled over geopolitical tensions. The fact that this language was even brought forward raises the question of how this is going to play into japans domestic stories. Could this be setting the stage where the Prime Minister is going to delay that sales tax hike . We could get decision as early as next week. David they did not get going much of crisis in, but they did add about leaving the European Union. The earlier drafted not have that line which. Language. Yvonne thats right and it seems like David Cameron really got the lastminute efforts going to get that line into that communique. They said brexit poses a serious risk to the Global Economy and how this could reverse the greater global trade and investment and not to mention the jobs that will be created with this. It has been a pretty good weekend for the u. K. Prime minister. He was also able to get support from the g7 when it came to chinas deal over capacity issues. The g7 says its going to tackle this excess, which has been field by government subsidies and support. Not singling out china, but the references seem to point so. David thank you from japan. Vonnie lets continue our Team Coverage ont g7. What is the reaction . Anna we have this concern about brexit into the communique what and what was interesting is that it was in the same breath as the concerns about global trade. It is something that perhaps g7 leaders found some resonance with. In terms of reaction domestically, it will not come as a surprise to many people because we had the finance ministers warning about this. Big voices warning about the impact that we could see from a brexit. Those who want to stay in the eu have incredible voices as the lead campaign will dismiss this as establishment figures talking down the u. K. Vonnie yet another warning even beyond all those mornings you costly andt how actual breads it woul brexit wo. Anna its talking about the cost that would be endured by Peoples Pensions if we were to see a brexit. Thats turmoil in mark critz, falling asset prices. Reportst the latest in that we have had from the treasury in support of the remain campaign. The League Campaign is dismissing this is outrageous and playing on peoples fears. We have heard prospects of a ahead. Ecession the polls seem fairly evenly split. It is hard to discern anything from them other than the fact that the undecided seem to be gradually coming down. Vonnie thank you in london. Jonathan heres a picture of the markets for you. The clue is in the color and its in the gray. The ftse 100 pretty much dead on the session. Thats up from the biggest threeday pop on the german equity benchmark since march. And has been a solid few days of gains. Wall street waits for the fed chair to speak with the dollar going nowhere as well. That great just speaks to the idea that we have a long and everybody is waiting to see if the fed chair does indeed, on monetary policy. Where you have a bit of price action is in the commodity market. Trading off those 50 a barrel levels. Wti is at 49. 11. Commodities are softer, but markets going nowhere. Lets go to the stock movers with abigail doolittle. Abigail valeant shares are up rejected aer it combined bit earlier this spring despite the fact that the stock was down 90 from its record peak. It means that insiders and outsiders alike find fundamental value with valeant. E are shares trading sharply higher after it passed a critical leap. It is the top leading stock. Outsold has managed to spin its 5 billion lighting unit in an 850 my Million Dollar and in a 59 million iop po. Vonnie president obama has become the first sitting president to visit the city destroyed by an american atomic bomb. Wreath att placed a ground zero in hiroshima, japan, where the u. S. Dropped the first atomic bomb. Mr. Obama says he was there to urn the deadthe japaneseamericans. Since that day, we have made choices for hope. The United States and japan forged not only an alliance but a friendship. Vonnie japans Prime Minister praised president obama for what he calls courage and coming to hiroshima. Search teams in the mediterranean have detected a beacon believe to be from the egypt airplane. The chief investigator says that picking up the beacon allows the search to be narrowed to three mile radius. Search are still have only found small pieces of the plane. Frances president Francois Hall on his valley to defend new labor reform from union resistance. Between battles between police and protesters, he says that unions cannot dictate the laws. Workers at french refineries walked out earlier this week, creating a nationwide shortage of gasoline. Froml news 24 hours a day more than 150 news bureaus around the world. Reign king dollar ranso supreme. Its jumping 3 from its peers. The dollar faces one last hurdle when janet yellen speaks today. Will we hear a more dovish tone . More go is next. Jonathan good day to a beautiful city of london. Futures going nowhere. Stocks going nowhere. The ftse is pretty much dead flat. Over in frankfurt, the dax benchmark in germany also positive by around 2 10 of 1 . Tone setting the chil treading water before Janet Yellens fireside conversation. Lets get to the other Asset Classes for you. The eurodollar 111. The dollar yen is losing the 110 handle. Also lower by about a 10th of 1 . Crude and wti brent no longer in the 50s. 49. 10 on the contract traded. David this is the point of program that we look at the top stories that terminal readers are reading on the bloomberg. We are putting up the top five here. We are back to miami real estate. About this this story the miamis condo frenzy ending with inventory piling up in new towers. About long we have heard latin american buyers putting all cash on the table and buying up condos. Some of us are scratching our heads because well miami even be there in 70 years . Miami is the poster child for the real state back and it seems like some of these condos are not selling out and some of them are remaining empty. One of the real state people we spoke with is that we will see where this all ends up. David talk about of boom and bust economy. Miami real estate is down and up. Jonathan its funny enough that we are seeing this in london with this huge project that is happening. A lot of properties are just not selling. Everyone out there is waiting for this bubble that some people would refer to it to go like that pop. People have been calling for it for a number of years now, particularly in london. You start to see specific hotspots start to soften up. David as long as there are no credit default swaps. The 19 thinking about his politics. Weve all been waiting to find about when the markets would start to react to present a politics and it may just be happening. If you look at futures for the s p 500, there are particular spikes coming up over the course of the summer and they seem to be timed to the two conventions. There also some fed meetings in there, but its interesting if you watch the chart, it really spikes up. Maybe people are getting nervous. Jonathan you would expect it to be upwards, but as you pointed out, there are little spikes around july. Meetings the fed that people are trying to price in, but i think people are thinking about politics with the convention and election as well. David you hear about equity people saying the part of the problem with the market right now is that theyre just not sure whats going to happen in november in the United States. Jonathan heres my story chandy on the bloomberg. Primepanese fin minister tried to make the risk of a Global Economic crisis on the global communique. At this point, everyone is waiting for him to make a decision on whether or not he is going to delay the next sales tax increase. David he got hurt on. He got it put into the communique. That has to help politically back home. I wonder if it influence of the d the voter. If youre sitting in the u k, do you Pay Attention to the g7 . Vonnie i will pass on that one because im not quite sure. Norways Central Bank Governor got another sixyear term. Coming up, what will happen to thbritish town following the june 23 referendum. Protecting against the fallout from the u. K. Leaving the European Union. That is next. Jonathan this it is bloomberg. Lets bring in the global fx strategy from the city of london. Its great to have you on the program. Of g7 had a few days noise with no real agreement on doing anything anytime soon. From what you can see, fed chair janet yellen coming up a little later on. Do you wait to see what she has . Ot to say kit this is one of the quieter days. If i was janet yellen, there was discussion about what she would say dovish. The big fear is that once she gets closer to the next rate hike that they will redo januarys volatility and turmoil. The chinese equity markets ended lower, but volatility and turmoil, im not seeing a lot of that the moment. And the equity market is in good shape. We would like a straight back from Janet Yellens if that works in america and then move on. That itsu are saying only going to be a temporary calm. Kit i think we have got more fromil coming just because where we are, we are marching down a very narrow path where we could be in danger of fears on the downside of global growth. A lot of the manufacturing indicators are weak. Goings. Manufacturing is to be a source of concern if it follows any of the region once. Mr. Abe is not comfortable with anything in japan . Theres not very much growth. Oil prices are higher, but metal prices are less. There is a very fine line for this calm period in markets with low volatility slightly softer and everything is ok. A bumpy summer seems to be quite a high risk. David given that fine line, is there much of a difference between a dovish rise and a hawkish hold . Kit no, not that much. Wood of the things that you feel is what the markets do not want is a shock. As long as we are prepped for whatever happens, it does not make much difference. There is a geek feature that if i look at the euro dollar , it tracks real 10 year yield differentials much more closely today than the shortterm differentials it used to. I would throw the question back to america and say, is there much difference from what happens to 1030 year treasury yields or even real yields between a hawkish hold the dovish hike . Probably not much. The uncertainty comes from elsewhere. Does any move caused turmoil to return in Chinese Exchange rates, equity markets, and so want . That is the harder question. Vonnie one area where traders are having fun is brexit turmoil. The pounds volatility against the dollar is at a high level. The highest in six years in fact. Traders are looking for solutions as a way to make money. Aken ore pound we c strengthened against the u. S. Dollar should there be an uneventful referendum . I would like selling the pound whatever happens after the first move. For whatma is working happens between now and june 23. Theconsensus view is that vote is going to be to stay in. I do not think we will see a rate rise in the u. K. Whatever the fed does whatever the outcome of this vote over the next two years. The u. K. Economy is ahead of the u. S. In the sense that the cycles rolled over. I think we are gone on rates. Rate riseur next comes in july or december, we will get more divergence in monetary policy, clear slowdown and the u. K. , and a legacy of a Toxic Campaign from both sides to hold us back. And must have some effect on investment. Im pretty negative on the medium longerterm outlook. Jonathan with regards to the activity in the Options Market, how much of that is just hedging . How much is that hedging their counts Going Forward so to speak for brexit . Kit it is one of the reasons that the pound has ordered peoples expectations. The spike in sterling came as a result of hedging positions. Sterling has in fallen, people are taking bets off and that is driving and down. The pound is going up in the recent fall back in sterling volatility from the higher totals are very much related. That is either people who are worried about what was happening being less worried now or it is complacency, depending on how you feel about opinion polls. Vonnie we have seen a lot of political drama, and it feels like were in for stability in places like brazil and turkey. Do any of these currencies look attractive to you know . Now . As long as the chinese authorities have markets calm and the economy is stabilize, which i think is the case, that takes one risk off the table. Commodity prices not falling every day takes another risk off the table. We understand the political risks in brazil. That is not to say they are not real. The same is true of south africa. I look at anybody who is independent to a degree on oil prices is in good shape. Ive been asked about the hong kong peg. Their certainly a lot of nervousness coming from all angles, but its not what it was. Jonathan great to have you with us, joining us from the city of london. The reaganomics band gets back together. Donald trump called on reagans team to improve his position. 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. Ive got to say that the gray gives it away. Markets are going nowhere. The ftse 100 is dead flat on the session. Very much treading water throughout the session over in europe. The german dax up a 10 of 1 . If you want some price action, go to the commodity market. 50 a barrel was your headline. Into crude down by 1. 27 bti Trading Software as well at 49 flat. In the fx market, a lot of discussion about japan given that we have had some softer inflation data. The real story is the dollar side of the trade. Its for the much going nowhere, up 1 10 of a percent on the session as wall street waits for fed chair jenn janet yellen. David heres what you need to go at this hour. Thermo Fisher Scientific will by fei. The g7 has wrapped up in japan. At the 11th hour, leaders added a warning about the uks referendum on leaving the European Union. Valiant shares are climbing this morning. The wall street journal reports that valeant received a takeover approach, and offer it rejected. Vonnie it is time now for your first word news, an update on what is making headlines up to the business world. President obama wants a hiroshima to call on the world to reduce its nuclear stockpile. Mr. Obama is the first sitting president to visit hiroshima with the u. S. Dropped its first atomicomb in 1945. The president placed a wreath at ground zero. Nagasaki areand known not as the dawn of atomic of our but as the start own moral awakening. Theie the president said world must chart a course that leads to the destruction of nuclear weapons. Says that if he is elected president county will see a lot Less Government involvement in energy regulation. He is promising to rescind what he calls job destroying Obama Administration and by mental actions. Environmental actions. He would also cancel a landmark climate deal reached last year in paris. And they made the final round longer and the words tougher, but still for the third year in a row, the Scripps National spelling bee ended in a tie. A 13yearold an 11yearold where the cowinners. They had to guess as three times as many words as the past year. Each received a trophy and 40,000. Froml news 24 hours a day 150 news bureaus around the world. Jonathan tom keene is here with the g7 ending today and Global Leaders have been looking at how to tackle the glob Global Economy. Your morning mustread is for mohammed elerian. I call it g7 inertia. Every quarter, they wait to an incredible incompetence of measures. It adds to the difficulty of the impediments to include some growth and makes the political context even more complicated. Nothing is being done once again a lot of talk, political action. Tom what is so good is the idea of inertial force. You central bankers with inertial force. Theres clearly this consensus view that all the g7 leaders are not organized and coordinated. Is a much like what he would call a g0 meeting. Jonathan is it because china is not there . Tom i do not think china is the big discussion of the moment. Maybe it should be, but the big discussion of the moment is the politics of adapting within a noninflammatory way of populist uprising. Each nation is dealing with this in their own were. The nations not dealing with it are the exception right now. I was leading off with Prime Minister abes conference on withwa and the delicacy which president obama spoke to not only a world audience as he goes on his final tour, but also has a spoke to the u. S. Audience , not so much at hiroshima. There is a clumsiness to the discourse for now. A narrativeere is that has been built up over the last couple days but each individual leader has used his platform to speak whether its Prime Minister abe trying to delay the sales tax hike or premise or cameron who wants the brexit risk on their. Re. Angela merkel coming out and saying it was not a subject of discussion. Tom what did you learn . Did you know that its a threeday weekend and you do not have to come to work . What did you learn about the Brexit Debate . Jonathan ive learned that we have had a very Tactical Campaign from cameron to leverage for his own needs. Tom are the people organized . Jonathan the leave campaign have not been able to leverage the groups like the imf and the g7 for their own campaigning. What will be critical in the coming weeks is that we now have the selfimposed quiet period for the government. The bank of england cannot wait in either. I wonder how the Campaign Shifts in the coming weeks. Tom there also the exogenous shock of economic data. June is upon us. Jonathan tom keene and i. Tom you need red, white, and blue paper free bicycle for the parade. You will have your bicycle. Jonathan can you speak on the bike . Tom have you ever had a hot dog . Jonathan tune into bloomberg surveillance radio. It is 7 00 a. M. Weekdays. Keene and i. David i want to photograph of that. If donald trump were to have his way, it could be the 1980s all over again. He is seeking advice from people behind reaganomics. Megan murphy joins us now for more. This is my question. We have been eager for mr. Trump exactly what his Economic Policy is. How real is this . Is it going to be a version of reaganomics . Megan it is real and the sense of lowering tax side. That is compelling in the sense of the people he is targeting. You talk about the individual rate of tax going down, but he is also talked about taking the corporate level text down. For republicans and the coalition he is trying to unify, that is hugely important. The american level of corporate and that ispetitive something everyone would argue on the left or the right. Whether we would get to a scenario challenging those types of economic policies, we just do not have enough flesh on the bone yet. David the theory i understood was that if you cut taxes you will get more revenue, so you reduce overall deficits for the u. S. Government. We had the 80s expanse which should not turn out that way. The actual percentage of gdp that we owed went up and not down. Does donald trump have a part of the problem . Megan he is not quite have a problem with that. That is too complex for people. When you talk about broad brush strokes, just saying to people that if we lower taxes, government revenue will go up, no one is going to have the level of facts that you have on hand. It sounds like a very good message out there. Im not sure hes going to be hurt by that. Americas deficit has really feted as an issue. This is something that would really dominate the cycle. The other thing we need to overlay and this is that americas economic trajectory is looking pretty good right now, even if we look at exogenous economic shocks. You do see that even we had a miss on jobs, but we see a level that looks sustainable Going Forward. Jonathan i wonder if there is a relationship here with the stocks being such a big issue because maybe its not so big anymore. The deficit has been narrowing. Megan it has been narrowing under this president that has lead over the last eight years and its not want to call that to attention. It will be fascinating as it plays out over the campaign. Who benefits from what looks like a stabilizing American Economy . Does hillary get credit for what obama does and can donald trump continue to paint it as such a bad state of the economy we are in . Who does this help . David it will be ironic if obama success helps donald trump. He also says he wants energy independence. He does not like the paris accord. Megan what will be fascinating is the polling on this. He wants to get out of that Climate Change agreement. There are a ton of jobs in america that are dependent on america as an independent Energy Resource and as america as a true source of energy growth. That is very popular among the sectors he wants to hit. Vonnie you see him choosing one doctrine or will he have a bunch of advisors . Megan i see him being incredibly flexible. He is mobile in terms of his policy. What he has shown this to be on what is popular and hitting the keynotes to make and him win. David megan murphy, good to have you with us. Vonnie a busy week for u. S. Economic data on tap. Impact theuld in fed schedule. We will discuss what it takes to give janet yellen the confidence to pull the trigger on a rate increase. David this is bloomberg. And david westin in the hewlettpackard greenroom. Janet yellen will speak at harvard. Will her language speak to a rate hike . That is on bloomberg tv. Vonnie you are watching bloomberg. Time now for your Bloomberg Business flash. A big victory for google over oracle. Google one a jury victory that killed oracles claim. It contended that google needed a license to run java to run android. Drugmakers have been asked for documents related to people foror helping the products. It cap patients from seeking lowerpriced medical help as well. Frenzy is coming to an end in miami with many owners heading for the exits. With big built deposits from latin buyers and its estimated that a third of the units are back on the market. That is your Bloomberg Business flash. Jonathan a long weekend ahead, a short and busy week after that. U. S. Markets are closed on monday for memorial day. The ecb Rate Decision on the same day and then finally u. S. Jobs data out on friday. Here to put it all together is laura. Put it all together for me. Ou have regional fed president s screaming it is coming, were going to hike. Laura the message has been that if the data supports it, yes, we may consider hiking. The labor market is going to be so keep. Ty,. I cannot think of a more important payrolls report, but it is a key one. We think that payrolls are going to come in on the weak side. We are looking for only 110,000 jobs that have been added to the economy. If the fed looks of that kind of number, we think that would be enough to raise questions about the outlook and postpone a hike. Jonathan yet had this huge outline call for a few months now. The next rate hike is 2018 . What data would you need to see to read think thats a scenario . Laura we expected to slow down over the years. We expect disposable Income Growth to slow down of the year and headline inflation picks up more than nominal wage growth. Game changer would be if nominal wage growth starts to accelerate and we have not seen it thus far in this recovery. David 110 is a conservative number, but if you saw a lot of which growth, that might counteract. Laura that is a great point, but we are not. What is driving job growth andabor force participation low gasoline prices have been very important to increasing disposable income. That is not going to last with oil at 50. Vonnie the fed should of been raising two years ago and then Morgan Stanley is saying its not going to be until december. Theres a big disparity still at their no matter what the markets are pricing in on whether we are getting inflation or whether we are inching towards outright deflation. Laura it is interesting. Bloomberg pricing suggest about a 32 chance of a june hike. We think that is actually too low. Even though we have no hikes in our forecast, we think the message from the fed has been pretty strong. If we get a good payrolls report, that could definitely give a green light for a hike. We just think were going to get a week payrolls report. There is a strike going on with verizon that might add some noise to the numbers as well. Things, as you see we saw data yesterday and one of the things that stood out was the capital goods orders, down for a Third Straight month. What is that telling you about the u. S. Economy specifically or is it a global story . Laura i think it is both. It is a global story. Capital goods orders this is a leading indicator of equipment investment. It is not telling you that we are going to see a pickup and equipment investment anytime soon. Firms are still cautious and unwilling to take risks and invest in new projects. We cannot rely on the business sector to carry growth. It all comes back to the consumer, which is why really that payrolls report and wage growth are really key,. David part of the problem is that theres misallocation of capital going on because money is so cheap essentially. If the fed raised rates, we might increase productivity the Coast Companies would make smart decisions on how to invest. Does that seem sensible to you . Laura know. No. The fed raising rates would slow the economy down. That is what that policy does and i think that we need to proceed only when we have enough growth and inflation in the u. S. Economy to warrant still needing the feds longerterm goals with that pricing. Vonnie this morning, stephen majors was on and he was saying that the front end of the curve is probably mispriced because we are looking at no hikes this year that should be around 50 basis points. We are up in the 80s now. Where do you see the curve going . Are you afraid it might flatten . Laura we think the probabilities attached to june are too low right now. We think the market is waiting for the data and that is exactly what the fed wants eyes on the data. We could see more action in rates after we get payrolls and other key data next week. David we have not talked about productivity. How important our productivity Growth Numbers on how the economy is doing and what the fed does . Laura productivity growth has disappointed. We have been in this low regime for quite a while now. We do not expect much improvement. It is not necessarily give us a nearterm signal about where the economy is going, but it does say that the economy may be cannot handle very high Interest Rates at this point, that lower the new trend and there is a limit to how much the fed can raise rates. Jonathan weve had this discussion about stock versus slow. These numbers in isolation, they look solid in this country. Do you think this is just the new normal for a while . Or do you actually for see it rolling over in a substantial way . Those are two very different stories. Laura we think we are going through a wave of more positive data. We think that the probability of a june hike is actually higher than the market thinks. We think payrolls will come in week, but the gdp tracking estimate for q2 has been rising at 2. 5. We think this momentum is going to be a head fake and that consumers will slow down in the second half of the year when we run out of steam from disposable income. David what are your expectations about corporate earnings in the second half of the . Year . Laura we are generally cautious on the corporate sector. Profits remain challenged by the tightening labor market. Labor was incredibly cheap earlier in this recovery and now it is not. That is something that is going to pinch profits, even with nominal wage growth low for unit of output. Labor is starting to get expensive from the corporate perspective. Jonathan laura, is the message to take it off until 2018 for the next site . Hike . Laura when the fed calms markets down and we do not have any strong dollar appreciation that was better for the Global Economy. David another reminder you have got to tune in today at 1 00 p. M. Eastern time to see fed chair Janet Yellens because harvard. We will see if she tells us anything interesting. Whether donald trump are Hillary Clinton gets elected, anxiety is creeping into the u. S. Stock market. We will show you that next in off the charts. David now time for all good off the charts. We were wondering when the election would go into the market. This is an interesting chart and the shows all the s p options. The strike price is less than 1 from where we are now. It really suggests that people are tightening to protect their long decisions, but they are starting to spike into the brexit decision in june and what it could do to the markets. They are upping that protection there. And the july fomc meeting the september meeting, and of course the president election, rising the whole year. Thed as you go out into future, youre not sure what will happen, but there is a spike here. This is the Republican National convention. There is a spike before comes down. That may indicate that people are starting to get nervous about elections. Abigail absolutely. I think there is some uncertainty and anxiety around the presence of race in november and some protection increasing into the election season. David great chart cou. Jonathan in the next hour, a worldwide borrowing binge by Companies Across the board, making may of the busiest months ever. Are investors trying to get ahead of the fed . We debated next on bloomberg. Futures are positive. Of about 15 points, but markets are treading water ahead of fed chair janet yellen. David crude reality could oil falling after hitting 50 a barrel yesterday. O the path of least resistance jonathan emerging markets quickly spread across the world as warning signs flashing at against. Vonnie comments from janet yellen and u. S. Economic data and focuses mone focus this mor. What to watch for as the june meeting rapidly approaches. David welcome to the second hour of bloomberg. Im david westin here with Jonathan Ferro and vonnie quinn. We will take a deep dive into markets across the globe. Vonnie in less than 30 minutes, we will be breaking u. S. Economic data. Will the numbers play a part in solidifieying a rate hike . On. s go to j jonathan s p futures up 1 10 of 1 . A little bit of stability on the benchmark in germany. Yields unchanged on the u. S. 10 year. 111. 66. Euro at giving up somei of the gains that we have seen in the session over the last week or so. Wti is down four percentage points. There is your view across the assets. Lets dig into the stock market and get a few movers with abigail doolittle. Abigail starting out with old tulta salon. sutsche banks mike baedeker saying this is where all the traffic is going. Also moving here in the premarket shares of palo alto networks. It guided the Current Quarter defense of the stock saying that results are misinterpreted and that investors should not look past the 60 . Bookings growth. Soaring after there is a deal as the Company Looks to restore investor certainty after allegations of impropriety by the former ceo. Those are some of the stocks moving in the premarket. David it is a borrowing binge. May is shaping up to be one of the biggest months ever for companies borrowing money. More than 230 billion globally. Joining us now from charleston, south carolina, is karen kavanaugh. Is all this borrowing going on with Companies Just because they cannot resist the low prices or are they trying to get in before they expect a fed increase in rates . Karen i think it is both. They are getting while the getting is good. Janet yellen means it, although we have seen the story before. They want to get in on those low rates and there is demand for it. Its a little bit of both. Jonathan theres a quote from bill gross that if youre and youaround the deal cannot figure out who the fishes, it might be you. Who is losing here . Karyn i think the companies are definitely getting a good deal and that Interest Rates are so low. Take a look around the world and yields are just not there. There is a demand for any kind of yield. It is satisfying both sides of the equation and that is the son of a healthy market where both the buyer and the seller is happy. Wells fargo downgrading recommendations this week for all sorts of corporate bonds, whether they be highyield or investmentgrade. Why would that be . Why would we have calls now . Karyn when you have rates that are so artificially low, and lets face it, we have not been anywhere near normal. When you have that, youre going to have miss allocation of capital. Youre going to have marginal sellers that are out there doing what they can to get a piece of that pie. Obviously there will be more the fault as the marginal players in this are going out there and issuing debt that they cannot cover. That is normal, but that is going to mean that investors need to be more meticulous in analyzing the debt that they are buying and not just a freeforall grab of anything they can get their hands on. Jonathan lets talk about the buyers. This the 9 billion euro bond auction. The flagship deal of the month was dell. Talk to me where you think the flow is coming from. Is it borrowed money or hedge funds looking for capital gain . Where is the money coming from . Karyn my sense that it is probably overseas and they are looking for yields. The u. S. Is the safe haven now in that our economy is picking up and things are getting better. I think it is most likely coming from overseas in that look for yields. The u. S. Is it. David we have been watching the s p Wander Around within a range for some time now. Within that range, i wonder what changes have you seen among sectors. Karyn the beatendown sectors have kind of come back and that is the way it always works. The pendulum swings too far and then investors realize, oh wait, i think i missed a good bargain here. Guessing that with financials and tech. Consumer discretionary all year. Investors just overreact and they do that over and over again. Does raisellen Interest Rates, and by the way, i do not think she is going to do that in june. , think financials will benefit so the market is happy about that. They are seeing a rally in financials. The dollar has picked up in the last month, but it still weaker from where it was in the beginning of the year. That is good news for Tech Companies that sell a lot of goods overseas. If you take a look at the earnings reports over the last quarter, you see about 70 of the Companies Mentioned a strong dollar co. We look at the dollar and saves getting stronger, but it still weaker from what it was at the beginning of the year. I think that will be important in terms of some of the sectors and looking out there and having to do business overseas. David we have a chart that comes off bloomberg about the biggest leader so far this year. Lets see what it shows. Energy is at the top actually. You cannot talk about energy. Is that one of the beatendown once that you think is coming back . Karyn thats an obvious one. Oil was in the 20 range and now its closer to 50. People, investors, the pendulum swung too far. They said i do not want to touch energy with a 10 foot pole. Energy prices have gotten stronger and now there are some companies that can do well under the scenario. If you take a look at oil over the last 25 years, the average price per barrel has been about 42, not 100. There are companies that can make profits within this range that were seeing right now. Although the price of Oil Continues to go up, we will see more plays going in and that will be a little bit of a giveandtake. Energy is one of the sectors where you see it time and time again that the pendulum swings too far and then it comes back. David that is karyn. Thanks so much for being with us. Vonnie time now for first word news. President obama has become the first sitting u. S. President to visit a city destroyed by an american atomic bomb. The president placed a wreath that at ground zero at her hiroshima. He said he was there to mourn the dead japanese animations. D americans. Since that fateful day, we have made choices for hope. The United States and japan forged not only an alliance, but a friendship. Vonnie Prime Minister abe phrase president obama for his scourge to come to hiroshima. Reform against labor resistance. He says that unions cannot dictate law. Workers walked out, creating a nationwide shortage of gasoline. And italian diver says he found the wreckage of british submarine sunk in off sardinia in world war ii. The wreck was found last weekend to 62 feet under the surface. It had 71 crewmembers aboard when it disappeared on the last day of 1942. The British Royal navy says it is looking into the divers claims. Froml news 24 hours a day 150 news bureaus around the world. David coming up next, a disturbing divergence. Arelast two s p selloffs lead by decoupling between the u. S. And emergingmarket stocks. Will history repeat itself as divergence takes form once again . Jonathan welcome back. The firstlly in quarter, emergingmarket stocks have dropped 4 in the past month. Last january, selloffs quickly spread across the world. Sounds very scary, doesnt it . A senior emergingmarket strategy at td security joins us now. Here is the chart and heres the catalyst conversation. Oil versus e. M. Fx. Currencies down and crew keeps climbing. That correlation has broken down, so whats your view. . We have currencies that should be benefiting from increase in oil. Given the state of global demand, the only thing that emerging markets have going for it are the prices are little bit higher for those like bit and mexico. It speaks to the fear surrounding the fed. We evolve easily had the fed communicating in a way that raises the probability of pricing over the next few months. This may be weighing most heavily. Jonathan the fear is one thing, but the reality is quite another. Much . T matter that sacha in matters so much as the market is concerned with it. Surprises created an e. M. Rally that people do not get behind fundamentally. We have had a reversal of that. That gets priced in and the more we see this weakness in the near term, the less that is going to be down the line when they do hike. David is the fear about the fed or local government . There is a real geopolitical issue when you talk about brazil and venezuela. Sacha absolutely. This has created a lot of potential for divergence. Brazil is a great example. They have had an ongoing impeachment case that will end up with the government going out. The replacement government is doing its best to study the economic ship for the time being. Its really questionable which way things go. Brazil could be a fantastic story three or four years from now. The uncertainty is that it makes it more hesitant to get involved in the economy. Vonnie with all the elections and the shifting around, and things that look like a happening with Political Uncertainty, you are saying that does not make a difference. Im talking about turkey, brazil, argentina. Sacha will he have is increased or sustained uncertainty. These are stories that are troubling economically speaking. If that is the case, one would think a lot of these are highyielding and they should be a tractive, but it is the Political Uncertainty that drives a lot of hesitation. Vonnie is china and emergingmarket . Sacha absolutely. Vonnie what you think about being interested in this . Going toviously youre have its a massive economy. The world is globally underinvested in china because of capital controls. People are going to be obligated to get involved. China theres always going to be risks there. I think momentum loss and Economic Growth to be very risky for china. However, eventually people become accustomed and maybe it will adjust to a level where a risk will be priced in. Jonathan just bring that chart up again and what you saw was this big pop like that, that revaluation. To think we are going to see Something Like that against, that august spike . Do they gradually lift the market . Sacha i think it is much more a case of gradual. You will take note that this week that china hit the vicks at a fiveyear plus low. Jonathan what did you make of that . Us, it was, but the general Market Reaction was a lot more subtle than it was back in december or january. I think it speaks to the fact that the committee kitchen strategies to tell the market that we are going to let our currency adjust in light of economic fundamentals like all of our trading partners. You should expect that. We are not losing control. That has been successful. Although people are worried about it, i think it is going to or should cause a lot less concerned than it did. Jonathan a lot of people think they have ditched the market approach and are looking for stability. Sacha right, lets take this with a grain of salt. A lot of emergingmarket central , currency policy is another arm of monetary policy. It will never be truly market based. We just have to get accustomed to that. We have to listen to what they are saying and what they think they are doing because that is part of the clarity theyre going for. Vonnie what you make of the news that the chinese are going to flat out flat and when the next rate hike is going to . Be . September,hink its but we think that all these global risks are due for september. Central banks are probably always talking to each other and it may have gotten a little blown up. Im sure everybody wants to know when the fed is going tight. I do not think the fed is going to tell the chinese. Jonathan great to happy with us. Have you with us. Vonnie valeant shares are up this morning that the wall street journal reporting that a drug maker a joint takeover bid this past spring. What happens now . We will be asking the questions. David this is bloomberg. That is new york city this morning. Drugmaker drama. Shares of valeant are up after reports that the drugmaker rejected a takeover offer and an investment earlier this spring. That is according to the wall street journal. Devon, i noticed the timing of this alleged offer was before they named the new ceo. As far as you can tell, was this a serious effort to buy the company . Devon its really an expiration and your point about timing is important. Most of the return is actually made on the entry. It is how cheaply you buy the company. All year, valeant has been declining, but after march when they lowered their for your guidance, when they said they would be delaying the filing of their 10k and that raise some issues, shares completely plummeted. David we have a chart showing exactly that. Devin from an expertise in health care, you have to look at it come to that. An attractiveas price for valeant in march, it looks a good pretty attractive price now. Devin sources said that it was the company that rejected the offer. Did havete equity firm interest, but the company wanted to give more room to run and time to a secure a strategy. Jonathan talk about the time horizon for any particular acquisition for this company. What are you try to achieve with the likes of valeant . Devin it has had a lot of success with Companies Like this, generic drugmakers. What it may try to do in a situation like this is look at a company in part and see what can be kept and sold to pay off debt. The playoff in the past with other pharmaceuticals is to invest heavily in r d with these companies and try to produce new drugs. I could see a playbook like that happening. This takes years. Private equity firms need a couple years to execute their playbook. David does valeant have a pipeline of new drugs it to be attractive at the right price . Devin it could be possible. Valeant has been built through lots of acquisitions. Some of it could be sold to pay off debt. Vonnie it is still down 80 over the last 12 months, so is this really just private equity trying to get in where Equity Investors themselves have fled . Devin its certainly possible, and private equity lets to do that. They love to see potential value creation. Theres an interesting point where the sources say there are no current bids, but this often puts a company c in play. David thanks so much for being with us. Vonnie time now for futures in focus. Gold trying to avoid an eighth day of losses. Oining me now trying to avoid another day of losses today, whats happening down there . Oliver it will be a quiet session with a lot of traders currently home out to wherever they may be. Eight sessions, if we close negative today, that will be four weeks of losses on the failure to break out. That was four weeks ago, last years high. That failure to breakout above that level lead to long liquidation and we have retreated some. On top of that, we have a hawkish tone for the fed, which indicates that they might go ahead and raise rates, which is obviously putting pressure on gold here in the near term because investors are looking for yields. Gold is not necessarily have a yield, so they are dumping that and looking to buy rates. Vonnie for a shortterm traders , they may not be enjoying the move, but what are longterm traders like druckenmiller doing . Oliver im with him. On the longerterm scale, i think gold is a great value by. The will come in pressure as we approach that june meeting. That is 50 of this years range, which i think present a lot of great value. At the end of the day, rates may be rising here in the states, but gold is part of the Global Market and the global economies are keeping rates low and in some cases even negative. No yield is better than negative yield, which is what we have seen from japan and several other countries. Vonnie even with these down moves, it was the bestperforming major asset, up 16 . Oliver, thank you. U. S. Economic data just moments away. We will break gdp numbers. Will they stay or will they go . With four weeks until the referendum, the economic consequences for both scenarios. How much worse would britain be outside the European Union . Jon this is bloomberg. The price action out there, pretty dull. Without futures up about 18 points come s p futures up about. 5 . Switch up the board quickly. 109. 67. En as the data drops in the u. S. , gdp annualized quarter on quarter revised down, 0. 8 . 0. 9 in the survey. Personal consumption revised up. Actual 1. 9 . Core pce, 2. 1 . Lets bring you the team, Carl Riccadonna a bloomberg intelligence. 0. 5 percent revised 20. 8 . 8 . S revised to carl now, we need to average 2. 7 of the remaining three quarters of the year. That makes it a little bit easier to hit that mark. I doubt at the june meeting. Could this process look much better than we had thought . Up 2. 9 . Financials down. 5 . That is good. Carl it was good that we saw improvement in the corporate profit numbers because it happened it had been down 12 . Slowmoving economy, that tends to be a very Strong Negative factor for corporate profits. As we start to see economic momentum build, the corporate profit trend should rebound. If it does not come at that is a major red flag the economy. Since theighest Fourth Quarter of 2012 what is the story their . Carl you are seeing decent april retail Sales Numbers were strong. The number on Tuesday Morning should be an important data point to the fed because all bets are on consumers here as we move to june. Jon looking at the data over the next two weeks, what stands out to you . Saying the fed will be pushed over the line. Carl without a doubt, consumers. They dominated the landscape in q1 come over the last four quarters. Any piece of new information from brexit, the move in oil prices or whatnot has to be filtered or the lens of consumers. If consumers are not rising to the occasion, the economy will not be Strong Enough or the fed to go for the fed to go. Policymakers cited High Consumer sentiment and robust real household Income Growth. Those getting hints that savings, the Income Growth is being deployed into consumption as well. Reboundwill be see the in Oil Prices Affect . Carl to this point, it is very contained. Even though gas prices have risen, they are still at very low levels, which are supportive of consumers. I dont think we have to worry about oil just yet. As we look at Business Investment or Capital Investment in the gdp accounts, they ares there is a definite drag on business spending and that is concentrated in the energy sector. One quarter out is too soon. Will this report give you any confidence we are avoiding what happened last year and the year before . We have a week q1 but better q1 better q2 andut q4 . Carl we have a recurring pattern of q2 strength, so you cannot sound the all clear. You have to average the two numbers to get a better sense of the economy. This is a cyclical anomaly. You adjust for the usual pattern and save the economy is performing decently, growing at a 2 type of handle. Which means everything is more or less ok. What will janet yellen and the fed be looking at first and foremost as we go into june . Carl jobs, jobs, jobs. Consumer spending is critical, but it is not going to happen if the Income Growth and job gains are not there. David its not just the number of jobs, its what people are being paid for those jobs. Carl employment income, they are looking at these broader measures like the fixed rate to gauge underemployment and marginal participants in the labor force. Thats giving them confidence that there is still some slack in the labor market. Not seeing there wage pressures the way we should given the 5 of limit 5 unemployment. David suppose we do have wage increases my people are sitting on their cash. What does that tell janet yellen . Carl the lack of confidence in the economic outlook. Speaks to a lack of confidence in the economy. If we look back to the previous michigan Consumer Sentiment s, finally, consumers finally are seeing that the outlook is improving as future expectations are improving. If people are more optimistic, they are less likely to deploy their savings as spending. Vonnie gdp rising at a. 8 annualized rate. That is what we just saw. The brexit referendum is less than a month away and officials including the bank of England Governor Mark carney have warned of economic risks. Jeffreys chief european economist takes a look at what either outcome could mean for the european economy. Outust had some u. S. Data what do you put down for brexit and what you put down at softening globally . Mark the u. K. Was growing at 3. 5 annualized, that has slowed. A lot of that lost momentum was due to external factors. World trade is falling for the First Time Since 2009. Moreover, sterling did rise by approaching 20 . We have ongoing fiscal consolidation, policies being tightened by the bank of england. Backnk brexit has come come is beginning to influence decisions. When i look at the gdp number and saw Household Spending solid, but a decline in Business Investment, what is the effect of that going to be . The interesting thing here, you think of the bank of englands reaction to the main inflation report, they still had tighten, raising rates sooner rather than later. Is going to get pushed back into next year. With brexit, they could be cutting rates. The first rate rise is being pushed out. Governor carney says the next move is a rate hike. Several quarters of negative growth if the u. K. Does not vote does indeed vote to leave the eu. They have not given us any idea of what the monetary response would be. You say cut, they have not said much at all. Will they address Spare Capacity instead . Mark every central bank wants to see inflation at the moment. If the u. K. Falls into recession ultimately told them to more policy easing. They would welcome a weaker sterling. Assuming it happened in an orderly fashion. The response initially would be mark carney gave that message as well when he was addressing the Committee Earlier this week. If anything come the pickup is being delayed. Central banks generally want inflation at the moment. I wonder how you gauge the chances of and it of brexit. You adjust charts aced on where the money is going. You look at the Options Market, a lot of people are hedging. How do you gauge the chances . Put thele to pole number somewhere like 5545. The opinion polls have been systematically wrong in the u. K. Since 1982. We are getting more and more polls and they are not reliable. The markets know the u. K. Is more likely to remain in the eu, but there is still uncertainty out there and the markets are discounting the full impact. That is not being priced into European Asset markets. Jon thank you very much. David coming up, oils resurgence. Has the rally gone too far too fast . Is a pullback inevitable after hitting 50 a barrel . Michael cohen joins us on the set, next. When bloomberg returns. Is bloomberg. Later today, janet yellen will speak at harvard. Will she give any clues about the rate hike . Jon welcome to bloomberg. Oil this morning retreating from its third weekly advance as canadian producers moved to resume operation. You saw the big headline, crude at 50 for the first time this year. Oil off the lows of this year, 85 rally since february. Joining us now is Michael Cohen of barclays. Prices, theil return of 50, is it here to stay . Given the amount of disruption we have come a we see very little Downside Risk in the next month or so. Clearly macro scenarios of exit thats brexit that could drag us lower, there is sentiment associated with rig count increasing again. The issue as we see it, at the end of the summer mother theres likely to be some kind of demand downturn. We dont think we are out of the woods yet. On an average basis for the remainder of the year. However, we think prices to move higher into the end of 2016 and into 2017 just because so much supply has been taken off the market. Are you seeing any whispers out there about the rig count coming back up . Mark the amount of bricks coming off the last couple of weeks has not been as bad this year as it was last month. Huge lag between when rigs come off when production comes up as well. Who knows what people will be looking at. It is a bit of a blunt instrument to be looking at the rig count. Is this the catharsis we needed in oil . We stabilize here for a while . In terms of the disruption, i think it is very likely that things could get worse and nigeria before they get any better. As long as these outages remain over the market and it is hard to see Downside Risk, hard for traders to say i will initiate a new short here, the issue is what is that price level to stimulate enough shale supply to offset the other changes on the demand side . 50 is not going to cut it david what would cut it . Mike prices need to be averaging between six to dollars next year by0 80 five dollars in 2020 85 in 2020. Of thewonder how much headwind all of this is. Mike inventories are at massively high levels, but in certain pockets. Asia,ses the fact that in we are in the middle of the range and in europe, we have huge refinery strikes. And thecomes to product peak season for those refined products, we are in the heat of it right now. Even though crude inventories are very high levels, refineries will run at a very high level and it is not necessarily the absolute level of inventories that matters, its how quickly they are coming off. David is iran up to Production Capacity . Or is there still some variable there . Mike in the next two months or so, we will see increased life from saudi arabia and from iran. Mythe last couple of months rent has been able to raise their output by 500,000 barrels a day. Months,e last couple of iran has been able to raise their output pied piper thousand barrels a day 500,000 barrels per day. Opec meeting next week. Give us the guide for next week. Mike the saudis have a new minister. He is speaking to the press. Discuss how the oil policy of saudi arabia meshes with the policy that has been set forth by the government. You still have to watch what the saudis say and you up to watch for any fireworks between saudi arabia and iran. Organization, the communique out of it might be that it is not as important the guidance is still listen to the saudis. What is the s p 500 telling us about the future of the equity market in the u. S. . Vonnie this is bloomberg. Time for battle of the charts. Mark barton versus abigail doolittle. An opportunity for doubledigit returns in the hong kong index. Rebounded 11 has since february. Turnover still at a low level, implying no momentum to push this market higher. Interest as art percentage of turnover . Short interest as a percentage of transactions right now at the highest level since 1998. , 2014, look at what the blue line did after those occasions. An average rebound of 19 . The hang seng is up 11 this february. The worstperforming stock market in the world in the last 12 months. Is it time to buy the hang seng percentage of short turnover of saying it isr time to buy the hang seng . Chart, mark. T i thought it was interesting to take a look at whether this historic bull run could be coming to an end. 500 the vix is added to his store close. Lows. Its historic around the great crash of 2008. The timing here is tough. That aows may suggest big selloff in the s p 500 could be ahead in the next 612 months. Mark, you know i love you, but if you look at your chart carefully, that blue line you have aen lot of lines going up when the Short Interest is down. Vonnie im afraid i have to go with mark. Jon im going with abigail doolittle. Very interesting chart. We separate fact from fiction. Is apple making a push into media or even thinking about it . More bloomberg is next. Futures going nowhere. Jon this is bloomberg. Global wall street was planning for a long weekend. Then, someone put a meeting in Janet Yellens diary and we are all put on hold. Down. 1 . If youre looking for price action, you will not find it in the fx market either. Down. 2 . Brent down by 1. 3 . We count you down to the market open in new york city. David we are just under 30 minutes away from the opening bell here in new york city. This is bloomberg. After you get past memorial day weekend, what are you looking forward to next week . Opec, ecb and jobs day. Im always interested in what mario draghi is going to say, so friday, what we get from the federal reserve, june or pushing june back even more and the market will get very sensitive to any small moves in the data. Jon jon we will have some vonnie we will have some kind of move next week. David the biggest job stay in history since the last one. Jon you are getting used to arent you . Vonnie you never do. Discussed aterns. He g7 di and the race for the white house. Eats up is the stock market price for all this new wants and everything that will happen in the next week . Relative to where we are with Interest Rates, the stock market is priced ok. At 17 times forward earnings, you would think it is expensive, but with zero Interest Rates and a low trajectory of rates Going Forward, probably riced about right. Priced about right. We had this monster rally in the last several days. Volatile, right . It is very hard to predict. Low volatility are typically followed by times of higher volatility. Jon we had u. S. Gdp data 30 minutes ago. Just below expectations of the margin what do you take away from the First Quarter . Katie it feels like deja vu. We went through this last year with a weak First Quarter. Firstear, a weak quarter, followed by a strong secondquarter, followed by weakness into the summer. It feels like more of the same. David it is not just where the numbers are, also where they are headed. Does First Quarter give you cause for concern . Been stuck in this trend channel for 30 years now. Theres no catalyst to get us out of it. We certainly do not see robust growth on the horizon. Trend channelpid growth. We are quickly pushed back down into it. There does not seem to be a catalyst for a change there. Vonnie will it be sandwiched between two soggy quarters this year . Katie weve had great housing data, super consumer data. The consumer is carrying a heavy load. They are doing their part. We see momentum coming into the second quarter, but it is more what happens after that. , it will berowth hard to reach the feds target growth rate of 2. 7 . Jon yellin in a conversation about her groundbreaking achievements at Harvard University. Wall street is excited about it. Is it best that she does not say much o at all today . Katie it is better. Theres been enough rhetoric the last week to give the market time to digest. Speechesncements and heard from various participants on the fomc have really there is a wide gap between the two sets of expectations. Look at the yield curve. We have less than 100 basis points between the two. Jon World Leaders in japan wrapped up their g7 meeting. Concerns over the Global Economy were a major topic. The group committed to use all policy talks to put that on a sustainable path debt on a sustainable path. For the first time in a long time, these leaders were very distracted by things going on at home. Abe and thebrexit, sales tax increase, they are all incredibly distracted. Katie it is certainly difficult. When all else fails, focus on what is happening at home. That is exactly what needs to be done. They talk about global of them areand many facing a lack of cooperation in their own country between fiscal and monetary authority. I do think more cooperation is needed. It needs to be the right kind of cooperation. The policies put into place need not just a coordinated, but effective. The negative Interest Rate , the jurysapan still out on the efficacy of that particular policy and now, theyre talking about raising the sales. We saw what happened the last time that policy was put into place. You look at those g7 leaders, for most of them, they do not have direct control over monetary policy. They all get together and say we have to use available measures. The closest thing we see in fiscal stimulus is japan saying lets not have a tax rate. It gets them moving on fiscal, if that is what we need. Katie you know these authorities do not move outside of a crisis. Europegative data out of or japan will force more cooperation. It needs to be effective. Certain policy tools are available, but may be ineffective in this environment. ,e mentioned the Interest Rate but it is not as effective as you might think. Isid the Options Market beginning to show some signs of concern about the political future of this country. Tied to the s p are starting to jump around the two partys conventions to ies conventions. How important to the market is the president ial race . Katie it will impact Consumer Sentiment, market sentiment. Market sentiment is quite fragile now. We continue to see outflows from equities funds. People are selling risk here despite the fact that the market is going up. In a normal election cycle, the market treads water during the summer and you have this relief rally regardless of who gets elected. Election, it is less clear what happens and this kind outcomeson from of the are much more uncertain, you will see a lot more uncertainty reflected in the volatility and Options Markets. This time, there is a higher tail risk because it is less predictable. Katie absolutely. The policy initiatives are fluid. There is a bit of pivoting going on in terms of positioning. Very,tential outcomes are very uncertain now. Will base that in their expectations. Vonnie are you changing anything allocation wise . Katie we havent changed anything. The last thing we did from a technical perspective, we took down our highyield exposure of it. Just technology weve had a bounce off a very low bottom in february. Weve hadknowledging a bounce off a very low bottom in february. Some shareholders make money by doing nothing, this is e for shareholders of astrazenecas rival drug the not get fda approval. Shares of terror acts shares terex downgraded to a hold. Already well below that price target of 21. , they missedker first order estimates, badly guided the fullyear well below consensus. The ceo will be retired by the end of the month. Those are some stocks moving in the premarket. Obama is thedent first sitting president to visit hiroshima. He placed a wreath in the peace park in hiroshima where the u. S. Dropped the first atomic bomb in 1945. He expressed remorse for those killed in the war. Werekyo, Passengers Evacuated after an engine fire on a Korean Airlines jet. 18 people were injured. Hollande francois spoke after police in paris battled protesters opposed to reforms. He said unions cannot dictate the law. Workers at french refineries walked out earlier this week, creating a nationwide shortage of gasoline. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. David coming up, one stock on the move ahead of the open in new york is valeant. The company fended off a recent takeover offer. More details next on bloomberg. Jon welcome to bloomberg. 15 minutes away from the open. Features going nowhere. Futures going nowhere. Wall street awaits Janet Yellens conversation there better be something. A bit of a turn down in the last 20 minutes or so. Near session lows at the moment. 10 year yield going nowhere. , another turn lower in the last 10 minutes or so. 40. 79. 48. 79. Vonnie Valeant Pharmaceuticals up 8 . The Company Stock has lost 90 of its value in the last year. 19 of its value in the last year. There is a report that they turned down a takeover bid by tpg earlier this spring according to the wall street journal. What do we know about this offer and might it return . Devin were thinking probably march or april after that stock took a nosedive after the company lowered its fullyear guidance. The companyt was that rejected the offer and the board rejected the offer because the stock is down so much. Probably has some vision for what the company can do. They want him to execute on that strategy first. David being down and not selling because of that is not cause for analysis does this indicate that in fact other people might be interested in buying them . N once a firm like tpg shows interest, that signals blood in the water. I did get an interesting email last night from a valeant shareholder who said when tpg wants to deal, it means 20 plus ive equity firms would love to do the deal. Valeant just became the prettiest girl in high school. Vonnie of course, they want to sell was it bill ackman that said that . Devin it is something you dont want to miss him investment opportunities, you have to look. When one takes a look at a company, it does signal an opportunity for other financial sponsors to take a look. Jon we can assume theres interest based on some of the reporting. Will there be interest from the other side . Offer would have to be hostile because of this issue we were talking about or. Talking about before. These Board Members probably have a vision for the company they want to pursue first. Equity bids from private firms, maybe we saw that back in the early 2000s. This analyst is saying it is probably not the case that serious bids will come in. Serious bids against bill ackman could be an adventure. Vonnie are there assets becoming fewer and fewer for avid equity to go after . Devin there is record dry powder in equity funds. Theyve agreed with partners to put that money to work in a record a lot of time and return value in profits to their partners. A populare has been area since the Affordable Care act came into effect. Health care technology, drugmakers, the whole gamut. Vonnie any public response from highprofile shareholders . Ask equitytrying to firms what their appetite for interest is. Jon coming up, Oil Production and whether high prices are here to stay. Bti wti Trading Software in todays session. Jon check out the commodity market. Oil trimming its third weekly advance. Oil has surged 85 since february lows climbing above 50 a barrel yesterday. Katie nixon is still with us. A quick question on what we are seeing. The debate being generated over the last week or so is whether the decline in inventories has made headway of the last couple of weeks. Andrew as far as the u. S. Is concerned, you have the canadian display supply disruption. , we are expected to ramp down on the inventory front over the course of this year, it is possible that we end up higher. We saw another decline. It will continue to become a show me market where the market continues to look for more inventory declines. David what about the demand side . Frome seeing demand pickup places like india and other emerging markets . Andrew of course. Gasoline demand exceptionally strong this year. Domestic production has fallen off in china. That is juxtaposed against the burgeoning u. S. Gasoline consumption as well come offset by some other weaker places in europe. Overall demand is strong, up about 1. 22 Million Barrels per day. They are looking for a six handled by the end of the year. What are you looking at . We dont provide price forecasts, but the market expectation is for things to balance here in the second half of the year. On, youcontinues to go will see saudi production ramp summer cooly their down and demand. The market may not be anticipating the fact that they will keep reduction higher. That will come at the same time asthe production slows canadian barrels come back online and maybe some nigerian supply comes back online and u. S. Exports go up and production balances out, you where we getr in to by the end of this year. If we exit 2016 at six dollars, you could see a commensurate pick up in u. S. Completion activity in 2017. Exit 2016 at 60. David is that correlation breaking down . Katie it has broken down recently, but there should be a positive correlation to the we see oil as a , wetion of increased demand sit here in the beginning of a long weekend, the beginning of the driving season, so we expect to see robust demand. Supply will come back on the market. Shale producers are thinking about ramping up production now that they are looking at 50 in windshields, you will see increased supply. We have decent demand as a function of an economy that is growing, not quickly, but growing. You. Andrew cosgrove, thank coming up, the market open is four minutes w away. Futures pretty much dead flat. Soccer. E, commodities thats commodities soccer. Commodities, softer. On this is bloomberg i am Jonathan Ferro. Futures a stable. Of about one point. S p 500 futures going nowhere. Heading for a second week of gains. A thirdeading for straight week of gains as the opening bell rings in new york. Such of the boards quickly. At 1. 152. Ollar stock your any unstable. Wti, if we close at this level, close to the one day the biggest oneday drop since may it is friday in new york city. Lets cross over to abigail doolittle. Abigail we are looking at a basically flat, unchanged open for you as averages just slightly hilar slightly higher. Janet yellen speaking at around 1 15 today. We will wait to see trading ahead of this player oil down a second day in a row, despite hitting above 50 a barrel briefly yesterday. This is among pressure from global oil makers, including royal dutch shell. As it of gamestop falling fell 30 . Gamestop has something six percent gains, so investors may not be surprised by these results. Rejectednd valeant a combined bid earlier this spring. Despite the stock was down 90 from its record peak. Some still see value in the shares of valeant. David we saw the latest revision of the First Quarter of gdp in the u. S. The u. S. Economy grew up slightly faster than thought. From a. Estimate of. 5 10. 8 . Bloomberg now is economist yearly not and katie nixon is still with us. If you are janet yellen and looking at these gdp numbers, does is have an event on what you think that should do . It looks positive, but not significant enough to alter the outlook for the economy this year or for the fed to change their excitations to change monetary policy. Everybodys eyes are on the secondquarter growth, which should be rebound and hopefully will. There,here is nothing in if they were inclined to move in june, to stop them . These revisions are minor. We saw some of the revisions in mining and housing, which is positive but not enough to alter their views. Continue with the roleplaying. Janet not have secondquarter numbers before you make a decision in june. What will you look at if not gdp numbers . Goodey will have a understanding of how growth is evolving in the second quarter. Numbers for consumer spending. Moreweek, there will be reports. They will have a good idea of what is going on. We have news from abroad coming, such as exit brexit. They will probably err on the side of caution. Jon you look at the current implied probability of futures on how the fed will move. On this, we go from 30 in june to 52. 4 around july. For them to get away, they need in the 50s. With they do that . I do not think they can do that on a coin toss. They cannot afford to upset the markets. What will happen is they will create the environment they are trying to avoid by creating more uncertainty, creating an extended rally in the dollar. Suggesting to the market they are not listening to the market. I think that is a highrisk move, if they decide to move in july. Raise in december. There was chaos in january. In the market came back over time. If you last in december and came back, it would look like then. So the market has rebounded. Katie but he was left in december and came back in march. We lived through a volatile time. If you think about one of the driving forces not just january, but think back last summer dr. Volatility really started increasing. China devaluing. We have seen a devaluation, a measured and orderly one, the last couple of weeks, because the ramp up in the dollar has not been a store near. If the fed gives the market the sense of they will go, you will see markets really get volatile. You will create the conditions yellen wants to avoid. David does that mean that the fed has created a frankenstein, that they cannot raise rates until something dramatic happens in the economy upswing . I respect fully disagree. I think they will go if they feel like the fundamentals are there for them to go. Persuade the to markets. They do not want the markets to totally disagree with them. They want to prepare the markets for the move. That is what they have been doing. We have heard from virtually anybody everybody on the fed. Katie abilities have increased. The one caveat is that if we do get strong consumer summers the next couple of weeks. If we have Wage Inflation. That is what janet yellen will see if Wage Inflation will continue to trend upward to a point which may seem uncomfortable for her. If we see those moves, the feds is moving for the right reason. Vonnie so work went up at the market is not playing the feds game. The 10 year yield is lower now. You can argue the fed is having a limited impact. Couplestion is we had a of this runs at this now. Do Global Markets get better at receiving a rate increase . Yelena i think we are more prepared than at this time. Because of better communication right now. And because people are reacting to the data more than they were before. So we are watching each and every report on employment and consumption. Everything. I think we are better prepared. And the emerging markets as well. To question further, is there a Downside Risk of not raising rates . We had the insurance and of shepherdson of pantheon saying saying there is a Downside Risk. He had a graph to show he was talking about here. He said as you go down below zero into negative Interest Rates, actually, the effect on Interest Rates may be negative and set a positive. Centralone because banks are talking down the economy and discouraging people, and it is encouraging misallocation of capital. How does that strike you . Yelena i totally agree. Is not investing in the economy around a lot of uncertainty this year and overall. This is really hurting the economy. Is a critical sector. Movements in Business Investments correlate well with overall growth in the economy. If businesses stopped investing and hiring, what happens . We all slow spending and growth slows down. This morning, we got a report on which was aofits, little encouraging. We did not see and other decline. So maybe at the beginning of a start of a new trend. And we will get some corporate allows, which will businesses to invest. Theie is it possible of ecb does something that will impact the u. S. . So. Na i do not think they will continue on what they are doing. The expedition is for them to easing. Talk about our view of the fed is that they , and they will probably post on the rate hike from june into july. Jon what strikes me is we were having this conversation a month ago, i would have brought up about 4 or 5 . What has really changed . Was there wall street or the city of london, communication from the fed has been confusing. If you get a move from 4 to 30 and 50 in two weeks, can occasion has gone wrong somewhere. Katie i agree. We have gotten some positive data. You mentioned consumer data, which has been surprisingly strong. Theuld just oppose with global goods. This is not an economy growing in the traditional sense. We have very low capital spending. It is directly tied to spending. See a rebound, not just flat is the new up, but a rebound in the numbers, you cannot justify a rate hike. I hope janet yellen does not say anything today. David just to tie all of this haves an investor, if you all of this middling data a little up and a little down, nothing breaks out what does it time you about investing in this environment . Prepare for lower returns. I do not think it means negative investors need to adjust to this new normal of very low gdp growth, very low inflation, very low inflation data even if the fed raises rates, the trajectory will be incredibly low over a number of years. That means nowhere return. That is a wakeup call for a lot of investors. Vonnie katie nixon, Northern Trust management, thank you for joining us. , thankena shulyatyeva you for joining us. And janet yellen will speak at harvard at 1 00 p. M. Eastern today. We will cover the event live here on bloomberg television. Could apple looking to buy a Media Company . Does that make sense for apple that is next on bloomberg. Vid this is bloomberg i am david westin. Be sure to tune in on janet yellen speech today at 1 00. Watchingoure bloomberg. I am a vonnie quinn. The u. S. Economy grew faster in the First Quarter than estimated. Gdp grew 8 10 of 1 . One half of 1 . The increase reflects less damage from trade and inventories. Household spending rose more than estimated. Technologyr in the business. Fisher Thermo Fisher has agreed to buy fbi. And the condo frenzy is coming to to buy fei. The condo frenzy is coming to an end in miami. His estimated one third of the units in new highrises are back on the market. That is the latest Bloomberg Business flash. Lets cross over to abigail doolittle, who has a few stock movers for us. Lyftil we have shares of trading nicely. Rival drugs for gastro conditions were not approved by the fda. Sa is up but down 1 10 of 1 on top of yesterdays 39 plunge. That was triggered by the news of the decision not to test a drug of the two companies are developing together. This spurred bmo capital to downgrade shares to a market perform and take its price target down 50 . David could appleby shopping for a big media deal . It was said to be making a bid for time warner according to the financial times. Joining us is Andrew Hargreaves portland, oregon. And we have cory johnson. Lets start with you, andrew. We saw this report from the cocoa financial times, and it came from eddy cue of apple. How seriously do take this initiative . Andrew not seriously. It sounded like a oneoff comment in a single meeting that is not go far. If you look at apple and the scale of the businesses they would be looking at, i would think if they would look into the video, they would look at platform rather than content. David that is what i wanted to ask you about. Not been a content company, but a platform want. This would be a major change in strategy. Would be. Part of the reason i do not take it seriously is that they would look for a business they could globalnfinitely on a basis. Producing content is not that kind of business. Vonnie i was going to bring in cory and ask they may not be wanting the tech the time warner cable, but why not get the asset . Cory if you look across the competitive landscape, you have amazon prime, netflix, apple, where they are all delivering video content online. Apple is the only one not doing certain doing anything syriza on the content side. Amazon expects to spend 2. 5 billion on content this year. Netflix will do twice that. I saw this and thought it was crazy. If you told me apple would spend 1 billion in the chinese uber, int competitor to would say that is crazy, but they did that. It is interesting to see apple thinking about acquiring content. They have something unique about their service. You see them doing deals like this and then music in a strip you they had the drake record where people does what they had it before anyone else. There are wild gardens appearing in this world of content. Person who abuse surprised is bob iger, who sits on the apple board. Steve jobs was a major shareholder in disney. If this does not make sense, is there another content deal that may make more sense for apple . Andrew if you want to be in the video business, netflix. You have the global leader, the business that is already scaled internationally. You have a company that has a broad contentbased to sell that you could accelerate. In have an adjustable market that business that is significantly larger than any you would get with individual content. Maybe not you see netflix taking the bike . Is apple doing things apple is not good at . Apple once the revenue growth. Vonnie didnt it learn lessons from music, from its radio . Cory they have followed in the face of music. They owned the Music Industry and let it slip away. I do not understand what the ambitions are there. Talk about other forms of revenue coming from regular content consumption, this starts to make sense. Just strategically, the question is is this a way of selling more iphones or is this a way of making money in the content business . Latter, why can apple make more money than the people who own it now . Are do not know that apple is cost sensitive, but netflix is spreading at six times its growth rate. Around 5. 9 now, which is an expensive company that is earning little. But if the ambition is to have content, having Something Like hbo would make sense. Whether they want to jumpstart something, it is not apples style. There acquisitions tend to be small. They want to build. David you follow apple. Is there enough pressure on this stock that tim cook will feel a need to do something . Even if it is not a content deal, some major deal to move forward, or are they content to expand their iphone business . Isrew i think there pressure. You always want to grow. They have tried to talk a lot in the last few quarters of them becoming a Services Company. You guys allude to it here you are not really a Services Company unless you have Services People actually want outside of the iphone. They do not have that now. Along those lines, if you are looking around the landscape, you want to be a Services Company, video is massive when it comes to that. There is logic to making a bigger acquisition there. Vonnie all right, thanks, Andrew Hargraves from portland, oregon. Cory johnson. And we want to point out apple has 42 buys. Coming up, it is Bloomberg Markets with mark barton today. What do you have . Director ofs. Derivatives will be talking at the gdp number. About the second half of the year. The year and target is time 1. 75 k looking forward to talking to elaine stokes, who manages the bond fund paid it has around 15. 4 billion under assets. U. S. Rateot see a hike on to know bandera. That is a big interview coming up, as is project minute bird, a Cardiff University professor of economics. Treasurysd the u. K. Model of forecasting paid in turn, a group of economists rubbished his model of forecasting. What an interesting conversation that will be in the 11 00 a. M. Hour. Vonnie thanks. Jon neither can the whole of austria. Reason many the of you are staying on the Trading Floor later than you otherwise would. P. M. Age of that at 1 00 new york time. Janet yellen speaking at harvard today. More bloomberg , coming up next. A long weekend coming up. U. S. Markets closed monday for memorial day. Opec meets thursday. Ecb Rate Decision the same day. Then the final u. S. Jobs data report to look forward to ahead of next months fomc decision. I cannot believe we are waiting for fed chair janet yellen, and she may not even say anything at all. David we cannot go to the beach because we are waiting for janet yellen. Vonnie you can always listen to bloomberg tv on your headphones. David are lying job stay friday. Stay friday. Jon the ecb and its present always something to look forward to. Thank you very much. Bloomberg markets is next. Betty it is 10 00 a. M. In new york. Mark live from london, i am mark barton. This is bloomberg market on bluebird television. On bloomberg television. We will take you from new york to london to boston. Here is what we watching this morning. Llen. Street waits for ye fed chair speaks at Harvard University. What to listen for as the june fed meeting approaches. We will talk to elaine stokes about why she says the fed will not raise rates before november. Soar after potential financing from citigroup. Couldy the scandal threaten the peertopeer market in london just as it is getting ready to go mainstream. About 30 minutes into the trading day