Transcripts For BLOOMBERG Bloomberg Go 20160722

Markets. Through lets whip some of these Asset Classes. A soft recession to europe when i got an early this morning. It has come back a bit further now. Market, shining bright red is sterling. About toright now, are break it. The flask pmis, ugly. Given team is quite a number cents 2009. Down for itk that we havent seen these number sense 2009. Well break it down for you in a minute. About threeown basis point. We will guide you to the markets to the rest of the hour. The worlds go around for indepth coverage over our urtire story all of o stories. Nejra is in london with the havoc wreaked on the u. K. Economy. We are joined in the public and National Convention the republican National Convention in cleveland. Like asurface it looked pretty stellar quarter. Sales were about 33 billion. Theis the stock down on report . Some expectations, they did beat expectations. Wasand gas was weak, but i worried about it being weaker. It is more about expectations and actual results. Alex where did ge fall flat . From ary, it went Financing Company to an industrial company. Karen they have some headwinds they are facing. Their power business is very second half loaded. The growth disappointed people. Forcompany held to the 2 the year. And it better than a 5 organic growth in the second half. That appears to be an uphill battle, in my opinion. They did not cut numbers. They beat numbers, but did not raise them. Alex lots of companies would kill for organic growth. Karen, thank you very much. Ge shares are now flat. For some movement here, that pmi was unbelievable. Unbelievable. The first post brexit read in terms of pmi. Lets go over to nejra. Ajra market called it dramatic duration deterioration in the weeks following brexit. You can see it here, the composite pmii dropping to a low. It was worse than expected. No surprise at all that we have seen sterling sliding. On sterling. 32 was this just a temporary post brexit blip . Or, will the signs of weakness persist . The economy is on track to contract this quarter. They are predicting a mild recession this year. Lasthan the mpc over the couple of weeks is split was sterling to emerge between those that want to act right away and those that are waiting. Is this the data gluing these guys together . Nejra it could be. Most of them are saying that action is required at the next meeting. Investors are pricing and 80 chance of the bank of england is going to cut on august 4. 100, despite the initial loss it has been reconvening. Could this be of an indication of the market perhaps expecting some more stimulus . One thing, there was a bright f newin markets, an index o manufacturing export rose in the most in two years. Exporters, those global facing countries perhaps benefiting. You, fromthank london. The pound is just breaking through against the dollar. Mr. Carneydraghi and have been waiting for that data. Jonathan it doesnt look good. Donald trump officially accepted the republican nomination for president. He was emphatic in saying the country needs to change direction and that he is the person to do it. I will work with, and a ppoint, the best to get the job properly done. [applause] mr. Trump in this race for the white house, iam the loaw and order candidate. David we are joined now by our it isgton bureau chief, lonesome once everything is away. Mr. Trump put away any doubts about whether he was going to change his tone into the general. Is that what you saw . He definitely did not change his tone. He doubled down on his tone. I think the quote was people are thinking that symbolizes what he was trying to say is he said this is Hillary Clintons legacy death, destruction, weakness and terrorism. There is a lot of things we have seen you to describe the speech. Some even called the dystopian, in some respects with the vision of America Donald trump was painting was a dark one. This was not morning in america, this was not ronald reagan. This is a man who is selling that he himself is the only take us away from in america actually in decline and restore it to greatness. That is a message he put out tonight. There were times he thought the crowd was and his hand. It was a long, lengthy wait to get his message across. I dont think people think he hit it out of the park. But it also was not a complete disaster. I readit was long, somewhere 75 minutes that is the longest since 1972. Nominateds the first it the station actually called his opponent a liar. That sets the tone of the campaign. Do we expect more of this in the fall . Brutal,his is set up a grueling match between them. We always expect it is. There was some thought that donald trump could put together an optimistic on the more sunnier there were moments of levity but they were pretty few and far between. What we are setting up now is they will focus their attack on her. That will be 50 of this campaign, bringing her down. Whether it is talking about emails, or benghazi, that will be a huge feature. Not only from donald trump, but the people campaigning with him as well. David it struck me that this is not a monolith. We had eater teal from select come in and say he is a different republican these days. Every american has a unique identity. I am proud to be gay. I am proud to be a republican. Most of all, i am proud to be an american. David he had a particular role here, what was it . Is addressing the culture war inside the Republican Party and trying to break down the social conservatism. Saint fighting much mentioned her bathrooms or lgbt is not what matters saying fighting about bathrooms or lgbt is not what matters. That is what the party needs to focus on, lets move beyond this. Donald trump also used the words lgbtq, that is the first time i ever heard a republican nominee for president use that phrase. That was he did want to bring he a bigger tent, just not t biggest we have seen. It was a dark message overall. David there you have it, joining us from cleveland. Now we take a look at some stocks moving. Alex we start off with vodafone, they did see growth in germany and italy as well as emerging markets. We did some comments on brexit, a pragmaticnd solution. There were questioned as to whether or not vodafone could keep its headquarters in the u. K. It was an interesting quarter, were missing estimates. Across the board, they were down especially in the asiapacific. Starbucks commented on the call that terrorism attacks had created Consumer Anxiety and a profound weakening in Consumer Confidence in the u. S. It did not look very good on the call. In of the story. Their profit is down 82 , trying scandale the food taint that is down that 40 since october. Interestingly enough, samestore sales drop for three straight quarters. This is supposed to be one of the big growth stocks. Three big guys to watch today. Only so many burritos one man can eat. Up, a rallyming interrupted, stocks retreat from a record high. Up next, the chief investment same thet will be here s p will move another 6 by the year end. Alex it has been one month since the vote for brexit. We are seeing the effect on markets. Christine lagarde spoke about the impact to the china form in beijing. Toi was hoping to come today for the first time in six years revise upwards the forecast for growth. I would have done that, because china, japan, the euro area, were doing better than what we had expected. Unitedortunately, the kingdom decided to go for brexit. To revise downward. Alex that was the impact on the Global Economy. We want to take a look across Asset Classes over the last four weeks. You can see this is what happened. It bottom quickly, then pushed higher. More positivea story in the ftse 100. Sawuse of its exposure, you quite a rally after that selloff from brexit. It really popped to the highest levels in the year. In the currency markets it has been a different story. This is the sterling dollar. We saw that huge selloff. We were a touch higher but have not recouped those losses. Has been a story of volatility in particular the yen. Remember when it moved to 99 . That was huge and i did that vote. What it into u. S. Equities take a look. An unbelievable record day. It was 1. 3 and we bounced off a little bit since then. That had people talking about if we could see 1 on the 10 year yield. P hit a record day, after day. It has been an unbelievable four weeks. Jonathan it is that classic risk off story. It gets more and more isolated and is capturing the pain more acutely in sterling. That is what we are looking at the moment. David absolutely. The fx reactants are violently, and on others did. Jonathan your have the you have the bounce backs. John, you have the repricing denting start to step back and the pain gets more isolated. What do you make . John we expected that we would get a rebound. On the very day the markets it bottom without the markets would rebound sometime by the middle of the week. They did. It is primarily something way city market come back, it is usually Economic Data. Been veryhas positive for some realization after a big jolt that perhaps brexit is worse for the u. K. Than it is for the eu. Most certainly, it is much for the u. K. Than it is for the United States. The other thought is you have theresa may now in the picture. There is leadership earlier than anyone expected. Theould think that market is responding as it should have. Overreaction,an which is not uncommon in the digital age. A recoverywe are in process with a little bit of testing in the market. This morning, futures were a little lower. Nothing dramatic so far. Me that therikes market reacted based on economists predictions. We didnt have any data. Now were starting to see some data. Data, whathe mining do you make of those . John with the pmi, that can be very volatile. Sentiment or an early read. Of july. K. , the week u. K. I was in the speaking with people, they were concerned. If you are importing goods into the u. K. , your prices of those imported goods had risen 10 . You could not pass that onto your clients. That may ease as we go forward. These are big economies. In working together for years. There is too much to be lost. Alex you are talking a lot the ecoside of it. Then there is the earning side as well. Many analysts were looking for the First Quarter. It seemed like the dollar and oil were reversing. What is your take on earnings . You have high estimates. John we do. Look at themo because of the resurgence of the dollar. If theres anything that is an thel on the dashboard, in nearterm the dollar has strengthened significantly. On the dxy, here today brexit it was off as deep at about 6 . Now it is up around 1. 5 . We are off about 2 from the 2015 high on the dollar. It could be a problem. For the Second Quarter we could continue to see pretty good results relativeto what analysts had expected. Is what you think is upside of the year . John for the dollar prebrexit, i dont think we will get back to that. We may see the dollar moderate again. It normally strengthens, then fed through the the gauntlet in the ring. We think the fed will raise in december to remind the markets that normalization is on. Alex to prove they can. Animal spiritsep in check. If they dont, the market might get hysterical. Jonathan thank you very much. Alex earnings to credit, we will talk about the credit risk right now with the ceo of bankunited. David this is bloomberg. As Property Lending accelerates regulators ascending moments about the growing risk. Joining us now as chief executive of bankunited which has 100 outlets in florida and new york. Welcome back to the program. They issued a warning for commercial real estate that expanded. Theyre worried they are taking too many risks. What we are fully aware of the regulators are saying. They are public and open about the attitude towards the concentration levels. Our markets flow in New York Center around new york city. We are not seeing any evidence of deterioration in that area. But, regulators of the much broader view. Looking at the whole country. Piercing a concentration on the books. That is what they are reacting to. David they are seeing a rapid expansion of credit. You are also seeing that and your bank as well. Are you concerned about the credit cycle . We are long into the credit cycle . John that is the subject of great debate. First of all, the credit cycle is and probably as long as we take. The first couple of years of this i dont think count. Secondly, banking regulation is a lot stiffer than it was post crisis. Are being more careful than they were. There was a good argument to be made for the fact that the credit cycle may be further out than most people think. Maybe, weaker than in the past. Our experience we havent seen evidence of it yet. David you are slowing down the pace at which you are growing. John remember remember, loans grew 30 from last year. This bank was the child of an fdic failure. Book verybuoild a loan rapidly. We can afford to slow down now because were grown into our deposit base. We have said that the regulators were so concerned about the concentration we take other banks will respond to this. Space,ercial real estate that gives us an opportunity to have a better lending environment for ourselves later in the year. There is always the hope that we hang on by our fingernails. David great, thanks for a much. It is always good to see you. That is the chairman and ceo of bank united. Jonathan coming up, politics and the economy. We will layout both candidates fiscal policies and their potential impact on the economy. We wrap up another week of trading. . C sv alex this is bloomberg. Take a look at pandora, down almost 10 in premarket. I didnt find it sent to 2016 revenue of active listeners falling by over one million. It may not even make a profit in the Third Quarter. Moving to pay pal, that company boosting revenue. But, it was below consensus. That is part of the reason youre seeing the stock off. Also a downgraded wells fargo. Wrapping up with advanced micro devices. That is a different story. The sales growth in two years will rise 18 with videogame players out setting offsetting those in the pc markets. It feels like a great friday. Lets address some of these markets. It has been a slow grind higher in stocks. In the ftse, it is the fifth straight week of gains potentially despite the brexit fallout. Ybe, because of the brexit fallout. Sterling is shining red hot. One full percentage point. That is on the back of some pretty ugly pmi data. In the commodity market, wt down a 10th. Wti is down by still negative around 50 basis point. The fiveyear treasury is up three basis point. Some decent market moves around the week. Donald trump says no one knows the system better than he does. The only one iis can fix it. He accepted the republican nomination for president. He warned of dangerous immigrants at home and overseas. He vowed to go after the islamic state. Trump he must work with all of our allies to stamp out islamic terrorism and doing it now, doing it quickly. Were going to win, and fast. Trump also blasted his opponent saying Hillary Clintons legacys death, terrorism, and weakness. Heris poised to unveil choice of running mate as soon as today. The announcement could be made by a text message to supporters. One of the leading contenders is senator tim kaine of virginia. He is said to have the era former president bill clinton. British panel urges allcials to look into discussions into the withdrawal of the european union. Toawsuit has been filed force Prime Minister theresa may to consult parliament for triggering the start of brexit talks. Global news powered by more than 2600 journalists in 120 countries. Thank you so much. It is the end of an era at fox resigned asr ailes the head of the fox news channel. Youll be succeeded by Rupert Murdoch for the time being. Any change of leadership will be of concern to investors. The companys Cable Networks led by their news network accounted for as much as half of 21st century foxs revenues last year. Alex, this is a time to move beyond why do at the fx are effects are. People underestimate how important fox news has become. Generator. Profit he built a remarkable entity. It was a real brand that engaged deeply with people. You can agree or disagree with it, but it brought in cash all the time. Alex 25 of cash flow for fox. That is an incredible number. The highlights on that point was soat roger ailes influential in a condition to republican politics. That didntmp, work. To me, that encompasses what is happening with these media companies. You have there, facebook, internet advertising that is taken center stage over traditional tv. Is a terribly important point. You hear about disney with the not growing as fast as it was viacom is struggling. All of the basic Cable Companies have gotten so much money are having to face the to universe, the netflix universe, the amazon universe. It will be a challenge regardless. Jonathan i didnt realize some of the talent contracts have those details in the contracts. That underlines the importance of him. Also, if Rupert Murdoch comes in and heads up david he says hes already having meetings. Peopleack to your point, would ask that when i was running abc news. We had a firm policy we would never give a key man provision. Now the must worry about key talent. They can negotiate a better deal. Jonathan Rupert Murdoch, the last time he had to deal with a back in the was United Kingdom which was the phone hacking scandal. At that point, before going after him. This is a big turnaround that he must solve the issues himself a stuff wonder what this means to roger ailes. Before he launched fox news he was a Media Consultant to president , necks in, and bush. I wonder what this means for his reagan,dent nixon, and bush. I wonder what this means for his relationships with the Republican Party. David he is really good at this. I wouldnt be surprised to see donald trump take up the phone and say you can help me. Alex it doesnt solve foxs other problem which is that there audience skews much older. You could make the argument the Digital Advertising is way behind their peers. David in the future it may make that transition harder. The median age of the fox news viewer is well over 60 years of age. Those dont tend to be the people on twitter a lot. That makes it a real business challenge. That is really important to the company overall. The republican National Convention has wrapped, and donald trump has accepted the nomination. Are to enforce all trade violations against any country that cheats. [applause] trump this include stopping chinas outrageous theft of intellectual property along with their illegal product dumping and devastating currency manipulation. Our horrible trade agreement with china, and many others, will be totally be negotiated. David now, investors one of the takeaways from this . He is head of Public Policy at barclays. First of all, this is extraordinary, the targeting of china. Im not sure which trade agreements he is referring to other than wto. I dont think we have a lot of bilateral trade agreements with china. How are investors reacting to a Trump Presidency . It depends on which trump we get. If he goes forward on this by slapping things on china and japan investors could be worried. But others say he is saying this right now as campaign rhetoric. Plus, congress will hold him back. They will not allow him to do certain things like this. You feel like certain businesses are taking steps to deal with perhaps the presidency . Are they taking more steps to curb any regulation may come down the road . Client see this as a huge step forward. They dont know where the u. S. Is going to go. There is a lot of political uncertainty. Theyre not sure how congress is going to go. One thing to clarify, if it is onmp, he can move forward currency manipulation without congress for stuff is something investors are worried about. The media, across the platforms, globally going after trump. That is just how it is. Shouldts, and we acknowledge that. And markets, that bias doesnt exist. I want you to explain that for us. We will do a survey asking who do you think will win the election. Think clinton do will win the election for the one i ask was better for the trump is55 think better for the markets most of that is due to the fact that many people say this is campaign rhetoric. When he gets in that hell be much more of an evolved candidate. We are seeing that where he is changing some policies and morphing into a more friendly candidate. David how much of that is because they really know what trump will do unlike what donald trump will do for the country as opposed to just really dont like what has happened and think hillary will continue. Of a thirds the idea term with obama theyre linking with clinton. A lot of it is a really dislike clinton quite a bit. Surprising, there was such hatred towards her. The phrase lock her up happen over and over thought the convention. That is something we see a lot in the Republican Party. Jonathan is there a fear she is been taken further to the left . Against that jay to run sanders, zeller Market Participants are thinking more muchthis will be a very more left wing candidate from the Democratic Party that we have seen in a long time . Absolutely. Theres a fear that if she pushes far on financial for issues Like Health Care or tax policy and on trade and globalization who is for trade policy Going Forward right now . She couldsion is who pick for Vice President. Alex in terms of a business leader, when you ask them why they like trump we never get specific answers for that we tend to get things like we just like the guy. There is a distinction between actual policy that trump can put forward then investors can react to versus we just like him. Shawn dont ever underestimate likability. That is very important in this. If you do the sample size, if it is just ceos, it is not the rest of america. One thing that strikes me, people in the Business Community are really adverse to a third term for president obama. If you look at the numbers, where assets are and employment is, i dont see where business is way worse off under obama. How do you account for that . Shawn i think there is a major disconnect on them. Some of the communication, the outreach to the Business Community has been somewhat many business leaders. They dont feel like to have a direct link to the government. On health care, and financial uporm, the lack of follow legislation to clean up the problems that led to that ceiling feeling and perception. David thank you very much, barclays head of Public Policy research. Alex from one politic to another were talking but a brexit fallout. The u. K. Is shrinking at the fastest pace in seven years and hitting the british pound hard. Alex this is bloomberg. Coming up, black rocks chief investment strategist will join us and walk us of the u. S. Open. Here is your Bloomberg Business flash. General electric posted secondquarter profits that Beat Estimates. Wants to focus on equipment manufacturing. The company is betting on businesses such as energy and aviation. Is also building a software unit. Goldman sachs is about to start raising money for its first private equity funds since the financial crisis. Goldman wants to raise as much as a billion dollars. The firm of contributing relatively small amount of the capital because of the new risk taking restriction by banks. Stop sellingll cars implicated in the emissions scandal. A News Agency Says the ban covers 34 markets. They inform dealers yesterday. Many models are among the top imported cars and south korea. That is your Bloomberg Business flash. This is bloomberg. Taylor, thank you. To the fx market we go. The pound is down and we trade , this after some data out of the nedim kingdom. Some pmis showing contraction across the board. One of the weakest reading to the financial fashion sense the weakestl crisis readings since the financial crisis. They will be doing something. Was that your takeaway . Should be think we surprised about it. People expect the different competences after brexit. The bank of england has been conscious in terms how much they want to do. I think those numbers are a strong signal that there will have to do something. Look at what is priced into the markets. Markets are already pricing and a cut and a half. It shouldnt come as a surprise. Last coupleer the of weeks we have seen fragment the Monetary Policy. Some policymakers, very rare to go out there and write op ads. Ce is whatthat patien is needed. Vassili the question is how much do you want . There comes a point where currency weakness becomes a problem. There comes a point where currency weakness becomes nearterm pushes for inflation. That will complicate the task. Theyre are trying to revive growth but dont want to be stuck in this situation where they have a problem on both sides. Alex the other move in the currency market we saw really had to do with the u. S. Dollar. Take a look at my bloomberg here. This is the dxy index. It wanted to highlight what happened in the last few days. It made a leap over that 200 day. Markets aree waiting for a fed rate hike. What do you see . Vassili long dollar trading seems to be back on. Hasnt been working in 2016. Recent white is coming back if the bank of japan expected next week. Ecb the fed might not commit to anything in particular. Think that is what is supporting the dollar. The first time at a push up from the dollar, the fed has backed away now giving less resistance to a stronger dollar that maybe there was before. Vassili the huge problem was this negative feedback loop. It became a problem for Commodity Markets. Fed tended to backtrack. The question is, is this negative feedback going to remain the same . We think the pace of dollar appreciation is not the same as it was in 2015. It is still down. I think the Global Market should be less concerned about moderate revival of the strong dollar. Alex to your point, the question of can we see divergent monetary policies in the world can we do it . We couldnt do it last time. David they started to diverge last summer that brought them self right back together. I wanted to know how much of this is divergent in the economist underlying them . They really diverge, though the monetary policies have to diverge . Fed has basically highlighted that they have to make the Monetary Policy for the u. S. Not the rest of the world. Again, the currency link is crucial here. That is the stabilizing mechanism or offsetting mechanism that is working together with Monetary Policy. When the dollar gets too strong, this divergence has a cap on it. The dollar has been relatively weak for about six months. If it strengthens a little bit i think it is less of a problem. Alex you dont like a strong dollar . What is priced in right now in dollaryen . Vassili we think the market is getting ahead of itself. Now people are getting excited about helicopter money and someone. We think there is a risk of disappointment next week. It will be hard to deliver up to those expectations. There will be a pullback in dollaryen, there are still reasons to buy. That is fiscal expansion in japan and that tends to be positive for dollar yen because they tend to trade together. Then we have a nice you are story developing w u. S. Story developing. Of awe could be a bit disappointment. It could be a buying opportunity for dollaryen. Jonathan good to have you with us on the program. David coming up, but take a look at what is beyond the week pmi numbers. Alex this is bloomberg. We have talking all morning about the disappointing pmi. We have three charts to take a little deeper into that. This is the composite, the white lines new orders. That blue line is employment. White line is tanking all the way to 46, well below expansion. The new orders tend to lead to employment. What kind of rollover may we see in employment Going Forward . Thenext big part is on positive side. This comes from new export orders. How much more can the u. K. Export Going Forward . Above that expansion level of 50 in part because of that huge decline that we saw in sterling. The third chart points to Business Expectations in terms of services. This is Business Expectations when it comes to service companies. This is optimism Going Forward. This is at an unprecedented pace to the lowest level in about seven and a half years. It is still around 56 right now. Look at that unbelievable steep decline. The is in stark contrast to summary of Business Conditions for july. That said that it was business as usual. What data points are correct . Cant square the Business Expectations with the exports postup so much of the u. K. Economy is exports. Jonathan so much of it is Services First of the economy is services. If you were to take one data point, they would say what is going on with services. 47. 4emi and services at that will be a big concern at a time when you are seeing a little bit of divergent on the Monetary Policy committee as to what they should do. That data is critical. David service is right at the heart of the brexit. How it may affect their services business. Alex this data points to an outright recession in the u. K. Tose are extremely sensitive sentiment. Give it a couple of weeks, if it gets better you could also shift fairly quickly. I thought that was a really interesting point. Jonathan we can debate that and we will all day. Coming up, were joined and about one hour away from the open this friday in new york city. Ge tops profit estimates. They focus on manufacturing equipment. Jonathan brexit wreaks havoc on the u. K. Economy. It is official, donald trump formally accepting the republican nomination and says he is the nominee to fix america. David welcome, this is the second hour of bloomberg , were live from new york city. Stocks may be bouncing back. The quebec little yesterday. Jonathan a little bit in the last hour they came back a little bit yesterday. Jonathan yes, they did. Biggest question is will investors continue to pile into treasuries hosting that rally . To theup, we speak manager called that surging to safety before it was popular. The president and founder of the global strategy revealed just how low yields can go. A check on the markets. Jonathan futures are up. In europe, i similar story. Eventually a second week of gains on the stoxx 600. The ftse could see a fifth straight week of games. The ftse up is about a third of 1 . This is a sterling story of bash at the moment. Datall dig into that ugly out of the United Kingdom and what that means as we go forward. And a commodity market, crude is pretty much stable. Bonds are the belly of the curve, up about two basis points. We will get much more on where yields will go. For now, lets check in with our Bloomberg Team for indepth coverage of our top stories. Rick is in new york about General Electric am also richard an wrappingexit, meg up the Republican Convention in cleveland. Rick i want to start with you with ge earnings. I see now profit, that was up 300 , revenue up 2 , where is the issue . Rick investors are still feeling out how to interpret earnings this morning. They did beat expectations of both profit and revenue. But, that was helped by a gain the appliancesf business this quarter. You also have a decline in orders. I think there was some lingering concerns about whether ge can continue to perform in what is a pretty sluggish economy. It was a Consumer Company all those decades back. It turned into a finance company, and is now an industrial company. Investors wanted that, now theyre doing that. What is it going to take . Finally get out of being a too big to fail Financial Institution during the quarter. That will free up a lot of capital. Investors are still waiting to see what exactly is going to happen. They talked about adding debt to their Balance Sheet and possibly exploring some share buyback. Alex good stuff, thank you so much. A headline out of the u. S. , across the globe, jonathan the fx market, ugly. Lets bring in richard jones. Rich. E through it, richard these numbers are expected to be below 50. The expansion and contraction line the big problem is that led this data down. Therefore, given the importance of service at the u. K. Economy for great portend times ahead. The pound has been sold off, whose expectation now that the bank of england could raise cut rate in august. Jonathan the ecb in what they do with the asset pitch could change because of the bond scarcity. Were learning according to officials familiar with him out of there would be no rush to do that in september. You covet impression from mario draghi yesterday, didnt you . A situationcould be where he may want to act more proactively than some of his other collect. Salesht have a bit of a pitch on his hands to get that to happen. At the end of the day i think in terms of the timing, as we get towards the end of the year the likelihood of them doing something will increase. September might be too soon. Jonathan some ugly pmis, and a weaker pound on the back of it. Some breaking news. Alex concerning Christine Lagarde at the imf, news coming out she must face trial. This is according to a french court. If the waiting to find out if she was going to have to face trial over that massive big state pay out to the tycoon when she was the French Economy minister about a decade ago. It turns out she will face a trial according to a french court. We will be managing those headlines as they come. The investigation was going on, but this is an important step forward. There will be a lot of things to go through. It is a complicated civil law issue. Home of the rock n roll hall of fame and the National Convention the last three days. He accepted the nomination and left no doubt about how different he is from his opponent. Mr. Trump Hillary Clintons legacy does not have to be americas legacy. The problems we face now, p overty and violence at home, or and instruction abroad, war willestruction abroad, continue as we continue to rely on the same politicians that continuing the first place. Now, bringing in megan murphy. Stay behind in that empty halls or she can talk to us. So, it is clear what he was trying to say, they dont want a third term for president obama. Is that the theme of this convention . The theme istely as Hillary Clinton as an extension of eight years of an obama presidency. It is very focused on her personally. Whether it was with her email server or with benghazi or her as a figure. This is going to be a campaign that focuses as much on Hillary Clintons weaknesses as it has on the long as it does on donald trump a step he did project himself as a different kind of candidate. The candidate who says to all of you forgotten workers out there to those people who feel disenfranchised with the american dream, i am your voice. For. Is what he is going we will see what the American People make of this Unconventional Convention we have had. David you say that, and an unconventional race so far. You have a sense about the success level for mr. Trump and bringing together the new people who wants to bring into the voting populace . It is so hardw, to tell. This convention was marked by so many moments. Surely it was going to end with butcruz, or getting booed, donald trump is a madefortv candidate. Madefortv convention in many respects. We will have to see if that onardless of the missteps, the hold is a this is just i cant wait to see how this ends up. We always think this perceived negativity will hurt him. Frequently, we see he actually gets a boost as what we perceived as being disorganized or not on message. We will see him get a slight bump. Anthe democratic convention, entirely different kind of convention for so well see if Hillary Clinton can increase the gap. David one of the groups mr. Trump will have to appeal to his women, particularly younger women. He was introduced by his daughter, ivanka. At my Fathers Company there are more female than male executives. Women are paid equally for the work that we do. When a woman becomes a mother, she is supported not shut out. David this sounded like a pretty direct appeal to a particular part of the voting is that you and say that mr. Trump is not done well with. Is this doable . Ivanka wasuestion hitting at those female voters that donald trump has alienated. Fascinating speech. She talked about her experience and about being a mother. She focused tremendously on what it means for her to be a woman and her fathers track record with women. We look forward to that speech. She seized at the moment. When it make a difference . That is what we will be looking for. Week, philadelphia, we turn to the democrats. Today it is thought that Hillary Clinton may well name her candidate to be her running mate. Chemical to alex with a look at some of the stocks moving this morning. Alex i want to start with vodafone. This was at its highest level since august. You had better growth in germany, italy, and emerging markets like india. Some comments on brexit postup they were of the company couldnt stay headquartered in the u. K. Ceo is trying to look for pragmatic solution. Starbucks into bali were two of the big guys same and chipotle were two of the big guys. It was the comments on the call that got the attention. One was that terrorist attacks a Consumer Anxiety and a weakening of Consumer Confidence. Hard times having a getting out of that food scandal. Profit is still down 82 year on year. Also, the samestore sales at the chain were dropping for three straight quarters. This used to be a momentum stock, a huge growth stock. Todo that you must continue open stores. Those key numbers are important for this company Going Forward. Lots of busy individual stock movers. Overall, the bond market and equity market still is relative calm. Jonathan throughout the day, coming up, there hasnt been calm. It is been the pain train the 2016, treasury yields at an alltime low. Revealed where the 10 year yield is headed next. Jonathan this is bloomberg from new york city. Futures largely stabilizing in the United States up about a 10th of 1 . The ftse is stronger. A weaker pound story the fx market. Dollar yen capturing that risk sentiment. A weaker japanese yen story. Pushing higher across the curve. Up three basis point of u. S. 10 year yield. Calls over the last couple of weeks of the bond market. They could fall to 1 in the First Quarter of next year. Global Interest Rate strategy joined earlier on. Take a look to what he had to say. We had 1. 9 percent growth in the g 10 and 2015. We think that will fall to 1. 4 this year. 1. 2 in 2017. We have Global Economy slowing in terms of their growth. Willink core inflation remain below centralbank target for that means they will keep their economy and up the ante depending on what region you are looking at. Jonathan joining us now from los angeles is the global strategist president. You thinkoutdone, yields could go south of a Morgan Stanley think they will go . On a real basis, theyre already deeply negative in the United States. What forces will take it south of 1 . Think one thing is that Inflation Expectations will be hitting downward. Economic growth could be much lower than the imf and the world bank have been expecting. That is been my position. Both of them pushed down. Item number three, you have the world situation with much lower like in germany and the u. K. That also is push the u. S. Treasury down. Another onerowing into the mix, you think the fed will get more dovish from here. The stories been internationalization of the treasury curve. The japan a vacation of the curve, forces from outside coming in. You think we could see curve,ication of the forces coming from the inside info study talk about the fed, the data so far is pretty solitary. When will they start doing something with rates . Komal you have had some positive data, but there is always positive and negative data going back to 2009. We have not been able to sustain the good news. The rest of the world will pull the u. S. Down. The difference today compared with 10 years ago is that the u. S. Is a smaller and smaller part of the rest of the world and the chinese influence is going to be a lot greater. H on fedwhat will weig policy. Alex we still have initial jobless claims coming in. We saw a lot of demand meaning that investors to see inflation picking back up. You reconcile the good stuff . Komal i put more emphasis on the fact that the labor force but as a patient rate is still 2007. Than it was in 2006 over allrue not only but for the 50 year as well. Remove the demographic influence. And the employment the employed people to population ratio is also lower than 2006. These indicate this has not been a strong economic recovery. It has been a recovery for the higher income groups and the equity markets, not for the economy. On the subject of inflation, explain to me why if the money supply is growing substantially faster than goods and services why does that not lead to inflation . Weve more dollars chasing the same goods and services. Komal the relationship between money and nominal gdp, the s notitative equation i something that holds on a quarter to quarter basis. Monetary growth can be long and the lag can be quite long first haspecifically, what created is either sitting with banks with 2 trillion worth of or the consumers back accounts when they dont want to spend it. Unless it is spent or lent by the banks, you dont have inflation. That is going to be a continuing story for quite some time to come. Marketou called the bond rally before anyone else. But it is now negative. You have to pay up a lot to get those best bonds. Terms of thek it overall bond market, if you look globally, i think the u. S. Could have the best advantage compared with the germany, compared with the u. K. Youre much better off in the United States. If you have the u. K. Numbers that you spoke about in the previous hour, and the negative cutuence on the pound, the in rates they have had, that also means that the yield is going to go down in the United States. Markets will be more the 30 year level. Alex thank you very much to see you. Some of this really bums me out. Jonathan it is a big rally there few want to go along. Sachs up next, goldman will start rating money for the first private equity funds since the financial crisis. That is next from new york city. David this is bloomberg. This is time for bloomberg trends. You can find these on your own bloomberg but going to read go. Alex i was really interested in this piece, Goldman Sachs is billion for a8 corporate fund, their first since the financial crisis. Would be as big. Will not have the Goldman Sachs lamppost a part of that is that the rule it cant own more than 3 of the covered fund. That is changing the way these guys have to do business. Normally, and private equity want to go in when valuations are low in credit is right now, it seems that valuations are high in credit is cheap. I am surprise. I am thinking nintendo, that is the other story today. The stock is up 90 in the last month alone. In the news comes out that the Financial Impact from pokemon go could be limited. Efron is fascinating. It comes out, most people with kids now have them downloading this. It is massive with a lot of people. It has exploded. The Company Comes out this morning and says the financial will berom the game limited. Imagine will happen on monday when the japanese market reopens. Matt t alex then, it was said that pokemon go could be good for apple. I dont understand how that works. David it was a joint adventure as i recall. Their stock shot way up. Alex it was up 90 . David i would be getting nervous if there was an overshoot there. Give a little bit of guidance there. Now, the story that keeps on giving. This is the Malaysian Fund the setup a few years ago supposedly for development and infrastructure. It turns out a lot of the money was used for private purposes. This is the largest asset seizure by the u. S. Government ever. Theyre going after 1 billion including the proceeds from wolf of wall street. Jets, itought serious is quite a story. More than one van gogh. It goes right up to the Prime Ministers office. Alex when i talk to this morning, he said david here is a hint. Department of justice is i didnt even know they had a clip talker see division. Cy division, but they do. Aex coming up, the ecb had familiar script yesterday making no policy changes. Will brexit eventually lead to new measures at the next meeting in six weeks . The countdown clock is starting. . C sv alix this is bloomberg , im alix steel. General electric earnings were better, but the stock is down. You basically had organic industrial revenue falling 15 . You had orders falling by about 2 . Companys transitioning from the Financial Company into industrial company, but it wasnt as good as what the market needed to see. The other company were looking out for is starbucks, Global Stores disappointed estimates. Weaker than expected sales in asia pacific as well as china. Risks a lot of profound in the u. S. Consumer. Terrorism is really fueling Consumer Anxiety, clouding that stock today. Companyl also, that raising the lower end of its company forecast. The second time this year, however, the stock is slightly down in premarket. They had a lot of acquisitions that were credited for boosting sales. Honeywell not performing as well. Also American Airlines rounding out here, Second Quarter estimates with lower fuel prices helping offset any kind of weakness you might see in the economy. Airbusnomy will defer 22 2022, and average deferral of about 26 months. General concern with the Airline Group that you have lower fuel prices, but at some point, that jews no longer holds any water and you need to find another way other than buybacks that juice no longer holds any water, and you need to find another way other than buybacks. The overall market, does feel like a friday. Jonathan a slow grind, a bit of a churn. Largely stable. Features of about. 1 , we did snub that nineday winning streak on the dow, we could take another step forward today. As we move0 up. 4 towards the close, potentially a fifth straight week of gains for the ftse, the longest winning streak since the end of 2014. In the fx market, a slightly firmer dollar driven by a weaker japanese yen at a substantially weakened sterling. Down by one full percentage point after some ugly data at the United Kingdom. Sorted,the fx market the court over a bond market, if youre looking at treasuries and yields creeping higher. A little bit of risk coming out of the core government markets. Up two basis points, a similar move on five year treasury notes up three basis points. Lets get to news outside of the business world. Heres taylor riggs. Hittingdonald trump is a dark picture of a failing nation that only he can save. The billionaire accepted the republican parties nomination for president. He warned that the country is set by crime, terrorism, and bad trade deals. He says he is really one who can fix the problem. Trump to every parent who dreams for their child, and every child who dreams for their future, i say these words to you tonight. You, i will fight for you, and i will win for you. X donald trump used Taylor Donald trump used some of his harshest rhetoric on her, saying her weaknesses were death, destruction, and weakness. Clinton will try and recapture the attention of voters after a week of the Republican Convention. She is poised to unveil the running mate as soon as today. The person says the announcement will be made by text message to supporters. One of the leading contenders senator tim kaine of virginia. He is said to have the year of former president bill clinton. The highest court in france has ruled that the imf chief Christine Lagarde will have to stand trial in a case from her time as french finance minister. Dispute to ae panel of arbitrators, and he was awarded more than 300 million. Global news, 24 hours a day, powered by 2600 journalists in more than 150 news bureaus 120 countries. Im taylor riggs, this is delivered. Jonathan Marchel Alexandrovich joins us now. Great to have you with us on the program. Timesked with as many over the years, thats what we see again in the data. It 27 month high, french data treading water. The ecb may have to do some tweaking in september. One of the thoughts . Marchel theyre definitely going to have to do some tweaking. Qey will have to extend beyond march 2017, another six months. That will anticipate this necessitates an increasing qe. Drop,ially maybe the shape or they can lift. We know there is a scarcity problem they face. The ecb has to adjust its rules of it was to carry on, on march 17. Jonathan weve been waiting for an update on yahoo . I want to get some breaking news. Verizon set to be nearing a deal to acquire yahoo . We have a narrow down to around five bidders. Verizon being one of them. Verizon set to be nearing a deal yahoo , stock up by over one full percentage point today at 39. 29. David more than one analyst yahoo , stock up by over one fullprotecting that vee most likely winner. Alix good point. We had verizon, quicken loans founder, the three favorites to acquire yahoo . Andad at t in the mix private analysts. Yahoo is expected to request the best and final offers, we are in the process. This will be a significant development. It will be over, we been talking about this. Back withwill put aol yahoo , something the head has wanted for a while. Jonathan verizon set to be the lead bidder, the announcement may coming days. Its not finalized and may still fall apart. Verizon and yahoo set to now be in oneonone talks. The field is narrow down. Bid theise and verizon bid was not including patents and real estate. That made the deal different than other bidders in the market. Jonathan patents and real esta. We will bring more headlines as they come through. And we will keep you up to speed on whats happening with yahoo . We will turn back to marcellus and rich Marchel Alexandrovich. We were talking about europe and whether or not they would need to change the composition of the Asset Purchase Program over the ecb. Lets talk about the u. K. Very quickly. We have the first post brings it post brexit lead. Is this a oneoff to the uncertainty immediately after decision of political shock . Or do you expect to continue in the months ahead . Marchel was the weakest cmi with had since 2009. It will send a clear market message to the markets that the bank of england will have to do something in august. Is it oneoff . We dont know. This is the second these of data we have had post brexit, which is forwardlooking. They giving when scores came out earlier in the week, they are pretty decent. They did not indicate the company was usually worried about the Current Business performance. Now you get the pmi, which is a pretty weak reading. That was in the signals of the market than any things are going to get worse rather than better and maybe the u. K. Economy is not going to shrug off brexit as a marsh its as the markets thought. The bank of england will do more, and the question is where they go from here . They wait until november and ease policy further than. Jonathan reportedly saying they can reset fiscal policy, does that couple kate the Monetary Policy response does that complement the Monetary Policy response . It does. We think august will move 25 basis points and restart qe. Recent of fiscal policy, the u. K. Government will have to have a new fiscal plan. If they relax fiscal policy by the very definition of issues, it will make bank of americas job bank of englands job easy. We know the twos of the policies have to be complementary and go handinhand for economists to grow. Ironic how quickly things can change in the u. K. And how much longer it takes things to get going. Alexandrovich,el thank you. Alix to reiterate breaking news, verizon said to be nearing a deal to acquire yahoo , with oneonone talks. The deal may still fall apart. If it doesnt, and announcement could come in days. Alex, this is the longest deal we have never had. Is this a surprise for the markets . Alex i dont think so. If you listen to our coverage since january, verizon has always been a leading bidder here. According to our reports this morning, the idea is that the leadas now become bidder of the five bidders that put in bids just a few days ago. Thats at t, private equity firms and other private equity firms called vector capital, and then dan gilbert, who owns quicken loans. Of those, to give them going into it, most people assumed that verizon would emerge victorious. Thatroblem with that is verizon had put in a lower bid early on, but verizon and the folks you spoke to that have been close to verizon throughout this, always told me in the end, they expected verizon would bump up the bid if they needed to in order to get the deal done. They didnt want to bid against themselves. ,e may be at the endgame phase where yahoo is just trying to s and. Th dot the is. An announcement could be made as soon as early next week. Verizon reports earnings on tuesday. David one of the difficulties in weighing these bids is what they are bidding for. Reporting is that different companys were bidding for different parts of the asset. Verizon was not as interested in patents. Are they stepping up to the bar on the patents . Alex thats a great question. We dont know for sure yet. Going into the final round of bidding, we have been told by several people close to verizon that they were not listed in buying the ip, and found the words of the ip considerably lower than what some others thought the ip could be worth. That said, i was also told if they forced them into buying the ip, he would not be enough of a stumbling block that the deal would get done. We dont know the answer to that yet, but we do know the yahoo the iplded things for separately, specifically from at least one consortium of Small Businesses that tend to collect this ip, which feel like they have a higher ip value to it than what verizon would use, simply paying a few hundred Million Dollars or so for the ip. Alix when you mentioned their bid of 3. 7 5 billion to 4 billion, they may have to raise that. Any idea how much they may have to raise that to july down the deal . Raise that to, to lock down the deal . Alex when you add the ipn business total, high bid we are hearing is around 5 billion as possible. A deal withoutin the ip, you would have to get to much higher than 4. 5 billion or so to make that the most compelling bid. We dont know those numbers you. The deal has not been formally signed, so those details are still to come. Alix hypothetically, if we have a verizon yahoo lockup, what will that kind of Company Look Like . Other bidders might break apart much of the company or real light it, but there is more synergy in some respects to verizon. Alex there hasnt some speculation, not direct speculation, but some people that understand the company have told me that they feel like verizon may not be done with this yahoo acquisition. That there is a broader plan that Tim Armstrong would run, where they could be future acquisitions that can be rolled up into a combined aol yahoo , as verizon tries to match their mobile video product with the Advertising Technology that comes along from both of these companies, and the contents. Its possible to verizon is not done here, they will continue to look for other Digital Assets they can combine with these two companies to try and make some broader mobile advertising product. Ofid alex, due in a sense how important yahoo s technology on monetizing mobile is to verizon . You know, yahoo acquired something called bright role, which is an Advertising Technology company. There have been problems with it, is not the greatest of Advertising Technology. Aols technology is thought to be considerable better. That said, yahoo brings in eyeballs and a lot of traffic. There are synergies between the is whatanies, which star board thought all along when they felt a little yahoo should be merged. Aol and yahoo should be merged. Verizon feels like they can get deal deal on the money they can pay. We see what they can go from there. Alix we have others left hanging if we see verizon yahoo deal. Did they go elsewhere in the sector . Will we see more of this tie up in tech . Alex its possible. The question is what assets are out there . Everyone looks to twitter as another asset that theoretically could be acquired, or stake in the company could required. That could be what verizon is seeing next. If not verizon, some of the other properties became available our sources indicate that twitter is not for sale. That could change. Atx everyone is for sale, the right price. Walk us through the timeline. If we have verizon of yahoo on oneonone talks, what are the next 48 to 72 hours of like . Alex from what we have been able to understand, there is still a small hurdle, which we dont know the specifics of, that needs to be addressed. That im sure will be issue number one. And then companies will decide when they want to make a an Earnings Announcement if they do reach a deal a deal announcement. The fact that verizon has earnings on tuesday theoretically could push this off a day. Often times when verizon comes around earnings, the announcers of done at the same time. We have one source indicating that verizon doesnt really want to talk about this before earnings are out. Its possible that announcement conflicted tuesday, even if the ty has a deal done monday, those plans can sometimes fall apart, depending on if we do our job correctly as reporters and are able to break this news early. Sometimes it pushes the ball forward and you end up seeing an outtake earlier than the Company Might like. We could see something sunday night or monday. Alix any indication of what would happen to Marissa Mayer if these two guys merged . Alex we have heard that marissa Marissa Mayer would not come along. She wouldnt be something other than a transitional role. Unless something drastically has happened over the last week, i would expect more semior not to be coming along. Alix alex sherman of bloomberg news. Verizon said to be nearing a deal to acquire yahoo , they are in oneonone talks. We have been hearing about this for the last seven months, and a deal could be in the next four or five days. David there are good reporting. We want to bring in winnie executivebloomberg editor for legal. Lets let go lets take a look at the legal hurdles. Winnie they have to in value if, and despite of how tough this in administration is being on looking at deals, there isnt a lot of competition. This is an like one of the cable deals. This isnt like one of the cable deals. David market share is minimum. Lets go look at health care and insurance industry, the Justice Department announced they are going to sue to block two really big mergers. At net and humana and cigna. Would take the industry down from five Major Players to three, and that would not be good for competition, and the governments view. Whats going to happen here is interesting. Aetna and humana look like theyre going to push ahead. They put together a couple proposals already for remedies, it wasnt enough to satisfy justice brennan. Theyre going to look at additional possibilities. David they came out with a joint statement. They said we are still in it. Winnie they really want to get this deal done, they were offered more things. They can also go to court and fight it. Services,ich provides and a lot of obamacare markets yesterday, that could put pressure on the administration. Another wildcard is that and e and cigna and some anthem and cigna are struggling. It might be a little easier. David does it weaken the Justice Department case . Winnie thats right. It might be easier. I dont think there is an easy path to getting this done. David speak to something about the health care and insurance industry, how concentrated it is. Is there room for anymore mergers of Large Health Care insurers at this point . Neede they think they this to compete with the hospitals that are coming together, they say it is essential for competition, not so much a problem for competition. Thats can be difficult to work out with this particular Justice Department. David one of the things that struck me as we have aetna and humana saying women to make of it investors, but they have had negotiations for months with the Justice Department, were presented with a offered various things to if they couldnt work it out, why could they work it out now . Winnie its a cat and mouse game. Tellovernment is really them where it sees the problem, they have to figure it out. Down, it mighter be. They still might find a way. Alix what halliburton fell down, it might be. Apart, the bidders were the issue. You didnt have a company that was big enough to buy the assets they could become a true competitor to these big oil services. Is it the assets of the people who are buying . Winnie you are just looking for what the cop edition is going to be like in the national market. They used to be that the government would look at breakdowns by geography. Theyre not doing that in this case. There looking at with the overall landscape is going to be, thats what matters. You are seeing a department that has had huge successes, with his halliburton deal put down, cable deals put down. In court, and are coming at it with a newfound strength. Obama put on executive order saying he wanted to see competition across the government coming version of. That is what we are seeing. David they only have a few months left in their tenure. We will have a new and administration, do we have any sense of how Hillary Clinton or donald trump would approach the sorts of issues . ,innie on the democratic side it would be the first times that section 98 the democrats have put in their platform something that sounds like the trust busting type from the Teddy Roosevelt era which says we are going to can tour edge encourage competition. That reflects the anger we are seeing about inequality and businesses being too powerful. They are putting it in their platform. What exactly a Clinic Administration would do, we dont know. We have a few clues about a donald trump and administration at this point. , the Winnie Okelley bloomberg executive editor for legal and financial. Alix Verizon Communications is said to be the lead that are now in yahoo , and then the deal may come within days. They are in oneonone talks, nothing is finalized, and things could still fall apart. The verizon beating out its rival bidders. All of this according to people familiar with the matter. Kirkpatrick, david david, thanks for being with us. I know youre reading up on headlines as well. What we can tell you is out of all the five bidders, it looks like verizon is in oneonone talks with yahoo . Do you think this is the best tie up for yahoo . For some time, its been clear that verizon was the most determined bidder. I think verizon has big ambitions to grow its content operations, to become a more vertically integrated company. I think the presence of Tim Armstrong, who is really running for and more of their content businesses, and who it really is a veteran and running and selling advertising in a business like god who, having basically created googles advertising business from the earliest days. He will be a fantastic person to run yahoo well. I never have been a huge critic of emerson mayor. I think it has been an incredibly difficult of Marissa Mayer. Its brennan it has been incredible difficult. No one wanted to do it. Stature, it was just too hard. Tim is capable of doing just as good a job as anybody can do. Im not shocked by this. David i want you to speculate, lets assume that this deal goes forward. What brand survives . Is this selling yahoo for scrap at aol survives . Is tims to meet or going lets go with yahoo . David k. i dont think you will see either brand get subsumed. Yahoo was a strong brand. They are still in the ballpark of one billion users monthly of all the things they do. I cant imagine the yahoo brand going away. I can imagine someone doing a better job then resume or has Marissa Mayer has done at leveraging it to make more money. I still use yahoo products myself, every day. Maybe that is because i am a baby boomer, maybe it is because it was the first big internet brand that really got good. I will tell you, there are a lot manyople like me in many, countries. No way is the yahoo brand going away. David in terms of alix in terms of the other bidders that might not get it, where might they go now . David k. thats an interesting question. If you look at properties that are out there, that are sort of maybe a little orphaned that have amazing promise, the biggest one that comes to my mind is snapchat. Its not a distressed brandon anyway. Brand in anyways. There are so Many Companies that would love to own that. There have been rumors about Chinese Companies wanting to buy that. They have done some investing. I think 10 sent out a position in snapchat. There is no other brand of the scale of yahoo that is in any related condition, in my opinion. It really was the first big internet content brand. That puts it in a unique position, in a way, because it got there early. It wasnt able properly to make the transition to a newer, more targeted marketing model. That google and then facebook perfected, each in their own way. Alix david, thank you for going through those headlines with us. David kirkpatrick. Verizon the headlines, said to be the lead bidder for yahoo , oneonone talks, nothing finalized, but they are moving forward. Jonathan the countdown to the market open, 30 performance away. Equities in europe largely stable and futures firm in the United States. Positive00 futures are. 1 . From new york, this is bloomberg. E jonathan for viewers worldwide, this is bloomberg. A firmer tone to this market as we close out a week. Futures firm are in the United States are potentially weaker gains through here and europe, with the ftse 100 up and the german dax unchanged. The dollar with a little bit of a blip. The bloomberg dollar index up. 1 . Slightly softer for wti and brent crude for much of the day. In the bond market, yields higher on German Government bonds and treasuries as well. As we wrap up the Asset Classes, we can down to the cash open in new york, thats 30 minutes away. This is bloomberg. David we are now just under 30 minutes away from the opening bell in new york city. This is bloomberg. I am david westin here with Jonathan Ferro and alix steel. Alix we have individual movers this morning, we check in with julie hyman in new york with a look ahead of the u. S. Session. Abigail doolittle and nejra cehic. Just a half hour ago, verizon is now in oneonone talks to acquire yahoo . Julie verizon shares pulling back a little this morning, yahoo is higher. As alex sherman and ed hammond have been reporting, verizon is now the lead bidder after that you have lose oneonone talks. Its not a guarantee, but after looks likerocess, it we are finally nearing an end to yahoo selling itself. As you heard from alex sherman, the timing could hinge on verizons schedule report of its earnings on tuesday of next week. We should have more news in the coming days. We should mention that representatives of both companies were either not available or declined to comment. The other big story matches today, but this week has been earnings. Tradingelectric shares lower even after the companys earnings Beat Estimates vary 2 , coming in ahead of estimates as ge continues to build on gains in its core businesses of energy and industrial. 2 , coming in ahead ofyou can see the shares are not benefiting this morning. Also we are watching chipotle, which continues to suffer. Their an existing earnings missing estimates. This time, down 23. 6 as chipotle continues to suffer in the aftermath of the various food safety issues that plagued the chain last fall. Cost, thethe drop in estimated decline was 20. 6 . It was expected to be bad by analysts, and it was even worse than had been expected. Lets see whats going on at the nasdaq. Over to abigail. Stocks moveot of for the nasdaq on earnings reports are out with starbucks, shares were lower in the free market, Third Quarter sales missed the mark, really driven primarily by weakness in the u. S. Starbucks said they had seen a profound weakening in u. S. Consumer confidence, a pretty big statement. Analysts are confident this is an anomaly, referring to wells barkley saying to buy the stock. Turning to paypal, they put up a solid june quarter, but shares are down sharply in the premarket, on the news that these and paypal have come to an agreement over digital payments, basically ending a 10 year battle. The streak was pretty bearish, we had at least two analysts with negative comments, well wells fargos downgraded the shares. This agreement could hurt paypal at least in the near term. Advanced micro devices this thes big shining star in chips space, up 82 year to date. Before todays open, soaring into premarket after the company put up a strong secondquarter, posting Revenue Growth for the First Time Since 2014. All of this as the ceos rehab efforts are apparently successful. Lets head over to london with nejra cehic. In thehere eurozone, Manufacturing Services , the composite all slept but did stay in expansionary territory, where is in the u. K. , not only did the composite go into contractionary territory, then it a sevenyear low post brexit. We are seeing the stoxx 600 falling, it has read traced retraced some of the losses, we are still down. 2 . Sterling down almost 1 at the moment. On this currency. The key question is will the signs of weakness persists, or is it just a reflection of an shock. Post brexit what does this all mean for boe policy . The direction of sterling perhaps signaling and reflecting that investors are pricing it at boe, cuttingthe rates at the august meeting. The ftse also reflecting that extrication of more stimulus. We are seeing it recoup losses up. 4 . The one bright spot in the report on the u. K. Was that an index of new manufacturing exports actually rose the most in almost two years. I was thanks to the sharp fall in the pound since brings it. That has benefited globally facing Companies Like vodafone, for example. It saw sales fall in the u. K. , but advance in germany and italy. Overall firstquarter organic Service Revenue Beat Estimates. These shares are rising up 4. 3 at the moment. Alix thank you, nejra cehic joining us in london. More news on the breaking story that verizon is said to be the lead bidder for yahoo the verizon price has been upped to about 5 billion. The previous range was 3. 75 billion to 4 billion. That price would exclude patterns. Joining us now for more is alex sherman. You broke the news and have been doing a lot of Due Diligence on this. 5 billion without pads, how does that stack up to the rest of the bids . Alex its higher than what verizon was floating early on, and it sticks with the theory that verizon was willing to bump up its price in order to get this deal done. What i am just finding out now from people familiar with the matter, the price is close to 5 billion. We dont know exactly where it is. This deal is not quite done yet. Where everything finally shakes out, things could still move. Hearing a christs a price closer to 5 billion, which was the earlier price that verizon had submitted in a previous round of bids to yahoo . The patterns are not included, which is in line with what has wanted to do. Theyve not been interested in the ip, two the same degree that other outside parties that see more value in yahoo s ip. Weve heard there are some outside patent troll companies, a consortium that want to get hold of yahoos apps that feel like they can have value of up to 1 billion. Verizon didnt see them worth more than a couple hundred Million Dollars. There was at a big gap the yahoo decided it would behoove the company to try and sell them separately. Rising coming up here in paying close to 5 billion is in the face of a lot of negative news around yahoo in recent days. Dispute in thea contract with mozilla that would have seen sales go away. They are losing some revenue potentially with the deal with softbank and yahoo japan. There have been other concerns about the core yahoo business. We saw a earnings take a tumble yearoveryear when yahoo just in the contract withannounced their re. All of those things aside, verizon feels like it can pay close to 5 billion for this core business, and it will still be a good investment for shareholders. Take us into the thinking behind a verizon bid. Assuming this plays out the way you were reporting right now, why is yahoo worth more to verizon that it would be to the other bidders . Alex verizon made the most sense to buy yahoo because of. He synergies with aol these companies more or less are structured the same way. There is some content to there. Theres a lot of traffic through legacy search and other legacy businesses, where there is sort of an ironic element to this, which is that verizon is acquiring aol and yahoo theoretically so that they can package the content and the Ad Technology with its mobile video service, called go 90. Who knows how that will morph over time . To attract millennials. You acquire these businesses that are seen as arcane to millennials. You repackage them into something to appeal to millennials. Out on the jury is still if verizon can do this. Its also possible that verizon is not done here, and that there are more acquisitions to come, and that there is a plan, the Tim Armstrong likely has in mind , the former auo aol ceo will run this new aol yahoo combined company, from what we understand, assuming the deal gets done. He certainly has a vision for this, and how it is paired up with a mobile video products. We dont know all the specifics yet. David verizon had a plan, thats how they bought aol to begin with. What does the same as a longterm strategy for verizon they are willing to step up once again to going to content . Down oney are doubling their efforts when they bought aol to now include yahoo in this. They are sticking to the playbook. They are two schools of thoughts on this. One school of thought is that people feel like they dont really understand what verizon is doing, they should be saving their money to buy spectrum at the upcoming spectrum auction. You need spectrum to have a robust Wireless Network. They should be using it to improve its core business. As another school of thought that feels like this is a drop in the bucket. Verizon is an enormous company. To just throw a few billion dollars of business is not going to be the end of the world. Its not going to be make or break if it collapses. Its not microsoft buying yahoo in 2008. Yahoo is a severely diminished company at this point. The time is right in order to buy this company, similar to aol , and try to use their hundreds of millions of eyeballs in traffic and mirror that to your Ad Technology and mirror that to mobile video and try to build a product that can rest on the Wireless Network on verizon directly has some synergies and is Good Business for verizon. As the news broke that the bid for verizon could be about 5 billion, yahoo stock took a. 6 for the lower, down by in premarket trading. Does that imply the market does not expect a bidding war . Alex it could. From my understanding here, the two companies are in exclusive talks. Im told that not necessarily expect an announcement on monday. That my get pushed to tuesday because verizon has earnings on tuesday. That could happen. That does leave a little bit of room for someone to jump in and make a bid. I can tell you this from other sourcing around this over the past few days, my sources have told me that if verizon wants to come in and write a big check, were not going to compete. Sources around at t have said they have always been lukewarm on yahoo , dont expect them to be there necessarily in the end. That leaves dan gilbert and vector capital. Vector capital is a middlemarket Technology Firm that has been surprisingly able to raise funding. But theres no way that a middlemarket tech firm, no matter who your partners are, can compete with verizon on price. It just leaves dan gilbert. That would be the wild card here at this point, would dan gilbert really pony up and challenge verizon at the last minute . The direction here seems to be like yahoo has picked its force. Course horse. Alix david talk about the respect of coulters. Cultures. Alex theres probably some similarity is some difference. The similarities that this these are two governors the used to run the internet, now they dont. If the a lot of talent walk out through the doors, and they continue to bring back talented people as well, because they have big names of people are drawn to the idea of working at these companies and potentially try to turn around. That said, there are obvious the differences between the east coast and west coast, and verizon is also not a west Coast Technology company. Fit problems. Ome we will see us things go out between yahoo and verizon. Verizon is buying yahoo at a time when the company desperately needs a turnaround in morale. You have to expect that. This is not going to upset employees too much. The writing has been on the wall here for so long. Alex has longest deal, been covering this since january. Alex sherman, thank you for recapping the news. Verizon and yahoo in exclusive talks to merge. Uppedice is to has been as much as 5 billion. And 5 3. 5 billion billion. It wont include the patents. The announcement could come within days. We will be following this story and much more throughout the rest of the hour. David theres also a lot of news going on outside the business world, particularly with donald trump. For that, go to tailor rigs. Taylor in cleveland, donald trump accepted the president nomination. Warned the nation besieged by crime and dangerous internet dangerous interests. Donald trump we must work with all of our allies who share our goal of destroying isis and stamping out islamic terrorism, and doing it now, doing it quickly. Were going to win, were going to win fast. Harsheste saved the rhetoric for Hillary Clinton. He said her legacy is death, destruction, terrorism, and weakness. Hillary clinton will try to recapture the attention of voters after a week of the Republican Convention. She is set to unveil her choice of a running mate as soon as today. It wasnt familiar with the plan says the announcement will be made by a text message to supporters. One of the leading contenders is senator tim kaine of virginia. He is said to have the year of former president bill clinton. Aviations greatest mysteries may forever remain unsolved. Officials say the hunt for Malaysia Flight 370 will be suspended once the current search area in the indian ocean has been scoured. Malaysia, china, and australia all admit the likelihood of finding the jetliner is fading. The boeing 777 disappeared more than two years ago. Global news, 24 hours a day, powered by 2600 journalists and more analysts than 120 news countries. Im tailor rigs, this is bloomberg. Jonathan its been a strong earnings season so far, but its enough for the rally to continue. As for bonds, could be beheaded in lower . Be heading even lower . Those stories ahead, this is bloomberg. Jonathan from new york city, this is bloomberg. Cityurprise index at climbed to the highest since january 2015. An upside surprise for serious Economic Data in the United States. Joining us from minneapolis is doug ramsey, cio at a live so group. We have seen this story develop over the last couple of weeks. The data has been good and the equity markets have performed. Are we in a place where good news is good news . Doug i think it could be, for a while. Bearish, io the year was on the show a couple of times discussing those views. Bearting a fullblown market. We didnt quite get there. Unless you were invested in small caps and e. M. And foreign stocks, those groups were down considerably. You could argue it was an internal bear market, with small caps down 26, the value line index and equal weighted index down 20. The dow and the s p held very firm. Justice move off of february lows, even more recently, off of the brexit lows has been very powerful and broad. Just from historical perspectives, when you see the indices breaking out a new heights, confirmed by all of these various measures, thats a positive in immediate turn indication. It would certainly indicate that new highs are likely over the next four to six months at least. I think the turn and Economic Data is part of that. I think that is maybe what the stock markets move here in the last five months has been discounting. Andnger Economic News better earnings perhaps in the second half of the year. Jonathan you expressed that bearish call, he went long bonds anymore long gold. I wonder if the equity market has become the real pace rate of 2016 . 11 people bearish, its not working out. Is this set to continue a lot of people bearish, its not working out. Is this set to continue . Every . Are you hearing me . I think we lost him. How many guests have we had sitting around the table saying bearish, bearish, bearish, and stocks keep rising. David i wanted to hear what went wrong with his production prediction . What were the factors that led to this bullish market . Jonathan it tells you that people were to bearish on the u. S. Economy, and weve had a series of upside surprises taking us back to january 2015 in terms of strength to read with that, the fed has gone from four hikes to none, everyone has to casually whats happening. Alix its going to lead to equity risk premium. The global x we equity risk premium is 5. 3 . The longterm median is 3 . Just goes to show how cheap stocks are in relative value to bonds. Bond risk is like negative. Its hard to look at that and say dont buy stocks. David how much of this is people who really want stocks or dont want bonds . Its been bond proxies in equity markets. The equity traders become bond traders, bond traders become equity traders. Its been bond proxies in equity markets. When you have a bond market is dominated by this massive buyer who is completely insensitive to where price is. Thats the central bank trade and whether its ecb or the doj. David whether this attitude will question carry over into the cyclicals . If you have high dividend stocks, will people go over in the cyclicals are riskier . Jonathan the conversation is, what happens if you have a high valuation unsafe assets, and what happens when they selloff . The playbook from 2013, when we the move for 100 basis points are u. S. 10 year yield over several months, equity markets were absolutely hammered. And stocksbonds moving in tandem, what if it moves in the other way as well . Alix that brings into the correlation, what do we look at . Correlations have been breaking down. What we have seen is as you have the decline in the u. N. As we saw back in august and december, you have seen the selloff in u. S. Equities. Now you see the u. N. Continuing to selloff versus the dollar, but the s p grind higher. Its not this correlation thats breaking down, its also the correlation of oil and stocks. Oil has been getting hammered the last couple of days and equities havent really responded. What we look at . Jonathan august, january, when we have the selloffs, the chinese currency was weakening, and it wouldve been council outflows as well. Goldman sachs zynga weakening currency has triggered an increase in the amount of capital outflows. But people are still pretty calm. Want to bring doug ramsey back into the conversation, great to have you with us on the program. The question of china, its been a weaker currency story, yet equity markets and risk sentiment has held up. Why do you think we are seeing what we didnt see in august in january . For one, we watched the Commodity Markets pretty closely. You have seen a very nice rebound in industrial commodities. Whether it is chinese demand, which some have speculated is artificial, were emerging markets demand more broadly, inre has been a nice low put in industrial commodities. In in industrial commodities. I think it is supportive for this bounce in emerging markets, china in particular. We tend to view the rebound and the confidence associated with it as legit. In our quantitative Industry Group analysis, we have seen the materials groups chemicals and so forth, make a serious move to the top of our rankings. Jonathan we begin with a very bearish call, and how it didnt bear out. Is china factor a part of that as to why it hasnt played out . People are more accountable now with the situation . Doug im not so sure. We had a lot of bearishness associated with that low in february. As i mentioned, you would argue if you looked at the average stock and a smaller cap stocks that we sort of had almost an internal bear market. This economic recovery has turned out to have more longevity then we suspected. When you get down to an Unemployment Rate as low as 4. 7 in may and then ticked up just a percent, thats full employment. We are starting to see some wage pressures. Nothing imminent that we are seeing that would indicate the economy is on the verge of a downturn. The fed has just been incredibly dovish thrall of this. Multiple windows to lift rates, get us towards the 1. 5 , 2 funds rate. We havent seen that. The feds incredible dovishness plays a link weve had. David thank you for your patience with the problems with audio. Doug ramsey. Jonathan the opening bell coming up in four minutes, we will bring you that right here on bloomberg. Futures positive, this is bloomberg. [hip hop beat] olympics 2016, let me get you on my level. So you never miss a moment, miss a minute, miss a medal. Why settle when you can have it all . Soccer to wrestling. Track and field to basketball. Fencing to cycling. Diving to balance beam. All you have to sa is, show me, and boom its on the screen from the bottom of the mat, to the couch where you at . Show me the latest medal count xfinitys where its at. Welcome to it all. Comcast nbcuniversal is proud to bring you coverage of the rio olympic games. David this is from new york, bloomberg. I am Jonathan Ferro. Things are stable, futures up. 4 up. 1 of 1 and inequities in london. A fourtheaded for straight week of gains, potentially the longest winning streak since march. Switching up the board, i will go through other Asset Classes. Sterling weaker, 1. 31 against the dollar, down after an ugly pmi. And a yen stays at 106. 07 weaker japanese yen, the dollar up. 25 of 1 . Yield is up three basis points, 1. 59 yield on the u. S. 10 year. Lets undressed some of the markets and get to julie hyman. Julie it is a summer friday. Happy summer friday. Again in the market this morning a gain in the markets this morning as we are in the thick of the earnings season. All three averages are up slightly, so we will see what happens over the session. We are focusing on a lot of individual movers and the first big story does not have to do with earnings but with the potential deal as verizon is now yahoo sbidder for core assets and they could pay around 5 billion for patents that yahoo holds. The bidding process as been going on for quite some time and there has been speculation about who might read the winner and speculation about the price as well. Perhaps he will see more of the move when we get the actual details. That could come as soon as next week. Looking at General Electric this morning. The Company Earnings beat estimate but industrial profits fell. And that appears to be weighing orders also and declining and that is weighing on the company, even though some of the other metrics to not look as negative. Chipotle is one that we have been watching after that Company Seems to have fallen more than estimated and the shares have turned higher, interestingly enough. They said last night that things are starting to improve to some extent and it looks like theyre bouncing around quite a bit. American airlines watching as well with the Second Quarter profit topping analyst estimates benefited from lower fuel prices and american did announce they were cutting capacity. Shares of about by 3 this morning. Talking about earnings, i think 125 of s p 500 companies have reported a sales rise of 1. 4 . Things would only get better from there. Is that the truth . Richard joins us from london, blackrock global chief investment strategist. The talk was First Quarter was the worst and you had stronger dollar, lower oil prices, what happens now . Richard we think we will see negative earnings again and that the bigication, but surprise so far has been the sales number on the top line, the revenue, which so far comes out somewhat better than expected, around 60 of Large Companies that have reported so far beating in terms of revenue. The reason that is important is looking into the second half of the year, if we get positive growth earnings coming through, that has got to be driven by the top line and wages are picking up and that will put pressure on margins. Francine you have to alix you have to look at the and the global risk premium is at 5. 3 . Tie the two together for us. Richard we believe in a low return environment Going Forward. It is about relative return, so the expected return on equitys now on a mediumterm basis, which is what the equity risk premium toes you about, nothing about shortterm that medium, reasonable,ns are and low competitive, particularly in the u. S. At 17 timesing earnings, i byte standard, but the low equities look attractive you compare them to the low returns that face negative returns and you are getting on fixed income assets but you are taking significant risk of buying into riskier assets. Yes, equities look attractive in the mediumterm horizon, but you want to focus on quality, dividends, stable source of returns Going Forward and you do not want to be buying cheap and highrisk assets when youre in the 17th Year Economic expansion and when valuations are high. Jonathan a conversation we have had is on the brakes on the correlations. At the start of the year, if you told me where crude was, i would tell you what Everything Else was, long, equity, but that doesnt seem to be the story at the moment. What are your thoughts . We have a stronger dollar story playing in, a weaker commodity story, crude down around two month low, and what does that become a factor again, if i dont if at all . Richard i think you have that break down and the correlation because you have the initial flood of money coming in to risk assets into energy and driving and i think investors have taken a step back to look at fundamentals and where they are. It looks much improved. You have seen supply constraint, some increase in demand, particularly for china, and our expectations is that oil will 40 dollarsow in the to 50 range and that is important because a new put that together with the fed on hold until the end of the year, december, we think the earliest we would like to see fed rate hike, and some stability in the chinese economy, that creates a more attractive environment for emergingmarket assets, particularly emerging debt. David youve mentioned wage pressure. Is it too early to be thinking about the possibility of inflation returning . There are some indicators that suggest may inflation is creeping up. Richard we have seen a number of our own indications ticking up, indicating you are getting some gardening of inflation in the u. S. Economy. It has been concentrated in the services sector, but we have seen some evidence of that spreading. At this stage, that is good news, signs are entering sustained period of expansion, inflation and it is a good thing. If you look at the real risk, it is deflation. There are no signs that those pressures are getting out of control. Darin mind that brexit is a global shock on the rest of the world and we have seen a strength on the back of it, and that should reduce concerns that inflation will get out of control. We think the fed is on hold until december. Jonathan in terms of appetite for bond market without a price with the price right now, we saw a Strong Demand yesterday, the stylist in about one year. We saw weak demand on threeyear notes and 10 year last week in an auction. Are we starting to test investor levels . At these richard i do not think so. When you see bond yields back up, particularly in the u. S. , and we have seen it a number of times, aco wave of international flows coming in to buy u. S. Assets, so bonds on the expensive and valuations, whatever metric you look at, but when you look at the level of the u. S. Yields, they look attractive compared to the , sods and europe or asia every time you see those yields rise, you have investors who want to come in. Many Global Investors and Pension Funds are underfunded every time the seat yields rise and they see it as a buying opportunity. David richard turnhill, thanks. Alix turning to our other big story of the morning, verizon is nearing a deal to buy yahoo for an exclusive talk and verizon is tod to have upped the deal 5 billion. It was 4 billion on the high end but at 5 billion, it includes patents. Joining us is paul sweeney, the media analyst and on the phone,. Ene munster we spoke to earlier and you said, there is a clear catalyst for yahoo to get the deal done before november and looks like it could be done in the next few days. Is the verizonyahoo tie up the best one . Jean great reporting gene great reporting from bloomberg and time is of the essence here because the real value here is unlocking yahoo the cash free and transaction, and they need to get that done before the election. This is a good outcome and some of the stuff that you have been reporting on, the alignment of what verizon was doing would make a ton of sense. Alix in terms of the 5 billion number, that comes from our reporting, the original bid was 3. 75 3. 7 5 billion and was that number surprise to you . It at over 6 billion, so that number is a little bit lower than where we take it will ultimately come out at, so we are at 6 billion. If you look at the tax and if its benefits for yahoo japan and alibaba, that is about 10 billion or 11 billion tax benefits, so 1 billion. Or there doesnt make much of a difference for yahoo shares. David lets assume the deal goes forward, how do assets fit together . Why is yahoo going to turn around . Paul it has been on secular decline for several years and revenue,19 decline in where world when it is 15 to 20 , so share loss has been extraordinary. You are putting it together with aol assets, another struggling internet darling of a generation past, but you are putting two very big audiences together, two big players in the media and Digital Space and youre putting them together with Tim Armstrong, who i think has done a good job turning around a well, bringing it within the Verizon Family and trying to leverage some of the reach that verizon has. By drinking a lot and yahoo together five bring gain aol and gathered together, or ad dollars are going there and aol was one of the leaders and there are some dollars on the asset side but i think tech is a driver. Advertising, mobile advertising revenue, an point. Nt we have two behemoths in the business, facebook and out for is putting yahoo together with aol going to be enough to fight against that . probably not but enough to improve where yahoo s trajectory is when reporting about the disappointment on their advertising business. I think you have to look at they have to take smaller steps first and i think writing the growth of their ad business is the first order and they will never really truly compete with a spoke and alphabet. Facebook and alphabet. Stocks are trading higher, where does this leaves the other bidders like at t, quicken loans, and other pe firms . Do we see more mergers been in the tech space . Gene i think so. Anderick bad tech advertising has been a big disappointment, and i think the companies that disappointed and stocks are disappointed that you are seeing some consolidation that started with a low couple of years ago, and i think we could see more of that. Ultimately, i look to the Companies Yahoo is a unique asset, but i could see them doing other things and there has been so much carnage of the last two years. 17 for the up by whole year, slightly higher. We knew the deal was coming. Did you have to rewrite their stock over the next few days or while we wait for that to close . Target, but i 40 think what is more important is that if they do this transaction, i think it unlocks up to 15 in value and a taxfree basis, so getting this under the taxfree basis is a big deal and we have talked about that being upset to the share price. In anticipation of this being a taxfree action. Will at the larger perspective for verizon. Verizon is essentially a pipe line. They delivered the pipeline and then they move to aol to buy content and how does this work for verizon . Moneyey trying to make off of content or does this help them in the pipeline part of the business . Paul i think it helps in wireless, they are that mothership for verizon and when they made the aol bet, they were making the bet ill bring in more content onto the wireless system, a bigger audience to monetize that. Historically, it is not just with wireless traffic but they are thinking video, and that is one of the things that aol brings and what yahoo would andrly bring video content that could drive that over the Wireless Network. They have introduced an online video product or wireless video product that has not really gotten traction, but i think they have enough faith in Tim Armstrong to drive the wireless content side of the business to give the more capital to go out and buy yahoo and see what he can do it the assets. David theres having the pipeline give them an advantage in the content area . For example, facebook or alphabet . That it is an advantage facebook and alphabet does not have and you have seen verizon tried to get exclusive content with nfl content. That is an avenue that we have always believed in yahoo , the content aggregator, and you dont have much but it generates real content and yahoo sports tends to be a good segment, maybe they could leverage that into some of verizons network. Verizon is probably one of the first areas that i would try explode, unique content in yahoo and try to sell some of your subscribers to get that content. Alix to some specifics we have learned about the potential deal at the 5 billion price tag, it would not include patents, but we are not clear on the real estate. What would be the best kind of looking deal in terms of real estate and patents . Investors, andor we think about this more simplistically, just a deal that could unlock the value of alibaba and yahoo japan and the taxfree basis is the outcome. The real estate and the patents are almost rounding errors in the bigger picture. Given the opportunity for a taxfree transaction, so i would just say that i would look very positive if the deal could get done and they could do those two pieces on a taxfree basis. David just given my past, i have to ask from the Employee Point of view, when you hear you are being bought, what does this say . What do the yahoo employees think today about the deal . Ene theyre probably concerned about their job, unfortunately. Tends to be ruthless in terms of what happens with the existing base. The good news is yahoo has been through the downsizing for the past for years, so a lot of that has already happened, but there is uncertainty and probably half the people who feel good that yahoo will be around a while because there is always concerned that the longterm i know look so good for yahoo , so it is probably more concerning than comforting for most employees. Alix great to get your perspective. Thank you. I started of 40 for yahoo . Gene munster joining us from piper jaffray. Would the synergy in a good 12 months . Paul i dont think this combined company could really be any kind of competitor to also that of facebook. Those are two of the dominant players in the marketplace, but advertisers will tell you they look for credible alternatives, and even Sheryl Sandberg of facebook said, if you are a big brand appetizer and you want to spend a dollars on the internet, there are two places to go, off of it and facebook. Tim armstrong thinks he can build a third alternative and he is taking small steps, one with aol, one with yahoo , but it is nice having the firepower verizon and the Balance Sheet of verizon and the wireless customer and man behind race. That is pretty Good Building blocks to trade a third viable option for online advertisers. Alix all are less than 10 billion. [laughter] thank you. Bloombergey for intelligence. Busy day in terms of media m a. Jonathan coming up, less than 1 chance the u. S. 10 year yields can reach 1. 1 . That is next on bloomberg. 18 minutes into the session and stocks stable across the United States. From new york city, this is bloomberg. David this is bloomberg. I am david westin in the Hewlett Packer enterprise screen them. Coming up, the pandora ceo. Jonathan this is bloomberg. To the bond market we go, the where where the u. S. 10 year. S heading even lower they believed they could fall below 1 . Certainly it could. Ultimately, what is in our numbers is the idea that the Investor Base is going to start to smell some key on the horizon some q. E. On the horizon. It is possible investors could anticipate additional qe from the fed good our numbers are correct on the Global Economy. Jonathan joining us now is the thomas a. S. Strategy great to have you with us. Morgan stanley drawing out there at 1 on the 10 year and then economic and new economic model to get tweaked and give me the why of 1 . We wanted a nonpolitical framework to look at treasury yield coming came up with this adjusted fair model. Typically when you look at any fair value model, you put it together based on gdp, inflation and other metrics. You get the value of 285, said the is that we adjusted fair value model to incorporate global forces, ecb qe and potentials for more cutie out of japan, so we made an adjustment to that. You get a fair value of the treasury yield. Jonathan how to calculate fair value when you have a buyer in the market completely pricesensitive . How do you calculate the fair value around that . Toarda we did not want abandon the existing framework. We think there is some value to be had and the market does trade a little bit based on fundamentals. In the last two weeks, we have seen 10 year yields move from historic lows up about 20 basis points on the back of strong data, retail sales data, so there is some value at looking at markets. Jonathan the treasuries are playing out to some extent with twoyear notes and the fed is going nowhere soon and rates are at record lows. Our bond markets completely detached from fundamentals . Subadra i do not want to believe that. Movel like for significant lower in yield you need a paradigm shift and you need the fed to start begin about beingng away from high to on the ezine. We do not think the Market Conditions warrant the move. Jonathan you have pointed out the global forces. In east tosis points become a bad this paradigm shift of negative rates, benchmark rates and in the eurozone and now japan, and you have curves deeply negative. We have a paradigm shift. Subadra everywhere else in the u. S. Andept the the key between the u. S. And the rest of the world is that one, we have higher inflation. Inflation is a big concern for europe and japan. The second is we are not currently engaged in qe and that may change in the next 2. 5 years but i do not think we are there a paradigm shift to happen, we need more than just the world engaged in qe. Jonathan what if the ecb does more, the bmg does more . What if it comes from elsewhere and not the fed . Subadra that is a risk scenario. I think it yields continue to grow lower, and the thing i am worried about as far as the yield concern is the coupling andgen decoul because there is more qe out of the u. K. , that will put pressure on treasury yield. Jonathan you put the fed value up around the tenure, what is the call . Call in fair value could be Different Things . What is the call . Subadra 410 year share yields decline to 125 because we think that it is a big issue and we have little clarity of what will happen on brexit. After that, i think this potential, given the general economy that we had back into 150 by year end, so we are saying that treasury yields will be in the current range until the end of the year. Jonathan fantastic conversation. Thank you. 1 chance, guys, that we could get anywhere near 1 . Alix i am a little bummed out now. David nice way to end the program. Alix i will Pay Attention to what happens to yahoo and verizon. Verizon earnings are on tuesday, but a lot of great reporting. David absolutely. Fascinating. Over the next 72 hours. Over the next hours, we are likely to have the Vice President ial choice from Hillary Rodham clinton. It is down to the candidates. They will try to shift the republican attention to the democrats. Jonathan much more excitement in the session, about 26 minutes in. That touch softer, down about one point 1 on the dow jones, and from myself, david westin markets isloomberg up next from new york city. This is bluebird. This is bloomberg. It is 10 00 a. M. In new york and 3 00 p. M. In london. From new york, i am vonnie quinn. And im nejra cehic. This is bloomberg markets. On bloomberg television. Vonnie we are to take you from San Francisco to cleveland in the next hour. Here is what were watching. Donald trump promises to bring back jobs, focus on law and order, and fix a broken establishment. Can a speech on the country in disarray with over voters in a general election . Vote wreaking havoc on the u. K. Economy. A key measure dropping to a sevenyear low. A key measure dropping to a sevenyear low. His the risk of recession and increasing danger. Vonnie verizon is said to be