Decent day. The dow is on pace for its best day since april 25, being helped , plus Manufacturing Index energy and the banks. The nasdaq down nearly. 2 . Thereason it matters is on open the nasdaq had been up about. 6 . Dipping declining and down as much as. 4 at the lows. Now lower. A continuation of the tech selloff we saw in june. Still not well explained by investors. Some had been saying it could be profit taking at the end of the last quarter. The quarter is over and we are still seeing big losses, all down in a big way. You have earnings season ahead. Last week, analysts told our team nothing fundamental has changed. What does seem to be having is a sector rotation out of tech. It is important to watch whether this is a trend shift. This is the s p 500 and the nasdaq in white. Out of the election, we see a beautiful uptrend for both. On june 9, that was the last time the nasdaq hit an alltime high. The last time the s p 500 hit alltime high, june 19. The nasdaq had its first down month in june since october of last year. If the weakness continues, it will be worth watching. It could mean perhaps the strong half for the nasdaq could be coming to an end. A bright spot. The 10year yield up five days in a row, helping the banks. They are up more than 2. 5 . Impressive gains offsetting some of the tech weakness. The dow again having its best day since the end of april. Scarlet scarlet thank you for that update. G20 leaders will be meeting on friday. Chancellor merkel will be having a premeeting with President Trump. She is urging everyone to seek a winwin. Ise with what we can expect john from london. Great to have you with us today. Before these meetings, we have Angela Merkel suggesting Donald Trumps position on things like trade, we have frustrations between President Trump and president xi, which meeting is going to be the most pivotal for private President Trump . The one that will attract the most attention in the u. S. Will be his meeting with vladimir putin. We dont know exactly what form that will take. Will it be a brief pull aside conversation or a much more substantive sit down meeting that lasts an hour . We dont go yet what the conversation will look like. That is going to be the most eyecatching one. There are so many issues around the world that they are all important. His meeting with xi jinping will be important with the tensions in east asia. Theres chatter perhaps the trade war is back on the agenda. Every single meeting he sits down for will be crucial. Julie a potential flashpoint is what you are saying. I want to get back to the point you were making on russia. Is cautiousration about formalizing this. Russian side, they want to have the appearance of warming relations. The comments from the kremlin today suggest they recognize the political backdrop and pressure as a result of the Russian Investigation have made that tough. There is for station coming about theremlin attention trumps ties to russia have been garnering in the u. S. Press. It makes it difficult for russia to do business with the United States. There are a host of issues russia wants to get down to brass tacks over. Syria, ukraine, north korea. Even the issue of a complicated country houses. Obama imposing sanctions on russia that confiscated some of the Properties Held by russia on u. S. Soil. It sounds like a small thing. Theres even a question about whether they can get small pieces of Business Done by questions around these Russian Properties on u. S. Soil. Across the board from the kremlin perspective, theres a lot of frustration, despondant and see even that they will despondancy that they will be able to get relations on a steady footing. About theant to ask phone calls President Trump had with the leaders. It sets the scene for the g20 meeting. Tell us about what the president hoped to accomplish and what got done. We dont really know what got done yet because the details of the conversations tend to be closely held. Clearly, President Trump is very focused on the north korea issue. If you look at the trajectory of his tweets over the last few weeks, it is an issue that has come up more often. And then there is the trade issue that is a constant refrain in trumps thinking. When it comes to japan, that is something he will want to sit down with them on. If you look to the runup to the g20, if you look at how Angela Merkel is approaching this, she is actively coordinating the onnese and possibly japanese Climate Change and a commitment to free trade. The president will find most of the economic superpowers lined up against him in a way a u. S. President has not seen in decades. Scarlet that is a good point. Another point Angela Merkel made clear as well is the difficulty of getting everyone on the same page, especially after the u. S. Holdout of the paris climate accord. How much of a cloud will that be hanging over the proceedings . It is important to point out merkel does not want this to end in acrimony. She is looking for areas of common ground. To certain extent, the argument over paris probably happened at the g7 in sicily. One thing to look at is the relationship when it comes to the Climate Change issue. Saudi is not a big fan of renewables. It is conceivable you could see saudi making noises at the g20 that would suggest they are sympathetic to trumps view on paris. It is an easy win for them. It would be an easy way for them to score political points with washington. When it comes to the climate issue, it will be there for sure in the background is a sore point with a lot of leaders. I think the damage has probably been done. Angela merkel is the chairwoman movebe anxious to try to the talks to areas of common ground. What kindd julie of statement do we get out of g20 . Where can they get the winwin from is Angela Merkel suggested . I think your face says it all. I want to ask about the underlying politics for many of the countries. China is heading into committee meetings. We have the abe results in tokyo, painful for president abe coming up to the general elections. Everyone has their own political pressure points coming into this meeting which also plays into their positioning as we approach it. I think if you look at the g20 statements we will get at the end, it probably will be one of the blander statements we have seen in recent diplomacy. We have the unprecedented g7 statement where the u. S. Stood outside and was a part from the consensus of the rest of the group on Climate Change. There are areas Like Fighting terrorism where you can get common ground. There is recognition from the powerful leaders that the age of austerity has probably come to an end and more needs to be done to assuage some angst that have propelled the likes of donald trump to power. On fiscal policy, perhaps you could see coming ground as well. You are right. The areas are pretty limited. I think it will be a real test of Angela Merkels diplomatic skills to come out of this with a statement that looks coherent at the end of all of this. Julie we shall see. John fraher, executive editor for international government. Thank you. There will be many days dedicated to this. Scarlet you wonder whether they will be able to get the cohesive message. Julie saying a lot and saying very little. We shall see. Another check on first word news with mark crumpton. In france, president macri on is promising to prevent terrorist attacks. He said today he wants to lift the state of emergency in place since 2015. He also plans to toughen permanent measures aimed at fighting islamic extremism and other threats. In germany, at least 18 were killed when a bus carrying a Senior Citizens group rammed into a truck and burst into flames. Police say another 30 people were injured. The accident happened near the border with the czech republic. Poland wants assurances from washington when President Trump visits this week that u. S. And nato troops will remain on the ground as long as russia remains a threat to their national security. That is according to the Associated Press citing polands foreign minister. Soviet bloc nations are concerned about increased Russian Military activity near their borders. In cyprus, talks aimed at unifying are entering the second week. Officials trying to crack the issues that have blocked the deal since cyprus was divided in 1974. A main Sticking Point is what will happen to the more than 35,000 troops turkey has on the ground. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Scarlet coming up, elon musk says they are ahead of schedule on production of the model 3. Find out when you will be able to get one of their most affordable vehicles. From new york, this is bloomberg an. Julie this is bloomberg markets. Tterly. Lia cha scarlet im scarlet fu. The deal closed today creating a powerhouse second in size. Tradingcompany begins wednesday. In london, four former barclays executives say they will plead not guilty to fraud allegations. Among those accused, the former c. E. O. Musk says the new model 3 electric car asked all regulatory requirements two weeks early. He says the hand over party for the first 30 customers will be held july 28. It will be teslas cheapest vehicle yet. The base price is expected to be around 35,000. For more on tesla and auto sales , lets go to the Detroit Bureau and david welsh. Give us more perspective on this tesla announcement from elon musk. He has been quiet thus far on the model 3 and the schedule. Today indicates everything is ok and ahead of schedule . Two weeks ahead of schedule is not that significant. Ist is more significant whenever elon musk says a car will be out in december, it ends up being months or a year later. The significance is it will be on time. He is going to fulfill his promise. Shares are down. I suspect because it will be 20,000 cars they will build in december, which is not out of line with what he has said in the past. Investors may have been hoping for a bigger surprise on the upside, may be that he would be building more and see more cash in the door. They will be on target with what and when he said he would do. Julie expectation management, always be late and when you are on time people are happy. S. U. V. s and the pickup trucks are doing the heavy lifting on sales. Better than analysts were expecting. Better than people thought. It was supposed to be down, and it is. It is not a great month but not bad. As much as that sounds onehanded, on the other it is significant because investors have been wondering if we will see the beginning of a slide in auto sales because we are down from last year. Last year was a record. We are seeing solid and stable sales. A lot of the drop is in passenger and compact cars which do not make the carmakers money. Many lose money. Those are vehicles bought by rental car agencies. Some inw you have various stages of restructuring. They are trying to thin out the fleet. They are not buying a lot of vehicles. The vehicles that are selling well are sold at retail. They are pickups and s. U. V. s selling at well over 30,000 and command big profits. Carmakers can make a lot of money in a market like this. Can they grow profits . That is up to how many of the big vehicles and luxury cars they sell and how they do on cost. But they can do pretty well in this market. Investors are realizing that in pretty happy. Scarlet that is why so many people look at auto sales as a leading indicator for Consumer Spending and sentiment on the economy overall. General motors reported a bigger than expected drop in june sales but is also higher. Why is the market giving g. M. The benefit of the doubt . A lot of the decline was in fleet sales. Those cars are sold in bulk on contracts. The command lower margins. They also end up in the used car market which puts pressure on new cars because they have low miles. G. M. Is doing less of thats what helps their overall performance. The vehicles selling well command a nice profit margin. G. M. Tors are saying what is doing the market looks good. Scarlet david welsh, thank you for that perspective. Julie Goldman Sachs is reviewing its commodities trading business after a slump at the start of the year. From new york, this is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. Julie i am julia chatterley. Goldman sachs is reviewing its commodities business after slump in the first half of the year. The performance is said to be off to the worst start in a decade. Joining us is michael moore. Great to have you on. They have always said it is going to recover. Other banks have dropped out of the sector. Is this a structural change . Are they just talking about a business that is struggling . It could be both. Certainly, i think the question of whether it is a structural change is more front and center. The bet was it would come back in there would be fewer people around and they would grab more of the share. That has not happened so far. If you look at the industry last year in 2016, revenues from commodities were about half of what they were in 2010. 2007 was even better than that before then. This business has been on a steady decline. There are less opportunities because of regulations that have come into play. I think that is spurring this review. Is personal for Lloyd Blankfein because this is where he began his career. If they decide we cannot take this anymore, will there be criticism of him for staying in too long for the wrong reasons . I think you could see some of that. A lot of people at the top of the house grew up in this business so it is somewhat in their d. N. A. To be in commodities. I think it would be unlikely you would see a fullscale pullback, partly because of that reason. But you could see a lot less capital dedicated to it, depending on what they decide to do and what they see as opportunities. It could be reshaped. Scarlet talk about how this is catalyzed by Goldman Sachs last quarter. That was a surprise to people. When pressed on the Earnings Call about what drove that, they gave different reasons. I think it was a variety of factors. Commodities were definitely a piece of that. Based on our report in the second quarter, it was not outstanding either. The whole first half was rough. I think that is driving it. We will see how much is a review that could structurally change typicalsiness or just a how can we do things better. But i think it is driving performance in the First Quarter definitely. Aboutt two julias point goldman perhaps staying in too long, other big firms have largely pulled back from commodities trading. Certainly more than goldman. J. P. Morgan and Morgan Stanley have pulled back. Some of it was forced by regulators. Commodities businesses are less attractive and you cannot even be in parts of them anymore. That has made the business a lot different. Julie . Quickly, we have seen management shifts in the commodities business. How important is that . You have had some talent leave. Maybe that is playing into their thinking reviewing the opportunity here. Julie great to get your insight , michael moore. Scarlet coming up, more on the changes reshaping global banks. Theprofessor weighs in on stress test and banking regulations in the new trump europe. From new york, this is bloomberg. Whoooo. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if there was a single site where you could find the right hotel for you at the best price . There is. Because tripadvisor now compares prices from over 200 booking sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Worldt from bloomberg headquarters in manhattan, this is bloomberg markets. I am scarlet fu. Julia i am julia chatterley. Lets check on trading. We are. 7 higher on the dow jones. Softening in the last 30 minutes, off the record highs. 4 . 4 . Higher by lets go to abigail doolittle. Abigail the tech heavy nasdaq again down today, not even being helped by the bloomberg dollar index that maybe a tailwind for the dow and s p 500, on pace for its best day since june 15. Behind this strength, we did have a betterthanexpected manufacturing report for june. We do have once again yields rising. This is a fiveday chart of the 10year yield, up five days in a row, the First Time Since the end of april. Asabout 20 basis points bonds selloff. It is not clear what is behind this. We did have a bigger move down in yields earlier. Lets look at a chart of the technicals on the 10year yield. We have been looking at this for quite some time. Out of the election, we had the big backup in rates and then uncertainty as the 10year yield stagnated. In april and may, started to break the bottom of the range as investors became more cautious about how much the fed will raise rates. Below the 50day moving average in yellow. In the recent move up, the 10year yield back up. The question is whether this is a true move higher or a pullback. Interesting to note here we are looking at a diamond bottom. It has a precise target of 2. 36 . If it does move to those levels, it will be interesting to see whether the move higher holds. Taking a look at the commodity complex across asset classes, interesting action. Both oil and wheat are sharply higher, not affected by the strengthen the dollar. Typically Dollar Strength will hurt commodities. Look at gold. Dollar strength is hurting gold, down 1 . On pace for the worst day since the end of november. The 10year yield is trading higher. That could be pressuring gold. Crude up 1. 7 , up for the eighth day in a row. The First Time Since last year. Investors seem to be forgetting about the Global Supply glut. Up nearly 4. 5 . Analysts say weather plus a wheat and alsofor soybeans. Interesting to see that up again. Scarlet a lot of big moves in the commodity complex. Theyre getting our names straight. Lets focus on the banks. Financials up almost 7 this year. A source of the latest boost is the successful passing of the federal reserves annual stress test. For the first time ever, all 34 large banks passed. Even so, the fed wants to increase requirements. Professor scott joins us from massachusetts. When i look at the bank index, not only has it gained substantially this year, it is also on a fourmonth high. The reason given is the successful passage of the stress tests but also rising rates. Why does that explanation fall short . A couple of reasons. First of all, the only reason these banks passed the stress test is they were required to have extremely high levels of capital. Those high levels of capital restrict Economic Growth. In 2017 gdpassumed would go down by 10 . It has gone up by 2 . The stress test assumed also that unemployment would be 10 . It is actually 5 . So the banks have to have enough capital to survive these extreme scenarios, the other extreme. These high levels of capital restrict the amount of lending they can make, and therefore ultimately Economic Growth in our country. Pendulum hasy the swif moved too far. Have you sell it to a public that still remembers the concerns about the financial crisis . In recent times, you have wells fargo. There is a lack of trust in the banks. To send a message they need to hold less capital is a tough one. The banks should be adequately capitalized. How much is enough . If you look at the treasury report two weeks ago, the treasury is going in the opposite direction. The treasury is questioning the high levels of capital. They are saying the stress test scenarios need to be reexamined. The secret model which predicts the level of losses needs to be opened to public scrutiny. They also suggested the qualitative part of the test has less importance and the test be done every two years. The treasury is recommending things that would reduce the level of capital, and the fed seems to be going the opposite direction. Was very concerning was the fact that last week governor powell who is in charge of supervision at the fed testified before congress that they were considering raising even further the required levels of capital to pass the stress test. We have the fed continuing on the path it has been going on requiring more capital, and the treasury saying maybe it is time to relax what is already an extreme amount of capital. Julia why is the fed getting this wrong . Why are they continuing on the same path with other voices saying we have gone far enough and need to reduce some of the Capital Health and push capital held and push this money into the real economy . Why is the fed not getting the message . The fed is continuing the policies and leadership of dan tarullo who was in charge of this most of the time since the financial crisis. The Trump Administration does not yet have its own people at the fed. There are three vacant appointments. There have been hints about who will fill them but they have yet to nominate anybody. Until those people get in, they will not be in a position to reverse this direction. Scarlet we have heard red cross Randy Quarles will be the president s picked for supervision of the fed. That has not happened yet. What does the delay mean for the overall effort to loosen bain capital and the effort to reduce bank capital and the effort to reduce the Regulatory Burden . He would be a great vice chair. We should look forward to him being there. That has not happened yet. Randy himself cannot do it. He needs other people there as well. None of the appointments have been made great it is extremely highpriority this be moved as fast as possible if we want to achieve the Economic GrowthPresident Trump is promising. Test, after the stress number of the big banks are paying out 100 of net revenues. They announced buybacks and higher dividends. Does that worry you . Do you think that return of capital should be dependent on some element of lending . You are laughing. How do the banks get capital . They have got to show a return on it. They are only proposing to get back to the shareholders capital that is even over the very high levels the fed is requiring. I am not concerned at all. Sign ifthis is a good we want investment in the banks. Without investment, the banks are not viable. To theirresponding shareholders demands for returns. But they are only giving back capital over the level required to pass these tests. Scarlet there is an argument made that the supply of loans available for lending is not the issue. The issue is lack of demand and significant demand. Borrowing costs are low. Capex has not taken off. How do you respond to that . This is a multifaceted situation. The market may be dampening the demand for loans. That is more than possible. Over onee control piece of the puzzle which is regulation. We do not want regulation to be so high at extreme that if the market does what lending it will not get it. These restrictions have a bigger affect on small and Medium Enterprises than they do on Large Enterprises who go to the Capital Markets for funds, not the banks. Scarlet the effect might be amplified. Thank you for joining us. Have a great holiday. Julia i think it is interesting because the message from the banks is we want to give this money out. We cant. To go to your point about loans, price you have to pay to borrow money could also be prohibitive. Scarlet prohibitive is a good way of putting it. Lets get your check on bloomberg first word news with mark crumpton. Jinping is int xi china for talks on expanding talks with russia. Moscow and beijing will sign dozens of agreements to deepen cooperation during xis twoday trip. Putins advisor ascribed the relations is the best in history. Tensions between washington and moscow have flared. During a phone call with President Trump today, president xi is said to have cited negative factors hurting u. S. china relations including sanctions against a chinese bank over its dealing with north korea. In japan, it is a setback for Prime Minister shinzo abe. His party won only 23 seats in the election for the tokyo assembly, its worst performance ever. 29 of the 37ty won seats. A wave of scandals have hurt his support. The white house and downing street are rejecting reports President Trump would make a quick trip to the u. K. After this weeks g20 summit in hamburg which ends on saturday, july 8. The president is scheduled to visit paris on july 14. Syrias military says it has temporally halted combat operations in the south ahead of russiansponsored ceasefire talks with rebels. The announcement came after a large syrian rebel faction said it would not attend the talks because the government was not abiding by previous ceasefire agreements. The ehealth paltrow rounds four talks since january. Saysor john mccain continued close cooperation between washington and islamabad is essential for peace. Today during a meeting with pakistans Prime Minister. Mccain arrived in islamabad on sunday ahead of the u. S. Review of the afghan strategy. Global news 24 hour is a day powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is embark. This is bloomberg. Julia the dow touches a record high but is faltering in the last hour. We count down to the early u. S. Closing bell. From new york, this is bloomberg. Julia this is bloomberg markets. I am julia chatterley. Scarlet i am scarlet fu. It is time for insight with abigail doolittle. Abigail joining me to discuss todays session in trading action plus his trade for the day, scott, thank you for taking the time. What do you make of this . We have the doubt putting in an alltime high. The nasdaq started at higher, now at session lows. A big divergence, one that we saw for most of the month of june. What is happening . A big divergence. I am surprised at the magnitude of the selloff of the nasdaq in the last hour and a half. I did not think the gains this morning were going to hold. I certainly did not expect what we have seen. I think everyone is taking a cautionary approach at the end of the shortened trading day. Not much volume. Volume is as expected very light. Off day tomorrow. We come back wednesday. Wednesday and thursday could be volatile days ahead of the important jobs number friday morning which could give us some direction as to what the fed might do, depending on the wage growth number. Insightld give us good on the inflation situation. Abigail i have to press you on the tech pullback. Down not quite 5 from the record high. To wall street ers, nobody has an idea as to what is happening. Do you have an idea . Taking profitss off the table and putting it to other sectors that have been underperformers or have a better outlook for the rest of the year like the banking sector. I think this little runup in the banks has been overdone. I would be very cautious. I think it is a natural pullback in a sector that has been so hot. , likeing for entry points we will talk about google in a moment. About the russell 2000, the smallcap index . It stands out the fact it is only up 5 this year with the dow and s p 500 up 9 . The nasdaq up 14 . This could be worrisome. It is a leading index yet lacking. Does this indicate a shift in trend . We look at that three or four weeks ago and saw the same divergence. Then the russell went on a spurt for about a week, really outperformed the market. Now we are seeing the gap widen. I think the overall market is good. I would look for the russell to catch up a little bit over the next couple of weeks. Abigail turning to the fang, a big selloff in june. One of our analysts said nothing has changed fundamentally, just the rotation you have been talking about. What about earnings season . Is this nervousness before earnings season kicks off for big tech names . I dont see any reason to be nervous. And it outlier is google is because of the news coming out of the e. U. With the big potential fines. Technicals are still in place. I dont see any upcoming concern whatsoever with any of the projected earnings. Abigail interesting. Turning to your trade, a big gap in google. Take us through your trade and how you play that. Absolutely. You mentioned the gap. That is what traders look at when there is a huge move in the stock with no volume in between. That happened on googles last earnings in april. From 895 to 920 almost immediately. That tests a very technical marker. In this case, 920 as google retreated and broke over the last hour through it, that should set a nice nearterm support level. I am looking at that gap level here along with the recent pullback in google as an entry point. I dont believe google will rally back gangbusters. I am not looking for a 7 rally back. Im looking for the stock to settle down and consolidate in this area. Im willing to sell a put spread in this cap area. This put spread. 5 wide, i can collect 2. 25. I know what my risk is. I think it is a very good reward to risk entry point for a stock that has been battered and is down at this Technical Support area. If the stock continues to go down, i am ok with it because i do not mind owning google. Abigail good stuff. Strong risk management. Thanks for joining us. Happy fourth of july. Scarlet thank you so much. Tune in tomorrow on Independence Day for the historic boston pops fireworks spectacular live starting at 8 00. It will be exciting. From new york, this is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. Julia and im julia chatterley. It is time for the Bloomberg Business flash. Chrysler, and japanese automakers posting betterthanexpected results in june following five months of declines. Trucks were the big sellers. General motors missed estimates, calling 4. 7 . It is selling its organic yogurt brand for 875 million. By sale is required antitrust authorities. Walmart is upgrading its beef to angus. The highquality meat is available at Stores Across the United States at no additional cost to consumers. The move aims to help the retailer better compete. It last upgraded its beef in 2011. Lots of food going on, making me hungry. Scarlet it is around lunchtime. It is time for deep dives. I am looking at the brexit barometer. It has fallen to the lowest level since the day following the referendum. This is a custom index designed to show the impact of the separation process on the u. K. Made up of indicators from employment, inflation, growth, and uncertainty. There is plenty of uncertainty now. The lower the number, the weaker the perception of the economy. September of last year, we were at about 51. Mid to late april around the time theresa may announced the election, a study decay since then. Right now we are at eight. Pmi notus the latest so great. Julia that number will be critical, coming on wednesday. A positive the last few days . Financials. We have been talking about the United States it also europe. I thought this chart was fantastic. This is european banks raising the most money since 2011 from ipos, strengthening their balance sheets. Butch a bank and Credit SuisseDeutsche Bank and Credit Suisse, there was real concern they would not be able to raise the capital needed. They raised a combined 25 billion euros. Pointsber of data seemingly positive. Scarlet looking a little better. Julia european banks doing their best to raise capital. Scarlet the market close is next. It is an early close today before the fourth of july holiday. The doubt earlier reaching a record high. The nasdaq lower for the first time in six days. This is bloomberg. U. S. Hatd you miss . Rally, and tech shares are slightly lower. Im junior gently. Scarlet im scarlet fu. Joe weisenthal is off. To we wantking to welcome you to our coverage, we are early ahead of the july 4 holiday. Scarlet its a half day of trading. The short trading session, where we have the dow making a record high during intraday trading by coming off its best levels. At the close coming in by quite a bit here for the s p 500, the dow and the nasdaq. The nasdaq off of. 5 , the laggard. Its now lower for the fifth time in six days, ill be at on pretty thin walling because it will people are taking the half day off