Friday. Officials say the increasing number of displaced people and a in temporary shelters, many people are now at risk of disease. Abc news reports that police are reviewing security footage of a raciallyall motivated slurve that was spraypainted at the front gate of lebron jameshome. Authorities were also alerted this morning and Property Management removed the graffiti before officers arrived. He arrived in california yesterday to defend their nba title. That game is tomorrow night. Global news 24 hours a day powered by more than 2600 journalists and analysts, in more than 120 countries. I am mark crumpton, this is bloomberg. Julia live from the world headquarters, i am julia chatterley. Scarlet i am scarlet fu. Joe we are 30 minutes from the end of trading. Julia the u. S. Stocks slightly lower today as the banks are sliding. Joe the question is what you miss . Scarlet President Trump could make good on his pledge to leave the paris accord. Of course, what this would do for other nations and their commitment. Some parts in america say that it could be time to abandon the slow growth toolkit. Rate rick scott cuts, as the president tempers the cloud. Lets look at whether major averages stand as we head towards the markets close. Abigail doolittle is standing by. We will see major declines here at the close of the doubt, all down fractionally. That perhaps we could see these averages or at least one of them could turn positive before the end of the day. We have seen that happen before. We did not do that yesterday. We do now have these lower averages. Happened time that has for the s p 500 in two weeks. And for the nasdaq since april. Not a surprise me look at this mapping out. We do have this trading higher. We also have others trading higher against the dollar as well as goal. Bonds have been rallying before. Has been dragging on the Financial Sector and one reason we have a bit of a decline for the major averages is when you look at the big things we are seeing some pretty big losses. The bank of america and jpmorgan, both of them indicated that fixed income trading could drop or appears to drop somewhere between 10 or 15 yearoveryear. Goldman sachs and Morgan Stanley are also trading lower. Goldman sachs at some of their activity is in line with the at the end of march or the middle of march. He thought that bank trading could decline and that could cause them to go into a correction mode which they are that to possibly even at bear market. Take a look at the bloomberg, you can see at the market possibility could happen. Anything can happen, when we take a look at the possibility of likelihood. And the blue we have the s p 500 Financial Sector and the white we have the 10 year yield. Election thethe banks shot higher, investors thought that could help with the lending activities. Then we have this big area of uncertainty, the 10 year yield below that level of 3 . They thinkenheim they could see a measure of this area down to 2 or lower. They will now have the Financial Sector here trading in what appears to be a head and shoulders strategy. , people aresell getting and wait and we could see a breakdown of some sort. We could see some bear market, that will be interesting to see if that happens. Scarlet thank you, so much. Lets get back now to President Trumps looming decision to leave the Paris Agreement. Top ceos are trying to get a push to persuade him that the u. S. Will have a lot more to lose in abandoning the agreement. Here with the latest is our correspondent in washington. Sense of what the ceos are saying to President Trump that might be able to push his thinking and their favor . They have been seeing it for weeks. With intensifying pressure over the last few days and weeks that the u. S. Has much more to lose that it stands to gain with pulling out of the agreement. Their message is that the u. S. Can be a Clean Energy Leader globally, we can produce solar canls and winter finds that lead the revolution great we forfeit that leadership if we abandon the field. He tweeted today that he advised the president on this, if the president decides to abandon the accord he threatens to leave several Advisory Councils. He has been advising me a demonstration on those. Pretty clear what elon musk is in favor of the Paris Agreement. Manmadeon to fight Climate Change, what about some of the other ceos with businesses that see more tangential to the issue . you have a slew of Companies Including those in may Consumer Products that are not related to energy that are involved in this i. They are concerned frankly about a trade backlash created a negative trait implication at the u. S. Pulled back. I could take the form of consumer led boycotts of their products. They are concerned about that. And the energy space you also have Gas Producers and Major Integrated Oil producers that are concerned about growing a market for natural gas. Shell and exxon mobil that engineer energy. Scarlet joining us from washington, thank you. Julia now here with us to talk more about this game about why she does not want to leave the Paris Agreement. She is the author of the big pivot. Thank you so much for joining us. I know you want to reiterate the point that we heard there that the Business Community seems to be i and large that against the decision to exit. It has been unbelievable to articles in the wall street journal to see the 30 ceos and i heard the conversation about companies that may seem tangential. I think the lesson is that there is nobody tangential to this. Energy is a big part of the cost structure and value chain for almost every sector. Scarlet i am sorry to interrupt of a we want to go to the white house now where President Trump is speaking. It is with a bilateral meeting with vietnam. He is talking about the u. S. And their major trade deficit with vietnam. Again this comes on the heel of his visit with the Prime Minister of vietnam. Lets listen in to what they have to say. [speaking vietnamese] scarlet this is just moments ago with the president holding his meeting, with mike pence and Rex Tillerson around him. They are discussing trade between the two countries. By the change will be top of mind. Andrew, i am sorry we interrupted you. If you continue what you were saying about big business perspective on Climate Change. Problem, i was afraid they were going to slip and he was pulling out of the Paris Agreement in vietnamese. I think the companies that are engaged on this are across the spectrum. If you look at the 30 companies that sign that big ad in the wall street journal they were a cross Consumer Products, industrial, dow and dupont pulling together the whole letter. , everybody was saying that this is good for business. That is the bottom line here, this is a good deal for business to be involved in. This is why they care, this is not about them hunting polar bears this is about business prospects. Also abouts investment opportunity, the United States as a huge opportunity here to visit with Energy Efficiency to invest with a greater extent than they probably are. This is something that obviously President Trump has talked about, he does nothing to be connecting the dots and the possibilities of these two things. I think there is something that he has gotten and the back of his head and people are was bring that he needs to pull out because tackling Climate Change or two and something about Carbon Emissions damages the economy. It is the opposite. There is this statement that it is going to be too expensive. The damages of Climate Change are already being felt. They are not looking at some model about predicting the future they are looking at real impact of their value chain today. It is costing them. Is going tot what be most profitable core business. They are looking at the cost of business or not doing something. Is a far better economic proposition for all the reasons you say, it lowers costs but it also tries to business and innovation. There are huge markets and clean energy, clean transportation, we can play in all of that. Joe earlier today the United Nations tweeted that Climate Change is undeniable, Climate Action is unstoppable. Lets say the u. S. Where to pull out of the Paris Agreement, could pressure build on those economies to start to pull back on some of their commitments as well . I dont think so, it goes back to what i just said that the pressure is actually towards action. It is getting cheaper and cheaper to do something about it. China cannot that has been the excuse that the u. S. Use in negotiations are years that china was not doing anything. Now that is kind of the opposite. China has committed 350 billion between now and 2020 and clean energy. They have built far more highspeed rails than we have. We have not basically. They are investing because they have to create look at the air quality and their cities, this is not a choice for them. They have also driven the cost of solar and wind down so far that they are the cheapest option. That is why big business in the states is investing globally and solar. We are seeing this towards a cleaner economy, that is what makes it so strange to pull out at this point. We are going to put ourselves in a legging position to join the two countries that have not signed the agreement that is syria and nicaragua. We are going to be the laughingstock on this issue. Scarlet u. S. Companies are making this for economic reasons, what about China Companies and india companies, we have talked about how they would pull out of the accord. A country like china or india could pull into the vacuum, what does that mean for those companies when it comes to leading the way on clean energy . I think they have already stepped into the vacuum. China has been spending more than us for a number of years, they rolled out their Clean Industries resident we have. They had just recently proposed a 1 trillion cut on , a lot of that involves the infrastructure as well. India has also made a enormous commitment to solar energy. A lot of this has gotten so much cheaper predict they are stepping into that point. Europe has been there for a well. Germany has have their very aggressive plan to move their systems to renewable only. The scandinavian countries have built a enormous amount of offshore wind. They are already doing it. The u. S. Is just not growing as well. We have been increasingly and investing, the majority of the new energy we are putting on the market is renewable. It has been for several years. If we pull out of his agreement we are just abdicating leadership. We are leaving open to the rest of the world. Doesnt truly matter to the american ceos to have donald trump say we are pulling out of the paris accord, or they know how they need to invest and a dock practices. The ceos will change regardless . There is elevator next year. I will make the case and i think some companies will continue down this path that efficiency is very profitable, they will continue to do that. That is true, they will continue. Policy, there has always been a growth of industry and a combination of public and private investment. A priceg like putting on carbon with china is rolling out over the next two years. Europe has been playing this for a while, we have seen this in parts of the country. That kind of policy can help accelerate this. We do think the economy will win , companies will continue to do this. It is a matter of how fast, do we need to move how fast this will concern Climate Change, i think that is part of what countries are worried about. Julia great to get your perspective here. Pivot. Or of the big scarlet coming up, find out why the head of Morgan Stanley is still making a push a motor vehicle. This is bloomberg. The big news these days julia center is more on electric and autonomous it goes great with how many cars are rolling up your subway lines. Earlier today at of jonas the head of Auto Research joins us to talk about the road ahead for this electric vehicle. Any advancement of the state ablesart of sharing im electrification because you can advertise because a lot faster. Electric cars look better as a model, when you are running it late the feedback. Could be as little as six weeks, this could help autonomous the other end. It is coming fast. Does that mean it tends to be urban rather than rural . It will start that way, where there is density. Not unlike the early horses and carriages from one century ago when only wealthy people in manhattan could afford one that it took 10 or 20 years when you saw them in ohio. The other way you can measure density is between cities. Kind of these sharp shorthaul aircraft where you can see what your community patterns. With your projections, 50 of all vehicles could be elected by 2040, right now it is a very small percentage, less than 1 . We have a fair amount of government subsidies. How do you get from where we are to where we are talking about . The cost of as battery has to come down a lot. They have come down a lot, our sources in Silicon Valley and germany and china suggest that a number or as little as 100 per asowatt hour by 2020 versus much as 500 is a couple of years ago. The inflation of the battery manufacturing and that there is the cost of internal combustion rising. A inflation of internal combustion, you see that parody of switching making sense. Then your throw in sharing where you can live in quebec. Of 30 years if you own it personally to as little as five years if you of the business as a business if you are using at 100 miles per year that is the magic, nation. We just talked about the price of oil, what does that do if internal combustion become such a small part of the equation . Have a kneejerk reaction that if you increase automation and increase electrification and must be in the death of oil. Piece yesterday with some of my colleagues in Morgan Stanley across the energy stack that discuss this. We ran a simulation, we are also believers in the sharing and automation of driving, that creates a of cost per mile. We are actually quite bullish on this, the people that see what do miles do . People ignore it. We think miles trouble globally by 2030, and triple by 2040. You can allow these to take a higher share of the by, but you can grow this you can then keep gasoline support at roughly todays level for decades to come. It is also about industrial demand, it is also going to be about driving the car. Used to be one of the biggest shareholders, is this a look at tesla . We think it is a pause for breath. We are a believer in the tesla story. We think that it is much more than just a car company. They are building out infrastructure for Sustainable Transportation and they are spending like 4 billion per year that is not going just to cars. That is going to something much more bigger. Was mainly a recognition that if you are going to apply ai into realworld applications like anding such as hd mapping Machine Learning with Computer Vision and all of the data with that ecosystem. You are going to attract Competitive Pressure from the amazon of the world. That is an of a wakeup to test what that if you want to own a juggernaut you are going to have some competition from folks with unlimited access to capital. Was at of jonas of Morgan Stanley. Dragging t jpmorgan stocks lower. Mayill show you why markets have something to do with it. This is bloomberg. Scarlet thanks her leave the drop in the dowscarlet after bank ofsachs and america and jpmorgan seated trading revenue is on pace to drop 10 in the Second Quarter because of low volatility. What you may have missed is that jpmorgan own analysts said the trend could be for the other big banks. What that shows is fun trading revenue will likely drop for the group. Jpmorgan estimated a 5 drop overall for trading. We will see the biggest decline down a 10 . Morgan stanley will actually buck the trend. Julia interesting. With brexit last year. That is what i am going to talk about or eight derivative of that. Q k trading ramping up. Survey that a showed this. Also been all over, this study if we go back to the briefly,ial election it predicted that Hillary Clinton would win the popular vote. Watch, theesting to sterling hit a fiveweek low. Then it rallied because another polls that she still has a 15 point lead. You what weshowing are seeing in sterling at the moment. There is a bit of a dichotomy going with some of these averages moving. That is just below 29, if you look at the second part of the chart which is the red and green you can see that as far as the Global Affairs are concerned that they were clearly it was me for the pound. Jo we also have a little bit of breaking newse, stocks surging around 12 in this late trading, on a report from dow jones that it is lowering for a sale. Is next, herese are the main averages with less than four minutes until the close. This is bloomberg. Julia u. S. Stocks flatlined to wrap up the month of may. Joe if you are tuning in live on twitter, we want to welcome you to our closing bell coverage every week day from 4 005 00 p. M. Eastern. Scarlet lets begin with the market minutes. Flatlining at the close is the perfect way to put it. The dow, s p and nasdaq, barely moving 1 10 of 1 , so the lack of volatility, very much apparent in the major indexes. It is something that weighed on financials today. Joe it seems like the same story, little headline movement. Lots more going on inside. Scarlet the need the surface. Lets take a look at the Dow Jones Industrial average. , we30 members of the index will focus on the worst decliners. Financials are at the bottom. Goldman sachs off i 3. 4 , jpmorgan off by 2 . Jpmorgan indicated that if revenue is down 15 , bank of america and merrill lynch, not in the dow, says that its revenue for the second order is going to be down about 1012 . That is all weighing on these things. On the upside, you have dupont, pfizer, verizon gaining at least 1 . A little bit of the chemical names and the telecom names, telecom has been a star performer over the last couple days. In terms of individual movers, i want to highlight michael kors. That stock plummeted, down 8. 5 after seeing store sales drop 14 last quarter, worse than projected. For this quarter, things dont look much better. Perrigo with an increase after firstquarter increases beat estimates. It had gained as much as 12 , but reclaiming some of that advance. Joe just broke the news that it is exploring a sale. Joe a possible sale, but interest is lukewarm. On the Government Bond market,. Ets look Nothing Happened in the u. S. At one point today, 10 year yield was below 2. 2 , but ended up unchanged. Interesting, more action in china. Lots going on, the deleveraging, the pboc moving up the human reference rate in a surprise to traders. Reverberating a bit in the bond market. Fiveyear yields, one of the bigger gainers on the day yields falling to 3. 6 . A quick chart, we are close to postelection lows here, havent quite broken through. A long ways to go to get where we were last november before the trade,n, but this trump whatever you want to call it, not showing much life. Julia this is why i like talking about currencies. I cannot we show you some kind of action, even if it is minor. The dollar index, little softer. Pending home sales missing expectations in the u. S. We spoke about selling a few minutes ago. We hit a fiveweek low wednesday hungstudy, suggesting a parliament. We rallied on theresa may cost lead theresa mays lead. The onemonth chart, to give you a sense of where we are, some bearishness from analysts. I want to show you dollar china, as well. This is the threemonth chart. We saw cnh down, this is the offshore rate, the strongest against the dollar since october. We saw a spike high by 1. 5 in trading today. Unprecedented. We have talked about this before. The government has used this as a tool to washout speculators, not necessarily suggesting that is what is going on here, but i think it is interesting. Definitely one to watch. On the commodities front, interesting action. Oil tumbling as a lot of us as a lot of gravity has pulled oil down by 3 . Going back to these china sensitive industrial commodities, iron ore continues to tumble, and rubber futures, looking at today, one of the big losers, down nearly 4 . I want to put the oil losses in perspective. There is a onemonth chart. We broke back above 50, optimism about deals and cuts. Traders arent convinced. There we are at the lower end of recent ranges. Those are the market minutes. Julia that officials are officialsg fed considering how to shrink the Balance Sheet. Not replacet bonds with new purchases. Said theresident central bank should unwind its Balance Sheet later this year, but that shouldnt be its main policy tool. I still believe fed funds rates should be the primary policy tool, and letting this Balance Sheet runoff should be happening basically in the background, and having said that, i am sensitive that in the early stages of this, there will be a lot of market sensitivity and we will have to take that into account and manage the choreography of how we manage fed funds rates as well as the balance. Julia easier said than done. Joining us is mariana. Great to have you on the show. Beautiful work, choreography there. How should the choreography be approached . The think the fed is doing best they can on that, trying to communicate effectively as they can. The steps will be small. The real challenge for the fed is that it is talking about keeping the flow, sort of stable , making sure the flow is not moving to rapidly. All the action is really in the stock. What i mean by that is, the fed is getting a lot of, it thinks about the impact about the Balance Sheet. If we were to have a sudden decrease in Interest Rates which led to a full refinancing, some ink some think the stock would fall faster. That is a real challenge for the fed. Julia how did he react in that ine how do they react that case . That is a great question. I think they are hoping it doesnt happen. Hope isnt necessarily the best strategy. Scarlet when you go forward, as a former fed official yourself, if they were to ask for your opinion, how would you recommend approaching a reduction of the Balance Sheet . What lessons would you keep in mind from the tapering . Those lessons come i think, have been learned. I think the taper lesson has been taken on board by, we are talking about all the time am a trying to communicate what we are going to do. Chairman bernanke in testimony with a few words announcing a change in policy. We hear others talk about it. That is the good side. What is challenging is that the markets like to hear about the flow, and the stock is really where all the action is in terms of in wincing policy. Influencing policy. If i were on the committee, i would say lets try to get the policy tool right. Adjusting reinvestments on an ongoing basis to make sure the stock of assets is where we wanted to be. Joe set aside the technical aspects of how to tighten. You made the argument in a saying it iseek, not clear that there is a case for tightening. You urge the fed to delay the tightening process. Why, or how, do you see things differently . Fed, i willhe explain my perspective first. My Perspective Shifts by inflation. Inflation is low. The yearoveryear print we had encore came in yesterday, and it was at 1. 5 , whereas the target is 2 . That is a sign of low inflationary pressures. You talked a moment ago about the pressures we have around the world that are coming through from commodities. That will play through in u. S. Inflation in a muted way. , they are ahe fed long way from their inflation target. They have room. They have room to help the economy grow more rapidly, which means take your time with a tightening move. I would be waiting until you saw a much clearer sign, two point 2 inflation. ,ou hear talk about overheating unemployment might beginning to low. Daesh might be getting too low. Scarlet low. Why does the fed keep underestimating the labor market strength and underestimating inflation . Overestimating inflation . Here,hink the challenge the fed thinks through what is called a phillips curve. That whenying to say unemployment is low, we should see Wage Inflation that is high and that should spill into price inflation. The problem is, the curve is moving around all the time. These linkages are always moving all over the place. Trying to rely as much as the fed does on the on of lament rate as a measure of inflation is a challenging game. We are seeing that in their forecast. Julia we will come back to this as well. Narayana is sticking with us. We have breaking news. Scarlet hewlettpackard enterprise, the part of the business with the valuable assets as opposed to the old reporting earnings, secondquarter adjusted earnings per share of . 85. That is the reported number . 35. The outlook here that we want to Pay Attention to his thirdquarter adjusted earnings per share of . 24 to . 28. I am looking at comparable numbers, hpe, the comparable number is . 32. It looks like we are looking at a lighter than expected forecast which will account for the decline in hpe shares after hours. This is bloomberg. For first wordow news. Tesla and spacex ceo elon musk says he will leave President Trumps Advisory Council if the u. S. Withdraws from the paris climate accord. He tweeted, dont know which way paris will go but i have done all i can to advise. Today, twootus people familiar with the matter say the resident hasnt decided to keep the u. S. In the agreement, but is leaning towards exiting. During the campaign, trump was clear that if elected, he would pull the u. S. Out of the accord. Cnn reports that james comey plans to testify publicly in the senate as early as next week. Cnn reports comey has spoken privately with special Counsel Robert Mueller to work out the parameters for his testimony to ensure there are no legal entanglements. President trump fired comey this month as the fbi was investigating russian influence in the president ial election, including possible coordination with Trump Campaign associate. Of voters Want Congress to begin impeachment proceedings against the president , up from 38 last week, according to politico. Politico notes that is less than the 40 5 to dont want impeachment. It reports much of the support for impeaching mr. Trump comes from political considerations, not a believe that the president is actually guilty of impeachable offenses. Willy corbyn says he participate in a general Election Debate tonight as theresa may maintains her position that she would rather address voters than confront her arrival on live tv. The bbc, which hosts the debate, confirms corbyn is a go. May house lead has mays lead shrunk. A new poll shows they could miss winning a majority. Day,l news, 24 hours per in over 120 countries. This is bloomberg. Gavekrocks larry fink a take on u. S. Economic growth in new york. He said the outlook is looking worse because of uncertainty over tax and infrastructure policy. It is consistent to believe, there is a belief in the marketplace that we will grow midtwos. From what i hear that is not happening. Rayana. Ill with us is na you said something provocative on twitter, which is that economists who claim that a 3 gdp growth target over the next few years, economists who say that is preposterous are doing a disservice to the profession by dismissing the possibility. That, ieason i say toieve that getting back sustainable 3 growth over the next decade, i view that as extraordinarily unlikely. That said, there could definitely be shocks to the rate of innovation in the economy over the next four years or five years that would lead growth to be as high as 3 . Joe you point to the upward shocks. Does that imply, larry fink was talking about later this year. Does that imply we could get to a faster rate of growth even if we didnt have any big change on fiscal policy . We could definitely, through changes in the fundamentals of the economy that we are not able to forecast, have growth as fast as 3 . It is not the baseline, but we could have upside shocks that would lead us to that, and all the people who are saying 2 that it is impossible to get a 3 , they have not made economists look good. Scarlet what is an example of one of those shocks that could lead to that type of growth . I wish we understood the process better, but the fundamental driving force for growth in the u. S. Is innovation. That could come for process change, it could come through efficiency realizations, better uses of i. T. Come all sorts of things. We dont know exactly where every detail will come from, but wed do know we dont know what will happen. People should know that when they communicate about what outcomes could take place. Howa the big question is, the fed is factoring policy and nonpolicy from the current administration. What is the biggest risk to achieving stronger growth in the short to medium term . Is a Donald Trumps nonpolicy or policy, or is it the fed, that they shouldnt be afraid of growth . Has in its mind that the economy cant grow faster than 2 , that is a big break on the economy. They have the power through their Interest Rate moves to make that happen. Julia is that how they think . I worry they are focusing too much on the real side of the economy, employment and output, in thinking about monetary policy, and not enough about the nominal size, which is what they can influence more directly, inflation. Joe i want to go back to the question about the damage to economists reputation. Its not great right now. People attacked him for a litany of things. Do you think it is possible, i dont think donald trump is popular among most academics. Do you think it is possible that the political bias among academic economists wanting to paint the administration is being unrealistic and crazy is driving some of these things . I think there is a tendency to communicate only towards only through the point forecast, our modal outlooks. What is most likely to happen. Without thinking about the range of possibilities. There is a feeling that the public cant comprehend this range of possibilities argument. That is a mistake. Those of us who try to forecast what will happen should be talking more about the range of possibilities on an ongoing basis. Scarlet if the Trump Administration can affect growth seems3 or more, what most plausible to you that could get us past the 3 threshold . I think there is a range of things on the table. I think myself, i am drawn to some of the policies like infrastructure that can stimulate the demand side. You go back and forth from the administration and congress, sometimes more on this up lies side, emphasizing deregulation, thecuts, and sometimes on demand side. I am more on the infrastructure side. I dont think we have seen enough investment in innovation over the last few years. More of the saw demand cycle building in the u. S. And the world, they would be more likely to engage in innovation and we would see more productivity growth and growth overall. Julia we havent talked about focus onnd the feds how the market reacts to policy. It goes back to the Balance Sheets. Is the fed afraid of markets . Are they too fixated on whether it is asset crisis or market on policy like the Balance Sheets, needing to calibrate the response, and we are getting it wrong . Inthey are overly gradualist their thinking. You will hear sometimes from fed speakers that they know rates have to get to a certain point in the long run. They want to move slowly so as not to upset markets. That means you are not reacting as much as you should to economic changes and economic conditions. You are moving slowly to protect markets. Julia you cant be read to list gradualist and afraid of growth, can you . Factthink in terms of, the , the reason they are raising rates now is because they dont want to raise them fast later. It is the fear of moving quickly later which is making them move slowly now. On the infrastructure bit, this excited people after the election. Tocks shot up is the case for infrastructure about the demand that there will be more spending, more spending creates more demand . Or is it that and a an economy with more infrastructure will be more likely to see productivity shocks . The answer is yes. Joe thank you, sounds good. Bloomberg columnist and former minneapolis fed president , thank you very much. This is bloomberg. . Oe what you miss the numbers coming out of china, sliding a little bit. Lets take a dive into the bloomberg, you can find the charts using the function at the bottom of the screen. I am taking a look at the chart put together by an economist. One big story of the reflation thing is how there was a positive impulse towards inflation coming out of china. Prices were rising, that would reverberate around the world. More and more, pistorius the story is falling apart. The yellow line is rolling over. The other lines come from the two different pmi indices that came out last night, the blue line is the official one. The white line is the china chin pmi. Pmi. It is a positive inflation story. It is decelerating a little bit. We can expect the official ppi number, the wholesale prices to continue to roll over, something to watch with potential ramifications for the world. Scarlet a dramatic move down. You have to go beneath the headline number. In my chart, which is from our Bloomberg Team in china, the pmi report shows Small Companies are buying into the recovery a little more right now. Pay attention to the blue line, the Medium Company pmi and the white line, the Small Company pmi. Climbing above 50, which signals growth, for the first time in three years. The reason why is because of the ppi you were showing us. Jump in input, a prices was squeezing the margins and they are starting to ease a little. Joe positive signs. Julia for the first time in three years. Scarlet it is exciting. Julia you can get all of our deep dives by hitting tv go. Cannot i fastforward . It is exciting. There you go. Guys. On the terminal, clearly, lots of great interviews today. Tv is where to go. This is bloomberg. Words time now for first news. The Afghan Government media center has raised the death toll from todays suicide bombing to 90. To beople were reported wounded. No group has claimed responsibility for the bombing that hit in a highly secure Diplomatic Area of the afghan capital. The countrys top religious body strongly condemned the attack, saying carrying out such attacks in the holy month of ramadan is completely against humanity. Police in manchester say the suicide bomber mostly acted alone in the four days leading up to the attack. Therding to the telegraph, bombct is assembled the himself. President trumps offered to World Leaders to call him directly on his cell phone breaks protocol and raises concerns about the security and secrecy of president ial communications. The president has urged leaders of canada and mexico to reach him on his cell phone. According to ache a former and current official, the white house did not respond to questions on the subject. Day,l news, 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Joe thanks, mark. Whatd you miss . The u. S. Housing market looks healthier, and there are fewer signs of on it unsustainable leverage. I want to bring in the head of u. S. Economic son renaissance economics on resid renaissance research, and danielle. Daniel, you have been blowing the whistle, sounding the alarm about possible bubbles that people dont see, frailties in the credit market. What concerns you . Aggregate of some of the delinquencies we are seeing rising, and the bottom line is, we are seeing these delinquencies rising and a strong macroeconomic environment. The last time we had car delinquencies pushing for percent, the on limit rate was at the latest saw read, but 7. 6 , and that is just cars. Stresses are building in subprime credit card lending. In the last consumer report, we saw homebuying has hit a six year low. That reflects a lot of the increases in home prices we have seen and the unsustainability and stress on household Balance Sheets. Joe do you see signs of unsustainability . A lot of people are pointing out the delinquencies rising in autos. You talk about the housing market, residential investments coming off two fairly strong quarters back to back. I take the point on the university of Michigan Survey on homebuying intentions, but at the end of the day, applications 510 relative to last year. That tells you people are willing to buy homes and put the down payment on. Attitudes about homebuying havet year. That tells you people recovered because people view housing is a better investment. With respect to subprime auto debt, this was mentioned yesterday, it is possible that a lot of the increase in subprime auto defaults is centered in Energy Producing states. There was a fed paper on that. For me, i think the vast majority of your viewers dont have single stock investment. It is not clear to me, what matters is the extent to which this is already priced into the market. What is the likely outcome and what is priced into the market . Joe what do you make of that question . Is there reason to think it will spread beyond narrow weakness to a way that is not priced in . I think so. If you look at the first four months of the year, when you talk about Discretionary Spending inflation, the things that households absolutely have to buy, shelter, food, home, that has risen at an appreciable rate. It is the highest level we have seen in four years. If you started think about inflation for things that we must buy, if you factor in the deferred average household annual spending, is housing. We are just now seeing rental inflation come down, begin to come down. Households are under extreme stress and it is not just a phenomenon we would see in the energy states. Alice and houston are doing exceedingly well, all things considered, given the recent weakness we have seen oil prices in oil prices. Shaking your head. Consumer spending is tracking about 3 . What drives Consumer Spending is real disposable income. So far this year. Consumer spending follows disposable income. The savings rates, a little bit. It is higher than you think and how low the Unemployment Rate is. I would argue there is room for upside surprises. Here is, lastry year, the u. S. Economy posted just 2 growth. That is because of Consumer Spending. The here story is, whether you k Consumer Spending can moderate, but whether other sectors will pick up the slack. I will bet yes. Joe we have to run. Thank you both very much. Me geteds to get with me offline and tell me what will offset Consumer Spending. Look at the data. Joe great discussion. Danielle, thank you both very much. And activistng up, investor nervous about real estate prices. Household debt in canada. That is coming up next. This is bloomberg. Julia activist investor carson block sees problems with canada. We are speaking to him live now. We had no intention of shorting that, for whatever reason reacted negatively. It makes me that maybe canada is the hottest market in the world right now for shortsellers, or if it is not, it really could be. You are talking about elements management, which is not the stock you were shorting. You were shorting a different stock. I want to ask you more broadly about the Canadian Housing market, because one of the things you said struck me, that this idea, the prevailing sense in canada that we wont see something akin to what we saw in the housing crisis in 2008 in the u. S. If that cant happen here, does that bolster your case that it could . Yes. I think anytime you hear on a widespread basis, people saying it is different this time, it is different here, that means that it will be no different, and eventually, there will be a bad ending. That is, there are laws of economics and those laws eventually apply. The one thing that was interesting for me with canada, and to be clear, i have not looked at canada closely, but the last time i was up there was 2011. I had some meetings up there. In a buildingas owned by one of the large banks, and this is a couple years after the financial crisis. There were these ads everywhere saying, borrow to get ahead, and work encouraging and they were in courage and debt fueled consumption. It was bizarre given what the u. S. Went through. Several years later, you had that, you had real estate pushed up in part by foreign buyers, which creates this frenzy, and a lot of canadians have taken on debt to participate. From aditions you get pretty distant perspective, but the conditions seem to exist for them are there to be pain inflicted on the market, not in the too distant future. What concerns do you have about regulation in canada, that institutions meant to keep these issues in check, i know you have talked about the regulatory structure here in the past and how much of it resides at the provincial level. How much of a problem is that . Issues in check, i know you have i am not the next bird on the Regulatory Environment in i am not an expert on the Regulatory Environment in canada, but there are some provincial regulators in canada, im speaking the of the market regulators, that are more capable than others. I think it is a curious situation to me. In the u. S. ,uld be if the states had their own securities regulators, which they do regulate companies, but the sec is obviously the regulator of the markets. That is the problem, when you have Different Levels of resources and sophistication. There is probably a lot that could fall through the crocs in canada. Could fall through the cracks in canada. We have some Satellite Photos from your latest report showing before and after, photos of wallailure at it failure at the mine. Validityconcern about of these photos. What do you have to say to them . Really . The photos are valid. Guys, i have been doing this for seven years. Person whohe kind of were putting fake information into reports like that, i think muddy waters would have ended a lot a long time ago. Similar accusations leveled at us why that management, which i think is still on trial for fraud, but the photos are valid. If that is the only thing that is keeping recommendation on the stock is your doubt about the photos, it is time to switch the rating. Like it down for me in terms meyour break it down for in terms of your management and how they are pitching concerns about the ore quality in this mine. Can you talk to me about whether you see this as outright fraud or a coverup . Is, not to be too technical, but fraud is really about the state of mind. If i were to say these guys are committing fraud, i would have to know they are intentionally saying things that are not true. I cant know that from this vintage point. It is not the most transparent company. There are other management teams who might have fallen on the sword sooner and let investors see the problems, but i cant give you an opinion as to whether they are committing fraud. To be clear, we have not called a fraud called it a fraud, but at the end of the day, we think it goes the way of substantial fraud whether it is fraud or not. We think it is headed to zero. Management calls this a placeholder of sorts. They say presumably, they will have some other projects coming online soon, the dynamite potentially in a couple weeks. Do you see that as another leg that could buttress new projects in the context of, how do they avoid bankruptcy . These satellite deposits, of which Dynamite Hill is one, the company is constantly shuffling around which satellite deposit is going to be next. To be clear, neither Dynamite Hill or any of the other satellites has the cash flow potential, in our view, to help this company get out of the corner it is in. It is a positive headline for them, but substantively, that doesnt change anything. That is our view. The really big oneday need to figure out how to develop big out how need to figure to develop is, they need more cash flow from an krohn then the 166 ounces they can pull out of a pushasily without back. More cash flow than they are going to get from those 166,000 ounces. What is interesting from their response, there are a number of things, but to the point, we speculated in our report that the company is about to walk walk away karen from the mine and it is about to pinch out. Focusing on the 166,000 ounces they can obtain without a push back validates the concern of ours, that the mine is about to pinch out, or effectively already has. Thanks, carson. Block,that is carson muddy waters cofounder and cio. Aboutmpany was talking and has concerns about refutes muddy waters report that says the statement and says there is no merit to the assertion made about the company in that report. The company themselves are refuting the assertions by muddy waters cio. Joe coming up, are the wealthy deferring their taxes . This may give congress a huge soon down the road. This is bloomberg. Carlet whatd you miss . Shares of lululemon languishing near a sevenmonth low. Analysts are hopeful, with most reaffirming price targets on the stock. The company reiterated it is on track to reach its goal of 4 billion in sales by 2020. Lets look at their progress in todays the numbers dont lie. The stocks dramatic selloff since march, they sold the most in eight years after their forecast for earnings and revenue missed analyst estimates. Another glimpse of the stock drop, layered on top is the bloomberg eps estimate of the first quarter, the orange line. That took a tumble as analyst revised down their outlook. The last earnings period, on aemon gained 8 nonconstant dollar basis. The company says sales would it to the low Single Digits in the first quarter. One potential hiccup for the sales was an online outage last week. Lululemons north american site crashed because of a power failure at a server farm. You are looking at online sales, the blue line, and how critical they are to the retailers overall sales gain, the white line. Investors will look at margin growth. Lululemon is able to generate sales without wild discounting used by its peers. We will follow their results when they are restaff released after thursdays closing bell. Joe president Donald Trumps promise to cut taxes may cause the administration more harm than good. There are indications that americas wealthiest are incomeng paying their taxes, intensifying a debt limit deal in congress. Bloombergsing in u. S. Treasury reporter, joining us from washington. Walk us through the steps here. How is the promise of potential tax reform intensifying the debt ceiling debate . Wealthy americans, who have nonwage taxable income, which they earned through stock sales or other asset sales, they are able to by law defer the payment about ae taxes for year. In november, when trump won the election and his vow of a tax overhaul became more real, and the pledge of providing a tax cut to americans became more real, they decided to defer paying their tax bills. What has happened now is, the National Debt limit is about to be breached within a couple months, and the treasury is doing what they can using some accounting tricks to delay that default date in order for congress to come to an agreement, to raise the debt limit or cut spending. Those extraordinary measures rely on tax revenue, but because mainly income tax receipts come are lower than expected, it is playing tricks on what Steve Mnuchin is able to do with those measures. Scarlet the wealthy have the opportunity to defer recognizing gains, thes, these taxable income that is not from wages. We have any sense of, by how much . Did anyone quantify it . The Rockefeller Institute has tax receiptssays for nonwage taxable income will 20 . By as much as it doesnt mean the government wont get that money. They will just get it later. The difference is, the government needs it now to buy time until, Congress Needs to find a way to avoid a default. Joe in the past, one of the pushes upreasury these things, they have trust funds or funds they can tap, the special measures, things like that. Already are we already in those jacob will that be available to us when we talk about the dates coming up this summer . We are already in that phase. Employinghin started extraordinary measures and is counting on tax receipts coming in as expected. Is estimated by some analysts to be around october or november, but what we have heard from white house budget director Mick Mulvaney is, that date may be moved forward a couple weeks. For now, the treasury secretary is being consistent with his message, saying congress should raise or address the debt ceiling problem before august recess, but not specifically that it needs to. Julia there is some debate over whether or not this will actually impact the debt negotiations and whether they have to shift those forward as a result. How much more dated how much more data do we need before we get an understanding of whether this is something that will continue as we had through the next quarter, and perhaps means they have to shift the debt debate earlier . Data over the next few days. We will hear from the treasury where tax receipts are. They get Real Time Data and a lot of other measures. Hopefully, they will hear something. Mick mulvaney has said we will congressw deadline for pretty soon, but we dont have anything more than that from treasury yet. Joe bloombergs u. S. Treasury reporter, the big story we will be watching. Thank you very much. Julia coming up, what you need to know to gear up for tomorrows trading day, next. This is bloomberg. Notet whatd you miss . Much in terms of the major indices. The s p 500 rounded up its best month since february. Coming up to my dont miss this. The saint heaters for economic or him begins tomorrow. You will want to what at 6 30 eastern with an interview with russias economy meant mr. Economy minister. Joe i will be looking at economic data. Julia are we there yet . Reporting atulemon 4 30 p. M. Scarlet that does it for whatd you miss . Alisa im alisa parenti, and you are watching bloomberg technology. Lets start with a check of your first word news. President trump welcome to vietnams Prime Minister to the white house today. Trump says the two land to discuss trade two plan to discuss trade. The Prime Minister is the first leader from Southeast Asia to visit the white house. White House Press Secretary sean spicer says President Trump has spoken with afghan president ashraf connie about the massive truck bomb that killed nearly 100 people ink in kabul. Attack was bomber one of the worst since the drawdown of Foreign Forces in 2014. Cnn reports that james comey plans to testify publicly in the senate as early as next week. Cnn also reports that comey has spoken privately with the special counsel to work out the parameters of his testimony to ensure there are no legal entitlements entanglements. Global news, 24 hours a day, powered by more than 2600 journaan