He was looking at a way to demote jay powell so he wouldnt be chair anymore, not fire him. I think a lot of people think it would be against the law. I asked senator tillis from north carolina, who is on the finance committee. He thought maybe it was possible. President , ithe is his administration. He should look at everything he can do within his legal authority. I havent reviewed the legal analysis, but theyve got a lot of smart people in the white house. It probably is within his authority not to remove him, but potentially consider another chair. David it sums like if you were to do that, the Republican Senate wouldnt stop him. Alix well no, of course not. Someone, who would he pick . Of uld be the perfect the perfect dove . David i think you will come out for blood if he doesnt get his rate cuts. Stay with bloomberg as we bring you live coverage of the latest decision, followed by jay powells news conference, starting at two is like this afternoon. Alix from one politician to another, and that is parliament. Apparently Boris Johnson again the frontrunner, picking up some steam to be the next Prime Minister. Ive got to say, i didnt think id ever see the day. David he looks unstoppable at this point. He finally came out of hiding and appeared at the debate last night at the bbc. Finally we heard from him. Alix Boris Johnson debated when he was going to become the head of some area in oxford, and was basically kind of funny and jazzy, and that got him elected, and that is what hes doing now. David a lot of this goes back to oxford. The interesting thing is rory stewart, the upstart that nobody thought had a chance, the reports are that he might be for lin he might be forming a liaison with mr. Gove to stop johnson. Alix the drama will continue. Overall on the market, it is going to be a pure wait and see for the fed. S p futures 1 away from the record high. Eurodollar up a little bit. It is a broadly softer dollars story as the session develops. Someone till the fx market that the fed might cut. 10 year yield up to basis points after a big surge in buying yesterday. Now negative yielding debt across the world. David now it is time for bloomberg first take. We are joined by luke kawa and gina martin adams. Luke, first i will start off with where the markets are and what the fed is likely to do. Some people think it is going to be a 25 basis point cut in july, not june. Some people think 50 basis points. But people believe it is going to happen in july. It is pretty obvious whether you are looking at net positioning in the future, looking at the options market. That is a very stretched part of the market, and it is going to be really hard to thread the needle where there isnt a big reaction in the bond market today. Think what we saw earlier this month is that when Jerome Powell speaks, everyone can find a way to read into it whatever they want. When he didnt say patient and did say act as appropriate, everyone just projected their own beliefs onto that. When Jerome Powell starts speaking, that is what a lot of people are going to be questioning their assumptions on what the fed should be doing next month. Alix so the confirmation bias within just the equity markets . Gina i think the equity market specifically is expecting at least one cut. I dont know if that is june or july. I think if they get the assurances in june, you can generally see markets hold in, but very clearly we went from pricing no cut before to all of a sudden at least one. The equity market is nowhere near as pessimistic as the bond market right now. Bond market is pricing in three cuts. Times, it would suggest that we are pricing in one cut at least, and wed confirmation that that is coming at some point in the near future, today i would expect. David President Trump now says hes going to have an extended meeting with president xi at the g20. This is what he said last night about a deal with china. Pres. Trump i spoke to president xi. Terrific president , a great leader of china. Spoke to him this morning at length. We will see what happens, but we think we will have a good deal and a fair deal, or we will not have a good deal at all, and that is ok, too. David are the markets still hoping for something to come out of osaka . Gina i was surprised at the positive response of the equity market, because you thought that done on this news, but you actually got some degree of hope of stabilization in trade policy. We thought we were stabilized as of january in the early First Quarter, and all of a sudden it popped up again. I would expect over time, the equity markets become more skeptical that this is ultimately going to get resolved, but for now we do see relatively optimistic that we will see some stabilization. I dont know if deal is the right word, but they be things wont get worse, and sometimes that is enough. Alix i wonder if that makes derivative markets super jazzy over the next week or so. Luke surprisingly not that much. Theres essentially a 1 move baked into what we expect after the g20, when we open that morning. We got the positive trade headlines earlier this week, we did have the premium sucked out of the market altogether, but where there is some vol is in the fx market. We know that china has a penchant for keeping its currency stable ahead of big events, and then afterwards it is anyones game. If you look at the difference between twoweek and oneweek, it is at its biggest gap since trump presidency, so this is the super bowl of the trumpxi trade war so far. Alix lets go to apple. Potentially apple is talking to suppliers to miss 15 to 30 of its production out of china. I have to wonder, in terms of costs for apple, does that mean they have to pay up for those when they move it . Does that mean supply might not be as good from china . Luke i wonder. Apple is a company of huge importance to the people it orders from, so maybe they have a little more power to push their suppliers to absorb more, but this to me speaks to what kind of costs you want to bear and what security you want in your business lines, where tariffs are on and on and you have to deal with shortterm sts, or moving more onto your supplier with the knowledge that this is going to get made, and we are not going to have these kinds of legal barriers. As weve learned, you just slap the made in vietnam label on it and it sells through nice and easy. David is this reassuring that maybe these companies can restructure their supply lines and it wont be as bad as we thought . Gina i think so. I think first movers within the equity market are going to be rewarded for this. The earlier you relocate supply chain facilities, pushback on suppliers out of china, the better off you are probably going to be as a technology organization. This is throughout the entire supply chain. I think the equity market will forgive any upfront costs because of the uncertainty that comes with that relocation. If you are relocating suppliers or production to vietnam out of china, it comes with a degree of stability over the longterm that you are not going to have if you are still tied to the chinese economy. It is very clear that no matter what happens with trade, the bigger issue for markets longterm probably actually is tech. That is not going away anytime soon. We dont know what the outcome is likely to be. So getting away from that risk i think is incredibly important to the longterm stability of your earnings strength. Alix and otherwise, it is a kerfuffle. Ourngs to look k thanks to luke kawa and gina martin adams. Check out the charts we use and more at gtv on your terminal. Youre looking at bloombergs Caroline Hyde sitting down with facebooks Sheryl Sandberg. They are going to talk about regulation, the new cryptocurrency. Is going to be a nice, long chat. David that is going to be a big issue. Its got a lot of peoples attention, particularly regulators. Alix you can check out the whole conversation if you go to on your terminal. Coming up, what the markets are looking to hear from fed chair jay powell. This is bloomberg. Viviana this is bloomberg daybreak. In Opec Committee sees Oil Inventories shrinking by almost 500,000 barrels a day, but only if the Group Continues to restrain supply in the second half of the year. Opec and its partners will decide in the coming weeks whether to continue with the cutbacks. A shaky demand outlook has led to weaker prices. Bloomberg learning tesla is overhauling its organization in asia to focus more on china. The company is about to start manufacturing in the Worlds Largest electric car market. Ceo elon musk is banking on china to boost sales and restore , whichr confidence slumped with tesla stock. David thanks so much. The fed will announce its Rate Decision at 2 00 this afternoon eastern time, with a press Conference Following from fed chair Jerome Powell. This chart shows the market is pricing in about 40 basis comes 40 basis cuts in july. With us is ben mandel of jude morgan of jp morgan. A good at the sign of decision if everyone is a little disappointed . You showed market pricing, which cut whichmarket is showing a rate cut in july. Lets reflect on what are the inputs into the feds decision not just in june, but in july and over the subsequent meetings. You have an Unemployment Rate at a 50 year low, inflation low but stable, markets touching alltime highs. In general you have political uncertainty, but no signs the economy is rolling over. How is that an environment where they cut rates . I think theres a lot of data dependency here, and they are going to have to have more thermation that in fact economy is under more pressure. Alix we just saw a sort of scorecard which showed the different Economic Data we got in may versus june. Retail sales pretty good, Industrial Production not so good, core pce going nowhere. How do you trade a line between economy doing fine with some uncertainty . Ben we are expecting basically zero growth coming into the year. We saw 3 into the First Quarter. With the economy growing above trend, which is about. 5 to 2 , that is yet another reason why you wouldnt take out insurance against lower growth. Theres a different story if you want to take out insurance against Inflation Expectations, which are low. It is also something that the fed is currently considering in terms of mediumterm strategy and Monetary Policy. That framework review is ongoing, and i dont think they will prejudice that with tinkering in the rate cuts in the meantime. Growth,xpectations of you said they were 3. 1 First Quarter. It is going to have to do awfully badly the rest of the year to come in under 2 . So what are you looking at if you are the fed . Ben if they are going to cut preemptively, it is all about growth. If the fed is cutting rates, the recent is that the growth the reason is that growth is coming under pressure. You also alluded to a subtlety in the market pricing, in that there are two types of cut you can get. You can get a cut because the economy is rolling over and we have to pull out all the stops. Markets are pricing a high possibility that that happens in july or the latter half of the year. Then there is a moderate scenario with an insurance cut of some sort raced in. When you look at ash sort priced in of some sort priced in. When you look at it, the probability of a insurance cut is even lower than suggested in that chart. Alix ben mandel will be sticking with us. Coming up, the fed decides at 2 00 p. M. Eastern today. Also, Caroline Hyde is sitting down for an exclusive interview with facebook chief operating officer Sheryl Sandberg in cannes. You can follow the whole thing at live. This is bloomberg. Nesid in france, the can International Film festival is taking place. Sheryl sandberg is sitting down with Caroline Hyde. Yl the legislative process is never linear, so we will see. But we do think gdpr is a good blueprint for processing of deflation. We also are not waiting for legislation. In the United States, there was a bill that did pass call the , which said for political elections, you should see who is paying for the ads. That bill didnt past, but we built it. It was up and running for the midterms and eu elections. The gdpr controls passed in europe. They didnt pasts around the around they didnt pass the world, but we made them available around the world. We are trying to work collaborative with government to write the right rules, but we will are working ahead on protection because we went to be a part of that. Caroline what about the effort in the unit is two breakup facebook, breakup google . You have responded with an interesting take, saying if you are going to do that, what about the chinese competitors . How is that argument landing on capitol hill . Do they see that is a real problem . Sheryl yes. I think people are really worried about chinese companies, which are not going to be broken up by their government, but pushed to export everywhere in the world. But when you think about what is underlying this conversation, people are worried about the size and power of u. S. Tech companies, and we understand that. We are large services, and we have a big impact to the world, and with that comes great responsibility. Antitrust is fundamentally about Consumer Choice and consumer benefit. One of the things we think of, and most companies in our sector, no matter how big we look at the time, kind of go through these patterns because new entrants are actually two relatively easy. Wants to walk out of this room into this beautiful place and take a photo, absolutely you can share that on instagram, but you can also share it on many other services, whether it is google photos, put it on youtube, share things on snapchat. If you want to send a message, you can use whatsapp or facebook messenger, but theres also ime ssage and we chat. Everything we do, there is a lot of Consumer Choice, and we are committed to doing the things we need to do to make sure Consumer Choice continues, such as data portability. You can download all of your data from facebook and move it to another service. A lot of our competitors have grown because we allow that, and we should be held to account to enable that, but it is definitely true that behind closed doors on both sides of are note, people appropriately worried about chinese companies, some of which are far bigger and have far many more people and more services than we do, and i think that is something that needs to be taken into account. Caroline i have a bit of a bias because i am from the u. K. , but what are you doing in terms of global human occasion . Sheryl im so glad we hired nick. I spent a long time trying to hire nick. He was the deputy Prime Minister of the u. K. In a company where most of the people report to me and mark, we ouramerican, but 85 of users are outside of the u. S. And canada. That is really important. So he is running our global communications, Global Policy team around the world. He has a loud voice for room murmuring for remembering that the world is global. Market and i want to run the company differently, and part of that is bringing new people who can see that. , yet hes five languages speaks my Mother Tongue better than i do. He has all of these unbelievably british and a little bit weird expressions. Caroline we love weird expressions. Me we last week you told dont want to teach grandmothers to suck eggs. [laughter] sheryl what does that even mean . What grandmother is sitting around sucking eggs . Caroline no idea. Sheryl these are incredible expense and i learned from him all the time. Caroline im glad we contribute to those. Forward . T m a going are you worried about the regulatory scrutiny, that you might not able to purchase advantageous companies to make your company even better . Does your product need to get better . Interestings because instagram is so big now, but when we bought instagram it had 13 employees. I remember when the announcement happened, and banks would call me saying we are here to do year integration work. It was like, weve already given them molly badge and a computer, so we are good. Instagram was really small. We will see what happens with acquisitions, but a lot of them were made one at a time. Caroline going back to the regulatory conversation, sure most of you know crypto in the audience. I am not banking on everyone having used it. But the libra announcement, what exactly is it going to do for those in the audience . How are advertisers going to use it, as well as the Consumer Base . Sheryl we havent launched anything. Weve done an announcement. We are pretty far away from advertisers using it. We are a technology company, obviously, but we want to bring everyone along. Marks vision was give people a voice all around the world. The idea that you could give people a voice who never had it before, there are 4 billion people in the world who dont have access to the internet, and that is something we worked on. Weve now connected people around the world. There are one billion people in the world not connected to the financial system, so lets talk about what that means. If you have a dollar, you have nowhere to keep it that is secure, and not a surprise, bad for everyone, but particularly for women. There are 100 million women in the world who are sending remittance payments home. That means some of them are leaving their countries, working to send money back to their ,amilies, and paying huge fees 20 more than men. We want technology to help everyone. What we announced yesterday is the formation of a Global Association based in geneva. We have some incredible partners in paypal, mastercard, visa, vodafone, spotify, uber and lyft, as well as ngos and nonprofits. We want to help there be a