Not too long ago, to set him up for this job. Expected butly faster than many analysts had expected. Thathich is how hard is my question, hollow hard a job is this. Limitedey have some exposure to north america. It did a complete 180. David but it is specifically into a larger story about Capital Investment and specifically energy. Alix and how deep it is in the u. S. That is what we will learn. We have earnings coming out and the macro picture. That Means Nothing is happening in the markets. If you like it was a same story yesterday. The dollar rebound from that selloff. Do williams came in and said nt keep your powder dry. Same in the bond market. A big buy coming in. Can we finally say it is a geopolitical risk story with crude . David did they shoot it down or not . Alix it is all cloak and dagger. David meantime, we want to find out what is going on outside the business world. For that, we turned to Viviana Hurtado. Viviana the Trump Administration and House Speaker nancy pelosi are moving closer to a deal to raise the debt ceiling. The white house and pelosi opposed spending cuts, this for part of a deal. It is up for pelosi to accept or reject items on the list. Another sign of the financial toll billing is pay boeing is paying. It will have a 4. 9 billion accounting charge with Second Quarter results. Grounding is entering the fifth month. Iran is denying a u. S. Warship shut down one of its opposed. The president says the Unmanned Aircraft was destroyed when it approached an Amphibious Assault ship, calling it a defensive action, another sign of the rising tensions in the region. Cargo ships have been attacked, iran shutdown and american drone, and a british tanker carrying iranian oil was seized. Global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. David you called it. Geopolitics are back in oil, perhaps. This drone came in with an within 1000 yards. Alix how many wars start with Something Like this, where it is a policy mistake . We are inching towards the line, and it is a nervous area. Yesterday, both sides would like to talk, but they couldnt quite get it done, that from century of with john micklethwait. Headlinesith these with russia getting involved lots of things. David we are joined by michael and rachel evans, head of etf coverage at bloomberg news. The big news was which clarida and mr. Rd Clarida Williams coming out. Fed president William Singh when you have only so much stimulus, it is a firstline of economic when to act quickly to lower rate. They must know the end of the month is a really important meeting. Michael what they ignore is traders do not listen to their speeches or read their speeches. They just look off of the headlines. John williams was giving an academic speech about how people make policy and a time when you were close to the zero lower bound. The new york fed later tried to clarify 20 years of academic research, but the headlines came outside williams said you have to to act ugly, and everyone says that means 50 basis points. Clarida was just asked would you consider 50 late in the interview, and said if needed to, we would. Then the headline is clarida says fed would, then everyone trades on that. It is a Communications Issue for them. Alix yeah. Thinkg back i do not we have had that from the new york fed. They said that williams remarks where an economic speech on 20 years of research, et cetera, to try to walk back, and the market did a little. Regardless, in the paper, he said neutral was at 50 basis points. Regardless of what they are doing in july, that is still a dovish statement. Michael when he is talking about neutral, he is talking about that on a nominal basis. You have to add inflation numbers. So youre looking at a fed that is close, little above what neutral may be now with the fed funds rate. He is obviously saying there is scope for a reduction in rates. David how are people in the etf world responding . Rachel we see a bit of a removal of money from the floating rate funds. It is kind of expected with rates going lower. Seeing a big outflow. We saw a big trade around noon yesterday that has not come in yet and we are seeing money coming out of shortterm debt, which seems counterintuitive, but equities have been popping off a bit. If we continue on this pace, we are looking at the worst week for bond inflows since may. It is an equity story, and a lot of people in the bond market are looking for more. Alix and we will get more funds next week with the ecb. We have this great function on the bloomberg that you can put seento a map and you can where you connect back the race across the world. Looking at cuts across the world, whether in emerging or developed markets. I wonder about the race to the bottom a scenario. The ecb may revamp their inflation target. Is this all tied in . Michael it is. There is a global slump. We saw a series of rate cuts from the koreans, the indonesians. Hit by most heavily trade wars. They are all suppliers to china, which assembles their final products. At this point, business is not good, so they are cutting rates. Countries are also anticipating a rate cut from the fed and later from the ecb, some sort of easing that will pressure their currencies. David it looks like a race between emerging markets, central emergingmarket Central Banks and develop market Central Banks. Who is winning in equities . Rachel what i am looking at is where the central bank flows. Emerging markets had a huge one at the beginning of the year. We have seen that tail off. We have been seeing money coming out of emerging markets bonds. It is kind of a switch will we see that go back into emerging Market Equities . Indonesia, have south africa, korea trying to get out ahead, but does it do enough to lift their stock market and encourage the flow to go there or do people look to the u. S. Where there will potentially be a higher yield environment here to lock in yields . We are not seeing it in the flows yet. Alix our third story, earnings really hit or miss when it comes to earnings. It feels like those are being rewarded in some respects. What does it mean for the economy . Michael right now, means a slow down. Jay powell has talked about that. The analysis from Bloomberg Intelligence equity analysts overnight is you are seeing a real reduction in capex spending announcements and in terms of buybacks. Companies are holding onto their cash, still paying dividends, for now, it is do not do anything unusual. We have heard that from that Bank President s we have spoken to. In 2015 and 2016, with the manufacturing slump. Not good for the economy. David are you seeing that, in terms of sitting on the sidelines . There was a bloomberg piece on Bank Earnings with ceos sitting on the sidelines. Rachel that is fascinating. When i look at the trading environment, the biggest story is moving away from the banks and to electronic brokers. I had a look at volume in the markets after seeing that, and they are slightly below last year, but the average is more than 2017 and kind of more than 2016. We would have expected the average to trend up theres more trading on the markets now but there is a bigger shift. Interesting thing when it comes to the sidelines. I am seeing people go into broad market funds rather than specific funds. Bloombergs Michael Mckee and rachel evans. You can find all the charts we use on gtv. Coming up, u. S. Futures climbing. Katie nixon, Northern Trust management cio will join us. And earnings came out for schlumberger. Stocks rallied now 1 . Peuch will be ceo. It appears they are moving now many expected it to be in the back half of the year. The company also cutting capex. G btv this is bloomberg. Viviana this is bloomberg daybreak. Here is your Bloomberg Business flash. A big transaction in the beer industry, an Australian Company selling to japans asahi. The proceeds will be used to pay down debt. Stillev says it may revive its asian subsidiary. U. S. Regulators are investigating a cryptocurrency form in asia that lets people make big bets with little money down. The investigation is focused on whether it broke rules by allowing americans to trade on the platform. Up bbc and itv are teaming to face netflix. The service is called britbox, costing 7. 50 a month, lower than what netflix charges for its standard service. Alix i love britbox. David i am in for that. U. K. Dramas are the best. Alix they are super cool. Now to the fed cutting rates. Rate cuts potentially pushing futures higher following dovish comments from fed president John Williams. This is the implied yield that white line. The blue line is our current fed funds rate. See potentially 225 point two 25 point. Katie it is possible. Yesterday threw confusion into the calculus, whether it is an or to private prevention a cure. There is a case to be made for 50, but i am not sure the committee will get there. David but if you Pay Attention to markets, if they think they will be 50, will they not just a 75 . Katie that is the danger going 50 in july. First of all, i think the fed would be worried about signaling there is something worse going on in the economy than markets thought. Second, i think it is feeding fuel to the fire. Instead of assuming three cuts it25 points this year, but would still be three points and they would think 100. But certainly communication continues to be an issue with the fomc. It really moves markets. Alix Mohamed Elerian said something similar, saying that the growing pressure on the Federal Reserve to cut points by 50 basis points is unwarranted, and by complying, the fed would satisfy shortterm at the risk of greater risks down the road, basically if you want to give markets an inch, they will take a mile. In july5 basis points and in september, it is not that big of a difference in terms of timing, you might as well go 50 i do not disagree with williams where if you want to do something and have a limited arsenal, go big. David what this is due to the dollar . Katie it is happening in the context of global Central Banks that are easing. We just heard some emerging market Central Banks lowering rates. They will continue to do so. The ecb is on the precipice of doing more stimulus. In isolation, i would say it would weaken the dollar, but in the context of everybody racing to below zero, perhaps it will bring some stability to the dollar. But i do not think it necessarily means the dollar will get weaker. I would say the strong dollar issues of its biggest that many corporations talked about in their earnings calls this quarter. Alix what do you do . Jc porter jc morgan ap morgan said jpmorgan said buy risk. Katie i agree. The environment of slow but positive growth, very accommodative Central Banks is good for risk assets. It means the search for yield will continue. Things like Global Infrastructure where things are on top of each other right now, it means support for valuations. David but doesnt the risk get riskier . The rest of the world is saying we think the world is slowing down, and at some point, you will pull the rug out from under the equities. Katie the premise has to be that we avoid a recession. If you think we will have a global recession or if you think the u. S. Will have a recession, then all bets are off, because those are bad garments for risk assets, regardless of the Interest Rate environment. Our base case is we avoid a recession, very slow but positive growth, and that is with the risk. David katie nixon will stay with us. Coming up, boeing puts timeline on what its beleaguered max 737 jet will fly again. This is bloomberg. Fell shares at boeing yesterday but appear to be recovering this morning after the company said it would take an additional 5. 6 billion pretax charge for concessions it anticipates making to airlines for the 737 max 8 being out of service. We welcome now bank of America Merrill lynch analyst ron epstein, will who has a neutral rating on boeing. Still with us is kitty nixon. You have a note out on this subject. Is this enough or is there more coming down the pike . That is a fantastic question. They were very careful in their press release to mention that this was an assumption they made to close the books for the quarter. The assumption is that the aircraft would go back in to Service Early in q4, but they were clear that it may not be the case, and if it is not the case, it is not enough. Each additional month in delays about 1 billion in penalties airlines, and each quarter of delay is about 1. 5 billion. David and we do not know how big the breadbox is, so to speak, because they think they will be back to service in the fourth quarter, and others think not so fast. Ron that is exactly right. The company, and they were clear that when the airplane goes back into service is not up to them, it is up to the regulatory community. Ofx so do we have an idea the airlines and what they want to do with it and how they will push back on boeing and if they will need more comp . What are we hearing from the airlines . Ron of course they will want compensation. If you think about it, there are two buckets of compensation. First are the airplanes actually taken out of service, about 390 of those. They were in service, had crews, had it costs structure, and they were taken out of service. Those airplanes are expensive for the airlines to have sitting around. Interruptioniness reimbursement from boeing on that stuff. And if you listen to what american and southwest have said, those are big numbers. It is like lost revenue. So there is that. Then there is the aircraft that have not been delivered, and on those airplanes, it is the what is the alternative cost and what is the Business Interruption related to that . What give us a sense of boeing salespeople are doing now. Are they visiting airlines and talking about the 737, starting the negotiation about Business Interruption compensation . Or are they frozen in place . Ron i imagine they have to be in the field, talking to their customers every day. Persontoperson. I imagine they are in communication with their customers every day, as this is a fluid thing. If you look at schedules for north american airlines, they are all flipping, going to service and october, then november it is a day to day conversation. Alix why is the stock up . Ron another great question. I think because some investors will look at this and say this is as bad as it gets. That the airplane goes back into service in the beginning of the fourth quarter, we have ring fenced the risk. That is why. What the market has to absorb, and probably will, is the ring fenced may get a little bigger, because this was an assumption to close the books for the quarter. Alix katie, would you buy boeing here . Katie i do not know. This situation seems to be devolving as we speak, from a financial perspective. While we do not comment on individual stocks, this seems to be a typical crisis, and you do not want to be the first one in when we like this comes when news like this comes out. Alix yeah, i harken back to bp. Thanks a lot. Coming up, they raced to the bottom. 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Alix this is bloomberg daybreak. You made it to friday. We had to mr. Williams coming up. Williams did not mean to be dovish. He was doing an academic paper but the markets did not blink much on that. Investors up by three. You see the dax flat. Index was driving any gains we saw in the dax. Eurodollar down by 3 10 of 1 . You had the leader of italy dangling a snap election possibility for voters so that is fun. It really is back in the news. You see coming in the bond market over out of europe and the u. S. You have yields in germany by another basis points. It is about gaining the ecb. How much will they wind up cutting their deposit rate in the fall . David as mario draghi walks out the door. Drop the mic. American express, we are looking forward to seeing how the or. They are doing all right. Two dollars seven cents as opposed to one dollar 80 four cents. They stuck with their estimates going forward. Up can see their stock is almost 1 in the premarket. American express. The consumer is holding up. Alix take a look at state street coming out. Earnings coming in at 1. 42 a share but under management, the highest estimates of over 7 year on year here in reaching 3 trillion. What is interesting is that the revenue was down by about 4 . Money coming in but youre not making much off the money. David people thought might have a tough time for net income as well as fees. Fees are under pressure so you see that in earnings per share performance. Turn. W lets it rebounded yesterday from the setback of ipo. The asian busines