Desperate luminary aprils preliminary university of michigan sentiment. David welcome back to the program. Is it as good as he makes it out to be . So far. I havent been through the full release. The Biggest Surprise coming from trading, whenever they have a big beat like that, that is the first place i look. Fixed income coming in betterthanexpected. Growth came up 17 yearoveryear. Analysts expected trading to be down and was actually a bit higher. Long growth came in around 9 . Trading, weok at focus on the Net Interest Margins. The industry statistics have shown a big slowdown. Question andk the there wasnt a solid answer as to why the industry was showing slowdown. Some of the regional banks have been sing that theyve been saying Slower Growth saying that theyve been seeing Slower Growth as well. David it is tapering off somewhat. Yes. Last year, a lot of the growth came from mortgages. Holding more mortgages on your book. Where investors are focusing this quarter is the slowdown in commercial and industrial lung growth loan growth. That should be positive and yet, we are seeing a slowdown. Alix provision for credit losses on a quarterly basis up 52 . What part of that is higher net chargeoff versus making more loans . In general come all the banks have said they will be provisioning more this quarter. That is related to loan growth. If you look at comparisons compared to one year ago, you will see easier comparisons. Last year, the banks were taking big provisions for energy. Up 96 million. That is impressive. The banks have said we will be provisioning for growth. ,wo areas i will be looking at auto and commercial real estate. Areas investors have been concerned about because of isid growth and credit cards also becoming a worry. It weaker underwriting becoming an increasing concern for the industry. Jon i want to bring in Charles Peabody. Great to have you with us. Lets start with the expectations management. Is that what this is . Charles it is. In the last two weeks of the quarter come all the big banks were trying to rein in expectations. Toimates fall from 1. 58 1. 51. Billion falling to 125 they tried to tamp down expectations. These numbers are in line with mine, except for chargeoffs. Chargeoffs of 1. 7 billion higher than anybody expected. Im curious if its in the card numbers. Thats where we been getting cardive surprises, in ch chargeoffs. What the progression of capital revenues were during the quarter we know january was robust in february was solid. Werese the big banks raining in expectations in the last two weeks of the quarter, i wonder what happened in march. Jon what happened in march . The comment at investor day was interesting. Normally they say, at this point in the quarter, we are running at x percent above. We expect to be modestly better. Its all about march. We havent gotten dimon since then. We want to hear whats happening in march, we want to hear what the outlook is. Somebody will ask on the call, whats happening in 2q . Management will say we are only a couple weeks into the quarter. Thats what analysts will be focused on. Alix you mentioned the chart jobs of 1. 7 million. Chargeoffs of 1. 7 million. 1. 7 billion. Charles weve been expecting down yearoveryear credit card earnings at jpmorgan for the first half of the year. Part of it is the reward costs they are having to absorb related to the contract renewals with their partners. The other is the rising loan loss provision. Jon the Net Interest Margin up 11 basis points. , it is at the situation great passing on the higher rates to those you loan to. The deposit beta, when does that start to kick in . The margin was better than expected, but the Net Interest Income was in line, which reflects the softer loan growth. Going forward, they should expect to benefit again in the Second Quarter from the march rate hike. What happens to the deposit beta Going Forward . Once you get over a 1 nominal rate, the deposit beta starts to pick up. You are looking at diminishing returns come a still positive, but diminishing returns from higher rates. Costs 1. 7,edit consensus for 1. 3. Were up 380 million yearoveryear. The student loan portfolio, im not sure if that is responsible for the whole higher delta. David what do we know about auto loans . Allison it looks like there is thatp in their ratio will be the focus. 3. 3 card charge ratio is above their guidance. Theyve been talking about below 3 . Autos much a morgue and super prime. Autos, jpmorgan tends to be prime and super prime. They did a 13 return on tangible equity on the quarter. They are beating their competition in that sense. Targeting 80. What is taking us down . Charles three things. You will see bad volatility or merge in the Capital Markets. I think you will lose some visibility to the rate hikes, particularly the june rate hike. , weve been forecasting the Inflection Point on the credit front. You are seeing that in the jpmorgan report. David when you look at the value of the stock, how much capital will return to shareholders . On theome more leniency regulatory front, what do these earnings tell you about the likelihood of shareholders getting money back . Charles i think you will see substantial returns of capital. Jpmorgan has talked about returning about 75 of their earnings this year. Moving more towards 100 in the ensuing years. Alix thank you very much. Charles peabody, you will be with us in the studio later. All the data from jpmorgan and citi and wells fargo coming up at 8 00. Coming up, what does Yianos Kontopoulos think janet yellen will get asked . Ofer, nigerias minister state Petroleum Resources will be joining us. What is his probability of opec extending its cuts and for how long . This is bloomberg. Alix the big news of the last 24 hours is President Trump decided not to label china a currency manipulator, saying a strong dollar is hindering American Companies from competing. He says on the dollar, the dollar is getting too strong, partially, that is my fault because people have confidence in me. That will ultimately hurt. , the best thing about a strong dollar is that it sounds good. Would see ont we monday. The president weighing in on the dollar. Mike very unusual. He had said on the campaign that on day one, he would name china a currency mix later. Then, he said we would do the report for this weekend. Donald trump has figured out what everybody else already knew. Not meeting the Legal Definition of current simulation. They had the large trade deficit current account surplus with the rest of the world and they have not been minute deleting their currency for advantage. Geopolitics is coming into this. Hes making friends with the chinese. It may be to his advantage not to do this. Jon interesting tradeoff between Foreign Policy and economic policy. Would give up some things on Foreign Policy to gain some things on economic policy. It seems to be the other way around. Youre not a currency manipulator. Its great if you go to the u. N. And the votes on syria dont abstain this time around. Mike Washington People were saying this coming in. What trump was understanding was how the world works. On situations like syria and even more so on north korea. Embarrassing them and labeling them a currency manipulator, not. N the u. S. s best interests david he got elected by saying the chinese are taking jobs away. Now, he says ive got a deal with the chinese president , i give up your jobs, but we are getting help on north korea. Mike the same question after Strike Missile what next . Where thoseuation people didnt get new jobs that is what helped elect trump. The people who lost their jobs to chinese competition and didnt get new jobs. He has to come up with some way to help them without angering the chinese so he loses the geopolitical gains hes made. David he said the chinese were responsible for us losing our jobs. He never said the russians were taking jobs away. No, hes being nice to the chinese and going after the russians. Where are we going here . There was a lot of talk yesterday about five Campaign Promises broken in one day with nato being another one. What does he do next . The pragmatists in the white house are starting to win the battle for Donald Trumps soul versus the nationalists. We will see how long that lasts. How does he follow this . How does he continue to appeal to the base and make the decisions he needs to make that are in the best interests of the United States . In the wall asked whojournal interview is running the white house . Alix Michael Mckee with thank you. With more, Yianos Kontopoulos and jordan rochester. Im trying to get my head around this. We go back on china and theres a more favorable feel here. Is this risk positive or risk negative Going Forward . Yianos its quite likely that the market may be looking at a slightly risk negative on equities. Just because it might create the wrong connection with how people might feel about the connection for reflation. This is probably supportive of risk. Yields are heading down, the dollar moderately weaker. Those are signals that are very helpful for deflation. Alix whats really interesting is yes, the dollar took a steep slide yesterday. We are backing off the lows of the session. Yields are what are really getting hit here. If the market has to readjust to a weaker dollar, what asset is most mispriced . Jordan from here, it is congratulations to donald trump it he managed to move markets. We were talking about diminishing returns with Donald Trumps suites. The best way to play it still is dollaryen. We get out this French Election risk, we are looking at the euro to finish the year 115 against the dollar. Of athe diminishing return single donald trump tweet. The idea that has been quite likes the fed chair janet yellen. Consensus that she wont get a second term what is your best case now . Jordan when it comes to guessing who will be the next fed chair, its always a big guess. I remember when it was going to be summers versus yellen. Summers versus yellen. Whoever he will replace janet yellen with will be a bit of a hawk. He said the dollar is too strong. It says a lot about the low interest point he made. David we heard donald trump his mojo back. That is a good thing. Is it a good thing for him to be interviewing on currency markets . It is the treasury secretary, not the president. Now, we have the president talking it down. What does that mean for the markets of the president starts setting rates . Yianos surprisingly, the markets will follow their own cue anyway. Whether it is the treasury or the president , it might not make that much difference at the end of the day. Over the short term, those things matter. Ultimately, you need to follow through. Its a question of what policies will be followed and how quickly. This is what the market checks for. At this point, its just rearranging expectations. Jon it is my job to ask outrageous questions was this a message to the fed chair yesterday about the kind of policies the president does like . In a maybe not so blurred way. I want a weaker dollar. You want a second term. Kerry on. Carry on. Jordan there used to political pressure. They will reaffirm their independence from the president. I dont think they will react just because donald trump says so. Jon it could be that the next fed chair could. Alix you want to buy cyclicals where you will get an uptick in Global Growth if that we still be in al search for yield environment . Yianos primarily because of peak acceleration and growth data, it was quite likely that we were shifting more from the reflation theme to the ca rry theme. The cyclicals will not do as well as before. That is already well underway. It doesnt necessarily mean that people should buy long on the treasuries side. There are plenty of opportunities to replicate good opportunities in carry. David Yianos Kontopoulos of ubs and jordan rochester. Both of you are staying with us. Coming up, we will take a look at washington, d. C. We will talk about the ppi numbers and what President Trump had to say about the dollar and janet yellen. Emma this is bloomberg daybreak. Qualcomm has one crucial backing for the Semiconductor BusinessAmerican Company has lined up financing from three japanese banks and the private equity firm silver lake. They are offering to buy the. Oshiba unit bes Largest Health insurer in the u. S. , edna is exploring a sale of its preventative unit. Tna is trying to rebound from that failed megamerger with humana. Alix i want to highlight banks, kicking off earnings here. Stocks up. 6 for jpmorgan. Killer revenue and killer earnings. The difficulty is the revenue in the credit card unit was down 3 . Net chargeoffs for credit cards was up 2. 9 . 1. 7ll chargeoffs up m billion. We will get an update from wells fargo and citibank in the next half hour. Hsbc down 2 in london. The biggest drag on the stock 600 today. Stoxx 600 today. Hsbc has said it plans to relocate 20 of its trading staff to paris. Its all about managing expectations, still planning for contingencies ahead of the official decoupling from the eu. Hanes brand up 10 premarket. Preliminary earnings coming in on the highend. This delays week store traffic fears for a little bit. An impressive move for hanes brand. Jon how many hands will go up jeanluc winsf the election . , Narayana Kocherlakota. From a beautiful new york city, you are watching bloomberg. Jon from new york city, this is bloomberg daybreak. As we count you down to a day risk off. Yields are lower. 2017 lows. Down another basis point on a u. S. 10 year. We come in by. 25 . Lets get you up to speed on the headlines outside the business world. Emma President Trump has indicated there are deep divisions between the u. S. And russia and that relations could not be worse. The president spoke at a News Conference with the nato secretarygeneral. President trump it would be wonderful if nato and our country could get along with russia. Right now, we are not getting along with russia at all. We may be at an alltime low in terms of relationship with russia. We will see what happens. Emma meanwhile, at the u. N. , russia vetoed a resolution that would have demanded syria cooperate with an investigation into the chemical weapons attack. U. S. Says assad carried out the attack. Russia rejects those allegations. In asia, north korea may be on the verge of conducting its sixth Nuclear Weapons test. Site Koreas Nuclear test is primed and ready to conduct a trial. Analysts say satellite images still,tivity at the site south koreas downplaying expectations that a nuclear test is imminent. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. David for more on how President Trump is dealing with north korea and those other geopolitical tensions, we are joined now by kevin cirilli. You covered this man as a candidate. We heard a lot about china. We didnt hear much about north korea. Are you surprised at the extent towhich hes dealing with xi bring pressure on north korea . Kevin yes. What we heard frequently from then candidate donald was essentially china is going to have to play ball in north korea. O address this dictator hes hoping to juxtapose these trade agreements with national security. Where it remains unknown is exactly what he wants out of north korea. Heard fromwe saying theillerson u. S. And russia are united on the policy argument of the nuclear rising north korea nuclearization of north korea. David china has leverage. It is up to president xi. What is the likelihood he can bring president xi to do things his predecessors couldnt . N he will not be labeling china a currency manipulator. That would be one of the potential bargaining chips. When you get to some of these other things that the chinese want, such as dealing with auto the Auto Industry and working with the u. S. In terms of regulatory structure for autos, thats where things get interesting. He wants a win with north korea. Jon six u. N. Security resolutions on china. Towed vetoed by china. Kevin when you look at the , clearly,eyve had this is a signal from the chinese that they are willing to work with washington. While they disagree with the u. S. In terms of how they are communicating with syria and russia on assad, they waited to put out their stamens until after xi left maralago. Statements until after xi left maralago. The rumblings out of washington are all interconnected. David we had Rex Tillerson meeting with his counterpart lavrov yesterday. They had a full and Frank Exchange of views yesterday. Kevin they played a little bit nice in terms of optics just hours later, President Trump butcher andd a secretary tillerson saying they are at an alltime low speaker ryan leading a bipartisan delegation to europe to meet with nato allies. David still with us is Yianos Kontopoulos and jordan rochester. Heard a lot about geopolitical risk and how it might affect markets. We are now seeing real can creep geopolitical risk. Concrete geopolitical risk. How are the markets responding at this point . Yianos i dont think they truly are. This is hard to pin down. Theres elements of it here and there. I wouldnt say theres something distinct. Issues