President delivering a speech on the economy. At 10 00, my favorite thing, universe Michigan Sentiment numbers, the soft data read. Because it is michigan, that is why it is your favorite . [laughter] therade at the top of agenda and late yesterday, the commerce secretary announced a trade deal with china, exports of everything from beads to liquid natural gas. Cirilli. S kevin we thought we were going to war with china and now we have cooperation. Gashis influence is natural , which is a bit of a concession in some regard from the Campaign Rhetoric of President Trump in that he is looking at this particular industry the coal industry may be snubbed but they feel this good help jobs. Beef and poultry is where things get interesting. The Iowa Governor is not been confirmed iv senate as the chinese ambassador, but driving the political policy point home. Secretary ross said this will be a 2. 5 billion net gain for the u. S. Economy as a result of that portion. The third point is where it is interesting, details have not been fully released, making it easier for the u. S. And china to have more Financial Exchanges and interactions. The later of which will be interesting to see the back story on how it came to be. Take a step back from the details. We were going to have them declared a curfew manipulator on day one and now lets have these deals. Is this indicating the approach of the Trump Administration to trade overall and specifically with china . On the flipside, this is the largest deal trade deal, there was something with canada. This is one of the biggest early on. That sends a signal. From a geopolitical foreignpolicy standpoint, theyre looking to work with china to pressure north korea. All of this coming under one week before the president goes overseas for his First International trip. We should give a wilbur ross credit. He did it all himself. Not the way it normally happens. In the midst of a lot of political fire. Thank you so much. Great to have you in new york. We have the Morgan Stanley u. S. Chief economist. And the jpmorgan Global Market strategist from london. One sector and country at a time. The news, but how long will it take good news, but how long will it take . The news, but how long will it dig deep into what it may mean for trade flows or their sectors. And then the lobbying begins. That is why some of these can take a long time to be put into place. This is good news. What is important, the content of agreement or the direction of travel . Direction of travel, the biggest challenge for emerging markets and the Global Growth picture has been a stagnation of global trade. The fact that, from a country that was previously labeled in the campaign to potentially being a currency manipulator and now a symbolic trade deal spanning not just into natural gas but all sorts of this subsectors and seven historys is a strong point that trade in the world may be stepping in that direction Going Forward, especially with one of the largest partners such as china. We are oversupply in the market, you have russia building a chief of pipe like to asia and a and natural gas coming from australia. We say we can export more to china but that does not mean we do, so does not mean anything for the trade deficit or gdp, or will it . Hkn, but beyond a reasonable time frame for what economists and Market Participants forecast out. You will get Immediate Reaction in futures around certain commodity prices. But where the trade deal comes to bear is so far out in the future, depending on how long it comes into place and how it affects flows. Shortterm trading it is on the new. You find this is better for sentiment but not like you will go by a beef reduce are in the u. S. . I would agree. Learning from the political sides of markets is that it takes time for it to get implications in the market but the symbolism is more important with the Trump Administration and global trade relationship with china. The question of soft and hard, you see data camp where a positive reaction from analyst and Market Participants. Where does this play out in the specifics earnings projections for specific companies remains to be seen. What is the direction of travel . What is the objective, the trade deficit . The objective to get the trade deficit to zero, why does that make sense in terms of the world of economics . Why is that an objective for the white house and should it be . Always it has been a policy objective for administrations. The trade deficit getting down, means you are you have more savings in the economy that is not flowing out of the u. S. And a smaller current account deficit which puts less pressure on your currency. It is generally the economic thought is that you should not run large trays deficits trade deficits. Tohas always been a goal and this administration, the trade deficit represents unfair practices. Ideally, you would not want a trade deficit because it means , in some sector or with some trading partner, there are unfair trading practices. Some of it is symbolic but if you are always striving to getting rid of the trade deficit with another country, you must be striving toward more fair trade practices. It is not a good, sensational story as the trade deficit. You mentioned, we thought we would be in a trade war with china not long ago, one of the symbolic data points with the administration was able to point to was the trade deficit with china. What is the take away . You have a deal between china and the United States, the g7, they cannot agree to talk about trade anymore. What does that mean for the future of global trade, if that is the new way of doing these deals . I am notsee that worried that we will not get trade deals at all. We knew coming into this election cycle that, whether it was a hillary president or a trump president , we would probably step back from globalization for a time. Good, overall, this is because it shows we are not necessarily stepping back from globalization. We may be stepping back from bilateral trade deals to and instead unilateral trade deals, but it is still trade and keeping trade open. Is this a story right now of the dog that did not bark . Right now innvest these exporters by you will not be hesitant to invest in general and exports to the United States. Elected, people were concerned that exporters would be disadvantaged and maybe that means they will not be disadvantaged. Point. Is the key with looking at emergingmarket equity flows, how much the exporters are really hurt after november. The flows of come back. With what recalibrate actually has been said and what can get through in washington and through the chamber where the trade deals are decided. It is a slight change in their readjustment to not all exporters should be couple of the aborted and you can pick and choose the one that have the benefits. This is a more symbolic news point than to completely reallocated now based on just the u. S. China trade deal. The markets six month ahead of the political analyst gus r everything has skyrocketed. The currency molecular test manipulator you dont call them at. They said the reason they are no longer a currency manipulator anymore is because donald trump told them to stop animated. Thank you for explaining the fx markets to us. Up, more on the top story, the trade deal with the secretary, wilbur ross joins us at 8 30 a. M. Eastern time. Later, an interview with the chicago fed president. The new york city this friday, this is bloomberg. I have your Bloomberg Business flash been spreads has started a merge with tmobile talks. Executive from spreads largest shareholder and sprint have had informal contract talks they would be open to discussion about consolidation. France, a 4. 2 billion deal, the companies are controlled by billionaires. It would unite the media part with the marketing and advertising assets. It is the biggest ipo in south korea in seven years. It climbed almost 4 in his first day of trading, the mobile game developer has a market value of 12. 4 billion, more than more than one of south koreas bestknown corporations. That is your Bloomberg Business flash. U. S. Consumer price index and retail sales number for april will be out in one hour and 17 minutes. They take on special significance given the soft numbers in march. You have models you follow ,losely with the u. S. Economy what are your models telling you about the growth rate right now . Should we be worried about the numbers we just had . No, the fed as well telegraphed, transitory factors that held by growth in the First Quarter. Those have come off. We are tracking a pretty explosive rebound in the second quarter. Our traffic fluctuates around 4 . The biggest delta is being driven by the consumer. 4 is higher than i wouldve thought. Extrapolate that for the year, the soft numbers in the First Quarter, what do you expect for the full year . On track for a few tense higher than 2 . In the pocket of the twoperson economy. Twoperson economy not 2 economy. Not high sentiment around change that would be coming from fiscal policy. We do not think that comes until early next year. This is an economy that has been knocked off track nor is it an economy that has sued a new lift to growth. We are still around to present but im not worried about the consumer. That was an eyepopping number, close to flat for the First Quarter for the consumer that a lot a very temporary factors in that. The consumer is just fine. You have cpi and retail sales, consumers, are they find . Yes, look at the confidence numbers, they are soft, you can see them translate to retail sales but last month softer numbers is an example of one data point not constituting a trend. We expect if not stronger numbers today, the trent to pick up and recover quite a bit throughout this year. Looking at other factors that affect the consumer is a and limit, those numbers are doing just fine with initial jobless claims at lows and jobs added every three months, job support seems quite good. That is the key for an economy that 70 plus percent, you need people in work and when they work, and an ever tightening labor market, that will lead a strong support for the u. S. Consumer we see and we like in the models. Generalizations, the wealth scare on the consumer, subprime automobiles are bubbling away and loan origination in many of the bank when they recorded quarterly numbers, they were not terrific. Are we seeing a weaker consumer down near the bottom end of the while scale that could bubble up . If you look at Consumer Confidence by income groups, it looks like a barbell. The wealthy have lower confidence, the low on the income scale have low confidence. In the middle, this explosion in confidence. I would like to see people happy across the board. You can get more robust involvement in Consumer Spending across income groups, if you see that. Nevertheless, at the end of the day, a very good point that we are still creating jobs. That means wages are still growing and people still have money. That is very important. So goes the job market, so goes the consumer. The subprime auto issue, typically, late cycles, you would start to see Credit Conditions for the household sector or credit quality deteriorate, it always starts at the bottom up. It can start several years before the end of a cycle. I take that as normal late cycle funds. There is a question of the on sentiment, of people parting with the cash. Auto sales were disappointing. Does that give you pause about the consumer situation . It should be wrapped up into a little bit of a weaker first start First Quarter in terms of sales. Watching the oil price move dramatically in the past six months could have affected the consumer in terms of thinking about auto purchases for the course of the year. I would say that we are not necessarily worried about this very court large diverse part of the economy that benefits as the Global Growth cycle picks up and as jobs pick up in the u. S. One thing we speak a lot about is the consumer Balance Sheet, the income effect from slightly higher Interest Rates in the u. S. As the fed it normalizes, should help a lot of the savers in the u. S. , not necessarily the middle of the barbell, people who have more in cash to be the lower end of the income spectrum , benefiting in terms of those who have the accounts in interestbearing liabilities. Interesting to think about in terms of fed policy helping another part of the consumer space in the u. S. Why do we see we Consumer Loan demand . Weak Consumer Loan demand . Nothing has changed for the consumer. We are still creating jobs and wages are still growing. We do not have more money in our pockets just because we have changed leadership in the u. S. Personal income tax cuts will help, help lift a real disposable incomes. Otherwise, if you look at disposable income, it has been on a significant slowing trend, which is typical late cycle. The only thing that can turn that around is either wage growth really accelerating, notably. Or we get personal income tax cuts. While consumers feel great, it has not translated to more money in their pockets yet, that is what will drive loan demand. Cpi, a huget, disappointment in march, your expectation for today, was march a fluke . Yes, the fx of changing global inflation dynamics come to a boil in march, we expect slightly higher, definitely higher number for the next month. Generally, inflation is picking up and you see Consumer Spending more and more month on month. The fact the fed has remained confident about getting to their and maintaining there to present target makes it quite comfortable 2 target, makes it quite comfortable in the u. S. Economy. Usthey are both staying with. Coming up, more on the top story, u. S. Trade deal with china. We will talk with wilbur ross at a 30 a. M. Eastern. At 1 00, i will speak with the wilbur rosss predecessor. Live from new york and washington, this is bloomberg. Lowering thenley probability of a u. S. Recession over the next 12 months to 25 . Give us the 411. We see the strong pickup in the Global Growth backdrop, which is driving investment in the u. S. , a stronger domestic economy. Reform. Delight of tax we think Work Together the delay of tax reform, we think Work Together to get that 25 . We thought we would get a tax cut and we have all this money . Nd a huge cycle do you see it picking up without that . We see, without the stronger global backdrop, demand for u. S. Exports has risen strongly which started over the summer of last year. The trade activity numbers turned up for the global economy. Large business in the u. S. And investment has picked up because theyre exporting. We think small and medium businesses are participating in the investment rebound because we have seen hiring among those sized firms accelerate over the past six months or so. Even without tax reform, we are getting a nice increase in investment. The biggest upside surprise in the numbers this year is investment. That is key, because come on top of that, if you deliver a structural tax reform that also creates bigger incentive for companies to invest, you can sustain the cycle. You set the delay was positive, most people say the sooner, the better, why do you say that . Late cycles, a firm promise is better than a delivery. Upon delivery, you may get disappointed. As long as we get a firm promise that it is coming, that markets can better digest that and say, something will happen but we do not see a lot of fiscal hope built into the market which gives me comfort, because if we do get disappointed later on, less of a kneejerk reaction. Does growth peaked for 2017 in this quarter . Q rate of 4 , that will be the biggest because that is because it is a rebound rate from the First Quarter and will probablys total around the 2 growth path, lets see what comes from fiscal policy next year, if we get income tax cuts, something on the corporate side, you can have late in the cycle, stronger growth in 2018 them 2 than 2017. Coming up, back to tray, wilbur ross midgets the deal on china and the comedy g7 with the form former fed governor. We will be live in italy. The home of the clan farro caln. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. From new york city, i am Jonathan Ferro and you are watching bloomberg. About one hour two hours away from the cash open with futures a little bit softer and the dow down 13 points. T has been that kind of week the price muted but a slow grind lower. After three weeks of gains, we could have a week of losses on the margin. Treasury yields have been slowly grinding higher for a fourth week. A little bit lower on the day, down by a basis point of 238 on the u. S. 10 year. Euro weakness throughout the week as we fated the macron win. Donwn. Llar down by that