Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170605

We will be joined shortly by Larry Summers. He has a piece out today in the Financial Times on the dangers of the United States giving of the leadership role in the Global Community of nations. Alix it is still a busy day. We get nonmanufacturing isn data. President trump will lay out his plan to overhaul the u. S. Traffic control system. Tim cook will deliver a keynote address at 1 00 p. M. Eastern. There should be a lot of shakeup especially when it comes to ai. Inathan a deadly attack london over the weekend left seven dead and nearly 50 injured. The Prime Minister of the United Kingdoms broke spoke earlier today. The successes weve enjoyed, we must do more to respond to the changing threat to our country and our way of life. We cannot deny that the threat from islamist extremism is one of the greatest we face. Now isn joining me nejra cehic from London Bridge and andna. What have we heard from the Opposition Party and how does this set us up in three days time . We heard from theresa may. Shetalked about extremism, talked about terrorism. She quickly moved on to trying to get back to some of the Campaign Themes we heard about before the manchester attack. In that sense you can draw a line between what she said and what Jeremy Corbyn said. He also wants to return to some of those themes. She was talking about strong and stable leadership. The contrast between her style of leadership and Jeremy Corbyn. He talked about governing for the many and not the few. Acknowledged what happened in london on saturday night, pausing to think about those who lost their lives. Jonathan the situation on the ,round in London Bridge stunning reaction from the police and security force, neutralizing the threat in just eight minutes. Whats the latest on the investigation . Earlier,a may spoke having her second cobra meeting. She said 11 additional people are being detained in addition to the 12 that were already arrested. Police making extra rates early this morning at 3 00 a. M. London. Ime following some searches the police do know the identities of the three attackers who were shot dead just minutes after the stabbing. At the Moment Police are not releasing the names of the attackers. We are still awaiting that information. Security still tight at London Bridge. The cordon remains behind me. The station is operating as normal. Question. A final if you ask many of the electorate who they would put their vote behind on issues like purity they would say the conservative party. That doesnt seem to be resonating with holes. Im wondering why. We saw a narrowing of the polls just after the manchester attack. Mean there was anything to link those things. A big policy missteps by the government around social care. When you look at the details, trust made to protect them from threats. 40 said the conservatives were best to deal with defense. Uptodatet for more polling to see whether we are going to see any change as a result of what happened on saturday night. The normal logic would be that buffet of party. Theresa may was in charge of Homeland Security for six years. Extent she has questions about what happened on her watch just as much as she can boast of experience on the beach. Extent she beat. Jonathan thank you for joining us. We have bloombergs executive editor for international government. Too much tolerance of extremism in our country. The words of the Prime Minister. Whose job is it to stop that and whose job is it to change it . Its fair to ask those questions. She was home secretary for six years. She might say she has tried to do this and was frustrated under David Cameron in attempts to. Ctually get to grips with this she might be vulnerable and people will be asking that question as they prepare to vote on thursday. Jonathan we talked about the terrific response of the police. Responding to it is one thing. How do you prevent Something Like it this . Its incredibly difficult. Low you look at the capability attacks where they used vehicle and nods and weapons, theres very few opportunities to detect those before they go into execution. Monitoring those high risk individuals and making sure you are identifying the most important targets out of that pool. Jonathan an increase in Global Cooperation as well. We have a reluctant on issues like trade. What about issues like security . Thats difficult to answer. Its a big part of his platform onbeing extremely tough terrorism. Theres a big difference between rhetoric and actually putting that into reality. People in london looking at his tweets question if he is becoming even more divisive than he was before. Clearly for the Trump Administration they are very keen to see more cooperation on this. They have been pushing nato to take a bigger role. The main argument of the Trump Administration is they are very serious about it. Have yet to see concrete details on how to do that. They fragmented middle east. Ties with manyc countries over there with questionable ties to terrorism as well. Saudi arabia, other gulf states cutting off diplomatic times with qatar. Can the main states tackle the issue together with the west as well . Toparticipation is critical solving the problems in the middle east. That has a direct impact on what happens on the ground in europe. Until the situation in the middle east is resolved, the threat will persist here. Particularly with foreign fighters. European foreign fighters coming back from iraq and syria in larger numbers. We need to have that kind of multilateral cooperation. With the snap election in u. K. , it was around brexit and who was going to be best to deal with it. Since i landed here no one has taught about brexit at all. Asshe tried to present it they one issue election about brexit. Shes such you would you like to the nation. Said she would unite the nation. Its an election about many things. Referred to theresa mays line about extremism in this time. Question markhe about who is responsible in society for harboring terrorists. You, otso iho. Will bep, Larry Summers joining us to have a look at Global Economics and Global Politics as well. From london and new york, youre watching bloomberg tv. Jonathan it is a resilient city of london after attacks left seven dead and many injured. Theresa may said extremism has been tolerated for too long. What was once thought of a one issue vote in an election suddenly becomes much more nuanced. It takes place in several days time. David were going to talk about Larry Summers. Is the former treasury secretary and today he has a column on the Financial Times. He writes about his deep concern the United States is abandoning the path of is the former treasy secretary and today he has a column on the financial internal cooperation established in world war ii and the consequences could be severe. Can americas adversaries and allies alike not follow Angela Merkel in concluding that the u. S. Is now far less predictable and reliable . How can the responses the other than destabilizing . He joins us now from massachusetts. Good to be with you. This is a very strongly worded column. Can you connect that with the developments were watching around the world today . And its qatar ostracism in the region. Im not going to connect the president s rhetoric and actions to any specific terrorist action. Terrorism is never right. Justified. S never we need hugely robust approaches. Parts a tendency on the of the president s critics to blame him for everything bad that happens and i think thats wrong. That having been said, we have stood in the United States since the Second World War for the idea of a community of nations that cooperate with respect to global problems. Advisors of the president s who are held out as leaning internationalist took to the wall street journal last week to declare that there is no such thing as a community of nations. People,llknown mushy Ronald Reagan, Henry Kissinger and james baker, george w. Bush regularly used the concept of the community of nations as what the United States was trying to uphold. When we step away from that, how to suspect that we are going to do list for other nations. Other nations are going to feel more strongly that they have to take matters in their own hands. We saw that experiment after the First World War when nations pulled away from each other and the United States didnt join the league of nations. Britain and france stood for maximizing reparations from germany rather than trying to create some kind of International System. This is a potentially catastrophic philosophy and it comes at a moment when we have the very serious terror threats that you talked about. I suspect ultimately more consequential, we have the challenge of integrating into the global system a rising china. Has aneague at harvard important book out on the trap talking about the difficulties the International System has in accommodating the rise of major nations. Problems. Very hard they are that much harder when the leading nation in the world issues the value of cooperation and indeed eschews the very values of rationality by putting forth budgets that have arithmetic errors, by denying the Global Climate change is a reality, by publishing economic touchst that are out of with reality. And i disagreed with plenty that Ronald Reagan did or george w. Bush did, but i never would have read we have seen the first postrational presidency. But that is what i fear we are looking at now and i think its terribly areas for the world. The question the world is going to ask of and is asking itself, i have traveled a lot in recent weeks, is this a temporary aberration for the United States or is this the way the United States is going . And the way they are going to answer that question is to look at other leading segments of society and see whether they are following the president or backing off. David exactly. Your column is addressed more to Business Leadership than to the administration, urging ceos to come off of those councils. We caught up with jp morgans ceo. Listen to what jamie dimon had to say. Im an American Patriot and i want to help the president of the United States. When someone is piloting the airplane you root for the pilot to go off of hard an Advisory Group because its just one issue. No one is going to agree with every president on every issue. I dont want to overreact. David why isnt jamie dimon right . We oh him as a patriot to help them be better . Jb refers to it as one issue. Theres an immigration ban. Theres arithmetic that doesnt add up. Theres climate change. Capitalism and selective deals. This is hardly the first and only minor issue. This is a central part of philosophy. As the United States believe in a community of nations. Preparede should be and i would hope any Business Leader would be prepared to offer the president advice. That is a very different thing than lending your prestige and that of your company to joining an Advisory Board of his creation. That is accepting a president ial appointment. Third, where does this principle stop . Jamie says its one issue. What would cause him to back off . Different. Nt is very i think the rhetoric on the left of it compares him to leaders in europe in the 1930s is frankly overdone. That said, at what point is a patriot is your allegiance to your country rather than to your president . I have always thought of my allegiance is a patriot is being to my country. If i had been asked to support the kind of policies being advocated i this administration while in government i surely would have resigned. Make no mistake, the decisions Business Leaders make send a both to thel signal rest of the world and to the president. If jamie and his colleagues on this Advisory Board resigned not over the details of the Paris Agreement but over the philosophy that the United States no longer believes in cooperation with other nations in a community of nations, that would send a very powerful signal to the rest of the world and it would send a very president ignal to the and people at home. Understand that these businesses have big stakes. They are regulated in many cases. They rely on the u. S. Government in many ways. I understand that its not easy to be courageous. Thats why i so admire elon musk and robert iger who i believe took the right step here. Thats a political issue. What is striking to me is that the markets dont seem to thought and. We have equities at records. Which market, treasuries or equities has the biggest sugar high right now . Hard thing to judge. I think the markets are related. Ratesdgment that interest are low for some very important structural factors, the kind of thing i talked about with secular stagnation, and excess of saving over, that awareness as it permeates into the market is in part because of the stronger equity valuations we have seen. Alix when you look at the market, the lowest i have heard is 1. 5 on the 10 year at guggenheim. Are we in a world where were going to see 1. 5 . Be myt wouldnt prediction and i know better than to make shortterm bond market forecast. I do think people have not appreciated how much the world has changed. Likehole set of factors rising inequality, demographic change, People Living longer that are leading to more saving. Factors of set of which the most important might be the fact that capital goods now cost so much less and the economy is the massive fine. Nobody needs moles anymore. , leading to less investment. More saving, less investment in a reduction in interest rates. Thats what we are seeing. David is there one thing you can agree with President Trump on . Infrastructure . A plan to redo air Traffic Control as a first up a major infrastructure investment. Is that something you can support . I can support the reform in airTraffic Control. They are right about that. They are right about radar being bad and gps being good and we use radar. Heres the problem. The center of their plan seems to be i havent heard it yet to be fair a nonprofit was i public corporation. The only nonprofit public corporations that i can think of in the nine states are the post office and amtrak and i dont think most americans would regard that as a hugely successful formula. Think to see why they this change in organizations is really going to be enough to change things. But i applaud the decision to focus on infrastructure and have airTraffic Control be the leadingedge of that. The question is are they going to find a feasible way of going at it or are they going to use this buzzword of privatization . Im concerned in that regard and will be watching anxiously to see what is said today. Alix if you had to pick one thing that would change the dynamic in the u. S. , Health Growth and help yield, what would it be . Infrastructure investment and rational immigration policy. Alix what are the chances that we get that . Well under 5050 because we are spending our time on budgets that dont add up and on scandals and tweets. Americas problems are solvable. They can be solved. But you have to focus on them and not focus on issues of personality. Londonh people dying in has the president chosen to make a political attack on londons ofor, a central priority white house rhetoric . That would beid exposed to a long talk and not a very pleasant talk with his board. I wonder whether the business Advisory Board, where they feel it is so important they remain in order to be effective, have taken up those questions with the president. I rather doubt it. I have to say thats troubling to me. David thank you for spending time with us today, Larry Summers of harvard diversity and former u. S. Treasury secretary. Will bep, Arne Sorenson joining us. This is bloomberg. Jonathan from london and new york, this is bloomberg daybreak. On jonathan ferro. Im jonathan ferro. Futures softer in the United States. Things are softer globally across much of the continent. Many countries including germany having National Holidays today. Levels 2017 lows on the 10 year yield. In fx marginally the Dollar Strength story. We come back off the highs for the euro in the year so far. Lets get you up to speed on whats making headlines. Heres emma chandra. President trump criticized the Justice Department and Court Systems in the dispute over his disposed proposed travel plan ban. An pam he called the courts slow and political. After thecal truce london terror attacks lasted less than five hours in the u. K. Theresa may and Jeremy Corbyn ramped up the rhetoric before thursdays general election. May argue there is too much tolerance of extremism. Saudi arabia is leading a push to isolate qatar over its relationship with iran. The saudis, the uae and egypt have cut diplomatic ties with qatar. They are also suspending air and sea travel. Saudi arabia has accused qatar of undermining efforts to isolate iran. Im emma chandra. As the ecb manages to convince economists that Monetary Policy may be boring, 90 of respondents in a Bloomberg Survey said the ecb will use its meeting on thursday to acknowledge the risk with the euros recovery of balance. Here to discuss further is david owens, jeffreys chief euro economist, and Michael Mckee in new york. Lets begin with david. How important is the language . Its pretty important. We know they can cut rates further. We know given the recovery broadening out they will likely take that reference away. The risks of recovery are more balanced. We had a real conversation, most people come into this room and say we dont ever expect them to cut rates anyway. Why is removing the language significant . Potential direction of travel. They could cut rates further. Economic data flow really did disappoint. They felt they had to do something on the back of that. They dont believe at the moment thanks having major problems. Its an important signaling device. Market managing mode is always tough for Central Banks. They do remain the only game in town. It is still early days. Installation on the core measure is printing below 1 . You have potentially an italian election coming through. Ityouve got italian bond yields 200 basis points over germany. Its going to be very difficult going through september and october. Michael mckee, david owen pointing out the ecb is the only game in town in a big way. Yields on treasuries and away as well. Does that open the door for the Federal Reserve in some way to do the things they need to do . Wayhat depends on which u. S. Yields continue to go. If they continue to fall it makes it more difficult for the fed. They would like to be able to continue to raise rates. Not just the ecb and whats happening in europe affecting it, we see this worrisome turn in inflation. Rise and starting to that was the data that mario draghi and janet yellen were building their economic cases on have suddenly turned. If you see inflation continue to fall than both of them are hamstrung because they made the case that we need lower rates to keep inflation from going too low. Its hard for the fed to continue raising rates and its hard for the ecb to continue tapering. At the september rate hike, odds 26 and slipping since the middle of may. Ane everyone is saying its done deal. Now september is in doubt. If june is in play why not september . A major surprise to the markets if they do not move in june and they do not like to surprise the markets. They dont have a real dangerous situation yet. Have no idea of whats going to happen in september and was to happen after june. If inflation continues to be very low you wont see the odds rise very much. If we get strong job creation and maybe in june inflation rising a little bit you will see a change in the forecast. Be the only game in town, but do they have a fair amount of options been created by the softening of the numbers here . If the numbers were taking off in the United States i would put more pressure on mario draghi. Right now he has the way. Leeway. I was in the u. S. Recently wondering when they will start tapering and they will have to come in and start buying more bonds if spreads start wandering out. They need a much stronger recovery. Its very early days for them at the moment. No higher now than when they started qe some time ago. . I think about the framework and an exclusive focus muchice pressure and not on output. The last time that happened in europe that they focused on inflation pressures and acted too soon. Is that how mistakes are made in the world of central banking . You focus on one thing to much. They still have a situation sort of underlying inflation pressures. Whether you are comparing the eurozone with the u. S. In particular the u. S. Has in recovering so much longer. You exclude germany from the picture, eurozone to defeat is not much higher than it was in 2008. It is still very much a work in progress. When they taper, what happens in 2018. All of these issues will fade some degree background. It does not happen. Alix jeremy will have something to say about that. Whats interesting to me is the story for this year was going to be centralbank convergence. Is centralbank divergence going to be the theme . We dont know yet. If the ecb does start to taper youre going to yields rise and you will get convergence. The fed would like to get rates up in case they have to start cutting them again. Perfectns this is the time to do it and the ecb would like to be in the name position. They are much farther behind because the economy has an slower to recover. Keep going, they dont have a good explanation for why inflation is falling other than energy. Does that make sense that the fed wants to get the rates of . LittleLarry Summers on a bit ago. In the past said that is really foolish. Is that a sensible approach . If the economy is Strong Enough it is a sensible approach. They want to get a bank rate of in the u. K. With the u. K. In the u. S. , an interesting dynamic is janet yellen is going to leave in february. It will start shrinking the balance sheet. That could happen in december. That game is going to be a real change in the way market in the next month. Interesting political backdrop in the United States and europe as well. Of brexition come negotiations. Our politics a headwind at this point . I think the u. K. Election result is so very much up in the air. With brexit it hasnt kicked off. Negotiations havent really started got the italian election result. David owen of jeffries and Michael Mckee in new york. We will have full coverage on the ecb decision. From london and new york, youre watching bloomberg tv. Mrs. Bloomberg daybreak. Im emma chandra. Coming up, Arne Sorenson, president and ceo of marist international. For the first time in years, apple will use its Developers Conference to show off hardware as well as software. The Conference Begins today in california. Apple is expected to unveil new ipads and laptops. In china, merger talks saying that reading a giant Power Company with 260 7 billion in assets. A group has been preliminary discussions with one of the nations largest coalfired power generators. The banks capital has shrunk because of that real estate loans and it is running out of time to prepare its balance sheet. Shares were last some 38 . Thats your Bloomberg Business flash. Npls are an issue . Oil off by. 6 . Saudi arabia and some of its allies are cutting ties with qatar. Closing land borders as well as shoving off air and the travel. From london and dubai, javier blosas. What happened and why now . It has been a dramatic escalation. Activearted with an conviction about qatars role in trying to isolate iran. They feel after the visit of donald trump that qatar has not been pulling its weight and has been looking at reconciliation with iran. A series of decisions blocking or locking off basically land sea and air travel has major implications. Compare it iso germany and the European Union decided to do the same thing on a country like france or spain. Thats the gravity. Its unprecedented in history. This is a new low in the region already significant strife and political turmoil. In terms of the oil market, we did see a pop earlier in trading. Give us some first active about how biggest producer qatar is when it comes to natural gas and oil. It supplies a significant chunk of the world. Is relatively a small player. It produces 600,000 barrels of crude. The same amount of condensate. A particular variety of oil. In total about 1. 2 Million Barrels a day. Thats about what north dakota produces in the United States. A significant player in the middle east but not a player that is going to cause a major spike in oil prices. Thed i wonder whether bigger risk is if saudi arabia is successful. Are the dangers of real conflicts with iran and the streets of ones right there. Straight of womans . Youre looking at as classes being affected across the board. We saw a steep selloff on the dough. Exchange around 8 . In the forwardes market. We are seeing a reaction of surprise from the iranian side. A rise in attention is a threat to the development of all. They are concerned by the development in neighboring countries. This is taking the human toll as well. There are families being torn apart. Upizens have 14 days to pack their bags and leave. His is a complete cutoff. Alix when is meeting for an opec deal . There are all contributing to the cuts. Does this disrupt the framework for a cut Going Forward . I think it remains. They played a big role in reaching their current framework of collaboration between the saudis, the iranians and the russians. Qatar posted several backdoor and secret meetings. It was key in helping this out is to get the deal. I think it will remain on active. They will be made more difficult because diplomatic relations are cut off between saudi arabia and qatar. Opec has overcome much more difficulties. We have seen wars between countries, iran and iraq in the 80s and between countries like saudi arabia and venezuela. Will be one of those rare locations where saudi arabia and qatar will continue talking. Alix great stuff guys. If you have a bloomberg terminal, check out the go tv. Interact with us directly. This is bloomberg. Jonathan from london and new york, this is bloomberg daybreak. It is a resilient city of london following the attacks which left seven dead days away from hk election. U. K. Election. An unpredictable one. Alix President Trump with through from the paris accord and ceos are speaking out. Dimon says he doesnt believe its the right move. I wish he didnt. Just to show you are collaborating. Collaboration is a good thing between nations. It not a bad thing. The Trump Administration feel differently about that. We wish they had stayed in. Nick atkins is American Electric power ceo. His President Trump pulling the u. S. Out of the accord change your makeup of energy in terms of at any point . It doesnt. Our industry is moving quickly to that green energy economy. Their customers and our shareholders expect in the futures. We are going to continue moving in the direction we are doing. Its a rebalance thing of the entire portfolio. Using resources that werent available for four before. Was 37 ur portfolio cold and it was 70 and now its 47 . What was the impetus for this . Economics, regulation or shareholder pressure . A combination of all three. Certainly the regulatory activities provided the forcing function. At the same time today its around what our shareholders are expecting from a risk perspective and from a customer perspective. Customers are expecting a clean energy economy. There are several large customers want to be served by renewables. You are seeing a rebalancing of portfolio as a result. Rank those issues. We are talking about cost. Natural gas got a lot cheaper. Another is politics. The government might change his mind again. The third is what your customers want. If you rank those three, how do you rank them . Customers are very focused on the economy. The third is regulations. Just a few years ago it would have been regulations. Different type of analysis. President appeared with cold coal workers the white house and said we are bringing those jobs back. Is that coming back in your opinion . I think the best we can hope for is sustained for the future. If you have fully controlled units that useful we will continue operation with those units and will remain a part of the portfolio. Natural gas is certainly prevalent today. Renewables also is very prevalent in terms of wind power, solar power. I would not underestimate the Big Data Analytics and technology on the grid itself. We are doing a lot of things to optimize these resources. In the future it will be that andlete rebalancing coalfired generation will continue to be maintained a certain extent. It will continue to drop. I would expect it would drop in the neighborhood of 25 of the generation in the next few. Alix how much of that is also from state . What is your experience been with reactions of states after trump withdrew from the paris afford . States have recognized the whole is going to have to be economic. To continue to gently fold and competes against gas and natural resources. They are reevaluating against the balance of the portfolio. Well continue to have full in the states. We will continue to invest in wind Power Resources and other types of resources as well. Get yourat to perspective, ceo of American Electric power. Much more coming up. Arne sorenson will be joining us. The city of london gets back terrorist attack killed seven people. Nations including saudi arabia trunk. On the futures down by about a 10th of 1 . Negative we bounced off of 2017 lows. Im taking a look at the safety check. The dollaryen slightly down. That is the tightest we have seen since october of last year. 87 basis points. Barely over 10 and not even getting much. Our morningfor brief. 11 30, President Trump will lay out his plan to overhaul the air Traffic Controller. Out what isd happening in london. The pressure is on with just days away. Is not as say no deal good as cash bureaucrats in brussels would think christmas has come early if the British Government stopped its approach. From westminster with what to expect. Nobody is really talking about brexit. Why and how is the Prime Minister going to put this at the forefront of her election . She has wanted to paperback from one of the things she talked about. It is by no means an ordinary day of campaigning here in london. Less than 48 hours since those attacks on saturday night, but you get the sense that theresa back before the attack. Contrasting her leadership with Jeremy Corbyn. Leadership his abilities. Focused onyn is cash and industry policy. We find leaders china get back at the same time, acknowledging what happened saturday night. It is not clear how the tragic events resonate with the public. Votet make thursdays more unpredictable . It adds an action layer. One of the other factors is turnout. This will be the turnout that the country has turned out for in two years. They said in a row factor that is difficult to predict is how the latest attacks effect voting. When you look at the fence measures, this is the kind of party doesnservative better than labor. We have heard this line before. The west in many countries are two tolerant of extreme extremism. Willdoes that mean and how they tackle it and change . You do see a similar threat between theresa may and donald thep in regards to how state should respond to extremists threats and there shouldnt be a political if groups areat hasusing ideology, Encouraging Technology companies to crack down harder and get better at their monitoring and be able to have more frigid laws and short extremist groups dont use social media as a weapon to recruit and mobilize. This was a very resourceful grassroots attack. These things require a lot of capability, but it does require strong ideological motivation. I want to bring in guy johnson. Usually tragic events boost the incumbent. They talk about what theyre going to do. The question for theresa may is why havent you done it already . She thinks she can have some impact with the general public because if she talks about rorism and rest on that, no way that is the difficulty she finds herself with. This is an area she understands and is also responsible for. There is domestic story with the u. K. Taking place. President trump for the left couple of days putting his domestic at the forefront. I think what youre seeing is a contradiction where the United States is building a more stronger middle east. We see trump alienating the United States when we have concerns over intelligence of course, that intelligence sharing will continue. We dont have broken ties or anything like that, but certainly it is differences in policies and approach that will add more friction or create more problems across. A one issue election. Electioncial markets risk you have a globalist candidates and the nationalist candidate. You can do that with brexit and the referendum. With what isat happening on thursday . Absolutely not. It has been fascinating to watch. Jeremy corbyn has decided to go back and take issues which he feels he can make an impact and. He talks about policing numbers. That relates back to what has happened with the security story. Theresa may started talking out that started out talking about brexit and then the economy. In terms of turnout, the low turnout party. Who is it . It is very hard to say. It will be interesting because the labour party tends to be in london. Link isorism interesting. Maybe people wont feel as frightened. Is something that is really going to come back and whether or not be the party, i think it is going to be really important. Thank you very much. On the program, we will assess the impact of terrorism on the business community. From the city of london for the week, you are watching bloomberg tv. This is bloomberg daybreak. Raise , plans to that would give the business money to potential acquisitions. Controllingin the shareholder. According to a person number shares and surprise 129 million last month. Decision between egypt saudis come up, and also suspended traveling. State wastary of asked about it while traveling in australia. We would encourage the parties to sit down together and address these differences. If theres any role we could importanthink it is that it remain unified. That is your Bloomberg Business crash. Thank you chris for more, lets bring in paul richards. Good to see. Inton you just put this perspective how significant this was. There was a recalling of ambassadors that took eight months and say we are over it. This time, they are talking about in much more severe cutting of relations. This all began on the summit where trump was and we saw a very coordinated campaign to ch a media barrage and out if youose two can. Hand you have sunni and shia, is sought a concerned about the extremists or more concerned about iran . When we take a look at this region and we are looking at the threat. In kuwait, the more third of the population all of these states are generally worried. They want to put that down. So cut her, like turkey is playing the long game. They know these groups are going to indoor. Has the ability to have more flexibility punch way of but a bunch its way. Ity want to put a stop to and that is what this whole campaign is designed to do. Sort of a nonevent. The why . A sincere move. It is to against one. Let me take another shot at it. Is it actually a question of compliance now and could Something Like this give people an excuse to say what a second, everything is falling apart . The raise a good point. It is all about clients. The good news is we get another nine months and i think the next five or six months will be extremely important as we look to see everyone playing ball. They know the importance of trying to stabilize. The markets are dealing with a lot of parts are now and i think what they achieved is significant. Davids point, what is the real risk of something happening. 30 of oil flows through their. Reality that could be close in any material way. I think the likelihood is low. And its sunni neighbors are competing with each other but through proxy battles and you see that from syria to yemen and so that is really where most of the activity is created you are not necessarily going to see this escalate into a confrontation. I agree when it comes to oil policy, that is not where you see the friction. All of these states agree they will have to shoulder more of the burden. They cant keep up with rising production compliance. It is more of the security consensus that is the issue. Viewsve very divergent and how this region should be. Anaged it is three and so on. I retire. Thank you very much. Up, the parity party continues. You have buying and treasuries and equities. Neither seemed to be something. This is bloomberg. Of respondents says the european bank. Paul richards of natalie, lets get straight into it. He risk assessment. 1 how significant is this crosswalk i think what it is going to do is if we look at this three months ago, the problem within people talk about growth and inflation. He peeled back. I think this will be the balance that he has to walk on thursday. You cant keep monetary conditions away. Bank oncevery central it right now. I think the balance is all about differentiating between growth, technology and it and calming the market. Very steadyg a line. Going into it, there is always a Market Participant that once excitement. Are we going to get any excitement . I think it is going to be pretty boring. About saying all we are doing really well, but we are not going to kill the party the next three months. I think it is going to be really boring day. There will be more excitement in washington then there will be in europe on thursday. Youve got the comey political the situation. In terms of market events, walk me through it. I think the comey testimony is really about good television. This pushes the issue out say two or three months until mueller delivers his outcome. I think youll get fantastic television but i dont think the market is really going to move thursday because what can Congress Actually do. To me it is more about the u. K. Election and i think we are going to see Prime Minister may handle that one and then you go to where the market is going to be slight hawkishness that you wont feel so for me it is about the u. K. Luckily there are different times. Firstws conference comes and second is the comey testimony. I will turn washington back on when we know we are to see a reply from mueller in terms of his investigation. That would be my choice. It is all about europe for me. Great to have you on the program. We will have full coverage on thursday. Alongside him, the global head of the Foreign Exchange for your watching bloomberg tv. From london and new york, this is bloomberg daybreak. Lets get you up to speed. We printed alltime highs in a friday session on the s p 500. A little bit softer globally. Several countries including germany a public holiday. Notbig consensus trade performing. Without soft those levels. Of about two basis points, but a similar move for the dollar. A 2017 high and a little bit lower. Lets the story across assets. Criticize hisrump own Justice Department and the court system over his travel than. The president said the Justice Department should have stayed with the original ban and not the politically correct and water down version. The attacks came as the paper u. K. Prepares for a general election on thursday. Party leader attacked and warned you cannot protect the public from the sheep. Turkey the u. S. Is seen arming syrian global news, 24 hours a day powered by more than 2700 journalists and analysts in more than once or 20 countries. This is bloomberg. Trump promise a major infrastructure pushed if he were elected. Today he is taking the first step in delivering that promise when he enough is an overhauled airTraffic Controller system. We have not built a major airport in 20 years. Im told it takes 10 years to get the average permanent im 10 years to get a permit to build a bridge. Just got back from hong kong and it is embarrassing. We just have to get back to the cando attitude. David joining us now is Michelle Meyers and as a full 60 why is the president starting here with his infrastructure push . I think there are two things going on. First, this is a bit of town of programming for the white house and it is trying to shift the conversation slightly away from the comey hearing. Secondly, i think they are taking up on an issue which is in which hasted specific proposals advanced by a committee chair. I think they are beginning with transportation because there is broad support. The problem with this is once you drill down to the specifics, you start losing consensus. David give us the outlines of the proposal that the president will be working off of. Our airTraffic Controller control system is still governed by landbased radar and there thateen a push to shift two more of a gps system, something that can use satellitebased navigation and tracking. Effort has been hampered by budget uncertainty. What this proposal is calling for an what schuster has been lets spin off from the faa and put it into a nonprofit corporation. David lets talk about a way to finance it. Aid generally the idea i applaud the decision to focus on infrastructure and to have airTraffic Control be the leading edge of that, but the question is are they going to find a feasible way and effective way of going at it or they going to use this buzzword of privatization . David agree or disagree with Larry Summers . There is the United States Postal Service and amtrak. I think the point that Larry Summers is making is you can talk about infrastructure with on which on surface sounds good. It is a way of supporting construction. Longterm an offense its for the question is how will it be done. Howl, the question is efficient will that be if you look at prior examples, it is not necessarily is. So, a lot of questions. Hattie the infrastructure hattie view infrastructure how do you view infrastructure . Think what we are seeing this week is a distraction. Is a long waya from getting to that point. Say iser thing i would one trump was looking at this, infrastructure was a bit of tax reform. David paul says we are a long way from anything happening. If the one issue democrats and republicans agree on. If you look at fannie mae, through its history has been quite successful. I think the fannie mae example was a good one. There is a belief among some that we should have an infrastructure bank. Some that would leverage the federal governments capacity get a 101 return on its investments. The problem is there is a contingent that is opposed towards government involvement in that contingent has been pushing for that partnership in the problem with that is democrats are feel full that if we you this that she is this, we will have the nicest toll roads in the world, but we will have any public bridges or roads. Do you think we will get into a world where will have itical aftershocks are . Where we will have political infrastructure . I think for Market Participants, it is hard to put it into our baseline until we have clarity. Markets probably arent going to react because theyre so many other things going even thought of so it is hard to understand what you put into your baseline. How do you model growth in your out years as well . We dont see very much in the way of infrastructure spending. You have tax reform. You can they be have some small version of that. I think there is a lot of concern on whether thatll happen. With one no in givesat comes out refined,p into the theyve got 15 months so i think the trump trade either get a massive stimulus in q3 for q4, or it guys. Until then, people on the trump trade has to hold on. The other great thing about mueller is there are no leads on this which is wonderful. Thanks to isaac and shell and paul richardson. Coming up, we will assess the impact of terrorism on businesses and the economy. This is bloomberg. This is bloomberg daybreak. Hour, in the next to your Bloomberg Business flash. Apple will use it Developers Conference to show off hardware and software. According to people familiar with the plans, apple is macbooks andnveil laptops. The the claims india, jet airways is in talks to buy narrowbody aircraft. Likely ong is most 5. 6 billion. Rse the fed and markets disagree on the fence next step. Can give us his take on the u. S. Labor markets on friday. We are looking at a labor market with very little slack left. In the near term, we should start seeing movement. In the immediate term were going to see more moderate pace of job fiction. In the longer term, it means laborrious talk about the market in this country. Also went on to say the job market on friday good. Look at the gap we saw on friday as an unemployment report came out. Meyer. Th us, michelle the dynamic between officials nothing new. This one seems to be a little bit on the extreme side. I always say you would like to split the difference. I think the data has been slower than many people had expected earlier in the year and it has been slower than probably with the fed communicated. Decelerated. S we should be realized a lower breakeven of jobs as we continue in this business cycle, but it is a deceleration. We are now averaging something between tohink the fed is determined continue the normalization process, however they could be forced to go slower if the Economic Data becomes weaker. Paul, how do you understand it . What michelle said, last year we were around the 18190 mark. I think the market is going to keep watching. A year ago we saw an anomaly in that data so is this a may or june think . We dont know yet. 135 was enough to bake a june, but it took september and suddenly you have stocks rallying again. Tenure probably justified. Fedmarket has caught the the last two years and the fed is winning. They told you they will give you three hikes this year. They are about to have to done. September is probably going to be a day there and that just puts december on the table. Get the two out of the and wethe first half were really sent off in the market and then get him back on as a possibility for hike. I think the commitments are starting to shrink the Balance Sheets and i think what is interesting is that language is continuing in despite the fact that inflation looks soft and the data looks weaker. Even if they cant get an hike, itl rate type is possible they go ahead with a mini hike which means ending the investments. I think it is a risk. I think the markets are actually starting to tell us theres a possibility of a policy mistake. The fed is so committed they will ignore the data. I dont think we are at that point yet. Hawkish. Unded more we are back to looking at the fed. A leisure. Ways you can watch us online or interact with us rectory directly. This is bloomberg. Munden strong. The city gets back to work and on the polls and not on terror. 1. 28. Nd just days away from the election. A big spread west of its wing between various polls. An unpredictable on thursday. It will be a very exciting three days. In the meantime, ray dalio of bridgewater is out. On the one hand he is concerned with pcs as consistently moving towards conflict rather than cooperation. Here for review of where the Trump Administration stands are now is marty shanker. He is bloombergs senior editor. Thanks for being here. What about this moving to conflict president cooperation that ray dalio is concerned about . Is that a fair summary of all we are seeing so far . I think it is. When you look at the withdrawal from the paris accord, there was a whole coalition of scientists, ceos and others who pointed out that since it was voluntarily voluntary it had no impact anyway, and it would have been easier to stay in and ask for changes. And again do that chose conflict over cooperation. This morning the president is out pleading out ban and about a travel he says the Justice Department should ask for an expedited of the Supreme Court. He seems to be in conflict with his own Justice Department. Many of you may remember the Sean Spicer Press conference where he criticized the press for calling it a travel ban. Not want to have signed it, he should not h signed it. It has been a bizarre couple days. The fact that his Justice Department has described requested next united. There is a way that the Supreme Court works. They only deal with things that are in front of them. And it may months take even into next year before they even have discussions over what to do about that order. Issue aney could immediate order while we are considering it to go ahead. I would consider that a long shot because the facts of the matter are is immigration into the country is down significantly. There have met there have been no significant threats. David lets go back to something ray dalio said. He said private partnership to deal with infrastructure. The president will announce some reforms of the air Traffic Control system. How real are those . Substances substituted a number of countries have gone to a private air Traffic Control system. There are number of people that think that is the way to go. That would enhance and speed up innovation. They are in the middle of an others who their of think this would upset the losses. Is if it goes to congress, what happened when they have a home you read of things . Questionat is the about everything, what happens when it goes to congress . Theoming up, we will assess impact of terrorism all across the economy and businesses. As we had to break, heres where we stack up on a safety check. You have a stronger dollar against the yen. And 87 basispread points. That is what im watching. This is bloomberg. Jonathan weekend terror attack in london with Security Center stage. Donald trump pushes his domestic weeka ahead of a crucial for the white house. A fraction middle east isolates qatar. Isolating economic ties to the country for its link to iran and islamist insurgents. On yields at 2017 lows. From london, its a good afternoon. To new york its a good morning. This is bloomberg daybreak. Im jonathan ferro. Alexside david westin and deal. Alix steel. Futures softer. Yields closed at 2017 lows. 2. 19. E basis points at the cold hard reality of treasury. Alix we have some pretty big movers. A biotech special got positive data on a cancer drug. All, the company is sales because it is adopting new protocols for sales there are companies that require companies to better document. From should grow anywhere. 5 percent to 35 3. 5 this year. Snapchat, jpmorgan lowering his price target to 18 from 20. Groupsdaily active user user growth. Isid President Trump talking about travel. He is tweeting about how disappointed he is with his own Justice Department as well as the court for not letting him press ahead with the more stringent version of what he calls his travel ban and instead submitting what he calls a more water down politically correct version. , Arne Sorenson. News about the president today. You have been a proponent of brand usa facilitate Global Travel. What are the consequences of Something Like this travel been travel ban for Global Travel. 1. 2 billion International Trips last year. 75 Million International arrivals to the United States. The u. S. Share is around 7 . If we had the same share that we , we would have over 100 million visitors. We think 75 million visitors create 2. 5 million jobs in the states. Those jobs are going tomorrow to say nothing of tech, revenues and other followons. Real set ofery questions from the events in london this weekend. What do we do to make sure we are protecting us from that. It is a perfectly logical thing to do that. To send you say we are going to or telln on travel parts of the world theyre just not welcome, is far too blunt instrument. What to get into how does the u. S. Compete for International Business while protecting itself. Wework just up the street from the white house in bethesda. Worked just up the street from the white house in bethesda. Have you had conversations with the white house on this . The total number of coworkers in the u. S. Is 76,000. Wheres the proportionality . We have talked to the white house just one time. Sort of an industry group. We are trying to make sure we articulate this need. Lets protect ourselves and recognize the economic opportunity. David are you intervening in litigation right now pending in the Supreme Court . We are not. We want to be focused on Global Travel programs and other tools to enhance security as opposed to getting into the superficial politics. Ofx mentioned the optics how it shows around the world. The other part is the risk rift we are seeing between european leaders and President Trump. How does that make it more difficult to do business . So far it is still early. We are all trying to understand the era we are in. It a step at a time. That if an apprehension the u. S. Stands back to much from Global Leadership and becomes a place that is not quite as powerful, quite as popular it could have negative impact on american companies. It hasnt really shown up yet. Big push going on in asia. Do you see a world in which the asia couldng back in affect your investments in china and india . Lets talk about china for a second. Last year 120 asia could affect million outbound china trips. 120 million. That is growing 20 a year. Down the first instance. The closeoing to destinations. They want to see the sights of europe and the United States. Our growth in china looks quite good. Every deal we do with a local real estate partner. 250 of our hotels and china are owned by chinese companies. That makes us a little bit less of a Foreign Company doing business there. We are optimistic we can continue to grow in that market. Alix the rhetoric is that china steps in and fills the void. More chinese travel to europe, europe traveling or to china as well. Do you see that starting to emerge in your business . Business travelers are the bread and butter. We are seeing growth in chinese travel taking place almost everywhere. Theres a global competition. Where are these new travelers going to go when they take their first vacations abroad . You have hundreds of millions of new members of the middle class who for the first time have resources that allow them to think about something other than where they are going to live. Competition is one that we think the United States ought to be playing in because it creates economic rose in the United States. How much elasticity is there between Global Travel and Global Growth . How much does it affect your business . Gdp is the single biggest driver. It varies a little bit by country. United states is 75 95 domestic travel, five percent inbound travel. The most important thing in the United States is what is gdp look like. David thats the most important thing on your dashboard. The local economy probably doesnt make much difference. The u. S. Economy primarily. David what about gdp growth is so important to you . It continues to be positive. It doesnt feel extraordinarily robust. A modest 2 kind of pace. We see individuals for Leisure Travel more bullish than corporate travel. Some companies are going growing gangbusters and others have big challenges. Positive but not terribly robust. Alix what kind of tax break do you think youre going to get this year . I dont think we will get tax reform this year. Happen love to see it but we need to get engaged somehow in real concrete steps about what tax reform should be. I worry that 15 is way too aggressive because holy will leave in the budget. Aroundould do something Corporate Tax amplification where we get rights to the 20 to 25 range but get rid of a whole lot of expenditures and deductions that could allow us without reducing thats a much more feasible deal. Even if it means you lose the interest reduction . Obviously we take advantage of that today. Otherwise we have almost nothing. We are a very simple model. Our taxes are in the high 30s in the united state. Increasingly dollars being generated offshore. It makes economic sense to leave them offshore. And most u. S. Companies are worth more is owned by foreigners then if owned by the american market. Optimistic. Lk is the actual impetus to growth is not really there. And you give us a sense of how much money you want to be spending in the u. S. And how much you are holding back . That doesnt quite compute that way for us. Everything we do we do as a real estate partner. The next three years we will open 100,000 rooms the year. We are opening a hotel every 14 hours. Half of those are in the United States. Each one is a big capital investment. As 50uld be as high million or 300 million. Our partners are telling us they are white optimistic about the future. Longterm investments. You are making decisions about an asset which will be running 30 years from now. People arent necessarily saying what was last nights tweet or last quarters gdp number. Travel peopleat see the growth of the global middle class should drive travel well. The other thing is we collectively want experiences more than stuff. We are elevating our desire to share for thend trip we can take. All of that should be helpful to us. David we have heard a lot about animal spirits. To see animals. , both corporate and personal through Consumer Spending as well as corporate spending on your rooms. You seeing . Support is white optimistic about the future the consumer is quite optimistic about the future. I dont feel a robust animal spirit. Thank you so much, Marriott International president and ceo,. Alix apples Worldwide Development conference kicks off in san jose. The text giant is expected to show a hardware as well as elsewhere. We will bring you the details. As is bloomberg. This is bloomberg. Jonathan from london and new york, youre watching bloomberg daybreak. We are about 15 minutes away from the open. This monday, futures a little bit softer at her a couple of days of gains. Negative two points on the s p. 11 on the dow. Lets get you up to speed on whats making headlines out that the business world. British Prime Minister theresa may is signaling she will the new powers on terrorism. Attacks on london killed seven people as the u. K. Takes place for a general election on thursday. May says stamping out terror will require difficult conversations. Germany marvin attacks her record as Jeremy Corbyn attacked her record as home secretary. Saudi arabia is leaving it is to isolate qatar over its relationship with iran. The saudis, the uae and egypt have cut diplomatic ties. Saudi arabia has accused qatar of trying to undermine efforts to isolate iran. Im emma chandra. This is bloomberg. Mayor made adons bold Statement Today in the Evening Standard condemning the extremism behind this weakens terror attack on the London Bridge saying, we need to work with the communities the government and others to tackle extremism. I am disgusted by this act. I want to send a crystalclear message around the world. The sick and wicked ideology of these extremist is no form of islam that i recognize. Join me now from westminster is an a redwood. Anna redwood. Is there any consensus around whats to be done . Khan coming out and condemning the violence. There will be many people working on that. You mentioned a couple of things. They are working with the communities aspect of this. Failing to act is not an option. He condemned the extremism, praise the Emergency Service is. No mention of President Trump. He has been critical of sadiq khans initial response to the attacks. Prime minister theresa may and Jeremy Morgan both trying to get back to the campaign trail. Its not an ordinary day of campaigning. Both them trying to move on from just talking about extremism and security. Using that to draw contrast between the parties. To other themes we heard about at the beginning of the campaign. Theresa may talk about strong and stable leadership. Jeremy corbyn talking about leading for the many and not a few. Jonathan what strikes me in the polls is just how big the spread actually is. We had a poll in london that suggested a doubledigit spread between labor and the conservative party. Other polls saying one single digit. Whats the story in the polls ahead of thursday . We had some polling this morning. None of it seems to reflect the post saturday night attack he will wait to see what kind of weget in the wake of that saw some narrowing in the polls after the manchester attack. The conservative Party Manifesto on social care was a big one before the manchester attack. Points12 percentage seems to be the difference. It depends how much you wait my turn out. Gap betweenfferent the tories and the labour party compared to if you dont wait for turnout very much. There is an issue around turnout this time. The third time brits have asked to go to the pool as a nation within two years. That could be something to watch. Certainly turnout would be one of the things we need to watch this time. Anna edwards, thank you from london to the attack killed seven and left almost 50 injured. Theresa may saying extremism has been tolerated for too long and signaled she would seek new powers to root out terror. There are observing a moment of silence ahead of the open. Alix you have been watching the New York Stock Exchange moment of silence as we head into the opening bell in new york to pay tribute to those who perished over the weekend in the london terror attack. Labonte versus the stock market. This is the correlation between the 10 year yield and the s p 500. Yields grind lower. Theres that positive correlation coming in by about half a point. Joining us is peter tchir. The story we take is a these are having all of this up to miss them. The economic pessimism is in the bond market. Is that true . I dont think its completely true. I have been seeing a growing risk in strategies. People are looking at buying treasuries to hedge directly risk. Longer data treasuries on the other side. Thats why were seeing this demand. Strategy has been around for a long time. It really performed well postbrexit. It makes sense to mimic that. Alix the idea is you hedge risk. They are moving at the same time. Thats very different than the scenario the playing out right now. As you have been attract inflows you are seeing people hold on to their knees and add these treasury positions. Youre not seeing volatility in the equities. Were getting income. Option premiums for the last year. Or is real risk to the strategy. As yields come down, the hedge diminishes as well. How far down is the yield going to go . Thats a risk. Thats big resistance. How much lower it goes comes a question and if anything starts happening that we should feel higher in the environment and that impacts stocks negatively thats where the real risk is as a couple in the wrong direction. Alix we are not seeing the same market thattreasury we are in credit spreads. Does that fully support your view . I think it does. If the bond market was leading the way you should see credit spent spreads rising. This is very specific sovereign debt buying. You are seeing it globally as well. The Central Banks are adding to that as well. David eventually does one of these have to be proven right and one wrong . I think they can both be right especially while theres inflows. A couple Fund Families have launched disparity funds. They can both be right. Out out host they turn to be wrong. We saw that most violently during taper tantrum. This is now a crowded street, you could get a fairly large move fairly quickly. That is quite the move. Even the corrections we have the exception of 2008, we havent seen a significant down move. What kind of volatility would we need to see you have a reversal of this . It would start with treasury yields going higher. Alix how much higher . 2. 4 , 2. 5 above. If you start seeing volatility pick up, that could also cause strategies. Om these its a combination of things. We need to see a these fall in conjunction with yields going higher. These things can then accelerate rarely weekly. Fairly quick. Alix how do you play this . Youve got to be little bit conservative in what you are doing. It does seem crowded. Either on long data bonds or stocks is interesting. I would go long data because it could last a little while. Start looking for other strategies. What not correlated, what has been undervalued. What might the interesting out there. Alix that might lead us to attack. Peter tchir, you will be sticking with us. A different explanation for why we have seen treasuries and stocks rallied together. Jonathan yes an intriguing one. We sit at an alltime high ahead of the open. Futures softer down about 12 point on the dow. Down marginally on the us 500. Four minutes away from the open. Youre watching bloomberg tv. Jonathan from london and new york. For our viewers worldwide this is bloomberg daybreak. Moments away from the opening bell. 22 seconds. We come into the week sitting pretty on a twoday winning streak. Futures ahead of the open. Negative 14 on the dow. Down two pints on the s p 500. We switch on the board as the optimism versus the reality, the coldhearted economic reality of 218 on the u. S. 10year. Marginal Dollar Strength. Up. 1 . 9682. Story across. Up to speed on the cache open. Alix we closed record highs on friday for all the major industries. Heres where were today. Its softer this. Board has not updated, can i till the s and p is flat as well as the dow and the nasdaq. There you go. As we open up. You have bold calls coming out. Morgan stanley saying you are looking 2,700 for the s p by the second quarter. That call comes from andrew sheets. The optimism builds in the stock market. On the downside, look at oil. One point had a rally under way overnight up by 1 . Lower by 1 on the day, breaching that 48 handle. Thats bringing down some of the nrk stocks. Halliburton, southwestern, and Chesapeake Bay are natural gas players. Qatar is a huge exporter and there is coin flict between the saudis and qatar boycotting businesses and shugget down the border. Banks, 87 basis points on friday, the lowest we have seen this october. Heres where its playing out for the bank stocks. They go nowhere. They got super hammered last week. Citigroup ushering marginal weakness as we head past the open. We talked earlier about where can you go in the market that has nothing to do with whats happening in the risk parity funds. One could be tech. This says a blue line there, you can see hitting record highs, as well as apple, that yellow line hitting record highs. Facebook, apple, amazon, netflix floog. The white line are s p bad debt companies. This is an interesting hypothesiscy. Are we seeing stocks outperform because of floog. The white line growth or becaus they dont have a lot of debt, they have a lot of assets. Its really all about credit and investors getting skittish over leverage. With us is peter cheer of brain capital. And chris brown, head of technical analysis. Chris, you look at the charts, right. How overextended are we . Historically they are not as stretched as you think. This doesnt compare to what we saw in 1999. This is a broader move. This is not just four or five stocks working. Big caps, mid caps, small caps. There is more behind the move than the stocks. You pick on a stock like apple. Apple went through a pretty severe bear market last year. Stock was down 30 from 2016. This is a relatively new advance. I still think we want to use it weakness as an opportunity. Google stock. Alix we have Goldman Sachs saying apple is the most underweight holding. How much more positioning can be add . I get that as well in my meetings with clients. Its not a stock that people hold the benchmark. Its 4 1 2. S and p 500. I would be surprised if its even half a wait for a lot of the streak here. Nasdaq 100 has had 44 record closings this year. Closes this year. Trailing only 1999. Were chasing 61. I think well get it. Alix peter, what did you make of my hypothesis earlier its not about growth its about these coverage arent leveraged and intervestors are skittish. I think they have been kittish. Thats why the chart is flat when other things have been doing going on. A lot of these companies have very broken charts. The stocks are down. The credits are doing well. The bonds have been tightening. The real upside is in some of the names where you look at the debt cap structure, credits performing well. That should translate nicely for the equity. I think maybe theres too much fear from last year and the year before, k. M i. , that maybe people are reluctant or watching this story and not buying into thats why the chart is flat when other things have been it. I think there is a lot of upside in those stocks. I would look for those stocks and maybe make a sixmonth to oneyear bet. You are going to have volatility. More downside. But if they turn, you could get those 25 to 50 return. Is there a possible link between the credit and exghit this sense. The question is wheres the growth . You dont mind having defment is it as simple as tech is thai tied to digital . Peter hit on an important point. Think back to 20142015. Oil is under pressure. They hit industry credit and industrial credit. Thats not happening this time around probably because growth is better. S p earnings are up. They were not in 2014. Europe is up. I think the fact there is growth here to peters point makes some of those credits interesting. We have seen oil under pressure all year. The fact that high yield credit has not deteriorated meaningfully is a big difference from 2014 and 2015. An important one. People have learned some their lessons. You go back to the credit crisis, it takes time for companies to default. People get overly scared, oil goes down. They hammered on that too quickly, too fast. One of my closer children is always radio shack. Company probably had no reason tokesist going back to 2000 yet it took 14, 15 years to default. People overreacteded to the oil weakness. They arethey are going to buy in david you talked about the growth nernings. Does thained kate why there is leadership from the tech shock . Are they growing earnings more than the rivals . They are. What you are seeing among the leadership pockets of the market. The stuff thats working. We have done a lot of factor worth. Earnings growth is factor thats working in 2017. You see it in cruise lines and hotels. I think thats an important characteristic here. The other point i think peter touches on thats important when we think about these long 15, 16, 17 year periods it takes to wash out a stock, that to me says its probably still too early to own energy. Were only 125 months off the major low. It took 15 months off the major low. It took them a decade. We have to look at energy in the same context. David were going to stay with tech because apples worldwide Developers Conference is kicking off today. The Company Announces software and hardware in its pitch to developers. For the first time in yeemplets joining us from the conference in san jose, california, is torrey johnson. I know you are excited about this. Why . Its its always an interesting ty. Hard to get a clue what apple will do next. We get that through through the software announcements. Well expect to learn the details of the next operating system and well be able to divine. So things in the iphone. Some surveys say people really intend to upgrade come the fall. But whats going to be in that phone, how much augmented reality . Will it work with the ear buds and watch . Are there other gargets or special capabilities the phone might have . Is got going to be 3r50eu78 to use things like pokemon go. The motions of augmented reality is looming because am has been hiring so much. So well get a lot of those details about four hours from now when this event kicks off. We have thousands of people out here in san jose preparing to enter the convention center. Even though the sun is just barely up here at 6 35 in the morning in california. David i thought you were going to talk about Something Else at apple other than the new iphone. What are you telling me this is a round about way what that new iphone will be come fall. Fundamentally everything apple does has to support this massive iphone business. I think apple internally is as a big the phone deal this year because it will be the 10year anniversary of the launch of the first. Thats a business that has transformed that company. I would even argue transform the entire technology landscape. Will they introduce a personal digital assistant to work off their siry technology . Siri technology . Perhaps. They certainly have the Technological Capabilities to do that. Whether they have the inclination to have a product on the market, well see. Will there be new mack laptops . They are going long in the tooth. They dont take advantage of the best semiconductors. The mack book has been very successful for apple. In the last three or years the industry has been shrinking, apples business has been growing. Are they ready to update those . Fundamentally this is about the software. The software thats for the phone. Alix in the meantime you have apple on the biggest point drag on the s p. Is there a riskf from underdelivering . Is that the buying opportunity . I think its the buying opportunity. Its hard to back away. What do we know, good trends should be baw. This is still among the bet trerneds. Mean reversion is an opportunity tokesploit that. Any pullback this summer. For the market at large are probably things you want to buy. My sense is there is still a lot of stuff around this market advance. As long as thats the case im unwilling to back away. Alix is that right, its been the its been working. And if people believe that they can hedge themselves with their treasury positions, there is less reason to sell stock, less reason for volume tifment david thanks now to bloombergs Corey Johnson and peter of Green Capital and christopher of Strategic Research partners. Jonathan, back to you. Jonathan thank you very much. Get uptospeed on Global Markets. About 10 minutes into the session. We fall back from almost allhigh highs. Down about. 1 . About 1. 6 on the s p. In london were off by a third. Europe stocks a tenth. If you switch out the boards, most of the crosses, most of the majors in. G10 space including the euro. The pound outperforming. One poll indicates in the conservative party may have a doubledigit lead ahead of the election on thursday. Treasury yields bounce up 27 year lows. These political conversations continues. What does it mean for Global Markets . From london and new york well seek to answer that question. You are watching bloomberg tv. Anna here in the and price kard greenroom. Coming up on Bloomberg Markets the c. E. O. Of boston markets. 12 30 p. M. Eastern time. Jonathan this weekend in the United Kingdom left seven dead and 48 injured. It marked londons third terrorist attack in three months. Prime minister may spoke earlier about the danger of extremism. Despite the progress we have made in recent years and successes we have enjoyed, we must do more to respond to the changing threat to our country and our way of life. We cannot deny that the threat from islamist extremism is one of the gravest we face. Jonathan town joining us is bill, chair and professor of international relations. The tragedy as much as the event the weekend, the orchestrated reaction that somehow we have uncomfortably we got used. To the lines i have heard over the last weekend, the last few days is that some embarrassing conversations need to be had. Who do those embarrassing conversations need to be have with . I do lead with the public, what were hearing is the usual platitudes about the need for more security, the need for greater surveillance of the internet, particular websites. At the same time the authorities are very happy to orchestrate candle lit, vigils, wakes, and occasionally concerts because thats a way of defusing the situation. The reality is the public asking all good questions and putting the Prime Minister and the authorities under pressure. Jonathan there are certain countries we need to have embarrassing conversations with. Jeremy, the leader of the lay bour party, calling out the likes of saudi arabia. Is there a conversation that needs to happen there . Maybe. I wouldnt put it all there. Its kind of a lazy reaction to always project the problem as coming from overseas or representing some kind of foreign ideology. The reality in most instances is that we find individuals who were born in the United Kingdom, educated in the United Kingdom, who in most ways were british through and through and yet had of not belonging here. A sense of exaggerated, sense of grievance. And completely lacking in any moral compass that they are willing to murder children and stab young women with impunity. Therefore to me there is a dressic conversation that needs to be had there is a domestic conversation that needs to be had. Jonathan outside of that, the other simplistic, i wont use the word lazy, simplistic explanation, is a term coined many years ago by the c. I. A. , blowback. That certain foreign affairs, certain foreign policies that will come back to haunt you at home. Is that a distraction . Probably a distraction. Its another theme of the discussion being held amongst those in authority. And others who think that they are being very raising people reality is if you were unhappy with British Foreign policy, you would have been a lot more unhappyier 100 years ago and possibly more. The britain has always interfered in the affairs of other nations. Overtly, covertly, and occasionally murderously than nowadays. Blowback not an explanation on its own. There is certainly a legitimate case to have to answer for our actions overseas, in the past that would have taken a political form. That would have taken the form of people organizing collectively to raise difficult questions from overseas and internally. It doesnt explain the kind of nile listic barbaric criminality were witnessing today. That must come from somewhere else. Jonathan talk about specific policies domestically. Within the United Kingdom, what kind of policies do they need to be lookeding at . I think looking at . I think apart frfering else we thought having this obsession we come together in grief. And Angela Merkel over the weekend in sending her condolences were unified in mourning. The reality is that any positive forwardlooking society has to be unified in purpose. It has to have a vision of what it wants to achieve Going Forward. That vision isnt just defeating terrorism but rather something broader so it might inspire wide society to participate. Thats one thing. The other one thats been drawn to my intention is the extent to which our young people today seem to have great difficulty in handling their emotions and handling setbacks and challenges in their lives. They take offense very readily when people use words that they dont like or when their Belief Systems are chalenged. That takes us all the way back to the Primary School and kindergarten where children are more tough believing their are brought up believing their feelings are important. And there is more emotional management today than better before. Maybe we need to do getting rid of that so we stop having a me generation and look at people focused more collectively on the future. Jonathan you bring up an interesting point because political correctness, which i think is what youre touching on, is an issue many people have campaigned on. The president of the United States is somewhat thats completely ripped to pieces the idea of carrying out some kind of peace themed agenda over in d. C. S that something that needs to be challenged . The attitude of the liberal elite, some people often talk about . I think it is. But thats only half the picture because theres better people mix when they discuss political correctness. There is usually a sneering attack on the left and socialist, is what happened to the right . What happened to conservative values . Why did they capitulate so readily to these agendas and ideas . Were looking at an elite dig dis playing a remarkable degree of spinelessness across the political spectrum. Thats what needs to be addressed. I remember during the general election in this country two years ago, one of the shadow ministers going on campaign and asking a school child who they would vote for, but the child answered to the United Kingdom efend party and the minister walked away without attempting to challenge the young boys ideas about foreigners. Jipe appreciate your time. As the university of bath. Im sure well hear from you again over the coming days ahead of that election. Alix, Something Different to think about as we tackle these issues. Alix if you missed any of that, catch it again. Go to bloomberg terminal. Check out tv go. Watch us online. Interact with us. If you want to go back and rewatch that interview can you do this. Soss bloomberg. Alix it is a big week for politics and the Central Banks. On thursday huge day that the e. C. B. Rate decision. Then fired f. B. I. Director jim comey will testify before the Senate Intelligence committee. Of course you have u. K. Election as well. And french parliamentary election. Joining us is International Economics and policy correspondent michael. If you could read the testimony or what draghi will say, what would you play . The comey testimony and everybody else. Alix i was voting for draghi. David whats more important and interesting . We know what draghi will say . We know what mario draghi will say. The decision will be important but hell punt it down the road. They are not in a position where they want to make a change in monetarypolicy. They are still waiting for datea. We have already priced that into the markets. What you cant price is what comey will say. Will he Say Something so explosive people will bring up impeachment talk again and it will affect the markets. Probably not. But it keeps ve on their chair. The u. K. Leaks i would almost put up there. We dont get the results until after he testifies. But if the early speculation that the polls are wrong were to come true and there were an upset there, then that would provoke an even bigger market reoaks. David for those of us old enough, the john dean testimony back in the 1970s was dramatic. It changed the president cy. It changed the history of the country. His testimony on capitol hill. One line from howard baker. What did the president know and when did he know it . That will be the key centerpiece of all the questions, of all the witness that is come before mueller and the senate and house intelligence committees. Alix wonder how many Market Participants are hedging their bets in a particular way. Protecting against any risk. It doesnt feel like there is any acknowledgement. I dont think you can. David the range of possibilities is so wide. I dont know who you hedge. Alix how do you have a Market Reaction . From the perspective of politics its a huge deal. Well follow closely. From a market perspective i dont see how it matters. You might see it collapse in confidence. Which would lead people to pull out of trades based on the idea the economy will expand. Along those lines we do get the various trump change the subject infrastructure proposals this week. Be interested to see if any of those have any traction on wall street. If anybody believes anything could go forward. A couple possibilities, one is the f. A. A. Announcement comes today, that is a compleshed out proposal. Then friday he talks about reducing regulations, easing the permitting process. Thats something a lot of people would like to see. Those two things could perhaps get some market attention. David it could really be the end of the trump trade. If you came out of this thinking the president because hell be distracted. Never get to it. The trump trade is fading rapidly because people are looking at the legislative calendar. Only 31 days until Congress Goes on vacation. Then september 30, the end of the fiscal year. Maybe a government shutdown. Maybe a debt ceiling crisis. Not to be concerned about. Alix thank you very much for joining us. Jon, no doubt that third day, extraordinarily busy day. Jonathan the beautiful thing about thursday you have to choose. You get an e. C. B. News conference, and comey testimony both of which will be here, and later youll get the polls after the u. K. Election. You do not have to choose. That wraps up this program. 20 26 minutes to the session in the United States. Up to speed. Stocks were up. Youre watching bloomberg tv. Alix its 10 00 a. M. In new york. 3 00 p. M. In london. And 10 p. M. In hong kong. Im bonney quinn. Mark im mark. Welcome top Bloomberg Markets. [captioning made possible by bloomberg television] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] vonnie the latest on thetry attacks in london what it meets for the United Kingdom election this week. And u. S. President President Trumps plans on infrastructure policy. Straight to julie hyman in new york. Julie we have the main report on the i. S. M. Services industry. Coming in lighter than estimates. 57. 9. 51. 1 was the estimate by economists. The pressure of the Services Economy the largest part of the economy in the United States. We already got the informing number last week. However, even though this number is coming in lighter than estimates, still shows nonmanufacturing industries on relative solid footing here. We got factory orders for april coming with the decline of 0. 2