tv Bloomberg Daybreak Americas Bloomberg June 13, 2017 7:00am-10:01am EDT
-- jonthan: jeff sessions testifies today. fed two day meeting commences and rate hike is on the cards. the market wants more answers to this -- to this $3.5 trillion question. good morning, this is "bloomberg daybreak." i am jonathan ferro alongside david west and. alix steel is off today. bloomberg's matt miller sitting down with an exclusive interview manager -- finance missed -- minister wolfgang schaeuble. futures a little bit firmer. stabilizing in europe. the second biggest gaining industry group on the session so far. treasuries stabilize after four days of losses. i can tell you david westin,
u.k. short -- wolfgang schaeuble saying the u.k. will face open .oors if the brexit is reversed i do not know how that is going to go down, but much more in a moment. david: i cannot tell anything in the world of u.k. politics. the federal reserve will be kicking off a two day meeting today and every -- everyone is just about certain they will increase rates. what signals will begin about future actions question mark joining us is keith parker, welcome to the program. i want to start with two points. number one, the fed has been clear about what they would like to do. they already had one rate hike and they would like two more. on the other hand, there is inflation expectations. i am going to put out a chart you canws tips and as see, since about march, it has been coming down and down. how does the fed deal with this
tension between what it said would be a track toward normalization and what is going on with inflation expectations on the other? have whatber one you is going in the real activity data and in the inflation backdrop which you see a lag with the bottoming in commodities, etc. what we have seen in the u.s. is a rebound in q2 activity after data in in -- weak q1. i think the second part is what they are doing along the long end of the curve and the balance sheet and what the can look like tomorrow. david: that is interesting, let's come back to balance sheet. right now, some have been critical of them being do -- being too data dependent. some people are concerned they are gone to keep raising a matter what happens with the data. keith: i think there is contention that believes the fed is very much behind the curve
and the worry that they are not data dependent enough and could have done more last year. at the same time, i think what you are seeing from inflation in prices is that there is excess capacity in the world. incremental demand is not causing a rise in the price of inflation and so there is enough slack in the economy to because this and patient. francine: why is it only the front -- jonathan: why is it only the front end of the curve that has repriced? keith: i think what we have been seeing is a reset in fed expectations that started where nothing was really priced in the summer of last year to something more normal or closer to normal in terms of a fed rate hiking cycle. i think you what you have been seeing is inflation expectations reset. a long run equilibrium fed rates around 3% and five year plus is around that with a risk premium.
the hard data speaks to it, the pickup in wage growth hasn't happened, why is the bias still to hike? why is the bias to increase interest rates? keith: i think the highest to hike is a product of where you after at years recession ended and you are still at this level of interest rates so getting to something closer to normal. inflation at expectations around 2%, but rates well below 2%. david: how do they balance inflation concerns and employment because in terms of the numbers being employed, that is in good shape. as donovan says, the wages do not seem to be there -- jonathan says, the wages do not seem to be there. how do they put all that together and conclude we need to get to whatever normal might be keith -- might be?
keith: it is a balance of risk. as you see unemployment fall to lower levels, you should eventually start seeing wage growth pickup. like you said, it has lagged quite a bit. david: if you are meeting today ofmc -- does in the that say something more technical about what is going on with yields in other parts of the world and that people are coming and buying hour-long bonds as they don't have an alternative? keith: if you look at the term risk premium or measures of that coinciding very much with what we have been seeing from the rest of the world where if you look at net-bond supply globally, central banks are purchasing almost the equivalent issuance.d i think that is having an impact
and if you look at u.s. yields compared to europe or japan, that spread is very high. david: if you are sitting in the fms see, are the risks symmetric or asymmetric on risking versus not risk -- rate? keith: what we are seeing with mixed data and coming out of inflation, i think it is prudent for the fed to remain cautious. the asymmetric risk given where it has been teetering is to remain patient. parker sticking with us. let's get back to the headlines. -- german finance miller finance minister talking to matt miller. u.k. would face open doors if brexit were reversed. david: do you think u.k. voters will respond to that? jonathan: i would say 62% would say no. maybe that is the most diplomatic way of putting it.
jonathan: wolfgang schaeuble spoke exclusively to bloomberg's matt miller about the future of brexit and said the u.k. would be welcome back to the european union if the british decided they no longer want to the block. wolfgang: i was told they are thinking about what is it mean that a lot of young voters voted for labor, not for conservative party. that more voted for
brexit than the labour party. areeaction has been, there -- if you look at the french generationhe younger -- there is aavor new opportunity to bring europe forward. of course, philip and myself agreed from the first day that brexit is a decision we have to accept by the british voters, but we will minimize the and maximizeage the potential benefit.
matt: do you think there is a possibility brexit doesn't even happen? wolfgang: i don't think it will be helpful if we start that speculation. we take the decision as matter of fact as a matter of respect and if they wanted to change the decision, of course, they would find open doors. i think it is not very likely. met: what if they want more time to negotiate? needs to sortu.k. some things out before they come to the table. it's already been three months since article 50 and they haven't started. can i have more time? wolfgang: i think that the negotiation's will -- negotiations will start and in the first round they will negotiate the principal of brexit and as soon as it is done, then we can do what will be in parallel for the kinds of
regulation and what will be the further relations between the u.k. after brexit and the single market and european union and so on. andefore, stock negotiation all of us will come to reasonable decisions. it is too early. jonathan: matt miller joins us now from berlin. great interview. helpful. how helpful is he that that is actually gone to happen and that you will get a reversal of the brexit situation? from my experience in the u.k. last week, no appetite for that on the labour side or the conservative side. -- dependsnk it can on who used beat. if you hang out with a lot of young people, maybe you would get a different take.
most of the investors think brexit is going to happen. i think this idea that the chances of brexit not happening are at least higher than they were on thursday morning last week is starting to gain a little bit of traction. certainly the election results, which were sharking -- shocking, weakened theresa may's hand. she had been campaigning on a very hard brexit platform. maybe that is no longer going to be the case and maybe she will have to conceive now that she has made certain partnerships with the dup for example, they are going to have to open borders in some places and there are going to be crack's in her hard brexit argument. i think others that were anti-brexit see the opportunity to soften it up. jonathan: something people have been grappling with is how this will shake negotiations. how does the finance minister of germany look across the table at
the u.k. government? how does that shaped the view of how negotiations are going to go? matt: first they have to come to the table. as we were just hearing, it has been three months since article 50 was triggered. michel barnier a pointed out this morning and they have not started negotiations. barney a -- barnier wants to speak -- stick to the timeline. will others allow the british to have more time because no deal could be different -- worse than any other deal the comes out of this? they still want to keep this flow of goods of trade. wolfgang schaeuble is a huge proponent of globalization and multilateralism and if he gets a softer brexit, that will be a stronger possibility. he cannot get a softer brexit if there is no deal and if the u.k. feels they are running out of time and hard brexit is going to take that route, i think it would be an outcome that a lot of the other 27 would not prefer. david: as you say, wolfgang
schaeuble is the finance minister of germany and his main responsibility is the finance of the economy, trade within germany. does he have a plan? does he have a view about what a good soft brexit would look like? i did not get to ask him about his detailed picture of a soft brexit and frankly, he is not going to put his cards on the table. he basically said as much. he is a politician through and through and i don't think that he believes in negotiating that way. what he would like to see and what he was clear about is continued cooperation with the u.k.. he thinks it is in the best interest of the u.k. and the -- the e.u. and the u.k. if they completely go through with a full brexit, he wants to be able trade with them and see citizens who live over there stay there without any concern of moving out and citizens of the u.k. who work here stay here
without having any concerns about that as well. on thet a lot riding continued cooperation of the u.k. and the e.u. economies in the german economy. david: suppose there were no deal at all that would really invoke wto, which is the back stuff. badly or materially with that hurt the economy that wolfgang schaeuble is responsible? matt: it would certainly make it a lot more difficult to deal with trading. it would make it more difficult to deal with the free movement of people. it would make it very difficult -- you will hear people on the to continuee say life as we know it between the e.u. and the u.k.. on the u.k. side, there are a brexiteers exit -- who say no deal is better than a bad deal. it depends on who you ask. i was speaking a moment ago with
the ambassador to the e.u., former ambassador to the e.u. and he said that would be probably the worst case scenario having no deal fall back -- trade would fall back on the wto rules. jonathan: i want to get into a discussion of the language. the hard brexit off brexit issue is a frustrating situation for some many people. most people's mind, a soft brexit is continued involvement, inclusion in the single market or at least the european economic area post-brexit. a hard brexit is everything else. you can have control of immigration unless you are out,. -- unless you are out, full stop. does the german finance minister have a different interpretation of what soft and hard brexit actually is? it is incredibly confusing. matt: just the last week i have .eard a lot
i have to say germans have a different view of what hard brexit is than the u.k. what germans think about as a hard brexit and this is a case also for what the french, the italians, and everyone in brussels takes about as a hard brexit is something the u.k. would be unlikely to accept. if you try and control immigration in the sense that you restrict the free movement of people around europe and throughout the u.k., then you will get no trade deal whatsoever and what the u.k. wants to see is some kind of access obviously to the single market. what wolfgang schaeuble would prefer is they continue to have access to the single market and continue to see trade back and forth and movement of people back and forth. it will be interesting to see because today he was talking to our reporter at a conference and he said he still wants to see london be a really strong center of finance even post-brexit. his vision of brexit is not a
hard vision you hear from europeans, but maybe closer to what the british think about as a hard brexit. i think you are right about the language and nuances. today i heard for the first time fake brexit, which i think is fantastic and something u.k. politicians would try to sell their constituency as we did brexit, but not really doing brexit. jonathan: there is a lot of people on the leave side of that are worried about that. are you sensing a crack in consensus a time? david: some are worried they are not going to get a deal at all. when in the going to start negotiating with us weston mark -- with us? jonathan: much more on that interview. still with us, keith parker. when people call you and talk about how negotiations are going to go with the year and the united kingdom, have -- with europe and the united kingdom, have those conversations changed?
keith: they have. i think there was some degree of hope and we are talking about multiple parties where may is going to the unionist party and potentially other parties where it complicates negotiations. when you have one-to-one, it is quite a bit easier. when you have many to many, it opens up the range of possibilities. david: it is not good news in a negotiation. exactly. keith parker of barclays will stay with us. coming up, and inclusive reggie wu with apple -- coming up, an exclusive interview with apple's ceo tim cook. this is bloomberg. ♪
company is focusing exclusively on autonomous vehicles. tim: i think there is a major , notption looming there only for self driving cars, but also the electrification piece. if you have driven an all electric car, it is actually a marvelous experience and it is a stoplous experience not to at the filling station or gas station or whatever you want to call it. plus, you have ridesharing on top of this. so you've got kind of three vectors of change happening generally in the same timeframe. as we look at it and what we are focusing on, what we talked about focusing on publicly is we are focusing on autonomous systems and clearly one purpose of autonomous systems is so driving cars. there are others and we sort of
see it as a mother of all ai projects. it's probably one of the most to work oni projects so autonomy is something that is , butdibly exciting for us we will see where it takes us. we are not really saying from a product point of view what we will do. we are being straightforward that it is a core technology that we view as very important. ofid: that was tim cook, ceo apple. still with us is keith parker a barclays. you cannot look at tim cook without thinking about tech and what is going on in the tech stops. they -- stocks. they stabilized today. apple was no exception. he got hit pretty hard and downgraded. it has been right in the center of it. two weeks agower wrote a piece about the rotation of the value into growth that was reaching stretched levels
where number one top 10 stocks contributed to the s&p return was nearly 50% brady hadn't seen that since 1999. apple a pretty good -- pretty big contributor and the growth reset from cheap levels earlier in the year to put the expensive levels. cut a list, you saw a pullback to positioning consolidated. jonathan: it is unusual to see the nasdaq pullback by two percentage points and the s&p 500 and the dow kind of tread water. is there a message in the section? keith: to me, that was more than a three standard deviation of a -- event. the message to me of positioning was extended. i think there is discrepancy around some of the story and i think, to me, the communication is after a rally driven by so few stocks. do you want to stay with that or position for the catch up trade
where we saw positive news for financials last week today and we have the fed tomorrow. jonathan: keith parker, you will be sticking with us. coming up, more from our exclusive interview with germany's finance minister wolfgang schaeuble about the future of brexit. take a listen to this. wolfgang: i think it would not be helpful if we started speculation if it won't happen. decision as ahe matter of respect. if they wanted to change their decision, of course, they would find open doors. i think it is not very likely. ♪
positive 0.14 on the s&p 500. are you looking for any indication the techs have stabilized, it -- technology companies the second-biggest gaining industry group on the day so far. some signs of stabilization. the fed decision tomorrow, the meeting commences today. -- 2.22 onn the u.s. the u.s. 10 year. today, all about a 30-year supply into the market. that is the story cross asset. let's get you up to speed on the headlines outside the business world. --emma: according to people with direct knowledge of the u.s. investigation, russian hackers have databases and software systems and a total of 39 states. that is almost twice as many states as previous the reported. a few hours from now it will be attorney general jeff sessions'
turn in the spotlight. he will be questioned about his role in the firing of james comey. he will also be asked at context he and others had with russian officials. prime minister meets today with the head of the northern islands party. may apologized to conservative party lawmakers and a great the party lost the majority in parliament and said she will get the party out of its current mess. he also signaled she is willing to rethink her approach to brexit. global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: growth is a function of jobs and productivity and both depend on whether ceos want to hire or invest. there is a ceo survey giving us
a sense of what 400 ceos think about the future. whether they will be hiring or investing and whether what is happening in washington effects their business at all -- affects their business at all. is the -- joining us executive editor for bloomberg view and gadfly, tim o'brien at keith parker, barclays head of u.s. a location. i want to start with the survey. it is booking out three years, 400 ceos. what are the top lines you think we should take away from it? >> 400 ceos in the u.s. and 1400 globally as part of this ceo survey. i think some of the big takeaways -- one is the confidence that ceos in the u.s. have about their growth prospects over the next three years. i think some of the other headlines are that the global counterparts are less confident than they were a year ago. u.s. ceos are more confident
than they were one year ago and i think that has a lot to do with their hopefulness around tax reform, regulatory reform and the positive impacts that can have on their business. david: does that translate into parting with cold hard cash? are they going to employ more employees or invest more? lynne: they say over the next three years their headcount is definitely going to go up. they also look at areas to invest in. it is going to be new technologies. that was one of the big findings when they say what are their top priorities. it is centered around speed to market, how they are investing in new, disruptive technologies, how to digitize their business. they are also looking at ways to be more data-driven. there is a big technology theme across the survey and in their priorities as well as some of
their concerns. being prepared to take on what it is going to take to get their organization digitized and also having confidence in their data, which is important to making all this technology work. ceo --n: last week the landed from china trying to catch up, how did infrastructure week ago? the joke being nobody was really following infrastructure week. people are pretty distracted. the business is distracted from the business friendly addenda even more so because of the testimonies we have had last week and later today. lynne: i think the ceos i am talking to really are not distracted. i think they are focused on getting back to the business of business. they are looking at the opportunity to use technologies in new ways to transform their business models. little bit ofis a a wait and see on what does the
administration do. will there be tax reform? will there be regulatory reform? some feedback from the survey is ceos are spending a lot of time analysis,rio reevaluating their global footprint. there is a bit of a pause, but i think they can't wait to focus on how their business models will need to change as they move forward. jonathan: to david's earlier point, we know their confidence. we thought they were less so, but maybe they still are in a big way, but they are not putting the money to work yet. what are they waiting for? big driver of confidence to be the fact when you have more money in your pocket meaning profits are up and corporate hasn't spent the profit recovery meaning cash levels for the median are up nearly 15%, you are starting to see an inflection incur -- corporate and we start to saw that last quarter so you are
starting to see signs, but nowhere near may the sentiment measures we are seeing. david: you are something of a student of donald trump the man, not the president. you literally wrote the book on it. is he dealing himself in washington out of what we are talking about right now? or threelk to a ceo to months ago they really lead with tax reform and deregulation. now we are not hearing much about it. is washington becoming less relevant? tim: i don't think washington is ever irrelevant. for what lynne was saying, ceos are hoping to see tax cuts and deregulation. i think president trump's having parallel those things. i think his distractions are on the russia probe, which is a serious issue and his inability to fill all the administration post across the federal government.
his inability to form a working coalition with congress left things like health care deregulation and tax in the shadows. it is unclear whether we will get those through this year. david: one thing you didn't mention his focus. you mentioned things like health care and tax reform and in for structure and yesterday we hear about cuba as an issue and this week's job improvement week. it seems like every day or certainly every week there is a new thing being added to the agenda. can this man focus? tim: no, he can't. he is essentially add. i am waiting for donald trump -- waiting for donald trump the focus will be long-term -- it is waiting for kendo -- waiting for godot. if he was surrounded by a more team that was technically efficient, something would happen. he has not built a strong team and is not being a good manager. jonathan: it is june in a
four-year term. fair -- of the trump administration? .eith: i think it is fair you are seeing it pushed further out and to tim's point, more and more things are coming in as a focus. i think we are seeing things starting to get pushed through or pushed along and the ball rolling by congress in the house on tax, but it is a slower process and you would like to see that leadership push it along further into focus. david: in your survey, i understand you don't say why -- how you feel about donald trump, but you suggested there is more concerned with geopolitics and geopolitical issues for ceos then there was before which might have something to do with washington. other other hints about what is causing ceos to have the views they have? --ne: i think there is a bit
there is optimism, but yet they want to see something happen. focused on the next three years. the signs are good. expect toaying they increase jobs over the next three years by a vast majority. they are also looking at where are they going to grow their business? they see the u.s. market as the market that is going to be growing the most. last year it was india, it was china. this year, across the globe ceos are saying they think their best growth prospects are in the united states. we hope to see action coming out of washington that will actually spur on this growth and i think ceos are feeling confident that there will be a pro business agenda. david: back when i was abc and i consumed research regularly it wasn't necessarily the absolute number as the delta, how does it change over time.
what is the biggest changes you saw in this year's survey? lynne: the biggest change is the confidence went up year over year for u.s. ceos for their counterparts -- u.s. ceos. for their counterparts in other parts of the world, it is a big decline. that speaks to what we are talking about, the hopefulness of having a pro business agenda in the united states and the other big theme was technology. organizations are seeing they have to be prepared for emerging technologies, the intelligent automation that is going to spur success in the future is key to them. i think that is going to be one of the areas they are going to invest the most. we actually saw m&a on the horizon as the climbing as opposed to where we had seen an increase and they are sitting on a lot of cash, we know, but it seems like the focus is on their organization, how they can grow organically, and how do they do that in new and very different
ways use lighting -- utilizing new technology and getting the most out of their data? jonathan: great to get insight into the ceo community. thank you for joining us and of course, keith parker a barclays will be sticking with us. coming up, an exclusive interview with germany's finance minister, wolfgang schaeuble. wolfgang: i think it would not be helpful if we started speculation that will happen. decision and we take it as a matter of respect. if they wanted to change their decision, of course, they will find open doors. i think it is not very likely. jonathan: more of that interview coming up. live from new york with a focus on the city of london, this is bloomberg tv. ♪
♪ is "bloomberg daybreak." coming up, the former philadelphia fed president. ♪ president trump has spoken out again and again on u.s.-germany economic relations trading the -- labeling the trade surplus as very bad. matt miller spoke with the german finance minister on the same subject asking about how the views toward germany impact his views on the situation. take a listen. wolfgang: it is a little bit more different and complicated as well, but on the other end, i think there is a difference
between announcement even in short messages and twitter and the absence of american policy. two days ago he delivered a speech when he said he would the obligations of article 5 of the nato treaty. we think he has to look at the we tryce of politics and and we know wete need cooperation with the united states as much as possible, but not only to us to decide. matt: chancellor merkel a couple of months ago said in a speech in bavaria that it was time for germany to go on its own and they cannot really count on partners like the u.s.
understande have to a little bit more in the past we have to realize that we have to take our own responsibility to make bigger contributions. i remember even president asked theng ago europeans for fair burden sharing in nato and after german had --tion all of europe have been the voices and now that germany has been reunited, germany is becoming again sovereign until 1990 -- take mores have to responsibility. once again, we are totally that the better the
cooperation and relation with the united states, the better for europe. we think always -- also it is better for the united states as well. nevertheless, we will have to take more responsibility. met: you can --matt: you can engage yourself a little less though, because we hear comments from president trump about how bad german trade is. how does this affect your relationship when you are in baden with the treasury secretary? the you think steve mnuchin has the same understanding of global trade is mr. trump? wolfgang: i don't know and if i did know i would not say it publicly because i don't think it would be polite or neither wise. there are different opinions between the president and the secretary. nevertheless, cooperation on the level of finance ministers is very trustful.
there's a lot of contacts and we have good relations and of course, we have different obligations. has to care on his own mandate by his electors. we are all democrats. in germany, the voters elect the government -- the farm -- parliament government. in this regard, with more cooperation we can achieve the better. jonathan: that was matt miller speaking with germany's finance millis -- minister wolfgang schaeuble pretty joining me, timothy o'brien of bloomberg gadfly and bloomberg view and keith parker of barclays. timothy, if you had said to me a couple of months ago that the friction was going to be between germany, i might have laughed and said it would be mexico or
china. i would not have picked traditional allies, fellow members of nato. it seems we've got a complete reset in global relationships and everything from now is just transactional. they are business deals. i don't like the surplus and that means i am winning and you are losing. what does all of that actually mean? tim: i would say not worry about this because the storm cloud will pass. it is germany now, it could be the u.k. two months from now. i don't think there is a guiding strategic philosophy on trump's part in forming his views on foreign trade or the economy generally. we saw nafta, he campaigned very hard against nafta and win push heame -- push came to shove was more informed about the issues and he retreated. he campaigned hard against china on currency manipulation, which was just factually inaccurate and trade problems.
he backed away from that. over time, i don't think he is going to an act trade sanctions -- enact trade sanctions against germany. jonathan: you look at the situation with nato and the finance minister saying himself to have to get up contributions. very few have achieved it. in the minds of many people, the president is absolutely correct going after this situation. he does so in quite a public fashion that creates conflict on the global stage. is that a good thing for a market participant looking at global relations playing out this way? keith: i think for an investor it raises uncertainty around trade and around these types of agreements where you do have to deal with headline risk. i think to some of tim's points, he is going down the list of who can pay from a trade perspective and who has surplus with the
u.s. and it is not that long of a list. from nato and going to partners and resets and relationships, i think it could pose some problems if a girl risks arise where you do need -- problem where bigger risks arise. david: right after the election i remember people said maybe we should go into small caps because they are not as exposed internationally. at this point, does it factor into your asset allocation at all the possible trade relations of the united states? keith: in terms of trade when you were thinking about the trump administration were the good and bad policies. bad for lack of a better word was around trade and the risks. we have seen that dialed back considerably and the risk was is there a type of shock to global demand question mark we haven't seen that. from an asset allocation perspective, i think the key fulcrum for markets is around tax and u.s. fiscal which good
drive rates and the value trade as they have lower tax rates. david: thank you very much keith parker of barclays and bloomberg's tim o'brien. if you have a bloomberg terminal, check out tv . you can watch us online, click on our chart and graphics, and we will do our best to respond to comments and questions. go to tv on your bloomberg. after all, this is bloomberg. ♪
♪ is bloomberg. i am david westin. attorney general jeff sessions will be testifying this -- before the same senate panel james comey faced last week. he will be grilled on his role firing the fbi director. we will bring the testimony live -- 2:30 p.m. today. that is wall street time. joining us is kevin cirilli. give us a sense of what jeff
sessions will address and what he is not going to address. kevin: he is going to address how many meetings he specifically had with russian officials. there is some discrepancy about how many meetings he had, if they were all disclosed. there are reports that in the closed briefing with fbi director james comey there could have been meetings that were not disclosed. he will also address the relationship he has with the president because he had offered to resign. he had recused himself against the president's wish. i have been told that they so -- patched it up, so to speak. another day in washington will be dominated by this russia probe. probe what is the russia at this point? is it a probe about russia and its relation with the united states and what it did or did not new -- and do in the election or is it the report on james comey? it turns out the russian
intervention at the state level in the elections was somewhat more expensive, like 39 states, which is bigger than what we have said in this is something wass comey was an fatt emphatic about. kevin: -- jonathan: great to see you serve. later on, republicans -- speaking with rand paul. coming up, that conversation and the countdown to the cash open. you are watching bloomberg tv. ♪
minister says the u.k. would open doors if there is a brings it. things are getting lost in the noise of d.c. testimony. sessions testifies later today. the fence today meeting commences, the hike is very much on the table. from a hot york city, good morning. this is bloomberg daybreak. alix steel is away today. itstech route stabilizes futures and the market action in positive.p 500's are treasuries go nowhere ahead of an interest rate hike potentially from the federal reserve tomorrow. there is more supply come into the market today. some remarkable stats from the tech front have just been handed billion in the8
tech sector, the s&p 500 lost $39 billion. of it was all about tech or in -- it's all about tech or it david: they had gone so high. they had to take that hit and still be with us. it's pretty extraordinary. in europe,he story matt miller exclusively sat down ministergerman finance on the future of the eu and the reform after the elections in france in the u.k.. favor and wem in have a good opportunity now to get more in european development. i discussed this some days ago with a good friend of mine. ready to make any reform, but only in nine -- line. as soon as we get amendments to
the treaty, we can do more. seekng as we are bound to a given primary law, we have to make some modern integrations in a governmental way. he said it, yes of course. agree that as soon as in itle, we would move governmental cooperation. amendments.e get we will work and i think it's pragmatic to move in the direction to get more efficiency for europe. in this way, we convince the people in europe that europe matters and europe is the right solution.
matt: don't you have to move in the direction of shared debt ?esponsibility, european bonds your spanish counterparts at it has to happen that way. he said recently it has to happen that way. only way ifbe the you want a deeper, closer europe. whatang: if you listen to the former governor of the bank , it makes itid more difficult. been and has always share --e can only risk sharing if we have instruments to implement this. risk, it iscommon the wrong thing and you will end
in economic disaster. jonathan: joining us from berlin is matt miller and nejra cehic. i want to talk to about reform. let's talk about europe. the ecb came up with its own planets all the debt crisis in one way or another. is this something taken seriously by the germans? i think the germans are not for euro bonds. he made it very clear for the reason that they don't want to be on the hook for someone else's debt if they can't also take part in someone else's decision-making. pass, whenomes to you get a tool that allows that kind of thing, it seems like they would be on board. the problem is they have to give something to the french if they get what they want.
that is structural reform from france. they have to be able to give something to make that. they don't feel they need to put those cards on the table until after the september election. jonathan: the conversation in new york city is by europe -- buy europe. they like the direction of the politics and the reforms. do they think macron can be successful? is he just another renzi in italy? matt: no. he is hopeful. it is vital to the interest of germany and i think he would say to the interest of the eu that macron the successful. if he is not successful, then they worry about the fact that a populist camp date like le pen could come back in a few years time and actually win an election. if he is successful, wolfgang is
one of the biggest proponents of a more unified relationship between european countries. macron is on the same page. samewant to get to the and. the question is what they do in order to get there. right now, it's not viable to put euro bonds on the table. idea often that walked it back after the election. call forar a growing it. this has to eventually happen. jonathan: i think a lot of people in the u.k. might not think a frexit u-turn is viable. listen to what the german finance minister had to say on brexit. wolfgang: i think it would not be helpful if we started speculation with what would happen on that. a takes the decision as matter of respect. if they wanted to change their
decision, they would find open doors. i think it's not very likely. david: is this simply pipe dreams? is there any possibility there would be another referendum that would reverse brexit? only main party calling for another referendum is the liberal democrats. the conservatives have been saying that's what they intend to do. both of those two larger parties have found to continue with though in varying forms. this is were we have interesting developments overnight. yesterday afternoon, the prime minister met with the 1922 committee of rank-and-file tory members. mps.te -- spoke to 17 there were interesting it changes in tone. was the onesaid she who got us into the mess and she
will get us out of it and -- it. that warmed up the room as soon as it came out. she said she would be willing to stay on as long as she is needed. she signaled she is willing to rethink her views on brexit. there has been some reshuffling in the brexit department just days before negotiations are supposed to start. there is a feeling the u.k. might be heading toward a softer brexit, reticular lieff this coalition happens. -- particularly if this coalition happens. they are headed toward some version, whatever it is, a brexit. when? she just replaced two of the ministers working for them. is saying weey a don't even have a date to get started. we are concerned this might blow up on us. when do they get moving? nejra: that's right.
thatomments were precisely the u.k. waste anymore time with these negotiations, it risks crashing out of the eu. in terms of the brexit department, the reshuffle was one member of the house of lords who was more pro brags it -- exit -- brexit. there might be a little bit more of a softer brexit stance in that department. david davis was not one of the brexit soft brexit people. in terms of the timing, those talks were due to begin june 19. we heard yesterday that those actually could be delayed. at the moment, we have not had any real clarity on when exactly these might start and if they do, what exactly the u.k. will
bring forward. the eu is said we are ready to go now. jonathan: what is going on there in westminster? maybe around the plaza for that fantastic interview. the brexit negotiations, we wonderedriday and about the negotiations and how they would change with that result. how has the nature of the conversation changed? of us to not go to sleep thursday night into friday. i think you were one of those people. wolfgang sees now a stronger chance that there will be a softer brexit. mean, he seest i a chance there will be a brexit with more trade, with more room for immigration.
someone told me this morning that the former ambassador to the eu was in bloomberg offices. the people who have to sell brexit to their constituents -- still calll it it a brexit. manymay make so concessions that it is only brags it in name only. -- brexit in name only. jonathan: soft, hard, fake. david: i wonder where david cameron is these days. jonathan: it's destroying its own party. david: matt miller over in berlin, thank you so much. we are going to look ahead at the fed meeting with the former philadelphia fed president.
david: the world change last november with the election of donald trump. data it changes much as we thought it did? there has been more doubt about how much washington can really get done. joining now is the chief economist. a softball for you, steve. you were not quite there. at this point, is this relevant at all to the markets?
steve: people have discounted a lot of the potential donald trump has on 2017. have they given up completely on 2018? that's an election year and makes it more problematic for them in terms of the amount of legislation they will try to get done it. taken out 2017ve and in the process of taking 2018 out. david: parts of the market are still in play. we just got a report about some backing off of dodd-frank. it's not as radical as some thought. could that help the financials? steve: it could. the problem you have is they are not really changing the -- legislation. they are changing the interpretation of the legislation. -- you going to ingest adjust your interpretation completely? all you wait and see this guy could become a two-term president?
if something goes wrong and you worked on the interpretation, you will be with who the next president may be. you have to be very careful about how you push that line. jonathan: talk to me about confirmation bias. brian: i am just a simple kid. i am very confused. good morning. confirmation, markets one up and markets went down. that's what they do. there is a lack of confidence in our investors around the world. we talked to people in america, canada, around the world. people don't know what to do. day, most of the our institutional clients feel like they have to be invested. we've heard so much about the stocks, we wrote a note june 1.
we took a position down on all of the stocks we owned for private clients in canada because we were being concerned that everyone was in the stocks. we do think america on a short-term basis is the place to be. that is the wherewithal of them from a corporate earnings basis. the fed is going to raise rates. we know that. the fed needs to provide more guidance with not only going forward financial stability of the u.s. markets, but more importantly in terms of inflation expectations. jonathan: they are rolling over right now. market is aond bunch of bullies. jonathan: they are usually right. isan: someone on my team from merrill lynch.
i need that kind of balance in my life. i think the fixed income people said nothing is going to happen. cap is not going to do everything -- anything. -- trump is not going to do anything. that's what i care about as an equity person, it has flattened out again. textbooknot been a recovery. jonathan: i love the idea of you sitting around the trading floor with the emotional scales are in debt skills. david: where are you on this? are they bullies? let's put the chart. these are really come off since march. steve: i think expectations are coming off because some of the elements are rolling over, the health care elements are starting to roll over. there is a lack of ability to keep pushing of rental rates going forward.
think is veryg i critical in here is the economy is not accelerating. a lot of the trump trade was a reflation trade. we are not going to get that reflation trade. the bond market will take some of that off. the problem is going to be they will continue to flatten. the federal reserve wants to raise rates. perhaps, we are not done after this one. i hope we are. we will see what happens tomorrow. jonathan: that line that investors want to remain fully invested, the you see that on an increasing basis? ,he route in tech over two days the other benchmarks outside the nasdaq, they held quite steady. the bonds were still to buy. seen awe have rotational market. these stocks are up over 20% with respect to your today performance.
it does not surprise us that we take a little wind out rid -- out. we are not macro investors. seasonal slowdown periods for tech is always the summertime. rejections come down after the second quarter. we expect the earnings are little bit too high in they will soften into the fall and we will get ahead of that. jonathan: he is sticking along with us alongside steve. coming up, dr. ben carson will be joined us later did live coverage -- later. hillcoverage on capitol will be later. you are watching bloomberg tv. ♪
daybreak. they are conspired at manipulating markets enable face charges in the u.s. they worked at jpmorgan, barclays, and citigroup. they will be arraigned in a new york court did they used a chat room to share information. a deale bank is offering of its management board. it will pay them their bonuses if they give up claims to payments. it they want to help pay fines imposed on the bank. some export members are not happy with the plan. that is your bloomberg business flash. david: for more on the state of financials, we have steve still with us. steve, we mentioned financials briefly. bring us back to an overall view about financial at this point. we heard that u.s. financials are in good shape.
europeans are in much more trouble. about deutsche bank figuring out its fines. steve: they are in a much healthier position. when you look at the coverage ratio, u.s. banks are back for one dollar for one dollar. they are immunized. the portfolio has dropped dramatically for them. they are in very good balance sheet position. the problem for u.s. banks going forward is profitability. that's what we will hear from steve mnuchin. that is what they are trying to do from dodd-frank. if you look at the banking industry, we have the lowest loan to deposit ratio we have ever had in this business cycle. part of their ability to generate profits is through loans and that is restricted by the like -- regulations. jonathan: we talk about the 2/10
spread. take comfort from that, the idea that it exists, but is flawed? brian: 100%. we look forward as investors. we don't look backward. people are mired in the fear of the credit crisis. changes toome dodd-frank, they are not as drastic as people thought. the trumpout administration trying to add jobs, where are they cutting jobs? government jobs. there are going to be less sec workers examining banks. all of the bad guys have been found. let's look to banks in the financial companies do their jobs, which is loan money. loan growth is slow because not only are the consumer scared, the banks are scared because we
don't know what the tax rate is going to be. we believe financials in america are the place to be. we are buying back stock again. we are doing what the banks are good at. balance sheet strength is the strongest since a 1950. -- the 1950's. david: that's going to come back to hot you at some point. steve: this whole thing has been fear driven. jonathan: we are out of time. i'm sorry. thank you very much. steve is sticking with us. we will go over who may be joining the federal reserve board. ♪
we are about 15 seconds away. we are up about 1/10 on the dow. yields are unchanged throughout the morning. the dollar is firmer, now weaker. is 127.31. ppi is up. this comes at a 0.3%. previous number was 0.4%. the previous number was 2.5%. these for more on breaking economies, we are joined by charles plosser. he is the former philadelphia fed president. as someone who served on the fed, do you pay attention to ppi numbers?
: good morning. i think the numbers are a little noisy. they are not terribly great predictors of the cpi particularly. they are informative. puzzle,ce of a broader they are interesting, but not determinative. david: let's look forward to the meeting today and going into tomorrow. we will get a ruling from the fed tomorrow afternoon. the market say we will have a rate rise. that is baked in. what do you look for in terms of guidance going forward? charles: i agree, they are going to move. i think that's fine. they have signaled that, they are on the path. i am more interested in how they deal with the balance sheet did when i was at the fed it, i had a lot of conversations and urged them to have a plan about what the balance sheet is going to do, where it is going to end up,
and how they are going to operate policy. it's confusing because they have not articulated that plan. they really don't know for sure, that is the debate. i am looking for some more information about what they think about the balance sheet. if they continue to raise rates, you have a conundrum. they say the balance sheet is large. funder ratehe target is not very informative about the true stanza policy. it is being offset by the balance sheet. i think they've got a communication problem there. they have had it for long time. they need to deal with it and communicate to the public in the markets about how they will contact -- conduct policy. jonathan: they are data dependent and that's what their communication policy hangs on. do you believe they are data dependent? charles: since they haven't told us how they are data dependent, it's uninformative. it opens the door to doing all
sorts of things. when they first thought about raising rates, we went through several meetings over about a year or two years where they talked about raising rates and some piece of data came out and they said we can't do it now. have conditioned the markets not to take them seriously. we don't know how they are data dependent. they could look at any data it wants to and decide whether it's , and changer policy their minds. i think it's important to be did a dependent. you need more information about how they're going to use the data. jonathan: i want to know how much market participants have been conditioned by the federal reserve for difficult u-turns. over the past few months, they've done what they said they would do. it seems the market doesn't really buy it anymore. is that ultimately the problem? the previous communication
errors have conditioned people not to believe what comes out of the fed? charles: that is exactly right. they did pull these u-turns. now, when the market has its -- embedded in the markets, people are puzzled that it is as low as it is. the marketst believe that somehow the economy is different than what the fed believes. i think it's believe the markets have come to believe that the fed says it's going to do this, but we don't really believe it. look at how they have behaved in the past. spread if you will or divergence between market expectations and what the fed seems to want to be saying is partly a creature of their challenges at communication and the desire to be highly discretionary and not really data dependent in any systematic
way. that's part of the problem. david: you've been clear about what the fed should do. on the balance sheet, two questions. when should they lay out the plan? when should it be implemented? they shouldptember lay out the plan. i think they should begin the inflammation -- implementation by december. they should give the market time to adjust. that's why you have the divergence between the implementation. it needs to be built into the forward rate structure. that's the most appropriate time. i would forgo a september move and i would probably forgo a december move if they start implementation in december. markets are right now about 50-50. jonathan: let's talk about your time at the federal reserve. were building up that
big balance sheet over at the to, what were your warnings the rest of the federal reserve? what were they doing? as you were building it up, the jew think about how you would unwind the balance sheet as well? on, one of my concerns about the balance sheet and policy action was the fed was eager during the qe to do something. policyre eager to make and be effective and healthy economy and so forth and so on. one of my cautions was repeatedly we need to think further ahead. we do this, then what? we need to plan further ahead and see what the exit is going to look like. i said this many times. we are doing this, maybe it's the right thing. what's going to be important is how we get out of this and what
that structure or operating regime is going to look like. they never really came to grips with that, even today. that's why people struggle with the balance sheet did -- sheet. they don't say by how much. they don't say what the operating regime will be when they get there. they want to do it slowly and gradually. that's fine. what will have to happen for the ratemy for the fund target? how will they interact with one another? they don't talk about it. jonathan: if you have a handle on unwinding the balance sheet? charles: i think there is a lot about the effects on the economy of the large balance said its the fed has rationale was to provide extra
accommodation. they could not lower rates anymore. we are not at the zero bound anymore. this was an audit rate increase cycles. when the fed is putting pressure to continue to put pressure on the long end through its allen's sheet affect, but -- balance sheet effect. that is not a rate increasing cycle. who knows how it will play out. they need to get on with how their -- what their monetary policy strategy is and how they will raise short-term rates and keep a big al and she did the same time. that continues to be a communication problem with the market and what is the monetary
policy strategy right now? it's not very clear. david: to wrap this up, the economy has had some big training wheels on the bicycle for quite a long time now. fatah, it had -- fed, it has not had an effect on the growth pattern. mightncerned are you that did her growth? steve: i am less worried about deterred growth then valuations. particularly, the equity markets around the world where the liquidity has found itself being invested in -- invested. the economy from a balance sheet perspective, from a risk for spec of -- perspective is healthy.
we took growth down from 2.3% to 1.6%. we can take a big shot. can we take a big shot from a financial market question? jonathan: it's great to have you on the program. you will be sticking with us, sir. we want to give you some headlines. emma: the run cyber attack on the election was more widespread than publicly revealed. according to people with knowledge, russian hackers hit voted databases and software systems in 39 states. that is twice as many as previously reported. a few hours of now, it will be jeff sessions in the spotlight. the intelligence committee will question him about his role in the firing of james comey at the fbi. he will be asked about contacts he had with russian officials.
the u.k., theresa may meets with the head of the northern ireland democratic unionists party. she needs them to prop up the minority government. she has apologized to conservative party lawmakers. she said she will get the party out of its current mess. to signaled she is willing rethink her approach to brexit -- brexit. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. up, and interview with senator rand paul. live from new york and washington, this is bloomberg. ♪
anna: this is -- emma: coming up, dr. ben carson will be here. david: as the fed prepares today and tomorrow, there will be three empty seats and there are reports of likely tenets to fill those roles. there is robert jones in indiana. marvin good friend is professor at carnegie mellon university. is the formerls treasury department official under president george w. bush. still with us is charles plosser. is mike mckee.
i will start with you, mike. quarrels, this is the position supervising things. what would he likely you like on the fed? mike: he is not a fan of heavy regulation. he would take a much lighter hand to fed supervision of big banks. as far as monetary policy, he has advocated rules like the taylor rule, which could be an interesting development. to this point, very few fed officials have advocated rules as opposed to discretionary monetary policymaking. david: how about marvin? mike: he is a rules-based guy. the feeling on wall street among some people is this may be gary
cohn's invisible hand. it would be easier for wall street to understand what the fed is going to do. doing that takes away their discretion to react to unforeseen events in the economy. if you look at the taylor rule, and i brought along the model we have on the bloomberg, this would have the interest rate at 2.7%. whether that's acceptable to the administration not, we don't know. jonathan: let's put the theory to practice. how difficult would it be to introduce a rules-based federal reserve? charles: mike, it was good to hear you chat about that. more forgued systematic policy than we've had. mean byds on what you systematic policy or rules-based policy. i think it's about how it gets
implement it. i think the fed already looks at rules. improve itsan communications great deal by -- whatmore about rep rules have to say about policy. it's hard. it's very hard. or otherers in the fed areas of government don't like giving up discretion. part of the reason it's been so hard to make much progress on that. i think both of these appointments, mr. jones i don't know, but i know marvin and randy quite well. i've known them for a long time. it's quite revealing about the strategy. , these names have not been nominated yet. i assume they go toward being nominated. it says a lot about the type of
fed the administration would like to see. i am very encouraged. i am very encouraged about both people, they are smart and capable. i am taking away good fives from this. -- vibrations from this. there are other directions they could've gone. david: we were talking about the balance sheet. one part of the tea leaves about marvin is he has expressed some skepticism about investing not just in treasuries, but mortgage-backed securities. the fed is really injecting itself into fiscal issues. do you share that concern? steve: i share that concern a lot. the more the fed engages in what policy, thet fiscal
more it engages that, the more it's not doing monetary policy. it's doing credit allocation. that should be under the purview of the fiscal authorities. those effects of allocating credit, it has distributional concert -- consequences. it's no wonder those consequences have come under a lot of criticism. i share marvin's view on this. i have written about it. i have talked about it in speeches i gave back in 2010. it has certainly turned out to be a problem, and we are not out of it yet. mike: let me ask you a question. this is something people have been debating. , the fed saysurve maybe it's flat. inflation is not going up. does it still work? does the fed need a new theoretical model?
a new way of thinking about the relationship between inflation and employment? charles: absolutely. the inflation curve, the phillips curve is dead. it was killed in the 70's. the fed wondered when unemployment was at 10%, the fed was puzzled why why inflation was still at 2% for a long time. the phillips curve wasn't working. it didn't work in the 70's or the 80's. i found it frustrating while in the academic literature confidence in the ability of the phillips curve to be eight useful predictor of inflation is still heavily accepted in the fed, even though they talk about it being flat. it's the only thing they've got going. both academic and policy makers need to quit relying so much on
the phillips curve for conducting policy or predicting inflation. it just is not a very good model for inflation. david: let me ask the $64,000 question. , as you look at these potential candidates on balance, would you expect them to be more aggressive at raising rates? if you look at the fed, people think when they had discretion, they aired on the side of not raising rates. if you put in a rule, you will likely get them up and -- up. it depends on how they want to do it. having said that, as you might i have never thought hawk versus dove is the right way to think about it. aboutbate within the fed
hawks and doves is really about the model of the economy they use. i think they're going to lean toward a little more systematic policy. david: thank you so much for being with us. that is charles plosser. thanks to bloomberg's mike mckee. if you have a terminal, check out tv . you can interact with us directly. just go to tv on your bloomberg. this is bloomberg. ♪
cook hasirst time, tim admitted publicly the company is developing a self driving system. in ane the revelation interview with bloomberg tv. >> we see it as the mother of all projects. it's probably the most difficult work on.ts to autonomy is something that is incredibly exciting for us. we will see where it takes us. we are not saying from a product point of view what we will do. straightforward, it's a core technology that we view is very important. emma: they received a permit from california to test three self driving sport-utility vehicles. jonathan: thank you very much. it's a race. david: i don't know.
jonathan: i don't think anybody has any idea. it's also one of the worst kept secrets that this was happening. coming up next, an interview with republican senator rand paul ahead of jeff sessions' testimony. dr. ben carson will be joining this program. we are 34 minutes away from the cache open. there is some stabilization. situation, yields are higher by a single basis point. 112.uro-dollar is at you're watching bloomberg tv. ♪
jonathan: the by europe story gets a little bit of backing. the german finance minister hopes france will respond under macron. president trump business friendly agenda is lost in the noise. jeff sessions testifies later today. and the fed's two-day meeting commences and rate hikes are on the cards. to market wants more answers a $1.5 trillion balance sheet question. a warm welcome to bloomberg daybreak. i am jonathan ferro alongside david westin. we are 30 minutes away from the opening bell. futures up 2/10 of 1%. the equity market action over in europe, the tech route has stabilized. the tech sector performing quite nicely in the european session. treasuries are on offer. the yield time by a single basis point, 2.22 ahead of the federal reserve decision tomorrow. in premarket movers, let's get over to abigail doolittle. >> the big story over the last few sessions has been that tech
selloff but we see the relief rally, apple up more than 1%. shawn harrison at longbow research says he was surprised by the selloff and he views it as noise and acquired taste despite the fact that he thinks q3 could turn out to be seasonally weak. we have blue ventures saying his interest for the iphone eight is stronger than the iphone 7. a little bit of a rebound rally. the stock is well below its moving average. another tech winner in the premarket, alibaba, up 1.67%. plus we have raymond james outlining this as a top pick in the big internet state. erin kessler has taken his first up to $190, suggesting alibaba could just move higher by more than 30% and then, finally, tesla. everybody's favorite momentum stock up this year more than 60% this year. today on an upgrade over at the member to buy.
pre-cashhe near-term flow potential over the long-term is superior despite the fact that they are bleeding from a free cash flow perspective. tesla might just continue trading significantly higher. jonathan: thank you very much. trade orite momentum the most painful short for everyone out there as well. david: we are about to find out. jonathan: maybe short still, as elon musk called it. the nasdaq, 30th record closing through 2017 but it is coming off the biggest two-day decline in the past seven months. it has been big bank stocks. the markets top performers leading the decline, shedding one of the $26 million in value in two trading days, responsible with 75% of the nasdaq slumped. the s&p 500 index is roughly unchanged. the question is, is this the beginning of a larger rotation
that continues? tech went from leaders to .aggards -- laggers running is is mike wilson, morgan stanley chief u.s. equities strategist. also, markets reporter dani burger. with the price action, a big somatic bid in 2017. they read and then we turn for a couple of days. good you so far? >> the stoxx got ahead of themselves. ahead of the typical stocks in the fourth quarter, you really have to go back to last fall and recall just how well financials and energy and some other areas did in the opposite. there was no reason for tech to underperform. there was no reason. rates went up and that was a shock, so think about what happened. trump got priced out and the fiscal stimulus got priced out and we go back to the barbell of secular growth. it just went too far. the earnings for financials, even the energy stocks in some
of these areas, have been good. one thing i want to talk about, which is a real misunderstanding now is the discussion of around the bad breath of the market this year but it is only 10 stocks. it is just not true. as of friday, there were more than in the s&p 500. asthat is excellent breath. these stocks are easy story stocks. people last onto them. they are very big and liquid. we do not view this rotation as an ominous signal for the broader market. jonathan: in terms of the secular growth story, was that defensive in nature? mr. wilson: absolutely because they were low volatility. i call it a defensive quality. these are quality companies and they got a little rich. david: so who got burned in this? we have all of the hedge funds piling into tech. somebody must have lost.
dani: they have continued to pile in in june also. this is a recent filing in. week, people who were above their 52%, 52 day highs have reached a new high for tech. but when you look at who really got hurt, what kind of movement this is, this is a bigger story than just tech. if you look at what sold off, you can clearly predict how much sold off on friday and monday by how much of a moment and share you would. if it had gained over the past year, it had lost more. take a company like i dekes laboratories. for pets,armacy veterinarian products. it has sold off a lot and it is the 12th biggest momentum name in the s&p 500. back to the question of who got most, this was more of a systematic selloff. somebody who had a momentum position, it was very clear this
delineation of what pulls off based on how much it had gained. it is not anything to be overly concerned about what all of a in,en, tech is going to be because it was a very specific player that was either a majority or acted as a catalyst for people to take profits off of the richly valued tech sector. david: is there any message in underlying fundamentals? or is it all technical? mr. wilson: positioning is always what triggers it. we have been writing about this for the last several weeks in our weekly note about how these areas have been underappreciated and people have thrown them in the garbage can thinking the economy was slowing. we are almost two thirds of the way to the second quarter. we are pretty confident that the economic year is going to be much better going forward. we are looking at following a first quarter of 1%, written by capital expenditures. as growth improves, economic
growth, what usually happens is the value reciprocal areas do better and we think there is a signal that that is part of the message. it is not that the value stocks are running away with it like they did last year but they can at least participate. they really have underperformed and we think it has gone too far. jonathan: let's talk about the pockets of underperformance. what are you looking at? mr. wilson: financials are the easy one because you have an earnings story that is pretty visible. we are very confident, broadly speaking, particularly in large cap banks who don't need ranks and then some of the regular tory changes that could be a tailwind and they are very cheap, 12 times earnings. the blur valuation sensitive now. energy, we think, is an interesting one because the positioning is so skewed the other way. year, in ourst work, we should they were in the one percentile ownership.
today, energy is that group. there is not one stock as of last friday that was above the 200 day moving average in the energy sector. it is a hated group. that is an interesting thing to look at from that standpoint. areas like the industrial space that did underperform and some of the material sectors like base metals played up with the china slowdown. they are looking to rebound as well. jonathan: what is it like in energy apart from that a lot of people hate it? mr. wilson: oil has gone through a tough year and i think the opec set up was almost perfect. people got too excited about the commodity going in. but what was interesting about that is the stocks underperformed. they were telling you this was a bs rally in the commodity. this is what we call divergence between the stocks and commodities. we are constructive on the inventory draw. 11 people have been. you can get it back under 50.
bsnathan: do i get to call it rally two now? >> [laughter] david: you cover financials. dani: i find it interesting because what you have to look at in the financial sector is we have talked about how correlation in the u.s. stocks is pretty low. but if you look at financials, they are actually moving a remarkable amount together at this moment. whether it be a larger cap or a smaller cap just in the s&p 500. i think there is a bit of nerves going on here just because there is a bit up in the air now. we have noise coming from washington. is deregulation finally coming through? do we dismantle the obama era policy? people are looking at the way people are trading financial stocks. they are doing a lot through the eds and a lot through options. this is a space where there do seem to be some nerves and some uncertainty. david: apart from the yield
curve which is an issue, you talk about net interest margin. you have to make the loan to get the interest. what about loan origination? mr. wilson: absolutely. that is one of the reasons they have underperformed. the of it has to do with fact that there hasn't been a lot of clarity around policy. but justhing gets done knowing nothing gets done allows companies to move forward. we are seeing capital spending intentions are still very high. the animal spirits that picked up after the election have remained elevated, even for consumers. there is a lot of folks who are scratching their head as to why have consumer confidence with all this disappointment? there is a real change in the direction of the policy. you can get nothing done and it is still better than getting more regulation. that has make consumers feel a little bit more optimistic. we are optimistic loan growth will pick up. david: but you have to get the coo to write a check.
we are starting to see it, we are sons the capital spending -- we are starting to see capital spending pickup. david: dani burger, thank you for being with us. mike wilson of morgan stanley will be staying with us. coming up, we are joined by rand paul. we will bring you live coverage of jeff sessions testimony before the senate intelligence committee. live from new york, this is bloomberg.
ease up on those stress tests. still with us is mike wilson of morgan stanley and we are joined now by christine harper. executive editor of finance and investing. >> thank you, david. david: give us a bottom line because there were a lot of expectations about this financial deregulation. does this measure up. >> i am seeing some of the research from the street today and people are pretty enthusiastic about it. one of the things they all caution is paying most attention to the things the regulators can do without congress because that is always a question mark. but quite a few things will lighten the regular tory load for the small banks -- even banksbut also the bigger reducing things like leverage lending, refusing to make leveraged buyout's. that is one of the proposals. the volcker rule, an easy way
if it has been in forst, and something that haven't even gone into effect like hedge funds and private equity ownerships. helpwould require some from congress. bank of america put out a report saying some of the changes around how capital could be measured would allow -- and this could be done by regulators -- would allow banks to up $2 trillion on the balance sheets which could go to lending or buybacks or dividends. david: so they could load more money -- they could loan more money than they have been keeping. we were just talking with mike about this. is there a demand for loans? christine: we have been talking quite a lot on bloomberg with the bloomberg invest conference, there is nervousness about risks in the financial system already. people are talking about the subprime auto sector and consumers debt having increasing
risks, so it is sort of interesting to see this desire for freeing up the banks at a time when we have slow growth today. this is not new for him but you have the risk in all financial markets. on the one hand some of these things are called for. the non-lower banks, raising the limit of $50 billion for something to really need more regulation, but some of these things like making leverage loans, freeing up the volcker rule, what would allow banks to take more risks in the financial markets, the question is whether there is already risk building up. david: mike, you said the risks are underappreciated. when you said that, were you incorporating what has been proposed by the ministration already? is this on top of this? mr. wilson: no, this is needed. we need confirmation of this. this is less endorsement so we don't need to repeal dodd-frank, we don't need to rewrite the
legislation in play, it is just the enforcement of it so allowing banks to return more capital to shareholders or to use it to make more loans, that is the essence. this is the trap we have been in for eight years, what financial repression is all about, that banks are required to own more capital so the fed increases their balance sheet but there is no velocity of money. this is what happens at the end. we got to be careful, throwing gasoline on the fire. then you get inflation and this actually tightens the screws later this year. we are watching this closely but this is the core to our large cap banks analysts, which is that we don't need ranks to go up or the curve to steepen for the bank to get more money to get this less regulatory enforcement. jonathan: on large-cap banks, the policies of this ministration were not supposed to help large-cap banks. he is to talk about smoke immunity banks. my focus on the large-cap banks?
-- why the focus on large-cap banks? david: you don't need the curve to steepen which looks a lot less certain. mr. wilson: 10 year treasury yields stuck at 2.22 in a world where global growth is pretty darn good. while thepinned so world's normalizing, economically, equity risk premiums, risk premiums in general, rates are probably not going to normalize as much as people would like to see the cycle. youhat environment, how can give a boost to the economy? all the capital is trapped in these large-cap banks. to help not doing this large-cap banks, hopefully they are doing it to help the economy, let the capital go to work. david: if they could do these things, let's put aside the legislation. who would be helped more or relatively less? the example of small committee banks versus large banks but also when you mention things
like hedge funds and private equity and goldman sachs. christine: yes, it does look like some of these proposals are very much the types of things goldman sachs would be in favor of. , james gorman, the ceo spoke about regulatory which lists which included things like making the stress test every two years instead of one year that is in this proposal. that are several things change on the liquidity that the have, therequired to supplementary leverage, which really only applies to the top banks. those things have changed so there is, in here, quite a lot for the biggest banks. and less important for the small banks. although they will be helped. david: bloomberg's christine, thanks for being here. wilson of morgan stanley will be here next. next, an interview with rand paul at head of attorney general jeff sessions interview on the capital. live from new york and
jonathan: eight minutes away from the open in new york city, let's get you up to speed on market action. futures are firmer, up 2/10 of 1% on the dow, positive one quarter of 1% on the s&p 500. in the cross asset situation, yields are higher by a single point. the two-day meeting commences today, the expectation is we will get a rate hike. the expectation is more detail on that balance sheet unwind at $4.5 trillion question, remaining unquestioned. here with us ahead of the open is mike wilson of morgan stanley. when you look ahead to a fed decision, it really meant something. it doesn't feel like it does anymore. is it irrelevant to you? mr. wilson: the fed is very
important. it is the most important central bank in the world but in the question of easing in this cycle, the fed's first followed by the bank of japan and others, the bank of england was in there as well. the ecb holds the key to global rates, meaning the spread between german funds and treasuries. it is widening. until the ecb decides to aggressively exit, it will be hard for treasury yields to move in a meaningful way. the wildcard this summer is more about what the ecb decides to do with their tapering schedule. they have signaled they will begin tapering in january. they might accelerate that because the european economy is on the upside and you have a very important german election in the fall. jonathan: if you hold the keys to global rates you hold the keys to global risk. if you are invested in the u.s. equity market, you have to pay more attention? mr. wilson: we talked about this early in the show, member where upt year election rates went
80 basis points so they have this rotation away from interest rate sensitive areas. micro stocks. then -- like gross stocks. the rates went up quickly. that will cause risks for inductors -- investors. it does hold the key. david: there is some pressure being taken off the ecb because the spread is coming down. there was a time where there was more risk, whether it was italy or greece or spain, but does that actually give draghi more? jonathan: there is not an unlimited amount of bonds out there. they are buying a lot of bonds. they are working in the same constraints as the bank of japan a year ago where you can't buy them so much. they want to normalize. david: when do they run out of options? mr. wilson: under different rules. it depends on what will happen to the economy and the need for
borrowing. it is chicken or egg. havehat is why they already started talking about next year. they will have to start going back. spreads did widen in the periphery in italy but it is important that that is now narrowing again. people felt more comfortable with the political situation in europe. it was stabilizing. there were good events in the last week. youthan: i am going to ask the question then. in 2013 the federal reserve, every time it upset that kind of balance in the market, it backed away. do you see and ecb that has the same function? mr. wilson: in 2013, the fed signal tapering, big rate hikes, the big rate rise on the backend and we had a sharp low equities and the risk markets. two things i would say are different now. they have to be very careful about how they talk about tapering and they have to
be measured. in 2013 it was not as synchronous of a recovery. gm was in bad shape. they had borrowed too much money from other parts of the world, their current account was in bad shape so they have gone through a pretty bad recession and the currency adjusted but now here we are in a situation where the global recovery is much stronger. it will take more to upset the apple cart. jonathan: great to have you with us. as we can you down to the cache open, we are up 2/10 on 7 percent..2 the cash open just around the corner. from new york to our viewers worldwide, you are watching bloomberg. ♪ [ mooing sound ] [ laughing ]
it's drivng me crazy come on. [ spitting from tongue ] time for my secret weapon. sports, movies, tv, ah... show me music to distract a minion. [ voice remote click ] [ pharrell starts to play ] ahh. i'm pretty smart- ahhh! [ mooing sounds ] [ minions laughing ] show me unicorns. [ voice remote click ] together: ahhh... that works too. find your awesome with the xfinity x1 voice remote. see despicable me 3 in cinemas in june. jonathan: new york city to our viewers globally, let's get you up to speed on market action. we are 21 seconds away. up 43 points on the dow. up 26 points on the s&p 500. the nasdaq positive 25 points.
we stabilize as we head towards the cash open. treasuries on offer, yields high by a single basis point. high coming into the market today. ahead of the rate hikes in the federal reserve tomorrow, 2.22 is your yield on the u.s. 10 year. 97.07 on the dxy. let's get to abigail doolittle on the cash open. >> we have a relief rally on our hands for major averages. we have the dow and the s&p 500 both higher but look at the nasdaq. , downe the tech selloff more than 2% between friday and monday. the worst two days on the nasdaq since september of last year but now up one half of 1%. , it is exhibiting interesting to see whether we moving to the close and it could be a reversal pattern at play here so it would be interesting to watch. behind that, all of the big tech
names or many of the big tech names, the ones that sold off very hard during the selloff, apple and amazon and advanced micro devices asked apple of 1.3%. shawn harris at longbow research was surprised. he viewed it as noise but it is interesting that he is also saying the q3 could be dealing with a nice big today after being the target of a well-known short seller. others say it is a great company but the stocks are bent high and amazon microdevices were down two in general. but it appears investors may be afraid to lose out on possible returns. over the past 12 months, they are up between 175 and 220%. you think that could be a strength for europe but that is not the case. chart, thee-year stoxx 600 relative to the s&p 500 so we see between 2012 and the middle of 2016 the u.s. really outperforms europe.
, the stoxxhe brexit 600 started to outperform in a very choppy manner the u.s. d-may, despite the fact that europe is the hot trade, we see the stoxx 600 has underperformed and that trench may suggest it may continue, that the underperformance in europe could continue as we move in the near term. jonathan: great to have you with us. 10 minutes into the session, we are up about 2/10 on the dow. 3/10 on the s&p 500. the closing records for those individual respective indexes. the story in europe is by europe. in the medium to long term, the hope that you get reforms from european politicians, early today, matt miller spoke to the german finance minister in an exclusive interview. a goodink we have more thany now to get
the european development. some days ago, a good friend of we are ready to make any reform but only in line with law. jonathan: still with us is mike wilson of-- mike morgan stanley and gina martin adams of bloomberg intelligence. when i first moved over here, somebody said you are going to witness one thing, a very binary view of u.s. based investors on europe. either super bullish or get out of there quickly. kind of nothing in between. we are out on the west side, super bullish seems to be the field. the you share it? mr. wilson: we had that view last year where people were nervous after brexit. we felt like things have gotten way too cheap in europe relative to the u.s. so we wrote that wave.
we wrote it through the italian referendum and the french elections and now we actually prefer the u.s. back to europe. iwas in europe last week and have not in the last several years seen this kind of unbridled optimism about europe and, you got to own it, and your u.s. market is now passe. it doesn't mean it has to go down. but i don't think this is the point to make a big regional that. we areregional bet very broad across multiple sectors. the regional call is not as important as it has been. jonathan: gina, what is in the price? >> i think that a lot of this year's performance in particular has been related to central-bank policies and yield. what happens this year in europe that was different from expected is the ecb started suggesting they will roll back balance sheet inflation.
that resulted in a large divergence between the direction of u.s. yields and european yields which favored european financials over euro financials. the question is, can we continue to see that move on because if it doesn't it really disrupts the trade that has been in place all year. frankly, the esb spoil the soup on that last week by suggesting that maybe we don't need to be quite so hawkish. maybe we can take it slow. but can the fed perpetuate that trade? that is your big question. david: when you talk about valuations of companies, one of the measures is the price of stocks versus the earnings of the company. in the past, the difference has been quite marked between europe and the u.s. does that equalize at this point or is it a good measure? mr. wilson: there is still a spread. there is always a spread between the u.s. and europe. the u.s. has faster growing companies. we have tech and health care companies that europe doesn't. it is a mix issue more than anything else.
not that european companies are inferior operators but that they are in slower growing sectors. that is why it is still there and it should be. there is an argument to be made that the banks, those ratings have not normalized at all. europe is really a call on banks. youou want to own europe really need to want to own the european banks. we actually do like the european banks that let's not miss the analysis. stable companies in europe are not cheaper than staples companies in the u.s. tech companies are not cheaper than tech companies in the u.s. it is the banks that are arguably cheaper. jonathan: we had a bank last week, did you take comfort from the fact that it didn't spark a page? we saw on other spanish bank aggressively lower but do you take some comfort that it doesn't become a blanket risk story in europe following an event like that? >> it took out some investors and the market took it well because the senior part of the
capital structure was protected. i think that was very encouraging. europe is on their way. feeling the way the u.s. did five or six years ago. they are taking the same type of steps and this time it is working so they can continue to push. i think central bankers are learning on the job. this has been a unique cycle. they pull back when things got unstable because of some action they took and that is encouraging. the fed has come up with three mandates. it used to be full employment. then you have inflation and now you have the petitions. but that is a good thing because they are paying attention to their actions not having in a vacuum. jonathan: imagine if mark wilson was my box and i was running a $4 trillion hedge fund and i am running on the job, give me some time. you might have different assets for me. look at the markets and the bank. as mike said there is an optimistic side of it. on the other side of a trade, there is a story. on the 17, financial crisis was
a while ago and the debt crisis was a while ago and the banks are still failing? gina: it is kind of phenomenal, but to the credit of the banking system in europe it has been absorbed to its relative ease. tell that that is a the banking system is a different banking system than it was several years ago. that the regulatory infrastructure is set up significantly better. the safety net is significantly better. friendly, the banks are keeping europe. my point is the banks are extremely cheap relative to banks especially here in the united states. so there is a lot when you talk about what is in the price. i think this persistent malaise is largely on the price in europe. jonathan: is this still a political premium in the price that remains permanently in there, a risk that doesn't go anywhere? >> i think in the last year between brexit and the referendums and the french elections, and the u.k. taking a aep back, we are now doing
soft brexit as opposed to a hard brexit, italy may be backing off the politicalnk risk premium is compressing now and it is probably correct but i don't know if you can take a whole lot more out. there is no political union in europe. at is where we need to get to and that will take one more cycle, one more recession. either they get the political union or they don't but there is no rush. the markets are no longer putting pressure on policymakers to have to do something now. to me, the best thing that happened in europe was brexit. it got them to say, we don't want to go down that path. david: mark wilson of morgan stanley, great to have you on the program. jonathan: an gina martin adams of bloomberg intelligence. nine and a half minutes into the session, this is what it is shaping up like. up i want quarter of 1% on the dow, positive one third on the s&p 500. the tech rally that has dominated the last two sessions,
>> this is bloomberg daybreak. i am emma chandra in the hewlett packer enterprise greenroom. coming up, live coverage of jeff sessions testimony on capitol hill at 2:00 p.m. eastern. david: this is bloomberg. i am david westin. housing contributes as much as 18% of the united states gdp and in the first quarter of this year it was a major contributor to the softness in the numbers as housing starts well below what has been expected.
a sector of -- secretary of housing and urban development ben carson is the man in charge of running the agency last year, with a staff of more than 8000 people. secretary carson joins us now. welcome to the program. >> talk to us about homeownership, which is really in your purview. it is now 63.5%. >> 62.6%. david: what is the ideal number? presumably it is not a hundred you look sec. carson: at some of the things that facilitate homeownership like as, i woulderves say, and accordion. when the economy is good and credit is easy you don't need .early as much fha assistance when it is tough, you need more and that is why you see the cycle going like that, like an accordion, expanding because that is what keeps things at a steady pace.
but homeownership is so vital because it is the principal message of wealth accumulation for families. that's the crystal method of wealth can relation for families. the average net worth of a homeowner is 200000 and the average net worth of a renter is 5000. a tremendous difference there but not everybody is ready to be a homeowner. it is a process. that, at leastaw generally, but we saw that in the early 2000, in 2005 where we got in a lot of trouble by letting people take on mortgage obligations they couldn't service. so is there any way to get homeownership up without incurring increased risk? sec. carson: i think we have to be very wise and look at things like, medium's. condominiums look at ways that we can bet condominiums. that is the first step into the homeowner market.
look at those with respect to millennial's. look at ways to perhaps combine the millennial's educational obligations with homeownership, ruling that -- rolling that all into a single bundle with a low interest rate. these are the things that make a also, necessity is the mother of invention. new mechanisms for homes. like a capsule that contains all of the innards of the home, the electrical, plumbing, heating, cooling, can be put on a flatbed truck, transported to a place where you have infrastructure embedded and you build the module around it for less than $100,000. these things are coming. david: something that may be critical here is millennial's education obligations, to repay loans that they took out. we had the president of the new york fed say that it is one of the biggest impediments to millennial's buying houses,
having to pay off student loans. are you working with the treasurer or with others to figure out the ways to allow them to afford a home despite the overwhelming student loans? sec. carson: it is a major focus. for treasury, for hud, for all of us. one of the things that is happening that is very different right now is that the silos are being broken down. it is very easy now to work with all the various different departments and we are trying to hone in on what is essential and get rid of the duplicative things. jonathan: in the u.k. they introduced the how to buy program, a government incentivize program to help first-time buyers. is that something you would consider? sec. carson: we will consider everything, anything that makes sense. jonathan: but would you consider a government incentivize man sized program? -- demand sized program?
sec. carson: i want the government to be involved primarily as a backstop and an insurer, not so much as one who pulls all the strings. david: you mentioned fha a couple of times. in the prior it ministration, they were cutting fha mortgage fees before you were in office. they were reimposed. you took them back up? mortgage takea her to cover faults down the road. in order to get homeownership up , are you willing to reconsider cutting those again? taking them back down? sec. carson: we are open-minded people. i think probably doing something like that on your way out is maybe not the way that i would do things. i would want to sit down and consider everything, recognize that we have to have a certain capital reserve by law for the m.i.t.. . the m.i.p
a few years ago money had to be taken out of the treasury. you don't want that. you have to be responsible. we will look at things in a responsible way, make the m.i.p. as low as we can possibly make it consistent with our obligations. david: i want to talk about the cabinet meeting where the the presidentn and each cabin member went around and said something about president trump that was supportive. you have been on the board for what, 17 or 18 years? you never had an instance where the board got together and told the ceo that they were doing a great job. to us what was going on and what the american people should make of that. sec. carson: the president simply said at the beginning of the meeting, "can we just go around the room, everybody, let us know who you are?" it was all spontaneous. david: so there was no instruction from the chief of staff to say, please say
something good. sec. carson: absolutely not. it was completely spontaneous. david: did it feel genuine to you? sec. carson: it did, particularly when people talked about the ways that apartments are working together. that is true. it is very easy to pick up the phone, to call steve mnuchin and say "let's get together for lunch and talk about housing and finance. it works. it is going to be one of the things that helps us. businessit more like a , we have hired a coo. one of the things i learned on the board of kellogg and cosco is you've got to have an operator. you can sit around the board table and talk forever but if you do not have an operator you will not get anything done. we are looking for a cfo right now. we have to find an excellent cfo, cio, so you can take the big picture look at all the material weaknesses and straighten them out. david: thank you so much for being here.
david: this is bloomberg. we will cross over now to capitol hill where our chief washington correspondent kevin cirilli has a very special guest. kevin? >> we are here with senator rand paul. i want to ask you about a vote that is happening today about saudi arabia and the arms deal that the president pitched several weeks ago when he was in riyadh. why are you blocking it and why are democrats supporting you? sen. paul: senator murphy and i have said for a long time the saudi's are funding terrorism. hillary clinton said in one of hurt you males john podesta, one of the ones that was leaked, "we need to put pressure on the
saudi's because they are supplying weapons and help to isis. why would we give weapons to a country funding isis?" second reason, they are bombing the country of yemen to the south of us. 70 million people in yemen are on the verge of starvation. i don't want any part of that and if i can prevent famine in yemen i will do it. kevin: which republicans are going to come out in favor of this? sen. paul: we've had three or four in the past. i know in the last bill, mike hill and dean heller were with me. kevin: with the opposition the president will veto this, what message are you hoping to send to president trump with this? sen. paul: we need to think through what we are doing. there is evidence the saudi's were involved in 9/11. there is much evidence they were involved in funding isis and there was evidence they have been indiscriminately bombing civilians in yemen. we need to add that up and we should be saying to the saudi's,
if you want to do business with us, you have got to behave. we want behavioral changes from the saudi's before they get anything. the iranians react to the saudi's. if we give them weapons, the iranians a lot more. kevin: the saudi's will cut the grammatic ties with qatar in recent weeks. what do you make of that? what do you make of the white house's response to that? sen. paul: i think both qatar and saudi arabia have been funding terrorists so it is a bit of the pot calling the kettle black but i think we have to see a change in behavior. if there is one country that has funded hatred of the judeo-christian ethic and tradition, it is saudi arabia. around the world, in our country and indonesia and saudi arabia, they are the ones funding hatred and they have been doing it not just recently but for decades. kevin: i am hearing that the president could ease back potential executive orders on cuba under the obama
administration. is that the right call? sen. paul: trade is the best way to avoid war. when i was a kid i thought we shouldn't trade with the red chinese or the communist and that is what conservatives thought and many of us changed our mind. it is not always perfect but trading with china makes us less likely to go to war with china because we are interconnected. disabled over cuba. that's the same will go for cuba. cubans have seen an update in their thinning of living. -- their standard of living. kevin: when you have the castro regime as a dictatorship, things have not improved. a lot of issues you raised about saudi arabia. sen. paul: so do we fix them through war or through engagement? engagement in trade is a better way to do it. if you look around the world, how many countries have either dictatorships or lack of freedom of speech, lack of freedom of property and security of property, probably 60 countries. we trade with most of them. i think our best way is through example and trade and that is
the best way to try to change the game. kevin: later this afternoon, jeff sessions will testify on the hill. what are you going to be listening for? sen. paul: i think that really we need to figure out. there are two investigations here. did the russians try to manipulate our election? the answer is yes to that, so we cybersecurity.e that is one separate question. it is a complete we separate question that did anybody in the trump campaign have untoward or unseemly or illegal contact with the russians. .he answer so far is no this has been going on for a while and the answer from comey last week is that the president is not under investigation and i think that is what the president has been missive about. he wants the public to know he is not under investigation. kevin: there was a deal met last night, bipartisan deal. is that adequate enough? sen. paul: i am really not in favor of new sanctions on russia now or new sanctions on russia ever.
everything we say that russia has done wrong, so this china. china uses cyber espionage, sign china steals electoral property, they suppressed speech, they have human rights violations. kevin: how do we protect our political institutions? sen. paul: sanctions don't protect us, they are just tweaking their nose. world that cane spy spies. anybody who can middle in elections does metal. including the west and the east and anyone with the ability. ofwere listening to all hillary's phone calls for one month. everybody is spying on everybody so if you don't want them to listen to your conversation you have to try to protect yourself. in our country we should say the government should have -- should not have so much power to spy on american citizens. kevin: the german finance minister told bloomberg earlier
today that essentially, their was, with regards to the president's position on nato you have to read between the lines. do you think the president policy or the president's rhetoric, specifically on nato are one in the same or two different things? sen. paul: i agree with him that nato allies to pay their fair share. we do everything for the world, we paid for everything at the u.n. and everything in nato and when it comes to supplying troops, we are the troops. we are the world's policeman and time europe shoulder the financial burden and of some of the has to go to ukraine europeans ought to go there. i am all for people paying their fair share and i think trump is right on that. kevin: thank is so much for your time. back to you in the studio. jonathan: kevin cirilli down in d.c. we are 28 minutes into the session. let's get you up to speed on the market action in new york city. on ame into the session two-day selloff in the nasdaq.
the tech stock route does stabilize. , theeversal we have seen s&p 500 up by about one quarter of 1%, the dow positive 2/10 of 1% so far. potentially, near closing records. the nasdaq up by 6/10 of 1%, positive 37 points. here is the situation elsewhere. treasuries unchanged. 2.22 is your yield on the 10 year ahead of this 30 year supply. ae fed meeting closing with rate hike on the table. at 1.2euro-dollar, cable 722. that wraps a bloomberg daybreak. our coverage continues. bloomberg market starts now. 10:00 a.m. eastern time in new york. i am vonnie quinn should mark: --
vonnie: i am vonnie quinn. mark: and i am mark barton. welcome to "numbered markets." ♪ vonnie: here are the top stories we are covering around the world. jeff session takes his turn in the hot seat today. meanwhile, a bloomberg exclusive finds that russian hacking was more widespread than keep -- than previously recorded. pressure on theresa may as she scrambles to form a government. with european politics in -- with british politics in flux, the european union is starting to crease -- to increase bandwidth brexit negotiations drawing near. the fed is expected to make a decision about raising rates tomorrow. is it a foregone conclusion? i think the answer is public