30 minutes into the trading day in the united states. from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. welcome to "bloomberg markets." vonnie: we've got adp employment changes this morning, which disappointed. the ism services index coming in stronger-than-expected, a very strong 56.9. that is a nice beat, and well above 55. let's see if it is impacting markets. the s&p 500 had already been higher today, and above 2800. now climbing just a little bit more, at 2816. campbell soup had a very nice beat, one of the best performers in the s&p 500, up a whopping 10%. some of the cloud companies beating expectations. salesforce is indicative of the performance of those companies, up 4.5% today.

i do want to point to the dollar index. we were well below 97, just barely above 96 earlier on. we did claim or backup to the 97 upk -- we did clamor back to the 97 mark. guy: italy is lower. there's the ftse in milan. this is the european commission starts rolling on a deficit procedure against rome. markets aren't taking that very well. it is the banks that are taking the biggest hit. unicredit down by 3.6%. vonnie: sticking with the markets and the impact of mounting global trade tensions, david point by joy.

guest: i think this is pretty clearly a reaction to but the failure to -- what the fed chairman said the other day. we will probably get a little bit of a bounce inditex names. they are probable -- bounce in the tech names. they are probably a little oversold. away, and ing way think the rebound we have seen in those shares is maybe reflective of reality. but i think this is basically reaction to the fed saying we will put a little floor under this economy while we wait and see what happens. vonnie: did the fed really say that, though? had the fed saying we are not sure if these tariffs are going to have an impact. we would have to see a lot more to see much more of an economic impact.

then you had powell yesterday seemingly cheering the market. it is hard to know what exactly is moving the market in terms of what the fed numbers are saying. david: it is interesting. majorally have two components to the economy tracking on different paths. on the one hand, you have manufacturing and industries exposed to the. trade tensions. they are under pressure -- exposed to the trade tensions. they are under pressure. on the other hand, you have a consumer sector that is quite healthy. consumer sentiment is pretty high, near historical highs. off of their all-time highs, but not by very much. the sentiment picture in the industrial side of the economy is terrible and falling. so the fed has to figure out, ok, what is the bigger concern here? how much do we have to pay attention to the impact of the tariffs on it be industrial side of the economy -- on the

industrial side of the economy? guy: david, good morning. many banks are cutting their rate forecasts, and the market is pricing in cuts from the fed. why are people not cutting their corporate earnings forecasts? david: that is a good question. number one, earnings forecasts in the near-term, the current and next ,uarter, are fairly modest although i think if we start to see a further slow down in some of the economic projections, i think some of those earnings forecasts will follow as well. but we've noted the fact as well as you have that earnings forecasts have hung in there. it is a bit of a puzzling situation, but that can change as well. if we get a second quarter gdp print that has less than a two handle on it, you might start to see that earnings forecast change a bit.

guy: if we get a positive payrolls number on friday, does the equity market go up or down? david: i think it goes up. i think it will reinforce some strength in the consumer side of the economy in the short run. it will probably reinforce some of the optimism you seen in small business, so as a result, to the extent that consumers are 70% of the economy, you would rather have that side of the economy working well. i would think it would be taken as a positive. of course, it will depend on just how robust it is and what some of the internals are. there is still a pocket of sentiment out there that says wage inflation is still moving higher, and the fed needs to be mindful of that. if you are rooting for the fed to cut rates, you don't want to see wages rising too quickly. vonnie: david, always a pleasure. thank you for joining us. rised joy, amerip

financial chief market strategist. let's check in on the first reduce. here's kaylee like -- on the first word news. here's kailey leinz. kailey: president trump read from a prayer that america's world war ii leader franklin roosevelt read. pres. trump: our sons, pride of our nation, this day have set upon a mighty endeavor, a struggle to preserve our and our, our religion, civilization. meanwhile, president trump says there's always a chance of a war with iran. the president made the remarks on a wide-ranging interview in london. thing u.s. can't do, said mr. trump, is let iran have nuclear weapons. senate republicans are pushing

back on president trump and his plans to put tariffs on mexico. lawmakers are threatening to override a veto if necessary. senator kevin cramer of north dakota said senate republicans are tariff weary. the european union has taken the first step to disciplining italy over its debt, setting up a fight in rome and paving the way for an initial pin of the of up to -- initial penalty of up to $1 billion. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. guy: thank you very much indeed. picking up on that last story, coming up next, the european commission taking its first steps towards disciplining italy. we are going to dig into the man who started that process, the eu commissioner for economic affairs. this is bloomberg.

♪

♪ guy: from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is "bloomberg markets." guy: the european commission taking its first steps towards disciplining italy today for running too high a debt level. the move intensifies a mounting dispute between rome and brussels and paves the way for an initial penalty as high as 3.5 billion euros. we are joined now for a first on bloomberg by pierre moscovici,

eu commissioner for economic and financial affairs. he joins us from brussels. good afternoon commissioner. italian debt tenure currently trading above germany's. do you think italy's current ?ebt trajectory is sustainable commissioner moscovici: we want to reduce the italian debt due to the fact that it is not controlling its deficit. that was not the case in 2018. it is not the case in 2019. it should not be the case in 2020. we delivered a report on the basis of an article of the treaty saying that at this stage , and without further data or a procedure for debt could be envisaged.

it is just the first step of a very complicated process. we have not decided. but we launched the process that could lead to it. if there is no correction in the data and the measures that the account in government -- could lead to it if there is no correction in the data and the that the italian government has taken. we are not talking about fines. fines are not made a tour. the stage of sanctions would take months and months. is convince to do the italian authorities that reducing debt is in italy's interest and in the euro zone's interest.

it cannot finance its public policies. each hero you dedicate to helps theublic debt developing economy, education, health, security. basically we want to convince the authorities that they need to do something else and to do things differently. let's not talk about fines now. handlingot my way of stuff. a commono incentivize future, and we want common rules to be obeyed. vonnie: you gave italy a pass at the end of last year, so i guess the idea if you can't continue to give it a pass constantly. if italy adopts a

confrontational stance to the eu, what would you do at that point? at the moment, it doesn't look like italy has much of a choice given that it's government is basically nonfunctioning. i am not in ai: confrontational mood. i think that talking about a confrontation between brussels and rome, between the commission and the italian government, or between mr. salvini and myself makes no sense. if a decision is taken, it has to be taken by the council, by the member states' finance ministers. italy will have to convince not only the commission, but the other member states, that it is doing things the right way. so let's not imagine that kind of confrontation. let's not play this game. this game is lose-lose. it is lose for italy. it is lose for the eu. it is lose for the euro zone.

it is lose for the world economy. let's try to find common ways of addressing this very serious issue of the increasing italian deficit and debt. vonnie: well, what would you recommend, commissioner? the people of italy it rea -- the people of italy elected their politicians, some on the promise of not raising taxes or putting a back tax on goods. therefore, their hands are tied by their constituents. there is no obvious way for italy to reduce its debt right now, or is there? what would you recommend? comm. moscovici: again, i am not commenting on italy's political parties or democratic choices. , -- tlected parties hey've elected parties, some of which i do not agree with, because i am not a populist and

not extreme right, but this is their choice. but this must be made compliant with common rules. my point is not to say whether this or that choice is appropriate. what i'm looking at is the balance, the budget balance. does this lead to a lower deficit? debt?his lead to a lower for the time being, what i see is that the policy until now leads to more deficit and more debt, and to the non-respect of our common rules. let's try to make things compatible. it is hard to say that reducing euro by billions of reduces deficits. guy: commissioner, would you like the financial markets to do your work for you? i appreciate what you said earlier on in this interview that you don't want to push fines towards italy.

nevertheless, a showdown has started and the gap between germany and italian yields is rising. do you expect the financial markets to do your work for you? comm. moscovici: certainly not. presentedng, when i that report, i said it is no use to speculate. i don't want anybody to speculate. i don't want political speculations about a confrontation. that is not the point. and i don't want markets to make their own decisions. i would not want to anchor markets. today there is a fact. our report is based on that. it is based on facts and objective reality. these facts show that for the time being, the deficits are not getting down in italy, and the public debt is increasing whilst it is already very high. it is something like 131%. without correction, it will be at 135% by next year, and this

must not happen. so let's not speculate. let's act, and let's act together. that's what the euro zone is about. we've got common rules. we are a club. everyone respects the rules. everyone goes in the right direction. that is what i urge the italian authorities to do because that is their place at the heart of the euro zone. this is the third largest economy of the euro zone. it is in italy's interest to be at the heart of the euro zone. vonnie: of course, and i'm sure there is a lot of goodwill on the part of the prime minister, on the part of the finance minister, mr. salvini, and so on to stay in the european union. but if italy can just not find those things to put in the 2020 budget that would bring down those levels and satisfy the requirements of europe, what would be the end game, commissioner? comm. moscovici: well, i am never the what if guy. i am moving step-by-step.

i am quite sure that with political will, with a common approach, without any kind of artificial approach, we can find am confident and i that the budget could be with a on thoserformance deficits that are independent of growth. it is possible to do that in italy, a budget which is broadly compliant with the rules. today we see that they are not on this track, and we have delivered this report to say at this stage, the procedure for debt be warranted. warn, wege, we

would like the italian authorities to take the necessary measures and action so that this is avoided. that is where we are, and i think it is absolutely doable with a common political will to live together in the euro zone with common rules that are respected and is limited by all other member states. the financial crisis was now 11 years ago. that were 24 countries were in deficit procedure. spain was the last country to exit, so let's go in that direction. let's work together if possible. guy: commissioner, thank you very much indeed. pierre moscovici joining us from brussels. let's get an update on the financial markets, re-are. markets and, -- where we are.

taylor riggs, over to you. taylor: big tech leading the way, utilities as well. big tech continuing to lead the way after some concerns perhaps that the doj probe won't be as bad as we thought. l at gtvo our termina . i'm curious about valuations here. let's take a look at a forward ratio. we had fallen monday, given the may selloff, below one standard deviation, but the rally of the last few days is pushing us back up. valuations made a longer look supercheap. i finally want to look at some of the big tech names. apple one of the biggest gainers today, recovering after that doj probe won't be as bad as we thought. salesforce also rising, one of the biggest movers after the

bell yesterday, beating current estimates and raising forward guidance. they are up about 3.5%. finally, we are getting some breaking news. laton, the cycling an offerhas proposed for their ipo. it looks like that ipo market is continuing to heat up. pelaton filing a confidential draft registration for that ipo. vonnie: another piece of news 1.5%outcome a boeing up unworried it has been negotiating one of the largest orders ever of wide-body jetliners with chinese airlines, even as tensions between washington and beijing escalate. at least 100 jets in that deal. boeing in talks with chinese airlines for a 100 jet deal. this is bloomberg. ♪

♪ guy: from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is "bloomberg markets." shares of gamestop are plunging. the videogame retailer reported first-quarter revenues that missed estimates. it also halted its dividend, the latest red flag for a stock that was already down 38% this year. gamestop's retail model is at odds with the gaming industry's digital focus. france says it will back the proposed merger of renault and fiat chrysler. the finance minister says there are several conditions. fiat must offer the government guarantees on jobs, a board seat, and local headquarters. renault's partner nissan isn't on board. renault directors meet again today to consider the deal.

gettech companies could subpoenas in congressional antitrust investigations, according to the lawmaker leading the inquiry. he says the subcommittee will begin by focusing on the impact of digital platforms on use organizations. he spoke to -- on youth organizations. he spoke to bloomberg tv. >> we need to understand the perils and some of the dangers here. it is in the long-term interest of the companies and shareholders to address this issue. vonnie: that is your latest bloomberg business flash. markets higher once again today. right now the s&p 500 is up 2/10 of 1%. this is bloomberg. ♪

♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is "bloomberg markets." vonnie: crude oil futures

trading at $52.68 a barrel as we for the weekries ending may 31. the data is suggesting we got a build of 6.7 7 million barrels, so once again, a surprise build of crude oil inventories. 6.77 million barrels. a muche inventories was bigger build than forecast as well at 3.2 million barrels. crude oil inventories from the doe surprising energy markets. we are getting a bigger drop now than earlier in the session. downelow $52 a barrel, almost 3% at this point. let's check on the first word news now with kailey leinz. kailey: u.s. senator's are set

to rebuke president trump over his move to sell weapons to saudi arabia and the united arab emirates. a group of bipartisan senators will introduce 22 resolutions of disapproval. the of been estrogen has overridden congressional holds on more than eight -- the administration has overridden congressional holds on more than $8 billion of weapons deals. says drought stricken somalia needs about $8 million. parts of ethiopia and kenya have also been affected. army rangers re-created one of the most dramatic moments of the normandy invasion, scaling this cliff. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

i'm kailey leinz. this is bloomberg. vonnie: thank you. it is day two of bloomberg invest. earlier, bloomberg reporter ed hammond sat down with the founder and ceo of pgt partners. he gave his perspective on the current deal environment. guest: i think the level of diligence, scrutiny, debate about m&a in board rooms is far greater today than it has ever been. some of that is the function of the shareholder base. shareholders today are much more vocal. they need to be on side. they are not just passive investors. we seen in many instances how investors can either accelerate a transaction or frustrate a transaction. i think boards of directors are much better in terms of

governing and oversight today than they were a decade or two ago. so the process is much better. be mistakes.ill there will still be transactions that go awry. but i think the constant push and pull is do we have the right business, the right model, the right team? can we do it organically? organically? in as scale becomes more important, you naturally move your field of vision to larger transactions. when you look at larger transactions, you're dealing with far more complexity about how you get those over the goal line because the number of hurdles you need to jump over just grow exponentially. that is why you haven't seen him in day -- why you haven't seen m&a move meaningfully in terms of volumes, but i think a discussion about whether a

company has the right strategic set, that discussion, that effort, that energy that is put into it is dramatically greater today than it has ever been. ed: what is the largest one you've worked on recently that has not made it over the line? paul: the one we have worked on that is in the hands of the regulators is we represented in thee and sprint merger, and that is still working its way through the system. ed: do you think it is going to get done? you've done a lot of these deals. paul: we've done a lot of these deals, but we are a client focused firm, and it is not for us to be talking about. ed: when you are advising on a deal of that nature, an industry that is already becoming smaller or you have national champion issues, how do you advise the companies going in? it does seem like we are in an environment where you have a lot givenrecedented action

regulatory or sovereign issues. how do you account for that going in? paul: that is a conversation we could spend an hour or two discussing at least. i will make the following observation. increasingly, companies need to look at larger and larger targets. for complexity in a successful completion, as the targets get larger and larger, that success rate goes down. what we have seen the last couple of years is investors have stood behind management teams for trying, even if they don't succeed. it is not there to meet that those conditions will remain forever. as an example, there were a number of companies who aggressively pursued inversions because they thought that was the right thing for their shareholder base, further companies, and they weren't able

to get over the goal line. yet, they were applauded by their shareholders for at least trying. there have been some unsolicited bids in the marketplace where the attempted acquirer was unsuccessful, and the shareholders have sided with them. that is not something that is always present in the marketplace. i think what that has done is enabled some boards and ceos to step out a little bit on the risk spectrum and perhaps take a more aggressive approach knowing that the probability of success, while meaningfully less, is one that has the support of their base. but if you go back and look at what the psychology in the market was in 2011, 2012, 2013, that risk-taking was not rewarded. ed: that is interesting because if you have companies going out veryursuing large-cap m&a,

costly, obviously, potentially ,reating long-term illiquidity that seems not a great decision. paul: it is not just that we are trying. it is that you have conviction that it is the right transaction, and no one can guarantee and deliver to you on a silver platter. in an uncertain world do you aly pursue things that have -- a 100%completion chance of completion. success is never going to be 100%. we are living in a world where probability of success is declining because you have so many potential intervenors. you have department of justice, fcc. you have so many different parties that get a say. you have activist investors,

shareholder votes and the like. my only point is that companies who have a well thought out plan where the risks suggest it is worth taking are not the monday morning quarterback today, but that is a market sentiment, and i am not sure that remains forever. but i think as long as people are comfortable that shareholders will embrace their good faith efforts to do the right thing for the company, you will see companies move out a little bit on the risk spectrum. when that environment and zeitgeist changes, you will start to see people pulling their horns a little bit. taubman, pjt partners ceo and founder, talking to ed hammond. approve theet to new best interest rules -- the fcc is set to approve the new best interest rules for brokers.

we will talk about the impact. this is bloomberg. ♪

guy: from london, i'm guy johnson. vonnie: from new york, on vonnie quinn. this is "bloomberg markets." c is expected to adopt new rules for brokers today that require them to act in consumers' best interest. joining us is the ceo of sifma kenneth bentsen. curious as to why this isn't the

case already. kenneth: this is something the industry has wanted the fcc to act on. you may recall that congress in the dodd frank act authorized them to do this back in 2010. it is something we had hoped had been done. frankly, most in the industry already operate with a best interest standard. brokersary regulator of already imposes that most claims brought are brought under a fiduciary claim. so this, in many respects, is updating where we are, but it is important to get a room put in place. we are very optimistic on what they are going to do here to really raise the standard. based upon what they propose, this is going to be a very tough standard that will ensure a big compliance for firms. vonnie: will broker-dealers need to make substantial changes? what will the cost of those changes be? kenneth: they certainly will

need to make changes. most of our members believe they do operate in their clients' best interest, and most of the industry provides both sets of services. the proposal that the sec put forward, and we will have to see what the final rule is today if it is approved, will be very substantial, very material. even though it will be principles-based, the obligation be quitee broker will mitigateal, having to and eliminate certain conflicts of interest. keep in mind, due to the now defunct department of labor rule, this will apply to all retail brokerage accounts, not just qualified retirement accounts. we expect it to be a large compliance list for the industry. guy: what was wrong with the barack obama rule?

what was wrong with the fiduciary rule. you talk about this being a high standard, but the fact that it is different to that fiduciary rule. why was that so bad? kenneth: there were a number of things with the department of labor rules that were problematic. first of all, it only applied to a certain number of accounts, not the broad retail brokerage accounts, which is what congress intended when it adopted the dodd frank act and authorize the securities exchange commission, not the deferment of labor, to undertake this effort. second of all, the deferment of labor was overly prescriptive in its approach -- the department of labor was overly prescriptive in its approach, requiring firms to pull back and take back a choice of product from clients that we didn't believe was in clients' best interest, and that the court saw as well. third, it added a private right of action that only congress can impose a private right of

action, not a regulatory agency. we thought this was inappropriate because there already is a private right of action in terms of how a client can redress claims against brokers. this is the job of the securities exchange commission. they are doing this job. it implies against all retail accounts, not just iras. it is aprons will-based approach, but importantly very clear duties and obligations, including much of the same language that was in the apartment of labor rule. guy: do you think it is going to get past house democrats? do you think it is going to get past state regulators, even if it is passed today? kenneth: i hope that it does. based upon our interpretation of what was proposed, this is a very substantial material rule that raises the bar for brokers, and by the way, is also going to have implications for

invest -- for investment advisors. i think people need to look at the words on the page. from a regulated entity's standpoint, those words matter greatly. we think when people read this rule as we read the original proposal, this will be quite substantial. one key point i want to make here is a lot of people have said this only requires you to disclose conflicts. our interpretation of the proposal is quite the contrary. it also required, and several instances, to mitigate or eliminate those conflicts. even the advisers act doesn't always provide for that. in some cases, this was the higher standard than the advisers act. i think people need to look at willords on the page as we come about our interpretation is this is quite material, quite expansive, very much raises the bar on the standard of conduct, under aindustry will be

quite dramatically increased obligation inputting their clients' interests ahead of theirs. vonnie: thank you for joining us on that new rule, kenneth bentsen, sifma ceo. guy: time now for our muni moment. that means we have to talk to taylor riggs. taylor: joining me is ted hammond, investor over at moody's. released your annual report. debt issuance is flat. what does that say about why states are cautious to take on new debt? right, debt was flat last year. i hate to disappoint those who were looking for this, but in fact, it is sort of an interesting story. we have seen perhaps one of the longest period of restraineds

debt issuance in history, and that has meant that since 2011, the average increase or annual change in debt has just been 6/10 of 1%. it has really flatlined. i think there a couple of factors at work. one is states, when they turned to their major transportation introduction or -- transportation infrastructure, are increasingly using cash funds instead of bonds. states have perhaps been a little bit cautious and pulled back from aggressive plans in the wake of the last recession. taylor: the little issuance we have seen has been for infrastructure, which arguably is a good thing. why aren't whizzy see anymore, though? more states -- why aren't we seeing more, though? ted: i think with washington taking a restrained approach to funding these projects, they have to bear more of the burden. we have seen many states raise

gasoline taxes for that very reason. we have seen most recently the state of illinois, which i happen to cover, double this gasoline tax as part of a $45 billion a year multi capital plan. i think we may see the tide start to turn in coming years, although you are right, it is correct that a lot of infrastructure project have been ignored. taylor: what states have the highest debt level per capita? who are the biggest culprits you are looking at? are the top two states usual suspects for the past decade or more, connecticut and massachusetts, and not necessarily in that order. but in this year's report, 6800 debt perd capita and massachusetts had 6100. that is about 100 times the median. bear in mind, these are also the

wealthiest among the wealthiest in the nation, so they can certainly afford those debt burdens. taylor: wonderful. the always anticipated annual debt median report from moody's, and that is ted hampton, their senior investment officer. guy: thank you very much. up next, futures and focus. this is bloomberg. ♪

♪ guy: from london, and guy johnson. vonnie: in new york, i'm vonnie quinn. this is "bloomberg markets." guy: time for futures in focus. let's go to phil strobel at the cme and chicago. volatility. recent the treasury market has certainly benefited from that, but gold has, too. do you see it going higher from

here? phil: definitely. you've got to look at the inverted yield curve when you are trading gold. the three-month treasury is at 2.33%. the 10 year treasury is at 2.09%. people are stocking their money away really fast, looking for safety. expectations for an interest rate cut are increasing. onve already seen the miss adp. the housing market is slumping at well. if the dollar continues to , if that breaks from here, we should see gold prices continue to propel higher. guy: let's turn to what is happening in the agricultural complex. the corn planting season is coming to an end, but as we all know, the recent flooding is having a massive impact. how much of this is already in the price for corn? are we going to see it rippling

out into other markets, like soy and sugar? phil: if you look at corn, none of those farmers got out and planted during that flooding. we should see about six to 10 million acres come off on the planting. you want to monitor that report that comes out on mondays. that will give you that indication. corn futures could potentially push up if it gets really tight here by year and. where that acreage is going to shift, about 2 million to 4 million should come back in. those guys are hedging from here. guy: always great to talk to you. thanks very much for joining us. ble of r.j. jail futures joining us out of the cme. r.jo futures joining us

out of the cme. vonnie: emma chandra is joining us now with the stock of the hour. the woodford equity income fund has not been well. we see a lot of investors pulling money out of that fund. it has reached such a level that redemptions have now been halted. the collateral damage of that has been a big backer of woodford. its stake has been falling from some $3.4 billion back in 2016 to $1.4 billion at the end of last year, still about 30% of the fund. that number seems to have convinced investors that they will continue to do poorly, given what is happening at woodford. guy: it is a pretty big come down. to a certain extent, the link is pretty clear, but it's been an impressive performance, hasn't he? -- hasn't it? emma: if you look at the

performance of the last 10 years compared to the ftse 100, there's just no comparison. in a way, you really can't compare them. when you take the likes of charles schwab, the outperformance of hargreaves lansdown is pretty severe. what is interesting is that hargreaves lansdown has been historically in favor of active management rather than passive management. that has worked very well until it hasn't. vonnie: emma chandra with our stock of the hour, thank you. stocks in the u.s. paring some of their gains. now the european closes next. -- the european close is next. this is bloomberg. ♪

♪ guy: 30 minutes left in the

european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: this is the picture we find ourselves with. equity markets just positive, but near the bottom of the session. ib is trading lower today because it's banks are trading lower today. unicredit down by 2.99%. the european commission has started the ball rolling when it comes to the deficit and debt procedure against italy. going to be interesting to see how rome reacts on that one. vonnie: pierre moscovici earlier very interesting on that one, the european commissioner who started that. s&p still above the crucial 2800 mark