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: equities down again, down by about half of 1% in europe. bsf under pressure, deutsche bank still under pressure. deutsche down by 2.9%. the pound down by 4/10 of 1%. disappointing retail data today. tomorrow we get gdp. the market is increasingly pressing and cuts from the bank of england. vonnie: here in the u.s., we are off our lows, but still down for the moment. the s&p 500 down 1/10 of 1%. kidney companies feeling the pain today, down almost 8% for avida, after president trump said he would overhaul that whole market. a downgrade for marriott and , among companies in that

index. the 10 year yield bouncing around a little bit, still at 2.05%, little higher than the last few days. guy: fed chair jerome powell before up to testify congress tomorrow as the white house keeps up pressure on the central bank to cut rates. we are joined by pimco portfolio manager and sovereign credit analyst. good afternoon. would you buy or sell the u.s. ten-year into the powell testimony? what does he have to do to move the needle? guest: we think powell will roughly compare market -- roughly confirm market pricing. the fed has sort of painted itself into a corner and shifted in a dovish direction, so if they do not cut, the market will be disappointed, financial conditions will tighten. the macro data is not really warranting a cut come about the same time, manufacturing is very weak in the fed knows that a

hawkish mistake is much harder to reverse than a dovish mistake. so for risk management insurance region -- for risk management assurance reasons, we believe they will cut. lookede payroll number pretty solid on friday. generally the united states looks ok, so presumably they are cutting for the trade story. how do they communicate that without completely spooking the market or putting it to sleep? nicola: i think they've already communicated that this is an insurance cut, a preemptive cut to avoid risk materializing. you are right, manufacturing is the weak spot of the economy. u.s. gdp likely grew more than 2.5% in the first half of the year. labor market is solid. inflation is below 2%, but not falling. it is not really macro data that warrants a cut, but even though many fracturing is less than 10% even though manufacturing is

less than 10% of the economy -- even though manufacturing is less than 10% of the economy, it is falling, so the cut is really insurance. vonnie: how do you see they transition mechanism working if we do get an insurance cut? would we get a cut? nicola: markets have rallied a rock. risk assets -- have rallied a lot. risk assets have rallied. i think at this point if the fed stability ind be the financial markets. point, don't cut at this unless the communication is very good, it might actually be triggering some more unstable market of elements. vonnie: when has the market ever been happy with what the fed has given us, though? what's to stop the markets asking for more? nicola: the market is pricing a fairly aggressive cutting cycle

now, about 100 basis points by the end of 2020. if the geopolitical situation improves and the trade tensions ease, i think there's room for the fed to not deliver the full amount of hikes currently priced in the market, but i think communication will have to be very careful in a way that doesn't disrupt financial conditions. guy: what do you make of the structure of the market at the moment? you've got the fed funds up, the two-year well below it. how does the structure of the market look to you right now? nicola: at the moment, the curve is flat, and in fact it is still inverted if you look at the three months to 10 year. it is showing that the markets remain concerned about recession --k, although guy: that's a telephone. let's turn it off.

is stillhe curve discounting some recession probabilities. i don't think they will materialize. but of course, risks arising because of the trade tension. guy: where is the value on the u.s. curve right now? nicola: we think that the treasury market is still ok, and if we are to choose where to invest, we tend to like the belly of the curve at the moment. vonnie: so at what point does somethingtop being that is the best there a shirt in the room? where does yield have to be for investors to start thinking twice? terms of treasury yields, if you look at yields as a whole in terms of core yields across the globe, if you look at treasuries around 2%, if you look at bunds -40 basis points,

japan below zero, u.k. yields in the 10 year space around 70 , even the 2% is a relatively low number, the biggest room for compression remains in the treasury market. when we look at duration across the major economies, we think that the u.s. still has more value than elsewhere. vonnie: what have you figured in for term premium these days? nicola: the term premium is very hard to estimate. it depends on the methodology one uses. if you look at the measures of the fed, it looks to be negative. i think the term premium is certainly very low, possibly negative, possibly zero. but it is definitely compressed by all of the unconventional easing measures that have been introduced. over and beguidance the rate cuts that were delivered -- and beyond the rate

cuts that were delivered. i don't see the premium rising any time soon, especially with the double-shifts -- with the dovish shifts we have seen from central banks globally. guy: where do you see the dollar going? that would obviously have ramifications for what is happening in the bond market on both sides of the atlantic. do you see a dollar turn? nicola: our bias is for dollar weakness from here. we don't have a very strong view given that the market is already priced for significant fed rate cutting cycle, but i think we are biased for weaker rather than a stronger dollar going forward. mai is going to stick around. vonnie: let's check the markets now in the u.s.. we are seeing a little bit of a drop for the major indices, down about 1/3 of 1% for the dow.

the s&p has crawled its way back to down just one point, and the nasdaq is in positive territory. some of the chipmakers rebounding after a down day yesterday. coming up, you don't want to miss this one. jimmy done is going to be -- n is going to be with us. this is bloomberg.

♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is the european close on "bloomberg markets." let's get a market update. here's abigail doolittle. abigail: a bit of a mixed tone for equity indexes.

the s&p 500 and the nasdaq in the u.s., very small moves. the s&p 500 slightly lower, the nasdaq slightly higher. fromtors waiting for cues fed chair jay powell tomorrow during his congressional testimony, especially concerning be better than report last friday that have moved interest rates in a big way. off.n stocks are selling in the asian session, also lower, down about 8/10 of 1%. let's take a look at the 10 year yield over the last four days. three days, excuse me. we have a pretty big backup in rates, at one point the most since january. right now up 10 basis points, the most since the beginning of april. in anticipation the fed might not be quite as dovish as previously thought, some now think that a july rate cut is off the table. whatever does come, there is reason to think that rates will continue to backup. let's check on a chart we've

been looking at a lot. it is now working very much in play. back in 2018, the 10 year yield around 3%. at that point, the fed very much in tightening mode. during the risk off period of the fourth quarter, yields fell. this year as investors became more adjusted to the idea of the fed could become more dovish and perhaps even cut rates, we have the 10 year yield at one point last week below 2%. --ht now back above 2.5% back above 2.05%. if we see rates continue to backup, that should be pretty good for the financials. we see banc of america, citigroup, and morgan stanley all higher. one stock not joining, piper jaffray on the news that they are acquiring sandler o'neill for $45 million. shares down a 10th of 1%. vonnie: i'm glad you said that because here's the latest on

this particular deal. piper jaffray having agreed to buy sandler o'neill. the combined comedy will be known as piper sandler. the price tag, $45 million. it will nearly double its fixed income business. ,e are joined by jimmy dunne who will be a vice chairman at the new piper sandler. congratulations, jimmy. jimmy: thank you very much. vonnie: it is a 41-year-old company, sandler o'neill. what is it say about the environment that boutique smaller banks are now combining? jimmy: we had great investors and great friends, but they made their investment about eight years ago, so when we did the original investment, we knew that we would either at some point in dime go public -- some point in time go public or merge with a company like piper. for now we think we can grow our

business with them very effectively, and we are excited to be joining the. -- joining them. vonnie: was there any pressure from any stakeholders? how did you arrive at the $45 million price tag? jimmy: no pressure from the private equity firm. we paid out a handsome dividend every year, and they were great partners. they absolutely understood that we knew what we were doing, and they were happy to go along with what we were doing. the price is just the result of a combination of things. what would be the best fit for our clients was the first and most important role. how can we continue to do exactly what we want to do at sandler uninterrupted? could we go with a company where we could make a big difference over time? , and i the price is low think they got a very good deal. i'm going to do everything in my power to make sure that they did, and everything we do to be

helpful for them, and over time we are going to make a real contribution and be large shareholders, and i intend to be a very large shareholder. there's a lot of ways to get paid in this deal. jimmy, what kind of rate of return did your original pe investors make? walk me through what they experienced being a partner with you. jimmy: you can ask them a come of course, and that is really their business -- you can ask them, of course, and that is really their business, but it is a really solid number with zero risk compounded. we did not lose money one month of the entire time we've been invested together. we only lost money two months since 1988, april of 1989 in september of 2001 -- and september of 2001. i think they are satisfied with

their total return. they have been great partners. you should ask them specifically what their returns were. guy: we will try and line that up. ealk to me about what you se the environment looking like now. you've supervised many financial deals over the years. is it getting harder to get those deals over the line? is the availability getting tougher to find? walk me through what you see in terms of what is going on out there? jimmy: it's a very good question. i was talking to somebody on sunday, and we sort of laughed about the fact that no one's ever said boy, things are easy. no matter what environment i've been in, it feels like things have been difficult. over the last several years, there's been a variety of things that have made it more difficult. if you go back three or five years ago, the regulatory environment may deals much more difficult. that has gotten better.

the reality is there's been a lot of consolidation, so you have fewer buyers, so you have many more negotiated deals. but there's still plenty of banks that need to grow, and right now size is much more important than it's ever been at a point in time, whether you are dealing with technology costs, regulatory costs, the overall environment. size has become important, so the merger way will continue. sandler will hopefully get more than its share of it. we've been very active in for an fintech.in we did the black hawk deal. we've been very involved in money management. we will get our piece of that. quite honestly, we have a lot of talented bankers here that hopefully, through their contacts, through the many boards we are involved with, we will be able to get involved and use piper's expertise and energy in health care and food and all

kind of different verticals they are in, and generate some synergy that people may be surprised about. our bankers have soft hands. that's what everybody talks about. we can do a number of things. vonnie: that's the company culture, i guess. it will have to spread across now. to the other company we are looking today at the likes of -- across now to the other company. futuresee in the potentially yet more of a role it is to bendler as now, and particularly -- and potentially yet another merger to make the environment even more amenable to the boutique banks? jimmy: i would say probably so. the reality is we are not really thinking about that today because obviously, what we want they bought is sandler to do what it does, so we are going to make sure that we continue to do exactly what

we have been doing, and they get the financial vertical they were hoping for. ,hat will make them a better more well-rounded, more diversified company. in turn, that will make them and us, and me as a shareholder, more attractive to a variety of different people. over time, if something happens, that is altogether likely, so we get. but when i am trying to do today is pitching with two clients as soon as i get off this call. i'm going to do the same thing tomorrow afternoon, and we are going to do what we can in the financial vertical we are involved in, and we will worry about the rest of the pieces once we demonstrate to shareholders that this was a terrific deal for piper to do. vonnie: no rest, even on a day like today. in what areas might there be enough overlap that there could be potential god -- potential job cuts thanks to this merger? jimmy: we have around 300 plus

or minus people. the truth of the matter is that each year, if you look at our history, which is obviously private, we have about a 10% turnover a year. this business is not for everybody. it is a hard business. rock ofot to roll that the hill every day. people's attitude and vision changes over time. there will be natural turnover, and there will be both synergies and cost savings. there's no doubt about it. neither have been modeled to achieve a nice double digit accretion number. but over time, it is just a natural thing. obviously, people with the best attitude and the hardest workers are going to benefit the most. other people will just deal with that on a day-to-day basis. guy: jimmy, i have to ask. i am sitting in europe, where the banking scene looks very different from the when you see

in the united states. as you look across the atlantic, what do you see? we've just seen deutsche bank over the last couple of days, and it is astounding. jimmy: obviously the deutsche bank thing is stunning, but not that stunning. this has been rolling to that effect for some period of time. this is how the world changes. if you look 15 years ago, so many of those companies were buyers of u.s. banks. we as a firm never went out to sort of cover them. we covered them by basically having the targets that they sought after. inhaving paul jones company buy,ma that dbva wanted to having what the bank of scotland wanted to buy, that is how we

did business. we spent no time chasing them. the reality is europe is a mess. i don't expect much growth from europe. i think it is a troubled situation. i don't see anything positive happening over there. fortunately, we have no risk over there. did business with them, it was more we were the other side of the transaction. to your point, i wish they were doing well. i wish they were buying american companies. that would be better for us. but the reality is there is a slow deterioration that will continue for some time. vonnie: are you looking for a fed cut this month? jimmy: i'm sorry, am i looking for what? vonnie: a fed cut this month. jimmy: i don't know. i don't really think we need one, honestly. i know that's not a popular thing to say. i thought the jump numbers you

pointed out before we got on -- the job numbers you pointed out before we got on our very good. i don't think it's necessary, but i just wish the fed would say less and just do their job. i don't think we really need it from an economy standpoint, but we may get it. i'm not really an expert on that. vonnie: jimmy, thank you so much. jimmy dunne, congratulations today on the merger of sailor o'neill -- of sandler o'neill being acquired by piper jaffray. this is bloomberg. ♪

guy: but if breaking coming out of reuters. bayer is under pressure as a result of the monsanto acquisition and the round of trials. they approached a lamb to -- approached ena -- approached elanco on a possible animal

health care deal. this story generating a fairly significant reaction. elanco up by 3.4%. let's take a look at where european markets are. the german market in focus for a number of reasons. basf feeling the pressure from the trade story, today coming out was very disappointing forward guidance. that is a refection of how difficult european industrials are going to find life going forward from here. that plus the deutsche story when it comes to a desponding day for the dax. we are free minutes away from closing up european markets. as i say, a big focus on some of these cyclical stories. more details in a moment. this is bloomberg. ♪ xfinity mobile is a wireless network

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xfinity mobile has the best network. best devices. best value. simple. easy. awesome. click, call or visit a store today. guy: we are wrapping up the european trading day. 30 seconds to go until the end of regular training. a sea of red.

down more the further east you go. germany down. scandinavian markets under pressure. portugal just down. ftse 100 down .1%. the pound is under pressure. the dax trading down heavily. basf plus the chemical sector a factor. the chemical sector is being hit. basf is an absolute giant that feeds into a bunch of industries. it is being affected by the trade narrative. the cac 40 is down .2%. let's move that off and show you what is happening with the pound because this is worth paying attention to. the british pound under pressure . tomorrow we get gdp numbers. q2 could look bad for the u.k.. the pound is beginning to price in the increasing possibility that the bank of england is forced to cut next. it is down .4%.

let's take a quick look at some of the stocks we are watching and give you an idea of what is going on. basf.ioned it is very much under pressure. let's take a look at that. real estate trading up .7%. ,tilities, telecom, health care the bond proxies are doing well. the bottom end of the market, real estate will see telecoms trading well. the bottom end of the market, this is where we are seeing the effect coming through. basic resources are down. autos are down. that is a feed off of the basf story which is a feed of the chemical stories. let so you -- let's show you individual names. there is some good news in terms of individual names. locarno is trading quite strongly. back by 2.16%.

deutsche bank down 3.36. locarno trading up 6.75%. this technology company bouncing back from a fire in one of its big distribution warehouses. that is look at the european markets. vonnie: divergence between the major indices here. dow down .33%. just down. several drags on the s&p 500. the 10 year yield at 2.05 before tomorrow's testimony. the fed chair with two days testimony. also jim bullard later today. gold futures underneath $1400 an ounce. it bounced above and below that line several times in the last few weeks and crude holding its own at $57.71. that is a look at the stocks on the move today. 3m is a big drag. rbc capital markets downgraded the company.

hospitality shares lower on the downgrade. , it is oncase litigation costs which rbc things are going to be more happy on the company than the company has been looking out for. you have the stocks lower as well. back in thering portfolio manager and sovereign credit analyst. what is your perception of what is going on? bunds trading -40 at the deposit rate. i have parts of eastern europe starting to go negative as well. the german is already flat. i wonder how much flatter it will get. to these markets look rational to you and if they do not, can they become even more irrational? >> i think you can see the

valuations in duration is pretty rational. monetary policy is trying to stimulate nominal growth and inflation expectations. what is clear is that the rewards of monetary policy and the returns are diminishing. central banks are doing all they can but they are struggling to lift growth. without a hand from fiscal policy it is hard for them to do so. if you look at the market, it looks like duration is suffering ation of theific markets where you're going on a path of lower growth, lower inflation for a long time. in that sense, even bund yields do not look so crazy. guy: would you continue to buy bunds with christine lagarde at the helm of the ecb? theold model is never short bund. will that apply in the christine

lagarde era? nicola: we see christine lagarde is continuity relative to mario draghi. she is a qualified candidate in that she has political experience, she has dealt with eurozone sovereign crisis. she has made comments that are dovish. era ofl continue the mario draghi. yields, ines to bund the belly of the current there is still volume despite the absolute level of yields. i do not think the ecb has a lot of [indiscernible] when it comes to us measures. with qe coming and with inflation expectations not rising anytime soon, then i think bund yields are accurate. vonnie: as mario draghi done a good job? nicola: i think he has. he has handled the european crisis very well. he has shown how he could find

political consensus. you need to be still politically to manage the european central bank. to stem thecreative crisis at difficult times and is technically confident as well as politically confident. i would definitely give him a thumbs up. vonnie: what happens to the euro over the coming year? given the inflection to their discussions, do you see the euro strengthening at all? nicola: we do not have a strong view on the euro-dollar, as i was mentioning earlier. i think you have the fed easing probably coming this month. the ecb easing will be in september. that will upset some of the effect of the easing by the fed. dollarnce, i think the is more likely to be weaker than stronger because of the higher

room for compression of short rates in the u.s. and partly because of evidence that u.s. growth is converging down toward the lower growth we are seeing elsewhere. at the margin, i would say weaker dollar. you think the market has priced in rate cuts from the bank of england? nicola: the market is pricing in a 50% rate cut. brexit thata hard is not managed properly, the central bank will cut. guy: do you think it is brexit dependent? nicola: the data -- we will get gdp tomorrow -- there is a brexit effect, but this is a small, open economy. it is being affected in the same way germany is by the trade narrative and the global economy is slowing down. europe is slowing down. that effect is coming through into the u.k. economy. there is a brexit economy. you wonder whether or not the bank of england could of got

away with hiking. in theory they are still talking about it. i do not see the background economically, globally, to be able to produce that kind of environment. nicola: i agree. i think the hawkish bias will be dropped in august. the current speech moved in that direction. i do not see the central bank hiking anytime soon. when it comes to cutting, i agree the u.k. is subject to developments but i think it is less of an open economy relative to germany. a globalewhat less of trade cycle. in the absence of a hard, uncontrolled brexit, i think the central banks will be on hold. with an uncontrolled brexit, i am sure they will cut. vonnie: a quick question about what sovereigns you are finding attractive that are not the key 10. -- they're not the g10?

any emerging markets looking good to you? nicola: if you look at emerging markets, there are a couple of things that are favorable. differential the and real rates between em and the u.s. are attractive. is on hold or in an easing cycle. these things are supported for the em markets. against that, china and political risk and a lot of these countries aside. we are selective and when we invest in em our main trade is through the fx, and we can to invest in a high-yield with solid fundamentals, among which indonesia and fundamental and , and we tend to be short currencies with lower yields. china and korea, for example. vonnie: thanks. for volume manager

and sovereign credit analyst. let's dig in on bloomberg first word news with kailey leinz. the latest fight -- kailey: latest fight on obamacare resumes in a new orleans appeals court. the ruling is on hold while the appeal is being heard. stake is insurance protection for millions of americans. than 20s from more states have joined california to push the trump administration on an automobile admission agreement. the states want rules that are consistent and require efficiency improvement. the administration wants to rule -- wants to ease standards on emissions. i met managing director christine lagarde to set to be confirmed in october as the next president of the european interbank. the eu's finance ministers have signed off on the agreement reached by governors. now the question is who will replace lagarde as head of the imf. china's ambassador to the u.s. and its washington embassy have joined twitter just in time for

the start of the new trade talks. the first week that he looks forward to engaging with more american people. twitter is blocked on china's heavily censored internet. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. guy? guy: we are done with the session in europe. a little dip in the auction process but not much. we are trading down in london by .2%. the big loss is coming over in germany. deutsche bank trading lower, basf trading lower after its outlook on what is happening with the global economy. the cac 40 trading down .33%. if you are getting the car going home and having a good day the trading desk, you can do so. jonathan ferro in new york, guy johnson in london on the cable show. this is bloomberg.

♪

vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is european close on bloomberg markets. .et's turn our session to ibm it's $34 billion deal to buy red hat close today. david westin spoke to the ceos and asked about the strategy behind the deal. >> it is important to our clients. it is the destination for the cloud. a lot of people think everything will move to one public cloud. that is not what we think clients need or want. it is the idea that i have existing estate like a house, i will modernize it and i have

five 415 public clouds, private clouds, and if i modernize and app i will put it where i want and i have to manage and secure all of that. that is the destination. platform between red hat and ibm that runs on any public cloud, that runs private, that runs traditional, and they want, downloaded anywhere, secured and manage it. that is what i mean by the hyper cloud and that makes us the region in that. -- the leader in that. others talk it, but they may just up the collection between their public cloud and private cloud. david: you have other competitors in the cloud. not hybrid cloud that are pretty big. to collect amazon and google. how will this of you catch up to them or is that even the goal? >> i will start for the red hat component.

our goal is to be an even better partner with those clouds are they are free partners. i'll software -- our software runs on the clouds. they will continue to be great partners for us. as we are capable of moving many more workloads onto our software platform, that is more workload those clouds can go and address and run. my conversations with the major clouds have been positive because they see this as an opportunity to get more workloads out of data centers. >> that is an important reason to do this. our clients want us to be able to take our platform and run it everywhere. these are partners and we cooperate for are in competition. david: you've ramped up the ibm percentage of your revenue from the plow dramatically -- from the cloud dramatically. where will this get you to? >> as you think about the clients moving their work, 80% of their more -- their work will

move to the hybrid crowd. our levity transcends the public cloud, the private cloud, canales platforms on other clouds included in our services revenue. the goal is to move with the same journey our clients needed to move with. david: what about moving with the overall size of the cloud? how much of this will just be riding with the cloud up and how much will be taking market share from other cloud providers? way to thinkne about this is 200 basis points of revenue growth over a five-year period. this -- the important part is our own cloud, the ibm cloud and our private cloud together should be the best for mission-critical work. clients had five to 15 clouds already. we also want to have our platform running everywhere else. growth anywhere will be good for ibm. >> to emphasize that, this is

about helping our clients provide more value to their customers. when client builds a new application, a new website, a new mobile application, the opportunities for us to participate, whether helping build the application or integrate that with data, having it run ibm's cloud, any of those components are areas of incremental value we can participate in as our customers create more value for their customers. and red hat ceo speaking to bloomberg data weston. -- speaking to bloomberg's david westin. hour isour stock of the metal producer -- here is kailey leinz to tell us more. kailey: copper is down for eight of the last nine sessions. it has been under pressure. flat on the year in the year that has seen metals rise because of ongoing u.s. china trade tensions, concerns about

slowing global growth and what that will do for the demand picture. that has put prices under given -- which puts freeport under pressure given that makes up about half of the company's overall revenue. it is not just freeport miners -- is not just freeport, miners across the board falling. you can hop into my terminal and see this chart at gtv . the purple line is industrial metals. therperforming, like precious metals, which have fared a lot better. gold getting a nice bit in 2019 given the dovish central-bank stance and a flight to safety we saw few weeks ago. it is those precious metals doing better than the base at this point. how dependent is the outlook on whether or whether not we get a trade deal? kailey: analysts say that

whether or not we get a trade deal copper prices are still unjustified and they see more upside. note froming a jeffrey's. they did cut their price target for copper but said it is still one of their top choices for the next 12 months because they think the demand picture will rebalance and those jefferies analyst remain bulletins -- remain bullish on the likes of freeport miners going forward. vonnie: thank you for that. that is kailey leinz with our stock of the hour, freeport. time here latest bloomberg business flash. a look at some of the latest business stories in the news. the world's biggest chemical maker has joined others in the business in sales and profit forecasts. basf says earnings will be as much as 30% lower because of trade complex. the company also provided a deepening economic slowdown and a weaker auto market. airbus is warning airlines of potential problems with older versions of the superjumbo a 380.

it has asked carriers to inspect wings for possible cracks. that is an issue that has arisen on donald baker plans. it announced it will quit -- on double-decker planes. it announced it will quit making the a380. coming up, our global battle of the charts. this is bloomberg. ♪ ♪

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vonnie: it is time for our global battle the charts. you can see these charts on the bloomberg. run the function gtv . >> i do not know it you're going away for your summer vacation but u.s. companies are staying at home. that is what we are seeing in deal making so far this year. chart,can see from this this cross-border activity for u.s. companies in m&a going back to 2010. as you can see, cross-border takeovers involving u.s. firms are down 40% this year, to about

$200 billion. no u.s. cross-border years in the top 10, which means no buyers or sellers involving foreign companies in the u.s. this year. in previous years, we have seen up to four. why is this happening? we have china and u.s. trade tensions. we have brexit, we have growth worries in your. all of this is leading to a historic low in cross-border activities. vonnie: i think that is fascinating. i probably should have realized that but it did not occur to me. we talk a lot about cross-border deals involving your. great chart. -- involving europe. great chart. guy, what do you have? guy: we have the fed testimony coming up from jerome powell. let's put that into context of the biggest uncertainties out there. how important is the fed in gauging where market pricing is? the market is paying a great deal of attention to the fed but

it has its arms around the fed in understanding where it is right now. we are pricing 25 basis points in terms of the cuts we will see this month. where is the biggest uncertainty? the fed policy uncertainty is elevated but the real policy uncertainty, and this is what the market is struggling to get its arms around, is what is happening with trade. you can see that has spiked rapidly over the last month. we have seen a huge pick up since the beginning of the year and that is continued in the last month and we are pushing up to levels we have not seen since 1995. why we will spend a lot of time talking about the fed, the market to a certain extent has a handle on that. it is figuring out how to understand the pricing around the fed. it is probably related to the trade narrative but the biggest imponderable for the market is trade and that is where i suspect a lot of people will be focusing on once we get through the jay powell testimony.

vonnie: that is also a fascinating chart. you both have given me a difficult decision. that i cannot sit down and ponder on this for long, i'm going to make a decision and that is that she wins for today. congratulations to the both of you. coming up, balance of power with david westin. he will speak to kevin cramer of north dakota, a member of the banking committee, ahead of jay powell's testimony on the hill over the next two days. u.s. markets are still in the green for the nasdaq, still in the red for the other major indices. this is bloomberg. ♪

david: from bloomberg world headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics

meets the world of business. on the brief today, kevin cirilli from the white house on president trump's meeting with the them year of qatar. on drops and adds to the democratic presidential ross, and from london emma thomas on the final days of the prime minister race. kevin: president trump is set to meet later in the day with the emir of qatar to judge the situation with iran and qatar offering to blame middleman between the u.s. and iran. it comes at a time when qatar as well as saudi arabia has also been -- david: we have a very close to the relationship the united states with saudi arabia. saudi arabia does not have a good relationship with qatar. how is the president playing off