i'm julia chatterley. welcome to bloomberg markets. we are live and bloomberg world headquarters in new york over the next hour. here are the top stories we're covering from around the world on the bloomberg. we begin with politics, and hold out on the hill could send the republicans plan to replace obamacare out. mitch mcconnell is hoping to sway members of his own party to garner a final vote next week. staying with politics, another twist in president donald trump's feud with president -- with fbi director james comey. claiming there -- there are claims that coming may have changed his story on their communication. and russia is rebalancing its dock index. this could heal a major jump in around the close. we will be talking with mark makepeace about the market structure and its business. s, at least equities,

are closing, and we have some direction, unlike yesterday. bithe dow was a little lower, now it is a little bit higher. all three in the green at the moment, with technology leading the game at .5%. we are still seeing low volatility, well, not still, but the return of low volatility after it reared its head, particularly in technology. it has gotten call once again. take a look at the mix. we are seeing a 6% drop -- fix -- vix. and a seeing a 6% drop, drop in some of the performers in s&p 500 today. bed, bath, and beyond touching his lowest level in five years, and one guggenheim analyst says it was the worst quarterly operating performance in recent history. the share is down 12.5%. cisco, the food distribution , the food sysco

distribution company sliding. is there anything at this point amazon is not getting into? cisco down 5% and whirlpool is down as well after it revealed one of the company's refrigerators appeared to have deadly tower fire in london. whirlpool iseath continuing to investigate alongside the authorities. getting to the other stories we , the annual today rebalancing. if you look at these three averages roug russell is tracking, the 1000, 2000, and 3000, we are seeing an upward by but we have not seen a jump in volume. we will get to that other chart in just a moment. you can see all the real them -- three of them are higher today, but volume has not been seeing a boost. in fact, we're seeing declines in volume. chart brings back

as the surge in volume, probably not until the end of the session. over the past several years, here is what the volume look like on the day we saw the russell rebalancing. in four the past five years, it ranked as one of the 10 busiest trading sessions of the year, however a lot of traders have position for it ahead of time. that has mitigated the effect of the russell rebalance over the past several years. scarlet? scarlet: thanks, julie. we will pick up right where we left off. more on the russell rebalancing, we are joined by russell ceo mark makepeace. thanks for coming in. so today is russell rebalancing day, the last day the indexes will be reconstituted and completed. we will get the jump in volume likely at the end of close. but what we probably will not get is any big extremes in share prices. it is actually a mixed perception that there is a lot of volatility around the close. >> we punch a lot of information in about the constitution, and

that is so people are prepared. some people will be trading before the day leading up to the day, and then we have the nasdaq , which really helps with the small companies where in the past, you have seen that volatility. the nasdaq really helps bring those together. ask and the lack of volatility is a theme we have seen throughout this year. it has certainly been the case. or lack ofncy volatility good for your business? mark: what is good for our business is this low return environments. people are looking to reduce their cost. that is getting people to invest more and more into the passive index funds, but also into many strategies, whether you call it factory investigating, what they are trying to do is how do we get active exposures? just at a lower index cost. so you see these two trends that

have been fantastic through all of this. ask and it is great to see that progressing when we talk about the progress into more passive funds that they are trying to allocate. where you see that going? mark: passive investment is still about 30% in the u.s., and the u.s. clears more passive investment than any other market. in this low returns environment, i think that is going to continue. yes, we are probably going to see more above 30%. internationally, we will see faster growth, but these sort of investment strategies, where active investors are getting replaced by cheaper ways of achieving that, that is what we , and i couldgrowth get as high as 30% of the market as well. scarlet: and we are talking about equities, because in fixed income you're not seeing passive and etf takeover quite as much. what is the challenge their? mark: the challenges what investors are trying to do in the fixed income market. they are much more trusted in

the outcome, yield. it is not the same way of investing. the level of indexation is quite low. but here is what is happening. big institutional investors are beginning to think about multi-assets, and mixing both equities and fixed income. we recently announced we are buying your book and the city bond in the seas come because we are bringing those together. the international investors have these multi-acids approaches to investing, and i think that is going to be the trend over the next five to seven years. julia: so i want to ask you about the changes we have seen in msci and china this week as well and you have china on your made the, and msci has decision to add them. are you behind the curve, or are they being a bit precipitous year in getting ahead of themselves? mark: it is very competitive between us and msci, and we went

into china in 2001, so the way we tackled this is reintroducing a china inclusive index. the a-shares were included if you wanted to invest in that. vanguard, the biggest emerging market front, they chose to follow that. that was two years ago. that has had an exposure in their emerging-market fund of 5% to a-shares. what msci is doing is trying to bring in a-shares across the board, so they have a similar choice, but a much lower level. reallyther words, if you are prepared, you do not have to move in that direction. the challenge for both of us is that the real weight of a-shares is much, much higher. as the china market opens, the a to gocomponent is going from where it should be today, which is about 5% of emerging 50%ets, two more like a 40,

-- 40%, 50% at the time. it will dominate emerging markets, become the second largest in the world, and that is a transition. we cannot do that in a short moment of time. scarlet: but msci -- julia: but msci, when you look at the overall exposure, they added it around 29%. the arty have exposure to chinese stocks. mark: but that already exists in their benchmark, but those are trade outwhere they of hong kong. are they really chinese? the mixture of chinese and international is in there, and the governance and all the other issues around that is higher because of they have been traded internationally. when we get into the a share market, it is a much, much bigger market, lots of potential, and a huge learning curve for all of us. >> some pacing is required. i want to talk about brexit, because it is the one-year anniversary of the brexit vote.

we have seen divergence between the 100, the foreign exposed stocks and more sensitive to sterling as well, but we are only at the beginning of these negotiations. how do you see this playing out, particularly for your business and the impact of volatility shares trading, and the perception of the u.k. in the markets? >> there are two indices we have seen so far. first, sterling has taken the brunt of the decision on brexit. sterling has fallen from close the one dollaro 26, $1.27 range. so that for early sterling -- that has been good because we have had large international business, which is very dollar-denominated business, so for our business that has boosted these revenues. and it has him the same for a large number of companies in the ftse 100, because these are international companies. the 250 is more domestic, and

that is why you have seen the 250 not perform as good, but it still has a few international companies. some indices we calculate, we ask you to show those companies that have the international exposure and those with domestic, and the difference in what is happening with the forms of those companies is huge. andrnational companies grow are still benefiting, but the domestic focus companies -- not only did they fall rapidly at the time of the brexit vote, they are still falling. i think the concern is the brexit now is going to be long drawn out, there is a lot of uncertainty, we do not know whether it is a soft, hard, somewhere in between, and i think that is going to have an impact on sterling, at which will have an impact on the market. julia: what he think the government -- mark: that is an ongoing question. these, ifk make

it's the -- mark makepeace, ftse rush -- russell ceo. >> this will make it easier to fire employees, making a push to overhaul agency that is struggling to serve military that. at the white house, the president said the law is only the beginning. pres. trump: in a short time, we have already achieved transformative change at the v.a., and believe me, we are just getting started. >> the measure was prompted they a 2014 scandal out of phoenix, where a vet died as they waited months for care. arrivesprime minister in washington on sunday for a two-day trip that includes his first official meeting with president trump. the prime minister will look to secure on a $2 billion deal for unarmed drones. analysts expect both leaders to build a rapport, but find it

will makehat they significant progress on immigration and climate change issues. the european union is giving a thumbs down to british prime minister theresa may's proposal for citizens rights after brexit. the european council president says may's proposal is about reducing citizens rights. the prime minister says almost citizens fromion the eu and the u.k. will be able to live there after the breakup. the city's insurance company in $1.5 million to settle a lawsuit filed by the family of michael brown. the financial details were not initially released. brown was an unarmed black 18-year-old who was fatally shot by white officer darren wilson in august 2014. wilson was cleared of wrongdoing, and resign in november 2014. global news, 24 hours a day,

powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton, this is bloomberg. scarlet? scarlet: thanks, mark. what david rubenstein told bloomberg about trump's agenda and the broader u.s. economy. his user next. from new york, this is bloomberg. ♪

♪ julia: this is bloomberg markets, i'm julia chatterley. scarlet: and i'm scarlet fu. julia: a busy week. we heard from cleveland fed rate ist, who said the not being raised to slow down the economy, and bollard says he scenes -- sees no reason --

bullard says he sees no reason to raise rates again this year. we asked they've driven sign for his take on the economy and the fed. david: the u.s. economy is slowing a little bit. it is not going white rate people -- quite at the rate people with ink it was at six months ago. they expected the economy to grow 2.5% this year, and they are softening that a bit this year. the fed will go on with its planned increase in interest rates if the economy is relatively good, but not as strong as it would like. there is some uncertainty going to the tax legislation and when it will go through. >> do you think it will go through? david: something a happen but i do not think it will happen this year. i think it will drag into next year before it actually happens, and i think that has low down the market. i think the market thought initially the president would be able to get this thing through, but it is going to take more time than anyone thought it would take. >> have we hit peak trump trade? has that moment passed?

david: i cannot say for sure, but i think many people with a it is going to take longer for him to get many of the things he wanted to get done done, and he is realizing that as well. >> do you think the fed is making a mistake by continuing to hike? david: the fed is increasing interest rates by relatively modest amounts. when i worked in the white house, interest rates were above 15%. that, butagging about it was very high. right now, they are relatively low. even if you go up by 25 or 50 basis points in a year, you have a low base. i do not think it is a problem. ofo not think it is because the base, i think it is an aging population, fewer people in the programs are taking a large part of the federal budget, infrastructure spending and those are the things that are slowing the u.s. growth rate. >> is there anything you're waiting for that will make a difference in your business in the u.s.?

david: knowing what the tax rates are going to be are going to be important, but i think the infrastructure spending program is very important. infrastructure in the united states. the roads have potholes almost everywhere you go on the east coast, for example, so we need infrastructure. and that bill goes through congress, i think they are taking a big role. that was david rubenstein -- scarlet: that was carlyle group ceo david rubenstein, who also hosts the show here on bloomberg television. still ahead, the senate health care bill is being met with heavy opposition from within its own party. we will examine the passage, just ahead. from new york, this is bloomberg. ♪

♪ scarlet: this is bloomberg markets with julia chatterley and starlet through.

-- scarlet fu. let's move on to health care. what is happening right now, donald trump has in speaking out against for a public and senators who have come out against the bill. bill has not said it would repeal obamacare and lower health care costs, but they are open to negotiation. joining us now is sahil kapur. on arrival,not dead because there are areas they can negotiate. but is everything up for negotiation, are there any sacred cows here? are, the basic shape of the bill is the same as the hospital, but includes new features that they will not hard ways with. that will be received, medicaid cuts, and tapping the amount of program sends -- spends for the first time in its history after 2025. cutill be a significant tax on high income household and ratchet back on the obama subsidy. those will remain in there. likepecific tweaks,

medicaid staying out or on the high-end are low-end, special carveouts for states like alaska with the unique system and unusually high health care costs , that is what they will negotiate. there will be potentially be negotiating funds for states in an opioid epidemic like ohio, west virginia, their public and senators there are insistent on extra money for that. those are the kind of things that senator mcconnell will be listening to and trying to see if he can find a way around. julia: scarlet: -- alaska, andentioned who would mcconnell need to win over to convince that they could bring along the rest of the moderates? is there someone like that? >> markowski is an important figure, the republican from maine who tends to vote as one of the most moderate remembers -- members of their party. you have west virginia,

colorado, people from medicaid expansion states. i do not know there is a filler bullet -- silver bullet or one person who could bring this all along, because this is a complicated bill that it acts everyone in different ways, and one of the most controversial both use republicans will have to make and it will come back to haunt a lot of them in the future. julia: the optics on this are not great. if you look at the headlines after yesterday, they are all saying this is basically a tax being done wealthy by the trump administration. here we have the protest yesterday, four republican senators say look, we cannot vote for this. what could mitch mcconnell be doing in between it now and next week, when they are hoping to vote on this tosenators say looe on the extreme right, perhaps, the most severe, and as scarlet was mentoring the moderates -- mentioning, the moderates to bring them on the side? >> there is little he can do anything on that. repealing obama care is very popular in the abstract, but

people are seeing what it means and it is difficult to sell because it eventually cuts a lot low and medium income people, and yeah, there is a big tax break for wealthier americans, and democrats are describing this as a redistribution of wealth from poor to rich people. it is hard to sell something like that. this is something of applicants have campaigned on specifically for seven years, and they won the house and senate while campaigning on it, so they feel like they have to do it. mcconnell will try to balance the extentoncerns to humanly possible, and he also has a quartet of conservative senators who are not happy about the bill and think it does not go far enough in a limiting provision -- in eliminating provisions that need to go in order to lower cost. these could be things like insurance, regulations on pre-existing conditions in terms of charging people more, the house weakened more of those

things with the affordable care act in the senate, and it is a very tough balancing act. mcconnell needs to get these moderates on board to ease their mind about the severities of these cuts and the conservatives to want to go for it. julia: quickly, what is the cbo going to say about this, because they are issuing their rating next week. also, what about the unlimited nature of the amendment that the democrats can pose here? what kind of a delay or complication is that going to present? -- i wish i knew what the cbo would say, but we have to look at their estimate for how many people are going to lose coverage under this bill, what the deficit target will be, because it has to meet the same number of savings as the house bill, and what the cbo says about what this bill does to cost in the short-term, the median term, and the long-term. and as far as the voter, process, yes, there are unlimited amendments.

you can stop anybody from offering what amendment they want as long as it is germane and relevant to the process, and not seen as deliberate we trying to delay for the sake of delaying. democrats will use that to try to throw sand in the gears as much as possible, and conical -- mcconnell needs to have a strategy with his members to keep them from messing that up. sahil kapur, our washington political reporter from washington. julia: up next, the uti crude looking to close out the week on a high note, but still at a 4% weekly loss. more to come from new york, this is bloomberg. ♪

♪ from bloomberg world headquarters in midtown manhattan, this bloomberg -- this is bloomberg markets. i am julia chatterley.

the commodity markets are closing in new york. let's look at today's big movers, starting with soft commodities, coffee ending the week on a high note. prices are rebounding from a 15 month low. coffee prices are also erasing a 5% loss from yesterday, and both features and focus our -- our -- to end the week. there is a lot of concern in europe still about what is going to happen with brexit. #btv 950.eck out g gold may be in a longer-term bullish trend, signaled by the -- falling of a rare golden cross indices in

december, and we are showing that, in fact. funded the previous time that happened was in 2002. scarlet? scarlet: we will pick up right there is because the question with oil is will this way on crude prices? daybreak americas, we asked for a take on it. >> know we can figure out what the oil market is going to be, but whatever the outcome of this is will be, and everybody in the middle east is hedging one way they were, and hedging last year when it bought a significant chunk of --, and it is like dealing with russia in the oil market, because when they were uncertain about where the u.s. was going to be. i think that hedge is a more powerful impact of geopolitics in the market. when you look at the saudi-russia relationship and

the qatari-russia relationship, the arabian-russia relationship. >> that might tell you more about sentiment, that looking at geopolitical risk in some cases would say to some people intuitively that it is not bearish because that would lead to be opec a rigged mint -- opec agreement. do think there is something very? >> i think there is something in the opposite way in that, that we had a change of crown prince and saudi arabia and the current crown prince owns the deal with russia. different matter from having people say this is not working. he owns it and owns it through the first quarter of next year. he owns it in a way that it may be extended and deepened, although that is the other part of what is happening. part of the other story is the promotion of mohammad bin salman, saying where does the focus in the saudi-russia agreement comes ant? they could have agreement with a run it was more in conflict with the saudis? >> that is what people are

saying, yes, but will it happen -- >> but what would give them the most risk? >> [indiscernible] have been looking in the wrong place. tension has been rising in the middle east, but we have to look south of the border toward venezuela, where oil production is sliding at a rate of about $30,000 a day per month, and where the risk is going there and a lot more. this is the biggest production risk in the market right now. >> the other things in this conversation for the longer term, if the toronto ipo -- is the iran code ipo. what is that have to do with anything right now? >> i think that is an effort by the saudi government to build a different kind of fund that will be able to do public-private sector investments within the kingdom to create employment in a bunch of different areas. i think the question is how do they raise capital for that fund? they can do it through an ipo, strategic investors going into the company, there are multiple

ways they could do that. but yes, mohammad bin salman owns the ipo as well. >> but that means they can get a high price, i higher price of oil going into the ipo, and after that, they had whatever value they wind up getting, which means pumping up more now and not leaving it in reserve ground. >> or pumping less now and getting the ipo done at any moment in time. >> but after that happens? >> after that, it looks like the bet with saudi arabia with opec and rush outside of opec, the world will see a steep decline in oil production, a big supply gap emerging. that is something they will have to reckon with, because this also goes with oil sands in canada making a comeback. and that is what unravels the purchasing power of producers to begin with and will arise a high probability by 2019 rather than

2018, that that problem will emerge and it is a permanent problem. >> and the question the market that i cannot answer and nobody -- seems to be able to -- what is the marginal cost of shale? what will stop the capital from moving into shale on the short-term? cost you look at the least shale oil, it is well under $40 a barrel. cut production by one million barrels a day? not now, but we will see what happens in the future. there is an inflation unplayable on the rise in for shale as well that has to be taken into account. julia: let's get a check on the bloomberg first word mark -- news with mark crumpton. mark: british authorities have implied a unemployed welshman with terrorism inspired murder after an attack on muslim

worshipers near to london mocks. -- mosques. the attacks came as worshipers were leaving the mosques after prayers marking the holy month of ramadan. in london, police a manslaughter is among the charges being considered in that high-rise apartment fire. said the fireday started in a whirlpool refrigerator. the manufacturer is now investigating. meanwhile, the outer coating and insulation in the building had failed safety test. at least heavy nine people were killed in the blaze. north korea is speaking out for the first time it's the death of -- since the death of the american college student in jail for a year. the regime denied that it tortured or cruelly treated auto warm beer. ambier. w treated themd they according to domestic law and international standards. turkey has rejected a key demand

by several arab states involved in a major dispute with guitar -- cutter -- qatar. turkey pulling out its forces was one of the list of ultimatums from saudi arabia and other countries. confirmed that it has received the list of demands from kuwait. it has 10 days to comply. i'm mark crumpton, this is bloomberg. julia? thanks, mark. more controversy surrounding president donald trump's with former fbi director james comey. yes, that is right. we will discuss it next. from new york, this is bloomberg. ♪

♪ julia: this is bloomberg markets, i'm julia chatterley. scarlet: and i am scarlet fu. let's get a check on the number with -- nubbers with julie hyman. let's start with commodities but not energy. >> oil had a bad week and fell into a bear market, but energy had a good week. test commodities had a good week. london metals and decks up -- by .5%, and seeing some strength in the companies that produce metals and today's session. so copper and gold up 2.7 percent, newport, about 2%. one of the areas of strength we are seeing in today's session. one of the areas of strength on the week has been faltering a little bit. i'm talking about biotech. regeneron is one of the , it's fiamma sickles and biotech, -- pharmaceuticals prescriptiveand

growth is showing signs of deceleration. that is according to reports that perceptions fell 2% in the week of june 16 compared to the prior week. 3%, butares down regeneron, like much of biotech, has had a strong week. if you look at either the 60 i -- x the ietf or the nasdaq index, both have had strong weeks. you are seeing in today's esch and that they are diverging. both of them are up by the bet on the week. -- xei going back up again, you've over the health care bill, we were seeing some strength in this group. that is also evident by the fund .lows into the xc i this shows the daily fund flow -- i should say weekly fund flow for the xc i, and you can see

there is a decent of take in the last week as people were buying into this particular etf. julia? julia: now president donald that hes an admission never taped conversation with now former fbi director james comey. this could expose them to new legal issues and might weaken his credibility in the eyes of investigators probing ties between the presidents associates and russia. our white house editor and -- join us now from washington. i feel like credibility is the least of the worries of the moment. he says he was trying to keep comey honest, but if he said he had recordings, it would allow or give comey less latitude to lie with the suggestion to fox news. is that a valid justification if we are talking about the legalities of this, and what do you think this will do to robert mueller's probe? >> i think robert mueller's investigators have new things to

look at in this case. as we arty knew they were investigating the president for looking at the president for possible obstruction of justice, the president now it knowledges that he concocted this twitter ruse to influence what james what he said to investigators in the russian matter. i am not a lawyer or investigator on that team, but that is an additional data point, as you were trying to decide whether obstruction of justice occurred. speaking of bob mueller, the president has been trying to lay the groundwork of casting doubt on his integrity, raising concerns about his objectivity, commenting on his close ties between him and james comey. on thatdy taking him up with the senate or house intelligence committee, casting doubt on this investigation being conducted by bob mueller in any way? >> not in the least. i do not think the president is really helping himself with these remarks. i think you would probably bet

-- he would probably do best to let this run its course. nobody in congress is latching onto the argument that mueller has a conflict because he's a friend of comey's or that mueller is hiring democrats as part of his investigative staff. trump did hit there may be other government surveillance though. he pointed to the leaks, and are there other things he might not be aware of at this stage. far-fetched, or does he have a valid point, because the leaks have been coming from somewhere. justification during this idea around? >> the president has a track record of making unsubstantiated lanes, and when he issued his tweets acknowledging and admitting that the comey tapes did not exist, he never made any, he floated this idea that maybe somebody else has in surveilling his conversations. we have no evidence that the white house has presented any

evidence of that. >> my problem here is it has been two weeks since comey first spoke about the agenda. scarlet: but i am sure the white house wants to talk about the agenda as well. presuming mitch mcconnell can get the health care bill to a vote next week and pass it, do we presume that will be the template for how the white house and congress for that matter pursues tax reform? they will put it together, ride it in private again? -- write it in private again? >> they are not done with this after this.lth bill they have to take it back to the house but the conservatives in the house do not like what the senate has done. this is not over with by a longshot, but as far as tax reform, i think this is pretty much -- look, i think is health care bill will probably be passed by the senate eventually, it is likely to be signed into law in some form. yes, i think this is the way they will probably do tax reform, a closed door process involving only republicans in

the white house, leaving out democrats and passing it through this so-called "reconciliation avoids hearings in the senate. ofia: whatever you think this bill, it is progress. .hey are getting work done perhaps we saw that from the democrats response last weekend, that they were certainly shocked that this thing was to be presented so quickly, because they have been focusing on the russia probe and throwing accusations around. so progress is being made. >> i think the president is very eager to sign a health care bill. really -- ke to sign [no audio] >> he would like it if not too and ifople lose coverage

the maybe cuts taxes as well, but as long as they sign it. but that is the story. scarlet: blackberry falling after 2.5 years, the company grow moreo organically, but nothing difficult as competition has been ramping up. for today, blackberry shares had 60% on the year to date. blacklock -- blackrock will manage the arizona universities foray intothe first managing investment offices, and replace is being to any unit. they have provided risk advisory services to sign up or arizona state for the past three years. and that is your business flash update. >> coming up, we will get some perspective on the yield curve in the state. trillion.e $1

this is bloomberg. ♪

♪ julia: this is bloomberg markets, i'm julia chatterley. i'm scarlet fu. the spread between five and 30 year u.s. treasury yields is that its lowest point since december 2007, just months before the financial crisis. today we asked our roundtable, as well as kathy joseph charles swap is there concern about the flattening curve? >> we have seen for a hikes over the past year or so, and it is calling -- causing the curve to flatten. the longer and is being anchor down that by ultimately, we are not seeing much in terms of inflation. that has given investors in in longer duration assets. >> we talk about a yield curve if it is flattening and

potentially somewhere down the road and burning, and it would mean recession is around the corner. is it different in 2017? >> i think of it is inverted, it would not be different. i do not think that will go so fast or so hard that they will push it to inversion anytime soon. market musthat the be underestimating how much the fed is actually going to move ahead, and whether the possibility that the fed picks up inflation down the road. >> michael, we want you to weigh in on that as well. this flattened yield curve, some people say forget about it, but this is not your 2007, 2006 story. what do you think? isethical little bit of it something relative value. if you look around the globe, rates are low almost everywhere. i think it is only natural to think that relative value might think -- ring investors to migrate into the u.s. market. as you get a tightening

environment, it is not totally shocking that we are seeing a little bit of curve flattening. i think there is an abandonment as well of the reflation theme therade, and obviously pendulum can swing in both directions, so we saw it with the euphoria initially, in a lot of the trump initiatives, the policies, and i think it has swung hard the other direction now. >> kathy, you mentioned a federal reserve might be underestimating them, but the data is going against them, the commodity moves are going against them, and the market is going against them as well. >> we have gone from this reflation trade to an almost deflation trade, but when i think you think about what the fed is looking at, they are looking at financial conditions that are extremely easy right now. one of the reasons they want to raise rates is to get back to normal to avoid asset price of this.and get ahead there is nothing standing in their way to raising rates. we still have negative short-term yields right now, so from the fed's point of view, if they are moving towards normal,

they have plenty of runway to reach shipped term -- short-term rates. into also need to take account they will start with the whole normalization progress. i think the market is taking this in stride, that we need to see when they actually start implementing it and whether or not there are any adverse reactions that happened at the one in time. that does give them a reason to be cautious to their approach with the fed policy right now. >> with the way the hike is going right now, do you see a policy era on the horizon? >> it is hard to see if it is on the horizon or not, but we have been saying for numerous months they are driven by the data. as long as they stay flexible in terms of the data they are seeing is the comedy of all -- as the economy evolves, but if they get too far ahead, that might be where we get policy mistake. >> most people say we are trying to figure out the dates in world reaction. some thing as come up on this program before, and i will bring it up again. is where the fed sees rates at the end of december 2018, they

are looking at a 10 year right now, and it is only a 2.1%. we get to the end of 2018 and somebody is wrong or you end up with a flat yield curve. where do you stand on that debate right now? >> it is interesting. i think you have a big disconnect right now between what the fed is implying through the dots versus what is implied in the market. who isstion is ultimately going to be right? our view is that the market is probably more right here, that yield over time, you will see those fed dots come down, they will imply certainly less tightening than what they are implying right now. from: some highlights today's real yield. catch it every friday at noon eastern, and now from bonds to stocks, rotation is the name of the game. -- two weeks after the tech selloff, oliver renick is here to explain. oliver: the best way to describe what is been happening, it is

two weeks after we had that deep in technology stocks -- dip in technology stocks were everyone freaked out. here is what is going on with the sector. this is a look at the company to have been doing well since that selloff two fridays ago. we are seeing a very different shift. companies that lead in the first half of the year are falling to the back of the pack, and companies like lines data, csr, they are doing better. what has happened is investors got scared about pricing tech, they moved out of the highfliers, and moved into some of these companies that up until now had been pretty cheaply valued. let's look at where that rotation looks on the sector basis. these bars are showing the percent of companies in each relative index that are reaching all-time highs or 52 week highs. over here in the red, that is a clear transition. first we had tech stocks getting high, and for a few days, financials, and now it is very much health care. i finally want to pull it over to what a lot of people have been talking about, which is

oil. outside the oil market, it seems like nobody really cares. if you look at the correlation in 2015, 2016 when the oil bear market got really bad, this is a correlation of the day-to-day moves that reached a five-year high. looking at where we are now, zero relation. it does not what happens in oil. that might be because it is in a heart yield marketcorrelation oy moves that reached a -- high yid market. good things to think about on a slow friday, guys. --oliver, thank you for the thank you for the watchlist there. oliver renick, he will be back with us to talk little bit more about our review. ahead, talking about over an hour tech week review as well. this is bloomberg. ♪

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>> it is 3 p.m. in new york. i'm julia chatterley. i'm scarlet fu.

welcome to "bloomberg markets." ♪ julia: it is 3 p.m. and we are in bloomberg world headquarters. here are the main stories we're covering. in politics, republican holdouts could threaten the future of the replacement to obamacare. senate majority leader mitch mcconnell has gone to members of his him party to get the votes they need for next week. on i press on -- progress capitol hill is boosting health care stocks. and there are geopolitical concerns with airlines. we talked to former american airlines ceo bob crandall next. let's check the markets -- julie

hyman. yes, i know i am in new york. heat andame it on the humidity. we are all feeling woozy today. i know i have been. we are not seeing much change in the average is rid sleep he friday. we will see if we get that volume surge at the close. so far, that has not materialized. we have the movement in tech that is contributing the most to the s&p 500. information technology as a of 1%.p three quarters financials had been higher or sort of have been bouncing around, i should say, down about ll today.elds fa we have eq t on the upside. that is an energy pipeline company getting your review from the federal energy regulatory commission on its mountain valley pipeline that analysts say is good news.

the death of the on going the opposite direction after that bed, bath,e out -- and beyond going the opposite direction after that company came out with disappointing sales projections. then on the week in terms of best and worst performers, julia teased this -- she looked at the performance of these two groups, and health care up by more than 3%, energy down by more than 3% as we have seen oil tumble into a bear market. health care companies were heating up for a variety of different factors, a lot of it bullishness from analysts surrounding biotech stocks. it even around health care legislation, there have been mixed explanations as to why these shares went up. we will be talking more about that. finally, i mentioned the volume surge that could happen on the close of trading. to go look at the bloomberg.

the russell 1000 index. 14% below the moving average. you see the white line versus the 20-day average, you always tend to get with any of the major averages a surge on volume in the close. we will see how it stacks up two other recent rebalancing. scarlet: we will see how trading shakes up for those russell indexes. the s&p 500 looks to finish the week roughly where it began. here to recap this week felt big moves, we want to bring -- this week's big moves, we want to bring in our correspondence. i just want to put some perspective to what julie was showing us with the biggest industry group gainers and losers. health care, of course, i am on the at grro

bloomberg. tech, which had been in the bull's-eye with the selloff on friday, has continued to recover and is now up 2.3%. maybe this is energy into health care. first, -- oliver: first, i think investors took a second look at technology and they saw these were expensive companies, generally trading at 24 times, and maybe they were looking for cheaper opportunities for growth. we have known that investors want to get growth, want to get return. tech is the place to do it. it is that growth part of the market, but at a cheaper but you wish same thing happened with tech companies where companies that were doing well some of the

companies that got hit real hard, they are still selling off. it is a different type of leadership. it is interesting what we are seeing with the s&p -- scarlet, you touched on it here it you're saying this early on in the show, we are not seeing this shakedown on market sentiment. it's in the credit markets as well. just explain what you think is going on. oliver: i think the occam's razor explanation would be just mathematically they got destroyed in 2014, 2016. they went from being about 11% stake in the s&p 500 to being about 6%. that's where we are now. there's the other idea that wraps there are more things that play. .here is the high-yield market

there is the band. and if you look at it on a five-year chart, ultimately i think the regime is pretty similar to where we have been. energy was going to be the driver of the asset, but that is not the case, is a? >> know, the reality with oil is we are in the 50's. 50, you haveh of saudi arabia on the light to keep the shale producers out. of the wti,e top and somehow the market got the hint of that end is knocking oil down lower. i'm not sure how much lower it goes. next week, you may talk about stocks of rallied and the transaction of health care into energy for all i can say. scarlet: the thinking is the fed

does not need to commit to that third interest rate increase this year. >> i think the bond market has had that bit tween their teeth for months and i think they are right. i think they are very, very when you look at the federal modeling, they are very much married to the -- the fed's modeling, they're very much married to the phillips curve. companies that can move plants and equipment around the world, wage growth is stagnant, the full skirt is an outdated model. they're working with the wrong urve isthe phillips c an outdated model. you're working with the wrong map essentially. scarlet: this is back in december 2015 when the fed finally got started with the interest rate increases. >> yes, essentially you're looking at the fed, the first rate hike. we are below that line. market is saying, bring it, so what? oliver: if you were not to know

what the other access points are, you would look when those hikes occurred and look what happened to the market and you think there is basically no effect. there's no clear indication of what happened. first you like in the yield curve went like this, and then it kind of flattened out. what is this environment where we have interest rate hikes but no interest rate yield? julia: communication. it's all in the price. >> it is pricing. if you are raising short-term interest rates, but not taking money out of the system, it's just repricing the curve. you are not -- you're not trimming qe. much: guys, thank you so for your insight and wisdom. a check on the headlines on the bloomberg first word news with mark crumpton. mark? julia, thank you.

we have a developing story. no bosh ceo says the changing health care bill in its current form is not the answer to obamacare's problems and he will not support the bill as written. tell her is the fifth republican senator to oppose the bill. the united nations secretary-general antonio guterres will pressure congress funding cuts to the u.n. he will meet with possibly senior cabinet members. the administration from proposed budget would cut funding for you and peacekeeping by 50%. president trump says his possible tapes may have an impact. he says that h the fbi director may have changed his story to reflect what happened. to rule thatefused

capture bowe bergdahl's by the taliban ended his unauthorized absence. his lawyer asked for the ruling so he could advise him on how to enter a plea to the desertion charge. he was held captive by the taliban and its allies for five years. a judge said today the length of his unauthorized absence should be decided at trial in october. nearlyt 40 were killed, 100 others wounded in three separate bombings in two major pakistani cities today. a suicide bomber was involved in bombing that killed 12 and wounded others. there was another bomb in a shiite dominated tribal region that killed four people. it came before a muslim holiday

that insulin month of ramadan. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. julia? julia: it is a new chapter for a uber. we discussed the fallout in the week on tech. this is bloomberg. ♪

scarlet: this is bloomberg markets. i am scarlet fu. julia: and i julia chatterley. it's time for the bloomberg's nest flash, a look at the bloombergsiness -- business flash, a look of the

biggest business stories. bed bath & beyond lost money in advertising and coupon offers. the retailer did not provide a full year outlook, saying it would have more visibility after the second quarter. finish line shares raced to the year,est rally of after an upbeat assessment for the second half of 2017. finish line cited confidence in his merchandise and operational initiatives. industry is apparel being pushed as more shoppers migrate online. that's your business flash update. clobbered is a technical term for you. scarlet: there you go. speaking of clobbered, there are tech headlines that grabbed attention. travis kalanick is out as ceo of uber, plus such an a della and other tech leaders travel to the white house to meet with president trump. "bloomberg technology" anchor emily chang joins us to wrap up

the week in tech. emily? thank you. im joined by our correspondent who has valiantly been covering uber and john giles. in d.c., there have been discussions of how productive these meetings can be. how do we think this one turned out? >> this is the beginning of what i think will be a long process. initially, it was a pretty collegial atmosphere. trump was talking about concessions on h-1b one visas. he years concerns that they do not -- he hears concerns that they may not be a look at the workers they need. tim cook made comments, which i think we will hear in a second. there's a lot of work to be done. jared kushner talked about the changes,s to approve

data on floppy disks at dod. i think they have started to do the work. what timt's look at cook had to say to president trump directly. let's listen i and. cook: the u.s. should have the most modern government in the world and today, it doesn't. it's great to see the effort that jerod is putting in and working on things that will pay back 5, 10, 20 years. tim cook did not join the presidential council by choice. he tells me that he does not think they are terribly productive, but he thinks it is important to join the administration, whatever their politics are. they say, we disagree on immigration. we disagree on the environment, right question mark he cares about veterans issues, and that's one of the things jared kushner wants to modernize.

tim cook and the rest of tech will work with trump where it matters and where it benefits them. emily: got to talk about the uber. big week question what >> every week. emily: travis kalanick resigned. >> it's really crazy. the ceo of uber has resigned. and bill gurley, the steward on the board, so instrumental in a lot of their recruiting and in the process, they got rid of travis, also stepped off. it is the mind blowing week in the world. they: you had a preview of game of thrones maneuvering. they delivered this in the mail -- this letter asking for his resignation. tell us more about what happened. only: what he could not do the board, get the board to ousted travis, he got a coalition of investors including fidelity, five investors altogether and had his partners

hand-deliver this letter to travis and, your investors have turned against you. you need to resign. we have this rape case and there are issues. you put the company at risk. you need to step aside. emily: we know they had another or meeting yesterday. what is the latest? where are they now? emily: in the scheme of uber dramatic board meetings, not the top of the list. that matt kohler from benchmark, they are now on the board and they are beginning the search progress to find a ceo to replace travis. they are moving that forward. emily: it does not seem like anyone is waiting in the wings to take this job. it seems like they are starting from scratch. >> they are talking to candidates. there is no clear favorite. it is a matter of finding some well-liked, high profile

executive who has run a big organizational ready and can help recover the brand and the organization. emily: the search for the next hoover's ceo well dominate the headlines, i'm sure. haslett made an agreement to produce vehicles in shanghai. what can you tell us? >> a big change from the way that they make vehicles. it would be a break with tradition. but this is a big market for tesla and they have faced the carsariff when they bring manufactured here. that puts them at a disadvantage. this is the kind of thing that gets them closer to the public and where there is a lot of demand for tesla. emily: the biggest car market in the world, that is what china is. thank you both. scarlet, i will send it back to you. scarlet: all right, thank you so

much, emily. emily chang and san francisco. trader is options looking at how to play the health-care care sector. from new york, this is bloomberg. ♪

julia: this is bloomberg markets. im julia chatterley. scarlet fu. i'm temp options insight with julie hyman. julie: thank you. me, our officer from recon capital. talking about health care. health care of 3% on the week. and, you know, there have been a lot of different things going on with health care. do you think the rally has legs beyond the week? >> i think it does. we are seeing a higher incidence of chronic disease and illnesses

. the companies are running efficiently, doing very well on finding new chores. what are they growing on? they are growing on the pharmaceutical side of the business. if you do have a tailwind, should health care pass, because a lot of uncertainty will be removed and we are seeing longer phase outs, things that can be happening, so it should not immediately hurt the entire space. blunts seen as more of a blow to health care. especially on the campaign trail and the rhetoric. that: but is your call health care could go up to help call?egislation agnostic could we still see the rally based on some of the fundamental drivers you are talking about? >> yes, exactly.

they are increasing dividends, doing strategic partnerships with each other. that's really good for health , especially these companies that we fast track. these companies are not only benefiting from the demographic change, but structure wise, where they are running their businesses. the call and the trade for today is going out to august, with health care sitting at 12.5% implied volatility, that is extremely cheap. what you want to do is just buy the call. what you're going to do is buy the $81 call in august and it costs about $1.15. health care moved 3% this week alone. should we get something passed in july or even say they work through the july recess, you will really benefit from this. moved even 2%care yesterday and then start coming back.

two times the amount of calls were being treated towards puts. the news came out that this administration is going to be talking with the senators opposed to it to get it passed and you saw two times the amount of calls. the tradingome of surrounding the health-care bill was confusing. yes, you see a direct effect on and sureit -- medicaid is. but the drug makers and many of the biggest insurers who have acadoned much of the exchanges, it does not matter as much. >> it does not matter at all. that is why when you look at the xl to make your trade, 10% is biotech. biotech was a pretty significant yesterday. they were dwarfing what the overall space was doing. america is not their loan market. look what they are doing overseas. a lot of the revenues are upgraded in the united states. that is net plus.

especially because they are growing. this is a binary trade. you can do stock replacement or add exposure. the markets will do 2%, 3%, 4% on the news and you can buy this call and participate. ok, kevin kelly. we will keep watching xl be and keep track of what is going on with health care legislation. questions.olitical we will speak to bob crandall straight ahead. from new york, this is bloomberg.

mark: i am mark crumpton. it is time now for first word news. the number of republican senators opposed to the obamacare replacement bill is

now up to five. dean heller of nevada expressed serious reservations when he spoke to reporters in las vegas. this bill that is before the united states and it is not the answer. it is simply not the answer. i am announcing today that in this form, i will not support it. heller, a moderate republican senator, is vote.ered a key swing he is concerned about the potential rollback of expanded medicaid eligibility. a vote is expected next week. bernie madoff is pointing the earliest a few of his and richest investors saying they are partially to blame for his massive fraud. he was recently questioned as part of a lawsuit involving his clients. he says the so-called big four, only one of whom is still alive, were like