tv Bloomberg Surveillance Bloomberg February 7, 2019 4:00am-7:00am EST
simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. england deals with uncertainty. times, democrats target wall street with new proposals for levies on financial transactions. presidential hopefuls on the left wrapup plans. savings, theost chief executive tells us the environments are to blame. we have announced a 500 million euros saving plan. ♪
francine: good morning, everyone. welcome to "bloomberg surveillance." check on the markets, but first, breaking news out of facebook. we understand that german courts have been ordered to change -- have ordered facebook to change user policy. facebook is combining user data from various sources, something we can keep an eye on. or have are changing, been asked to change their data policy. coming up, first let's look at the markets. you can see the stocks europe 600 down, a little bit of pressure overall. it started with asia of its concerns we're at the end of the rally in -- rally.
cable and euro-dollar down. coming up, we speak to the chief executive of north hydro. the company posted a loss for a pretty tough year for the al -- aluminum market. will get plenty on that, but first let's go to new york city with your room berg -- bloomberg first word news. >> democrats are setting up a call for a financial transaction tax, which replace a levy on the fraction of a percent. it would tax high revenue trading and generate revenue. jay powell is giving a positive assessment of the u.s. economy. the federal reserve chairman said the economy is quote in a good place, this as investors from pimco and vanguard say the peg it has killed off the immediate risk of yield curve inversion.
president trump is nominating a senior treasury official to lead the world bank. he is seen as a loyalist, a sharp critic of china, and keen on a shakeup of the global order. don't miss our interview later. says he expects to announce all of the territory once held by the islamic state has been one back. partsoup controlled large of syria and iraq but has lost the best majority of the territory due to global and international military efforts. pompeo is reassuring allies they're not being left behind by the presidents troop withdrawal plan. nott is a tactical change, a change in the mission. theoes not change structure, design, or authorities on which the campaign has been based. it simply represents a new stage in an old fight.
>> the global search for sovereign bonds seems to be good for italy. investors are casting aside concerns of a recession. they have raised some 8 billion euros, but the imf warns there are still falling short on much-needed reform. they say economic growth will stay below 1%. italy's central bank has dumped a hawkish stance and delivered a surprise rates cut. giving policymakers room to support the government and spur growth. the rate was cut by 25 basis points to 6.25. this was the newest decision after stepping down in december amidst a spat with the government. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. the bank of england has long
been at the mercy of brexit. economies are disrupting plans and officials are likely to hold the benchmark rate at their meeting today. the focus will be on governor carney's youth conference and the bank forecast. keep the conversation on boe. joining us now is a european economist at hsbc and an economist at bloomberg. thank you for joining us. when you look at the concerns, what should we be looking at -- lookingan day for? think they need to send a hawkish message. if you look at the yield curve, the market is not pricing in a rate hike until 2021. the bank of england has been consistently saying they want to
do one of the year. first, the voter, and that others in terms of the inflation report. you'll want to look at that forecast number. if it's about target, it is a signal the bank of england is not happy with the way markets are pricing. we saw that the last 18 months with a talk the market up for a hike, and then did not hike. what happens this time? >> they certainly will not hike this time around. what is happening with the yield curve is investors are worried about the snow deal risk. if you look at the market, every time the risk of no deal, or the perception rises, the yield curve flattens. so the implication is they think the bank of england will cut your that is completely -- cut. that is completely contrary to the guidance they have been giving, and they been talking about significant rate hikes. our view is very similar to five years. -- fabio's.
will want to send a hawkish message. is it not giving the idea if they can hike if there is a no deal brexit? if inflation goes up, that they hike. view terms of our generous , we don't think they will be able to deliver rate hikes, that is because we don't think the economy is strong enough. even and in an event of let's call it soft brexit, then we would still see some headwinds making it very hard for the bank of england, particularly considering where the global world is going. we don't think the ecb will be able to hike.
in that environment, probably hiking rates would be a policy mistake and they might have to reverse it. , they need toat signal to the markets that they have got a little bit too far out. francine: do you agree with that? past march. in the case of a deal, we think they hike quickly. yououtlook is weaker, but have got fiscal stimulus going through, a low oil price, and that will bolster domestic demand. and you have got pay growth picking up. siu are seeing the outlook is consistent with a couple of hikes. the banks say they will do one a year, but they are saying this potential they can do it twice a year. once that cliff edges out of the way. but it is waiting for that to happen, which is why they want to anything today. if there is a no deal
brexit, how aggressively the they need to hike? if there's a no deal brexit, the need to cut rates. ? do you agree -- francine: do you agree? >> yeah. francine: then why say they need to hike? >> the shop, the tariffs on imports, most likely and there is a supply shock and a demand shock. we think it is the demand shock the economy suffering in the face of no deal that they will focus on. francine: what does that mean for pound? >> on a no deal brexit, we have got the pound falling to 1.10. francine:we would agree that woe inflationary pressure. a general view for the pound is quite dependent, obviously, on the outcome. for 1.37, but we think the market is not pricing in the possibility there might
not be a brexit at all, which is why we got a bit of an upside. on a soft deal type of scenario, we can see the pound headed towards 1.35 towards the dollar. at the moment, our forecast is quite dependent on what happens at the end of march. it is required to make projections beyond that. francine: certainly is. up next, a shift to steepening. -- vanguardackberry are amongst those saying they no longer need to worry about yield curve inversions. later, we speak to trump's nominee to head the world bank. this is bloomberg. ♪
francine: economics, finance, politics this is "bloomberg: surveillance.". let's get to our is the flash. goldman ceo lloyd blankfein has taken to twitter in his spat with bernie sanders over stock buybacks. he tweeted it is a surprise to be criticized for not paying higher salaries. the senator earlier tweeted that instead of making the rich richer, billionaires should consider raising the pay of ordinary workers. facebook has been ordered to policy, to change user
preventing the giant from combining data from various sources unless users agree to they say they disagree with the decide -- decision, citing fears composition. societe generale has cut profits less costs and review less profitable parts of the business after a 29% revenue slump. . announced a 500 million euros saving plan. in order to take into account this new environment and improve the structural profitability of these activities. sorry the most after announcing a buyback of more than $5 billion. tore are stepping up efforts close the discrepancy between they say with the company is
worth and what the market is. proceeds will find the repurchase. it will be the biggest buyback in softbank history. that is the business flash. francine: thanks so much. there are being commission publishes new forecasts, attention will be paid to the asent of growth projections evidence mounts the slowdown may be deeper and more prolonged than anticipated. in u.s., the fed chair says the and what he is calls a good place and financial systems remain strong. he also said that policymakers are independent and do not have to bow to political pressure. independenceecious to political concerns. ourre directed to carry out work in a nonpolitical way. the other side of that has to be accountability to the public. aboutne: let's talk
global growth and monetary policy and still with us is fun deal from hsbc. -- fabio from hsbc. how bad could it be for the eurozone? >> from the european commission perspective, the starting point is so high, the cuts will be sizable. we're 1.9% growth, 1.4%. italy would be the one everyone is watching, because it is reported they might cut. clearly, the environment is one of growth, much weaker than what they had anticipated. and certainly the ecb is still anticipated. we are not headed for a recession. we think there is a resilience in the domestic demand. us is whyestion for this is not translated get into more consumption. there has been a significant slump in terms of confidence you look at the underlying data, it is of the highest level in more than 10 years.
we still expect a little more domestic demand. that they haves deteriorated so much business confidence that we might be in a prolonged slump. if we look at what the fed can or cannot do, is that due to monetary tightening? >> we think there is more space for the fed to do something, including the latest data from the labor market. it shows there was a trend in the u.s. economy. there is a reason for the fed to hike another time in september, see by 25 basis point. we don't think the same is true for the ecb are good at some point, they will have to come to terms with reality, and for them , it would be very hard to tell hike rates. and it is not important enough for them, the concerns around profitability for the banking system, to do a couple of rate
hikes. for them, it is about the economy and inflation. next summer, inflation can be as low as 1% in that environment. it will be hard for them to start the right hike. francine: what does that mean for euro dollar? for us, all of that environment is still good for the dollar, which is why we got becauseollar at 1.10 the fed has more firepower, even in a bad growth situation. they can cut rates and the ecb struggles. also, if you look at the very , there are very good reasons for continuing to invest money in the dollar. if there is a no deal brexit, what kind of impact? could you have? does it hurt italy even more?
>> it does not hurt them more. if germany has a trade circle of 60 billion with the u.k., the u.k. is a very important trading partner, they go to the u.k.. it would have an impact, certainly, and ultimately, they would try to do everything to avoid a no deal scenario, and that is true both for the u.k. and the eurozone. be impact there would clearly against these weak growth environments is something the eurozone would be more worried than, for example, in 2017. they could probably afford it more, now they would certainly be more concerned as it could tip the balance between slow growth and going back to the recession. francine: if we see slower growth in italy, will there be a fight about the budget again? fight on the budget is almost inevitable.
happen in the spring, because i think as long as the reason for the fiscal slippage is lower growth, the region commission will probably look through. they look mostly at structural balance. on, theou think of next italian government has penciled hike,3 billion euro they've already said they don't want to do it. they cannot find those cuts, so yes, the likelihood of another tussle with the budget is quite likely. francine: thank you very much. coming up, a surprise move by india's new central bank governor. we're live in mumbai to find out what is behind the unexpected rate cuts. this is bloomberg. ♪ francine: this is "bloomberg:
surveillance." india's central bank has cut benchmark rates, becoming the first in asia to increase are in cost. it was predicted by 11 of 43 economists with the rest expecting no change. , let's go tohis bloomberg's executive producer in mumbai. he joins us now. first of all, good morning to you. what prompted the r.b.i. to cut rates? >> inflation, the headline inflation number has been
steadily falling. came in atading 2.2%, an 18 month low. committee the the head of room to go ahead and cut interest rates by 25 basis points. clearly a surprise as far as they are concerned. most of them anticipating a status quo. the other important thing taken place is that the policy has shifted stance from calibrated tightening to neutral. this, in a sense, underscores the bank of england was important and that the r.b.i. is giving growth conditions. it could be supporting and stoking economic growth. weeks, last couple of bond traders have been spooked by the skewed record announced -- huge record of borrowing announced by the government with -- whereed a lounge
they announced a large program. francine: how does this help his reelection prospects? >> it is an interesting one. prime minister modi, a couple months before the elections, he has already announced $13 billion that include a farming support program. this rate cut comes at the right time because it provides the much-needed support to his reputation as an inflation slayer. he can say he has brought down borrowing costs. francine: thanks so much. brexit,p, more about and talk about theresa may as she is in brussels. this is bloomberg. ♪
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it seeks to make 500 million euros of cost that's, we spoke to the chief executive and she started by asking him where the cost cuts will fall. say, we haveh to posted more disappointing results in the capital markets and what we are doing is not just reacting to a difficult fourth quarter, we are taking into account the environment we are expecting in the coming years and testing a key change versus what we had in mind 12-15 minutes ago -- months ago. it will impact the capital markets. conditions, went need to adjust. refocusing the capital allocation to our areas of excellence.
the distribution of investment products for example. such as our prime brokerage. and our fixed activities. profitabilityless and no capacity to improve. global announced in the banking investor solution, a 500 million euro plan on the 2020 horizon to take into account this new environment and improve the structural profitability. >> will this mean job cuts? what level job cuts is implied for the investment bank? >> it is too soon, we have a process to refine our plan and we have to discuss with our trade unions the consequences. it is too soon to comment. >> what other is on the chopping block? >> we have effectively closed
our activity in asia. our dedicated activities are part of the activities in the review beyond asia. constraints, we have to improve profitability. , long-termings commodity, credit-rating, does that make sense? expensive but does not bring in a lot of money? francine: that was the chief executive speaking to us. let's get to the first word news in new york city. england officials are likely to hold the benchmark rate at 0.75% at the meeting today in the face of brexit and a slowing economy what the focus on mark carney's news conference and the banks forecast, even if they become obsolete with the
exit from the european union at the end of march. stay with us for coverage of the bank of england's decision with the release at midday followed by the press conference by mark carney at 12:30 p.m. london time. the will democrats in united states are stepping up the call for a financial transaction typically placed a levy of a fraction of a percent on the price of a trade but the goal is to curve high-frequency trading and raise revenue for progressive causes with republicans trolling the senate and the white house, it remains a long shot. itsa's central bank dumping hawkish stance and delivering a surprise rate cut, inflation is giving policymakers room to spur economic growth and the repo rate was cut by 25 basis points to 6.25, the first decision by the new chief after the other one step down in september amid a spat with the government. global news 24 hours a day, on air and @tictoc on twitter,
powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. theresa may is in brussels hoping to secure changes to her brexit deal. officials are brace for tense talks unlikely to bear much fruit. following scathing comments by donald yesterday. here is a reminder of what he said. >> i have been wondering what the special place in hell looks like for those who promoted brexit without a sketch of a plan how to carry it safely. more, we are joined in brussels, what can theresa may get out of the eu today? >> good morning, francine. she claims she has a mandate but in the eyes of the european union, she will likely go home
today empty headed. we have heard it from the eu many time, the backstop cannot be time-limited. comments from the irish prime minister who yesterday said something i found interesting, she can get a deal without a backstop that may be cleared u.k. parliament but the european parliament has to ratify this and they will never agree to a deal without a backstop. the unity of the eu playtime being on the issue is holding strong. the head of the council said there should be a special place in hell for brexiteers. is there a sense they have run out of patience? >> that is the sense. .here is frustration we have 50 days until brexit and many say we need an answer for the same in december and in september, the eu feels for almost eight months there has been no progress made.
he always said things that sent a message to theresa may, this is not the first time he criticized the trimester, he did it earlier and that resulted as a disaster for her. it will probably not be a good meeting for the prime minister today. francine: we have talked a lot about the impact brexit is having a business but let's focus specifically on british manufactures. joining us is the chief executive of manufactures organization ees. tonk you for being here better understand the implications of what you are going through. what does your association want from brexit? >> a deal. no deal is too damaging to the manufacturing sector in this country. in the automotive sector, reported that customs and what it would do to the highly integrated supply chains but there are many other details,
particularly in this late stage where it is not certain about the trading conditions. francine: why are the details coming up at this late stage? >> everything around the trading's with europe, no contrast past march because they're not sure about the terms of trade. one thing worrying is this idea that it is 50 days to go and for those companies exporting under european trade -- free trade agreements and if you think about southeast asia where it is six weeks on a ship, that deadline is two weeks and the conditions when they land, what tariffs and customs, because we have not those agreements in place and it is not clear for those companies. there is risk involved. francine: can manufacturers stockpile? that is a disaster if we have a deal. >> there is that worry. i did moment, half of manufacturing activity is about building inventory. stockpiling materials and building inventories before --
so lots of working capital and cash is being tied up and doing that. if we get a deal, months of inventory in the system that has to be released. there is a big strain on working capital now in terms of building that inventory. it is limiting investment. cash is being used for that and not new investment. 70% of manufacturers are not investing in capital at the moment. francine: is it difficult to put a number on how much this will lead to losses by -- either because you are having to release it or having stock and doing a no deal brexit? >> it is different by different sectors that a substantial part of manufacturing activity at the moment is around building inventory and that is at the cost of the people in the supply chain. the largekely manufacturers asking for that inventory will pay for that until they take the inventory. it is building up a large bubble of working capital.
that and all of the other issues we have about the regulatory environment that it will be like and the legal trading terms, what they will be like, which is still not clear, needs more work to be prepared for a no deal. we are not ready. francine: what is downing street telling you? >> they understand these issues and they are working on a deal. onm fox is working hard trying to get those transition agreements in place with the 40 countries we export to under free trade agreements, recognizing that time is short and we are only two weeks away from loading the ships and getting them to southeast asia. the time pressure is immense. we need a deal agreed as quickly as possible. francine: does the government give you legal advice, manufacturing is meant to be the pillar of the post-brexit u.k., do you have a manifesto of what people should do and how you prepare for no deal? >> the government has worked hard and we have a lot of
technical notices but there are a lot of gaps in it. it is a large integration we have had with the eu for 40 years you cannot hope to cover all of those regulations and one technical notice. there are a lot of gaps and uncertainty. people do not know what to do in the circumstances. we do need a deal, it is critical that the eu, theresa may, and permanent get together and we have a sensible exit from the eu. francine: thank you for joining us. the chief executive of ees. next, the chief executive of north geithner of joining us for his first interview after they posted their biggest quarterly loss since 2015. we will talk about them. this is bloomberg. ♪
francine: this is bloomberg surveillance. norsk hydro biggest quarterly loss has focused investment is on whether a full restore in brazil could be further delayed by the disaster. shares fell the most in four months after they reported a higher raw material costs because of disruptions to its plant had resulted in a fourth-quarter loss. joining us on the phone from oslo for his first interview of the day is their chief executive svein richard brandtzaeg. thank you for joining us. give me a sense of what the next 12 months will bring? what is our biggest risk and how do you plan to mitigate it? >> the biggest impact on our restored -- restart, in brazil we are running 50% capacity. documentation from the
environmental authorities we can run our operation safely. from independent also , statingies in brazil that we can't operate safely. operate safely and it is up to the judge to decide. when the judge will open up for production in brazil. there are some uncertainties in the market because of trade and development of the macroeconomic situation. there are some softening of demand in some markets. overall, the alumina market is in a deficit -- aluminum market is in a deficit. are you expecting trade disputes affecting your plans to continue? and trade disputes to escalate? >> that is something we are
concerned about. are opportunities in the u.s. that of impacted the premiums in the u.s. market. that there is healthy growth domestically in the u.s. and in europe. we see competition from china. it depends what happens next with regard to trade. francine: how can you restore investor confidence? you are stock sold off quite a bit, are you concerned your investors will not stick with you and what can you do to reverse of fortune? >> i think the investors are concerned about the brazil situation and the impact of the economy on the company and that is why we worked day and night with the authorities so we can come back as soon as possible. that is one of the first things for us.
we also continue with improvements, we continued to develop our position with customers and have a long value chain. we have a wide range of markets where we see development. francine: you mentioned a potential for softening demand growth. can you take precautions to avoid that? >> we have a strong market position and good relationships with the customers. transportautomotive to be lower demand this year because it was extremely high in this market last year. we also saw last year very growth inand, 6%, 7% building an aluminum in u.s. last year and we expect that to come down to more normal levels. i would not say they are weak markets but we are back to more normal demand in some segments we saw had very high last year. francine: thank you very much.
svein richard brandtzaeg, chief executive of norsk hydro joining us. facebook has been ordered to change its user data policy by germany, a decision to end the chart from combining data from various sources unless users agree voluntarily. facebook says it disagrees with the decision, sending fierce competition in germany. you learn -- thank you for coming in. what does this mean for facebook? >> in the short-term, it will be a long time going but this is unusual. we are used to data privacy, the irish regulators said seven probes and facebook in ireland. we are used to this. interesting here is the german regulars are trying to do it -- use antitrust laws that usually works on how companies compete to protect the consumer. that is a novel approach that
could be adopted throughout europe. francine: will this affect other tech giants? >> we will have to see, facebook is interesting because they have a dominant position in social media. they are able to use that. we will see what the german courts do, this is the first place this will go as facebook has not corporate it with this probe. during the press conference today, they say facebook did not try to address the concerns. they did not try to mend it and come up with a settlement. they are going to court and say this is an outlandish use of antitrust law. it is used to predict competition and not consumers in this way. francine: thank you. -- protect competition and not consumers in this way. francine: thank you. democrats are targeting wall street. details next. this is bloomberg. ♪ francine: economics, finance,
tourism, earnings, downgrading even the two stable -- to stable. publicis, organic revenue dropping three tins of a percent and the had forecast a gain of 2.5%, they said it would be a bumpy ride in the first quarter and are slumping by the most since 2002. , the mineorsk hydro in brazil -- the refinery i should say that was closed down for concerns continue, already weighing on costs. investors worried will -- it will exacerbate the situation, it the timing of the reopening is not certain and they still need legal approval.
in october 2016 low. francine: wall street could be under pressure from a new democratic tax plan on financial trading. it is a way to curb high frequency trading and to raise money for progressive policies. itshe 2020 president raised underway, hopefuls on the left have been putting forward proposals. elizabeth warren suggested a 2% of 50 tax on wealth billion -- $50 million and defended her plan. >> i talk about this with people across the country and they get it. they get how the rules are rigged to help the wealthy and the wealthy -- well-connected, and they are ready for change. francine: joining us is a senior writer stephanie baker. how popular are these proposals? >> surprisingly popular. there was a survey done that
showed that more than 60% first -- 60% of all voters supported her wealth tax. it is seen as a way to pay for popular programs like what many democrats have proposed, medicare for all. and to solve the long-term budget funding issues to pay for entitlement spending, social security and the like. it does have a lot of support, on both sides of the party, you see the republican party having picked up more white working-class voters under donald trump. wages remain stagnant. i think it is you as an equitable and fair way -- viewed as an equitable and fair way to support those voters. francine: do they have any chance of passing under president trump? >> not in the current configuration with the republican-controlled senate and donald trump and the white house. should democrats gain control of
the senate and white house in 2020, some proposals could go further. hillary clinton proposed a tax that she would impose on high-frequency trading when she was running. these have been bandied about for years. andas been looking at it has been divided over what to do about a financial transaction tax. francine: is there a sense that the democrats are going much further left, or do we have to see who they come with as a presidential candidate? >> it is such a crowded field and many candidates have come out, kamala harris, elizabeth warren have proposed more left-wing policies. i think the more moderate wing, we are waiting to see about joe beto, better o'rourke, -- a rourke, the polls are indicating that most immigrants want the candidate that can beat donald trump, even if they do
not agree with all of their policies, they want someone who can win. francine: stephanie, thank you. bloomberg surveillance continues, tom keene joins me from new york and we will have coverage of the bank of england's decision at midday followed by mark carney's press conference at 12:30 p.m. london time. we will also look at what goes on in the markets. i have a couple of moves and we are expecting the european commission to come out with new forecasts. for what they have to say on italy. and the commissioner in charge of financial affairs. this is bloomberg. ♪
and a slowing economy, will mark carney off the surprises. democrats target wall street with new proposals for financial transactions. presidential hopefuls on the left ramp up their plans. the changing environment are to blame. >> we have announced in the global banking investors solution, a 500 million euro savings plan. francine: this is bloomberg surveillance. i am francine lacqua in london and tom keene is in new york. eu forecast for 2019, the big revision is from italy, the growth forecast in italy has dropped from 1.2% which people thought was too optimistic to 0.2% which means it could at huge applications for the standout we have seen in the past between italy and brussels.
tom: we had germany last week, i will have a chart in a moment which says all. it is fascinating, the bank of england has no options within the united kingdom and with europe rolling over, you wonder what the choice is for mark carney today. todayne: a lot of people, it will not happen but give us a good indication on whether they want to be hawkish and if there is indication or is a no deal brexit, whether they will hike because pricing in the market is not there. marcus do not price any kind of boe move until next year. first, let's get to the first word news. british prime minister theresa may goes to brussels, trying to change the brexit deal she reach with the european union last year, she wants the eu to change the most contentious part of the agreement, the so-called irish border backstop. there are a few signs they may compromise. mayuse committee
investigate whether foreign governments or individuals had improper leverage over president trump. intelligent committee chairman adam schiff says he wants to make sure the policy of the u.s. is driven by national interests and not by financial in -- financial entanglement involving anyone else. president trump calls the move presidential harassment. federal reserve chairman jerome powell says the u.s. economy is in a good place, he gave a short but positive outlook at an annual event for teachers. he says unemployment is low and 2% inflation. the fed has signaled in recent weeks it will be more patient when deciding how to adjust interest rates. in a surprise move, india has become the first nation in asia to ease borrowing costs this year with the central bank cutting its benchmark interest rates by a quarter point, the 6.2 .5%, the first policy meeting for the new governor. the indian inflation rate is under 3%.
more problems and the french banking industry, a bank shrinking its market business and cut key performance targets after trading revenue plummeted. revenue from fixed income and activities falling 29% in the fourth quarter. we spoke with their ceo. a $500ave announced planon -- 500 million euro in order to take into account and improve the structural profitability. >> global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. one screen of data, not much going on, weakness in bitcoin and futures negative five. euro weaker. francine: this is what i'm looking at, overall, markets are
taking a breather. following asia. global stocks are drifting off and dollar extending the rally, treasuries also rising, india and investors trying to assess the surprising interest-rate cut by the central bank. , to see if there is indication for mark carney about what happens in a no deal scenario. , downterling slips away to a 128 level. , germanyns in europe with a 1% number a few days ago and the italy number we just mentioned. the italy in you -- the italy in green, the big rebound of germany out of 2008 and what is interesting is that both roll over at different times. italy is at the zero mark and some say in recession, germany has a vector that is not pretty. to say the least. francine: we kind of have a
similar chart. hillary clark helped me with mine, the difference between the 10 year italian and german spread. urine commission figures, they slashed growth forecast for the major economies from germany to china but the slowdown in threatens to make the outlook even worse. that is significant when you look at what is happening with italy. eu cutting its italy growth outlook, the setback for the coalition. joining us is hans. cutting projections from one point to come up with were considered optimistic, 20.2%, 0.2%, cause ofto problems. >> the european central bank has reason to be patient.
communication of the central bank may lead to that direction. why -- it has to do with the slowdown in china. that economies which are specially exposed to trade, they had been hit hard. germany is falling into the category. the italian tradable sectors are huge and there is an element. , it had to of italy do with political confidence. up, the spreads blew bond yields rose significant relative to the other, it had an impact on local funding conditions and we see that now materializing in lower economic activity. the question the market will raise now is, will it be a
technical recession in germany or only will italy study in a technical recession? we have to look eased. -- east. china has moved away from what had been regarded in the past as electing easing. -- reluctant easing. ,rancine: if china gets worse we could have a resurgence of the euro crisis in italy? china, isying, if turning around, we can talk more in detail about that. if china would stay weaker, you would have to build in additional growth risk and we all know the interdependent between economic growth and the sustainability into bond markets. .hat is not new we france that in 2011 and 2012 but we expect china will do -- is now the outlook
weaker than the reality turn out to be. tom: the prime minister speaking for the eu -- and the person speaking with the eu came up with a special place in hell, for the eu the special place in hell is no combined fiscal mess in the -- mechanism and the monetary mechanism is -- if the eu slows down as we see in italy, as we see in germany, as we will see in other countries, does the euro have the ability to adjust to help them with the slowdown? can the eu adjust without the proper tools? >> what you are saying is right. this will launch another mechanism. i believe people have not adequately debated this. the pressure to integrate. you cannot run a currency union without political integration. this economic slowdown we see now will force that into
additional political integration with significant implications on bond markets. tom: can you predict we will see fiscal integration? >> i think fiscal integration is already starting. these steps are small but they will accelerate from here. they have limited time. we do not have safe acids in europe -- assets in europe which will limit the european central bank to maneuver into the next economic decline. it is all about creating safe assets and you can only do that with political integration. francine: i am looking forward to speaking with -- about the italian case but will they have to revise their budget to make up for the slower growth? that the extension of the fiscal policy, which had been tried to be implemented earlier, it had always had to have a negative impact, if the
size of debt in italy, if you increase the funding cost relative to the size of battalion debt, you have -- italian debt, you see the impact of the economy. thatould not underestimate as the trade, slowing down globally quite dramatically, the italian economy. francine: thank you very much, head of global ethic strategy from morgan stanley. coming up, we will speak with the european commissioner for economic and financial affairs, giving a news conference now on those forecasts and is walking off the stage and coming to bloomberg surveillance at 6:30 in new york. this is bloomberg. ♪
>> this is bloomberg surveillance. ,et's get the business flash antitrust the doors in germany ordered facebook to change the way combines user data, they examined how facebook scoops up customer data and whether it uses its market power to make users give up their information. facebook says it will appeal. the shares of the french advertising giant publicis plunging, a surprise drop in fourth-quarter sales that hit , they of other ad firms blame cuts in ad spending by consumer brands in the u.s. the italy biggest bank speeding up cost cuts and bad debt sales, they report it beat its fourth-quarter target for reducing expensive but the banks earnings were better than expected, unicredit is in the final stages of a turnaround focused on cleaning up bad loans and cutting jobs and
strengthening the balance sheet. that is the bloomberg business flash. francine: thank you. decision day for the bank of england, while officials are likely to vote unanimously to hold the benchmark, plans for future policy moves are at the mercy of brexit. theresa may is in brussels to seek legally binding changes to her deal. , it seems like progress is slow, there was a tweet that took the brits by surprise talking about a special help for people who supported brexit without a plan. what is the mood? >> good morning. the prime minister just came behind me and the body language -- she did not say a word. she just went straight in for the hand-check. there are quite. -- handshake. very quiet.
this was hours before we are supposed to get a joint statement. if this is any indication of what to expect, it will not be a good day for theresa may. she will probably go back to the u.k. and beheaded and their delegation is angry about the comment. tom: your reporting has been great and off-camera you have painted the color of brussels. the former prime minister of poland, here is he for the eu. >> i do not recall anybody insulting members of this house and the government and the british people in such a way. what means are open to the house or the government to respond to such a completely outrageous insult? tom: the house of commons forth.e, we are back and i want you to tell me what the body language will be? what does the rest of theresa may's day look like?
indication,s any she will go back and the empty-handed. there are no concessions as the european union has a pack mentality. they stay when you stick together, they need to rally behind ireland and it is not about making concessions. the prime minister it looks isolated and the opposition hates this deal at her own party hates this deal and the eu is not playing because they want to look tough and point at her. the u.k. delegation they feel they should get the opposite, a helping hand, they will not get it. tom: is ireland the single this feature?-- , 85% be frank, in brussels of the deal and maybe 90% is done but the only sticking point is the irish border. for the time being, this may not
hold. 27 behind ireland is strong, not just about one country but they need to send a clear message that the eu will not get , member state to help the u.k. which will essentially be a third country to the u.k. if this gets cleared, you could argue brexit will happen but for the time being, that will not be the case. the boxed up one of the event -- the backstop will not be there and not time limited. francine: thank you so much. now is the lng ceo and the morgan stanley head of global fx strategy. thank you for sticking around and joining us. nigel, welcome to the program. we love to talk to you about -- how is brexit panning out?
>> interesting the prime mister walked past me and striding purposely. thed to figure out implication of a stride for feature outcomes. this will be a long and complicated process, a lot of us got that is the weight will play out. parliament is edging forward. thate moment, our view is a deal will result. francine: some kind of compromise? andolitics between us europe has always been compromised for the last 30 years. going forward, there will be compromises made, and that is a good outcome. you do not want one side to feel they have won. both sides have got politics determining economics, which is not ideal. in america we have a political
overhang slowing down growth in the united states, in the u.k., and now in europe and we have to have political clouds lifted. it is up to the politicians to do that because everybody wants to get on with their lives. and have a good place to live and a good job and get their kids educated. put on holdings because there is so much political uncertainty and disappointingly so. a lot to talk about in our eight hours of surveillance. coming up, a look at the bank of england's decision. and comments by governor carney as well. a half an hour later. he is very punctual on that matter. later, the deputy prime minister of ireland, the most timely conversation. stay with us from london and new york. this is bloomberg. ♪
tom: good morning, everyone. francine lacqua in london and i'm tom keene in new york. the business community of the united kingdom and their ability to focus on investment. talking about the bet on on theg and nigel wilson bet of future investment. state the case right now for you to put a certain millions of
dollars over a five-year business plan into london, edinburgh, liverpool, first place in the premier league. why do you want to invest in the united kingdom right now? >> we will continue to invest in the united kingdom because the towns and cities outside london are booming. u.k., poised in the u.s., in in europe for future economic growth. there is a huge amount of money and massive infrastructure deficit. they consist are at an all-time high in britain. excess demand for housing. the backdrop, the huge political uncertainty, is positive and the danger is, because of a small and leaky border between northern ireland and southern island, tiny amounts of european trade go through, we risk finding europe into recession which is not a that people across the u.k. and europe want to take on right now. tom: i want you to discuss small and medium-sized business.
the simplistic view is big business wants to remain, a lot of other businesses want to leave. what do you say to the levers and united kingdom business? >> people are fed up with the uncertainty more than anything else right now. there is a long transition when the outcome. they business is prepared pretty well for -- big business is prepared pretty well for exit scenarios. we are not seeing that polarization of the debate outside of london. most of the rest of the country wants to get on and sort out their local economies and are doing a good job. manchester has more cranes, more investment going on than it has ever have for long times. glasgow is picking up. around the u.k., the small positive things happening. people are fed up with the political uncertainty. and the consequential downside
if the trade deal is not met in the united states and brexit falls off or some reason in -- between u.k. and europe. people want to invest. francine: nigel wilson of legal general. we will talk more about the boe later. at the gopro chief executive 9:30 a.m. in new york and 2:30 in london. this is bloomberg. ♪
liverpool not in first place. city-liverpool tied. i am sorry. i did not mean it. let's go to first word news. slashed the e.u. growth forecast, saying they will grow just 1.3%. italy's economy is expected to be virtually stagnant. the e.u. cut this forecast by a whole percentage point. european union officials expect talks to be tense today when theresa may comes to brussels. she wants to change the most contentious part of the brexit deal she reached last year, the so-called irish backstop. this morning, little signs the sides will compromise. stands by a few
words ad-libbed in his state of union dust state of the union. .- state of the union he called from our legal immigration after pushing to cut it. he said the u.s. needs more immigrants because unemployment is so low. in virginia, the democratic party appears to be in a meltdown. ralph northam appeared in a racist photo from the 1980's. the attorney general said he wore blackface and a lieutenant faces allegations of sexually assaulting a woman over a decade ago. shares of softbank soaring the most in a decade after announcing their biggest buyback ever. the founder is trying to close the gap between their market value and what he thinks the company is worth. they will buy up to 5.5 billion of stock. global news 24 hours a day on
air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. jay powell says the u.s. economy is in what he calls a good place and the financial system remains strong. he said policy makers are independent and do not need to bow to political pressure. the fed's policy pivot will drift the credit curve before steepening. wilson of legal general and hans redeker are still with us. we are talking u.s. growth but we did not even mention boe. nigel said, we need to deal with brexit one way or another. the boe probably wants to do the same. do they hike or cut with a no deal brexit? that means they could have
a similar outcome as we saw after the vote, so you see how the economy will reckon in the next two months. if you see insurance is no longer required, remove the insurance. i think it will be only limited downside potential of sterling in the case of no deal. the reason why, you look into valuation metrics and find sterling undervalued by about 20%. u.k. areyields in the trading at a significant premium. the dividend yields against the u.s. when you look in other market segments, you will find value in this country. agreement,getting an which i believe should still be our base case, and sterling is going up.
what is the bank of england going to do? all the circumstances it has to consider that could affect the economy. francine: what is the job of the boe today, to indicate to the markets they are more hawkish than they think? hans: i think every central banker will sit on the fence and will not change a lot. why should they? the political uncertainty is sustained. political indications globally and locally have been tending toward weakness. as a central bank, you take that into consideration. you are not moving away from other central banks. look what india did overnight, a rate cut. look what the fed did last week. more fun -- central banks are moving toward the dollar side. if you want a positive outcome on brexit, you will have a positive response in this economy.
materialize on the investment side. the economy will be driven more by investment and less by inception -- consumption, that is positive. again, it comes back to confidence of investment. i do not see any discussion in the media about confidence in business investment. where is it and what sterling level do you need? remain very confident because we can take a very long-term view. that allowed us to continue to invest. .here is a pent-up demand the size of the prize from political agreement is very large, and you have to believe that the policymakers will be rational and actually a leaky should not hold up what is a very important deal for the
whole of europe, and take this cloud of uncertainty off. it is a pretty rosy scenario hans was else -- outlining. people are creating jobs in the u.k. and united states. there is tons of money available. assets are cheap on the fundamental basis. there is lots of positive things we can talk about, but all we talk about at the moment is politics, which is intriguing, but we wish it would finish. tom: do you have a bet on sterling? i am fascinated by morgan stanley's tactical call on sterling. how do you play that? hans: you have to see where you could be wrong. that means when you look at our recommendations this morning in euro-sterling, we are aware the trade could sour. there is a very good chance here, and the chance is that you
get more positive use relative to the calendar -- current observation we do in the media. at the end of the day, we have to look at what is reality. when you look to the northern irish border, you are talking about 4 billion of transactions going through a year. then you look to the rest of the through, mainly going 220 billion. the significance of the backstop debate is about how does that influence the future trade negotiation's between the u.k. and e.u.? some people in the u.k. have concerns that this will intonently put the u.k. this customs union concept. if you give it a timestamp and say, when this backstop may be
removed, or you look into a bilateral agreement between the republican dutch republic of ireland and the u.k., you do have solutions. do not understand why we are seeing this pitch black and a dose of optimism may be justified. francine: how is the housing market? nigel: soft in london, but ok and the rest of the country. -- in the rest of the country. rent is growing and you will see substantial growth in the next five to 10 years. built to sell, people are nervous because of the brexit uncertainty and it is manifesting itself in slow sales in housing pretty much across the country, particularly in london. expecting ae you lot of volatility in asset prices this year? nigel: i think we well, but i
agree with hans. if the politicians put us on the right footing, the business community is ready and willing to invest or their and -- further and uncertainty will disappear. we want much more investment in digital assets but also in people. these things could come together with a good political solution. francine: how are you changing legal and general? in the past you said you have been more active investment decides having a -- besides having a big chunk of passive. do not think you will see m&a in wealth and 2019, but you will see us accelerating our investment because the acceleration that hans talked about is our central case. that is the one we are planning around for further investment in glasgow and manchester, right across the u.k.
local politicians are stepping up while central politicians have all been obsessed about one issue. francine: nigel wilson and hans redeker. coming up, we speak to pierre moscovici at 6:30 a.m. in new york, 11:30 a.m. in london. we are seeing italy's minister of the economy of five speaking -- finance speaking after cutting the growth forecast from 1.2%. this is bloomberg. ♪
lacqua in london, tom keene in new york. we need to go to india come most of the pros got this wrong. harsha subramaniam joins us. we talk about politics in a central bank, a new guy in the block. he cuts rates and he is doing ynormous real g yield. can the indian economy move forward with a real decision to cut rates? a couple of months ago we were talking about how the administration was at loggerhead with the bank of india. in two months, things have turned around. the administration appointed somebody who used to work in government. lo and behold, you have the entire dynamics dramatically
changed. the inflation headline number has been falling consistently. at two pointnumber 2% in december has been at an 18 month low. they have the headroom to cut interest rates by 25 basis points. they moved monetary policy from calibrated tightening to a neutral stance. the governor goes on record to say he will give equal weight to supporting growth. this is music to the ears of policymakers in new delhi. tom: that is a calibrated politics? we have powell, trump, and the politics in washington. ?s this just accentuated is it really calibrated politics? harsha: this is a classic power play that has unfolded and modi has been successful. we are just two months to the
elections. even in the budget meetings last week, the government said they have broken the back of inflation. the timing plays beautifully to the narrative prime minister modi will be building. claim in theto last four years he has won over inflation, brought prices and the cost of borrowing lower. the timing is absolutely right. francine: does this help with the modi reelection? harsha: as i said, this gives them the ammunition to say he succeeded with real issues in the economy. look at the budget, and the fiscal gap is large. we do not know how they will fund the stimulus to the tune of nearly $30 million.
the math does not quite add up. politics, other things matter rather than actual details about the economy. francine: harsha subramaniam in mumbai, let's get back to hans redeker. when you look at india, we are talking about markets in the break and waiting on the emerging markets, is that on the back of tightening monetary policy? hans: we have been getting long and valuations have changed in the meantime. positioning has become positive to emerging markets and we think we are getting into volatility into desk and global asset markets. we are arguing from the declining availability of global capital. in the case of india and the impact it will have on the exchange rates, people think a
surprising rate cut by the reserve bank of india. you have to see that in the context of the real yield in the country relative to the global capital ready to go into funding this country. this i think is very different to what we have seen before in the case of turkey, where we have seen a significant decline in real yields and that caused the turkish lira over the summer months to come under tremendous pressure. we have the same observation in india. -- well the currency react will the currency react to an increase in the markets? there will be a collection -- correction. that is where i would stop. francine: is it basically a china story?
then you change your view on everything else? hans: china will play in, but in the case of india you have to consider it is about an inflation story. andprices are coming down that will provide additional relief on the inflation rate which allows room to maneuver from the central bank because decrease oil prices the real yield in india. this type of outcome we could see again provided that oil prices are falling, but china is an important part of this equation. people are pitch black in their outlook when it comes to china. people have to go into statistics, social funding statistics. they have to look at what
capital has been recently doing and what type of capital import we are seeing in china. people are not looking into this. capital imports in china are increasing in bonds and equities. there is assigned direct investment is rebounding. when you look at the relative performance of the equity market , this is telling you the same story, a story of increasing confidence over the last couple of months. francine: hans redeker of morgan stanley. coming up, and interview with joyce chang at 1:30 p.m. london. this is bloomberg. ♪
stock units, they pay out if the unit is sold or goes public in 10 years, the clearest sign gm wants to spin off the unit. more problems for pg&e. the company contained a natural a pipe thatm exploded in a major thoroughfare in the city, spreading to at least five buildings. e.g. any declared bankruptcy after being stuck with up to $30 billion in liabilities. at chipotle mexican grill, same sales- same-store increased. digital some debts sales make up 30% of chipotle's total. that is the bloomberg business flash. francine: societe generale is to shrink its trading business as , andoks to make cost cuts
cutting their 2020 profitability target, announcing trading revenue dropped 20%. spoke with then ceo. effectivelynnounced in the global banking, 500 bylion euros saving plan 2020 two take into account the environment and improve the structural profitability. i do not see in the short-term any cross-border merger because the environment is not there. there is not enough visibility. of -- someack contradictions between regulators regarding what kind of banking model they want for europe. morenk there is now much
issue gathering -- even if there is a hard brexit scenario. the transition might be longer if there is a soft brexit, marvin u.k. economy in -- more of an impact on the u.k. economy. francine: that was the chief executive of society -- societe generale. joining us is our bloomberg european finance editor. talk to me a little bit about french banks. they were kind of the poster child of what a european bank should be like and do like last year. have things changed? >> there has been a marked turnaround. if you look at how bnp performed, the headwinds have gathered. a quarter was made hard by the
stock market rout for the and of last year. many of these equity derivatives came back in a vicious way to stand the french banks. we saw that definitely in the case of bnp. tom: we are way too short of time. i want to do this again to talk about french derivative history and the collapse of their derivative confidence across the nation and their economics well. we will continue. adam posen with us. i want to talk to dr. pozen about an outstanding article on socialism. ♪
he nominates david malpass to run the world bank. the prime minister is in brussels. our maria tadeo there. of the irish p.m., may britain. she and brexit will have a special place. best bnp paribas are craters and they will review less profitable opportunities. the french banks have a special place in quantitative hell. lacqua. keene, francine all american banking has been waiting for this. this is the first big regional or super regional merger. , let's call itst two southern banks, they will merge.
35,000 -- make it 59,000 employees compared to the big banks with 220,000 employees. a combined revenue in the vicinity of $21 billion versus jpmorgan at $110 billion. the size of 1/5-ish jpmorgan. hugely anticipated. francine: i find interesting the financing. about 57ers will own percent and suntrust owners will own about 43% of this new combined company. tom: the body language of management, king will be the new ceo, kelly king. what is far more important is wait andbeen wait and
finally we are seeing them coalesce to compete with the ascendant 2 -- too big to fail. there will be much more on this across the bloomberg today. right now, our first word news. shed theirhe e.u. slah forecast growth down 6/10 of a percent from the previous forecast. they warned brexit and the china slowdown could make things worse . italy's economy is expected to be virtually stagnant. this morning, theresa may is in brussels where she met with jean claude juncker. she wants to change the most contentious part of the brexit deal she reached last year, the irish border backstop. u.k. are 50 days until the is set to leave the e.u. and little signs of compromise.
jerome powell says the u.s. economy is in a good place. unemployment is low and prices are near 2% inflation. the fed has signaled it will be more patient when deciding how to adjust interest rates. india has become the first nation in asia to ease borrowing costs, the central bank cutting by a quarter of a point. it was the first policymaking for the new governor. india's inflation rate is under 3%. more problems in the french banking industry, society general cut key performance broth -- profits. currencies falling 39% in the fourth q. >> we have announced effectively , a 500global banking
million euros saving plan in the 2020 horizon in order to take into account the environment and improve the structural profitability. viviana: global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much. let's do the data, we have a perfect guest to talk about this bank merger. futures deteriorate, -13. the euro off the bid. i just have one screen today, but i have got to watch sterling and what is going on in brussels. francine: and in the u.k. with the bank of england, that decision in less than 55 minutes and then we follow that press conference in 90 minutes. pound at 1.2 910. european stocks are pretty much unchanged but drifting lower.
1.1336.lar, tom: i am going to skip my bloomberg this morning. what do you have? francine: i basically have the difference in yield between italy and germany on the back of the commission having to lower their forecast for italy. that was quite significant, from for 2019,rrently 0.2% which could have fiscal implications for the government and coalition. tom: adam posen is with us of the peterson institute, uniquely qualified on the bank of england and the you dynamics. -- e u dynamics. the consolidation of american banking, we see that within the regionals and within the recovery of the too big to fail banking's. , given theng
monopoly, with the consolidation of american banking towards what canada has? adam: there is nothing wrong with that because there is not really an alternative. as we saw in europe and japan, tooou got over-banking and many players in the system no one can make a profit. what remains wrong is too big to fail. in a world where you are allowing too big to fail, you have to let them consolidate because otherwise the medium-sized banks get screwed. there is canada, switzerland, there are examples of countries that have a few big banks but the central bankers are very aggressively on them, and that is what we are lacking. tom: bb&t and suntrust will merge. here is the read of the day, someone that adam posen and i adore. this was brilliant on
socialism is used by president trump and the liberals. socialism has been debased into a millennial #for the left and schoolyard talk for the right. they redistribute the outcomes of the market. they don't replace the market. , the democratic proposals party we are in an uproar apart private, conscript capital in the pursuit of social priorities. you are the expert on this as well. this morning, does america have to worry about the reincarnation of eugene debts? adam: i wish it did. if there were not pitchforks and the streets after the callous comments of trump officials during the government shutdown with people in bread lines, there will not be any eugene debs rally. we need to worry about a lack of
social democracy. what you need to do is look around the world. most countries have a social market economy, rich democracies. in the u.s., we pretend we don't to you give huge subsidies privileged interests and do not pay for your fiscal deficits because you do not raise taxes. if what some democrats are calling socialism turns into more relevant -- revenue for the government and shutting down political monopolies, i am all for it. francine: will it lead to more than consolidation in the banking sectors? .dam: i do not think so a lot of serious people are looking at the opposite, in a world of networks and industries , winner take all industries, how you reformulate competition policy. tom made reference to the gilded age and some of my colleagues are looking at, do you go back
to the model of teddy roosevelt and say, we got to break up the trusts? there is a trade-off because some of these big network companies are there because they deserve it, but that is a very rational, reasonable thing for the u.s. to be looking at. it is not about consolidation per se. francine: where do you think we are headed socially in america? adam: i would love to see the estate tax raised for symbolic as well as economic reasons and social justice reasons, and i think that may happen. we should be heading towards a offsetax, a carbon tax by something it does to four people. we should be -- poorer people. interesting work on trying to expand the income tax across the political spectrum, a lot of
good things are in pretty good agreement, and we need to work on shutting down the international tech shifting. -- tax shifting. tom: we have a million things to talking -- to talk to you about. the fear of the right in america is, we do not want to be like the socialists in sweden, italy, france, etc. that is our arch fear. are we tending towards european socialism? adam: no. 60% from where we are to european socialism because it would improve the well-being of people in the save 10% from the gdp being thrown away in the health care system, but it will not happen. we need to incrementally make things better. it is not that socialism is the ideal, just the u.s. has gone
off in this crazy path. tom: i got in email from a woman writing in from italy writing -- i am not socialist. we have a merger, bb&t and suntrust, it has been widely anticipated. all sorts of people to talk to drive the conversation forward. the regionals combine. it is about 1/5 or 1/6 the size of jpmorgan. i will let the cfa's tell me what that number is. much more to talk about, a conversation with year moscovici, the year -- pierre cut -- pierre moscovici. please stay with us. worldwide, this is bloomberg "surveillance." ♪
tom: finally, bank mergers in america, bb&t and suntrust will combine. revenue as maybe in compared to jpmorgan, $110 billion. $1.6 billion in synergies. i do not believe that number. it will be larger. us, onng perspective for short notice with bloomberg banking. brian moynihan bank of america saying it was only a matter of time. what is the typical percentage of revenues taken out over three or four years when two of these dinosaurs mate? number they are giving you is 1.6 billion but there will learn -- likely be a lot
more. is revenue.t deal mergersbeen waiting for among smaller and large-size banks. tom: what is the why of now that brian moynihan predicted that dollars? sonali: this is a crisis. we have not seen deals among firms and midsize and large firms have struggled -- small firms have struggled. firms i'm doing a big deal, so it is not surprising to see a big deal immediately with suntrust and leaving today rather than somebody bigger. francine: will we see more deals
like this or consolidation? sonali: that is likely. once country -- companies start merging and a smaller space, a dam is set up. these deals are difficult to get done. deals and smaller banking are diversifying deals. becoming see,us b a mortgagebuying company, and trying to find scale in areas they do not have for the sake of more in assets and cutting costs. francine: is this regionally? is the somebody on the west coast that want something on the east coast or something else? sonali: this is definitely something that is creating a firm that will have $442 billion
in assets. it is something that is definitely being done to create scale. that is the second paragraph of the press release. they are doing that to compete with the larger guys. tom: thank you so much. we will have much more from our banking team all through our coverage today. adam posen with us in washington, with the peterson institute. we must get to european news. we are most fortunate this morning to have with us brian .evitt of oppenheimer funds via,s go back to walkover ovia, which i believe was the third-largest bank. when it merged, within three years it had vaporized into the ether. will that happen to one or both
of these banks? .rian: it remains to be seen this is a byproduct of the environment we are in. the tax overhaul, deregulation in the financial system, so you would expect these types of mergers to compete with the larger banks. tom: catherine mann at citigroup , famed international economist, is adamant our combinations are unheeded inoving the time of roosevelt and before that. moreword scale is nothing than a fight for profits for the gilded age. partially right, but the reality is what is happening in the banking sector is you have a handful of banks who control most of the deposits . for midsize and regional banks, to the extent they can grow the asset and deposit base and
create synergies, this makes sense, given the amount of money they are sitting on. tom: is there a geographic play here? technological -- are we too technological? i think suntrust in washington is when abraham lincoln did his deposits. it is almost gone in the time of technology. brian: this idea of going to the local branch or spending time with the local bank lender, those days are a thing of the past. this is more of an attempt at creating synergies, a bigger deposit and asset base to compete with the big banks. francine: thank you so much, brian levitt, oppenheimer funds senior strategist stays with us.
malpass at 8:30 a.m. in new york. breaking news out of the u.k., the government still intends to hold a parliamentary vote on february 14. they had said this was the day but there was media coverage saying theresa may may not get a new deal by then so she may delay that vote. stillk. government is intent to put that vote to parliament on february 14, and nothing is confirmed on another jeremy corbyn/theresa may meeting. this is bloomberg. ♪
♪ francine: this is bloomberg "surveillance." tom and francine from london and new york. what is happening in the political space in the u.s. with tax proposals. joining us is stephanie baker. we heard the latest proposal. we heard a lot from the democratic side. popular are they went the united states? stephanie: it is popular if it is positioned as a way to pay for popular programs like medicare for all, which seems to garner the support of a majority of voters, and a more equitable
way of showing up things like income inequality -- shoring up things like income inequality. they are big in the democratic republicanso the party working base. -- and weok at this want to get adam posen back into the conversation with the huge news flow -- i would like your thoughts on your expertise, which is the president's comments on investigations in the state of the union. is this the week where mueller reports? stephanie: i do not think we can predict when mueller will issue his report and whether it will be released to the public. clearly, in the state of the union address he was concerned about the investigations, that they would hamper economic growth. the house is launching its own
investigations that are set to go on for the next two years, including attempts to get trump's tax returns. this is not the end of investigations into the trump presidency and business. tom: stephanie baker, thank you so much. really appreciate it. americaic merger across , the biggest merger in a decade , suntrust and bb&t will combine. in europe, we are combining into a major debate. bank of england coming up at the top of the hour. pierre moscovici will speak at 6:30. this is bloomberg. ♪ i'm a veteran
my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. the latest inisn't just a store.ty it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. ♪ flow,n extraordinary news francine lacqua with all that is going on in europe from queen victoria street studios. i am in new york with
appropriate american chaos. we have brian levitt of oppenheimer funds and adam posen at peterson institute. move away from american banking and your good comments earlier to what we are seeing in europe. we have pierre moscovici coming up who is at times, a french socialist. that is his history coming out of france, his noted a claim in the e.u. is it a europe falling into recession and when you and jacob aerkegaard suggest, it is unique social recession? adam: i do not know about recession literally, because it early -- italy has never really made it back in a sense. it will be a hit to growth and revenue. germany will probably bounce back. the last quarter numbers were pretty out there.
i do not think they are supported by much. what you face in europe as you faced in japan and we are facing partially in the united states, secular stagnation. you cannot raise rates because then things go out. there is no investment, and then you have your own specific factors exacerbating that. it is not a good luck. .om: let's move forward the state of unemployment in europe is different than not fully employed america, at least that is what i am told. that is the backdrop for this new socialism, a primal cry for people who are not in the advantaged age, isn't it? adam: the u.s. is unfortunately starting to look more like europe but fortunately, europe is starting to look less like itself.
labor force petition patient has got -- per dissipation has gone up a lot in europe, and spain and greece have lots of youth unemployment. there are lots of places in europe pulling them in. part of the message from the u.s. that the fed is not following, you can pull more people in if you run the economy up. levitt, thisan screams opportunity for me. oppenheimer funds is a unique and international perspective. do you load the boat? brian: valuations are attractive -- tom: and the yield is outstanding. brian: to unlock that value, you need a catalyst, so any return framework over the next five years, you would expect returns
outside of the u.s. including europe to outperform. dr. posen makes a great point when talking about trend. the problem we have with the u.s. growing above trend, the rest of the world growing below trend. we need a catalyst. the u.s. and europe are slowing. we need to have a clear signal from the ecb that they are not committed to raising interest rates, and stabilization out of china. policymakers are working hard at that. francine: is that the catalyst or just avoiding the worst if they do that? brian: i am just saying a catalyst to unlock value. 2017you had in 2016 and was significant chinese stimulus that lifted up the rest of the world, and that was the catalyst. we are not getting that type of stimulus out of china now. it will not look anything like it did in 2016 and 2017.
the catalysts now is slower u.s., stabilizing china. we working -- we're working to get there and that should unlock value. adam: i think francine is right that this is not sustainable, that just getting policy back up will not be a good medium turn look -- medium-term look, but there has been a lot of flight to the u.s. out of concerns abroad and there is a lot of room for money to rotate. francine: thank you both, adam posen and brian levitt both stay with us. the european commission slashed for major forecast economies, warning that brexit and the slowdown in china could make the outlook worse. italy's forecast was cut to 2% -- .2% from 1.2% previously.
commissioner. muska vinci is with us. deficitut fiscal targets. now that you are lowering projections, do they have to revise the budget? comm. moscovici: our system is based on a european semester. we are not discussing today about fiscal targets but we will come back to that in may. we will monitor the situation. the major message i gave this morning was about europe and the eurozone. we still have solid growth in europe. in eachll over europe and any e.u. and eurozone countries, that with a slowdown. we forecast 1.5% average in the and 1.4% for e.u.
the eurozone, so we are still on track. we are creating a lot of jobs that we need to watch uncertainty in asia and the administration and italy. 0.2%, which is much more significant. youcine: commissioner, are concerned about a return to much higher bond spreads his growth in italy is zero and its deficit goes up? again, we arei: not today discussing about policy issues. we are not discussing fiscal or financial issues. what i know is that the situation in the market is now quite under control and that the commitment, the agreement we reached with the italian government in december was the right thing to do because things
would have been much worse without it. reflection and it is not about this or that howct of public policy, but to enhance potential growth in this country, how to foster productivity and competitiveness. ist is badly needed now reform, and that the message is not about an alert, is not about the budget. it is about, our growth is weak. what can we do to enhance it? francine: 50 days until brexit, can you get a deal done or have the odds of a new deal brexit increased significantly? comm. moscovici: things that we know now after the vote in the british parliament is that the deal was reached as such did not convince the british parliament. they do not want either a no deal, but may would not be prime
minister. what we need to know is what the british parliament wants and when you to build together a solution that avoids the no deal that nobody wants. it happens at the project -- precise moment as we talk now. in the european commission discussing with president jun cker, both sides are on a reflection moment. 27 members are united and do not want to open a renegotiation. nows up to the british side to say how to vote a new deal, which obviously they do not want. tom: well you were taking a degree in philosophy years ago, the smart guys were doing quantitative economics. bnp paribas going down in flames and socgen with a restructuring
off of failed financial activities. you and i heard in davos, the need to clear european banking. how urgent is it for the german government to clear out deutsche bank challenges, italian bank challenges, and under your watch, up up european banking? up european banking? comm. moscovici: we think the situation is not an alert for us. there are situations that need to be addressed on one hand. on the other hand, there is still almost more in some countries, a high number of nonperforming loans that need to be addressed. we have no particular worry for the banking sector as such. since 2012, we have built a banking union. we need to complete it.
basically, we have done a good part of the job. this commission is creating banks to move on without. tom: you are moving on from there and you have spoken with deutsche bank about the need to clear the german banking market with the merger of deutsche bank with someone else. comm. moscovici: again, i am not going to comment on that. ovicithat was a mosc answer. francine: it was good. comm. moscovici: i try to give answers usually. francine: i agree. tom: acting like an american. francine: almost. you are calling on donald tusk whether there is a special place in hell for brexiteers. is there a special place in hell? comm. moscovici: i am not saying
the e.u. is paradise, but for the brexit since the start, we respect the will of the british people but we regret it. hear wasot to see and a fragmented political class, and we hope really that in the coming days -- because we have a daysays, something like 50 -- we will find a way. it is up to the british side to tell precisely what they want and to reflect on what kind of relationship they want with the e.u., whether it is inside or outside. yet -- now we are not but time is of the essence, time is running out. pierre moscovici, thank you so much for being with us. adam posen with us.
you are an expert on german culture and german theology. they have to clear their banking system. can you explain why this is so hard for germany? adam: there is three reasons. the first is because just like every word else in europe, you noe too many banks making profit so you have to shrink the number of people employed and look at cross order mergers. those are always painful. the german specific things are that they have great pride in their companies. to a lesser degree, but deutsche is seen as the national standardbearer and they do not want to look at china and the u.s. and france having big banks and not having one. that is a silly thing they believe. they are worried about turning over lots of finance for their small and medium enterprises.
that is mostly done by the public banks in germany, but that means the big banks, commerzbank and deutsche, cannot make a profit. they will have to choose how to make that work and do not want to. you'sdam pros and, thank -- adam posen, thank you so much. brian levitt quietly with us. let me tell you about bloomberg radio, 16 minutes of mark carney and the beer we announcement. .- boe announcement look for that morning briefing on radio. please stay with us. this is bloomberg. ♪
bloomberghis is "surveillance." mergergest global bank and a decade, bb&t and suntrust banks will combine in an all stock deal to create the sixth largest rank in the u.s. bb&t shareholders will own 64%. more problem for pg&e and san francisco. they contained a gas leak in a pipe that exploded under a major thoroughfare. no one was hurt. declaredek ago, pg&e bankruptcy after $30 billion of liabilities from the wildfires. shares of soft bank soaring the most in years after announcing the biggest buyback in years. they are trying to close the gap
between the value of the company and what they think it is worth. that is the bloomberg business flash. tom: you have intimate knowledge of san francisco and these fires. what part of san francisco is that? viviana: very residential, as well as commercial. i grew up right on the avenues over there, so this is a big deal, and just one more problem for pg&e. certainly the wildfires we have talked about for the past couple of years, but aging infrastructures, natural gas leaks, wiping out virtually a whole city block. hurtado with her jefferson airplane collection in her youth. we star of bloomberg radio, will be together at 9:00 a.m. i have to ask you about the bank mergers. allison williams has been
predicting this for ages. the first big deal we have had out of the financial crisis. brian moynihan of bank of america suggested recently he expects to see more big bank m&a and maybe another competitor from a big bank. tom: would someone put twitter out of their misery? onen: one could -- paul: could argue they are not viable in this digital platform. they either try to live on the crumbs of the digital advertising or get bought out by somebody bigger. sweeney with me, 9:00 a.m. on bloomberg radio. i am looking forward to that. we will continue forward on twitter this morning. we will speak with the twitter cfo in the 2:00 p.m. our.
"surveillance." tom and francine from london and new york. fiat chrysler is coming out with fourth-quarter results just a touch above estimates. just minutes away from the bank of england rate decision. stay tuned for mark carney's news conference at 8:30 a.m. in new york. mpc,u were still in the which way would you go on the vote? i've seems the boe needs to give a hawk's message -- it seems the boe needs to give a hawkish message that do not know what form brexit will take. adam: there is no point in them saying anything about the forecast. they should say, we pass until further developments are cleared. francine: is it right that the market seems to say nothing is
going to happen in terms of interest hikes -- interest rate hikes before 2020. brexit, were a no deal would they not have to hike? , conditional on no deal brexit or anything close, the initial impetus would be for the bank to cut to offset the shock. hikewould be forced to with the pound crash and inflation. by market essentially, pricing in no rate hike until 2020, are pricing in no hard brexit. tom: given the challenges mr. carney has in banking, is there a phillips curve or are we on to a new territory yet undefined? adam: we are getting toward new territory. --re are differing employee
opinions when it comes to this. my colleague thinks the fed is alive and well and others say it is not there. i say if it is there, it is so flat that you can do what the fed is doing and the boe is doing, and wait for the inflation to come. tom: your world at oppenheimer funds is there is no real rate. where is the risk free rate? brian: the neutral rate for the fed funds rate is -- tom: i want to know what the risk free rate is investment. this is there y intercept dr. posen. brian: what is most important is we need to keep interest rates low for a long time. the bank of england and federal reserve cannot move. hiked 25al reserve basis points a couple of years
ago and a series of hikes after, very disruptive to the market. we cannot go down that path in europe and the united kingdom certainly cannot. adam: what you are implying is the neutral rate is really, really low. it may not be negative, but it is really, really low. tom: really, really, using scientific notations. francine: i want to get you some of the brakes -- breaking headlines we are getting from the e.u. they will not reopen the withdrawal agreement. jean claude juncker saying he will not reopen the withdrawal agreement. the spokesperson saying that may demand it legally binding changes -- demand it legally binding changes but they will not agree. we arengle best chart,
bouncing around, but it is that kind of newsday. adam posen, thank you. brian levitt, thank you. of bb&t ande y suntrust? levitt will steal this morning off to tv. suntrust in yellow. bb&t in white. they are not getting it done. show me the chart again. jpmorgan is the benchmark. fortress dimon getting it done. adam posen and brian levitt, thank you. watch for our news from the bank of england. ♪
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. and the army taught me a lot about commitment. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. alix: big bank deal. bb&t and suntrust say they will merge, the biggest global bank
merger in more than a decade. incredibly shrinking socgen. they announce cost cuts after trading revenue tumbled. boe rate decision. managing brexit with low unemployment and higher wages. that decision out right now. completely expected, no change when it comes to rates. however, the bank does cut its growth forecast, saying the brexit damage has increased. voting 9-0 to keep interest rates unchanged. they do see weaker growth because of brexit. david: what mark carney has been able to say that we have a deadline of next week. alix: the cuts are real. cutting growth to 1.2% from 1.7%. these are substantial cuts here. david: we may raise