tv Bloomberg Markets European Open Bloomberg March 1, 2019 2:30am-4:00am EST
nejra: welcome to bloomberg markets: european open. i'm anna edwards, alongside matt miller in berlin. matt: today the market say that's what we wanted to hear. china leads gains after surprises to the upside. trade deal iss a not far away, sending futures in the u.s. and europe higher as well. the cash trade is less than 30 minutes away. anna: bringing back the rally,
stocks gain as china shares signs of reversing the low, as u.s. officials are reported a preparing a final trade deal. jay powell reiterates the feds' , andnt approach on rates bill gross speaks to bloomberg exclusively about the challenges powell faces. >> it is a challenge between interest rates and the deflationary forces that continue to exist. the question becomes, can central banks inflate? musk's double-edged sword. tesla delivers on its promise of a new model three, but shares dip as the ceo says the company will not post a profit this quarter. matt: take a look at where we stand right now as far as futures are concerned. we are looking at gains on the back of the kai-shek pmi data out of china and optimism maybe from the white house that we
could get a trade deal with china. hasourse, that optimism been bouncing around the markets and should already be priced in, you would expect. 1% futures up two thirds of right now. ftse futures up about 4/10 of 1%. what do you see, anna? in chinasee that story and a whole host of china themes boosting equity sessions. the chinese market is up strongly, but it clearly does not stand out in the gmm. the hong kong market reflecting optimism around china. whether it is the data you look at or the talk of a trade deal with the united states, although be looking ahead to the national people's congress and what they can deliver on growth in stimulus. all of that has focused minds on the upside for equities. as a result, we see begin in one of those havens. let's have a look at the other
side of the gmm, because i want to point out what is going on in energy prices. brent crude up by just over 1%. barrel.ti go over $57 a we are also focused on u.s. gdp data. that came in reassuringly. we see commodities moving higher this morning. in u.s.ian stocks equity futures edging higher. european futures as well. that is the latest reading as china's economy beats expectations. this offers reassurance to investors concerned about the global growth outlook. the yen has also fallen to its lowest level since december. let's into the markets with our strategist in singapore. what does that weak yen say to you? is this complacency, or are markets not concerned about anything? >> i am not sure it is
complacent. i think the overall backdrop is positive. there is a chance that negotiations still break down, but we have optimism on that front. if we get a trade deal, the world is looking good for markets. global growth is perfectly fine. we are getting central banks providing liquidity overall. few the fed, one of the central banks removing liquidity, is talking about not doing that anymore. have centralwe next supporting the economy, china fighting stimulus, talk of a trade war. it is looking good for global assets. if trade talks break down, it breaks down across markets, but that is not the case. we should see the yen continue to weaken overall. anna: we have the people's congress taking place in china next week. what our expectations like? supply-sideng about reforms, and one of your
colleagues pointed out that this is a term that could mean all sorts of things for all kinds of people. we focus on that next week for china's story. >> absolutely. supply-side reforms is the buzzword, even though none of us know what that might entail, which is why it is exciting. you can skew it to your underlying bias. i think people are excited -- people who are bullish are excited, and people who are bearish think it might mean nothing at all. what it might actually mean is focus on the credit side. removing support for some of the old economy industries and providing more credit to targeted creditors to private companies that are part of the new economy. overall, it looks like it could be pretty exciting and will be another step in this iteration towards china trying to be more targeted in its deleveraging drive, or the fact that it has pulled back on its broad leveraging drive, but it is still doing some focused withdrawal of credit.
in kind ofer step making the policy from china a little more nuanced, more targeted, and i think it is a good thing longer-term. day --he question of the the mliv question of the day is fascinating right now because of the current emt fed. will the u.s. or italy have higher 10 year yields by the end of march? for those who have not read into wt, there is the famous ar. why are you comparing u.s. and italian 10 year yield? surely is it is not because of modern monetary theory. theycorwin it is because yield the same amount of sentiment right now. if you do not think they are naturally comparable, there is a trade implied. if you think they should be trading at different levels, there is money to be made. which way will he go in march? what is important is the context.
for quite a few years, we have seen u.s. yields quite above italian yields on the 10 year level. at one point, it was 125 basis points above. the second half of 2018 changed that, and we have generally seen italian yields above u.s. yields for the last four to five months. at one point, it was 55 basis points above. now italian yields are coming down with the general positivity . u.s. yields have started to climb a bit. where does it go from here? it is a call overall on markets. it is a way to hold not too much duration risk. it is a relative bond trade. are you constructive or not? if you are constructive, italian yields will come lower the ecb providing more stimulus, and you might see the you see beals get higher. -- the ecb yields get higher. italian yields might blow out again. anna: will we see more support
from the banking sector from the ecb, or will we have to wait until next? i think one of our surveys at bloomberg suggested that. mark, thank you very much. you can join the debate and get involved with the question of the day, will the u.s. or italy have higher 10 year yields by the end of march? use the function ib+tv on your bloomberg. let's get a first word news update. ra: north korea's kim jong-un has vowed to continue nuclear negotiations with president trump, after their two-day summit collapsed due to disagreements over sanctions. the pledge was released through north korea's state-run news agency. kim called the summit "productive. israel propagator plans to indict vitamin netanyahu for bribery, fraud, and breach of trust.
the indictment tremors through israel's political landscape, 40 days before a closely fought election. it could usher in the end of netanyahu's political career. retires today, but after the most storied career in finance, he has some surprises left. he revealed to bloomberg he has been diagnosed with asperger's syndrome. he said it is why he has been such a successful investor. onl: it helps you to focus longer-term things without .etting mixed up in the details it allows me to take what we call the secular approach, a long-term view, a good view to take as an asperger. debra: don't miss the full special on bloomberg tv tonight and over the weekend. an indian air force pilot
imprisoned by pakistan may walk free today, but it is unclear if his release will be escalate a tense standoff between the nations. india says it will not engage in talks with islamabad unless the country takes steps against terrorism. with the election just weeks away, there is little incentive for india to back down. day,l news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. and i am matt? -- anna and matt? matt: debra, thanks very much. next, musk's broken promise. tesla announces a cheaper model 3, but says it will not be profitable in the first quarter. we will discuss this hot topic. and remember, bloomberg radio is live on your mobile device or on dab digital in the london area.
optimism on trade coming through in the asian story. here is a look on what we are watching out for today, a slew of economic data hitting the bloomberg this morning. financialt manufacturing pmi figures for the euro area at 9:00 a.m. u.k. time. it is likely to reinforce a weaker outlook for the sector. the factory gates will come out at 9:30 a.m. u.k. time. look for any weakness ahead of the brexit data. let's get the bloomberg first world news. here's debra mao in hong kong. debra: gap is spinning off old navy. the market like the news, sending shares soaring area the company will consist of the and bananaand republic. 's ceo says he does not see the company filing for an ipo in the next two years, but
at some point he says it will become an option. the ceo of bahrain sovereign wealth fund said it is open to the idea. he is an investor in a british maker of supercars. >> one of the things we want to communicate is this is a very rational investment, not emotional. at some point, they will realize value, either partially or wholly, an ipo is one of the options. we do not need the money. we are well-financed for what we are doing. uber is reportedly holding discussions to buy its dubai-based rival. it would expand the ride-hailing giant's reach in the middle east. rival is valued at about $3 billion. uberr is aggressively -- is investing aggressively. debra mao in hong kong with your bloomberg business flash.
tesla has fallen short on a big promise to its investors. elon musk says the company probably will not be profitable in the first quarter, contradicting past predictions. but there was that are news -- was better news for consumers. musk announced a cheaper version of the model 3. he promised years ago it would be available for $35,000 at some point. now it is. joining us from tokyo is dave mccombs to talk more about this. what is the significance of the price cut here? is this a bigger promise that elon musk had to fulfill? ise: that's exactly what it very of investors have had to bank ways of looking at tesla. it is a carmaker that sells cars for more than they make them, and then they make a profit. it is like a slice into the mad genius of elon musk, in this
grade future where profit can always be made next quarter. hisou are looking at that, promises can be impressive, and this idea that they are capable of looking at a mass-market vehicle, selling at a mass-market rate, 35,000 dollars is actually a key number because that is the average price for a passenger vehicle in the u.s. target point for them, and if they are going to make it, that is a sign they are capable of pursuing that particular promise. another way to look at it is it is a sign that demand is not as spectacular as we thought it was. is a company that has been noted for having a backlog of willing buyers, and it has been trying to meet that demand. cars as fast as they can make them, yet at the same time they are offering a lower-priced version, suggesting they see an opportunity to get more buyers and. matt: -- anna: what about the probability
comments we got from musk? clearly the price they have sold that has been painful. must saying making these final price cuts has been excruciating. how will investors react to what this does to the bottom line? is another example of going on twitter and saying, yeah, we will make a profit next quarter, and then he pulls it back. he said there are specific charges the company is taking that is related to that. some analysts did not believe him in the first place. if you look at the average of projections for this quarter, you will see there is an expectation of a loss already, so it is not a huge shock. at the same time, when the head of the company comes out and says, we are going to make money in this quarter and then they don't, there is bound to be some disappointment. you are bound to cease selling of shares. matt: why do they have to cut dealerships?
they are trying to spin it as this is a way to lower the price for the base model three, but it seems like there could be something else going on. do they not want to keep all the employees on payroll? it does not make sense why you would want to reduce your presence -- your workshop presents more than a dealership resins, because people have to somewherer tesla when it breaks down. dave: good point. you could talk about tesla being a strong global brand, which it is. it's not like you would need that much exposure. they are not competing head-to-head. but they do need that particular service presence. when you plop down that kind of cash for a specialized vehicle, you want to know if that specialized service will be available in your neighborhood. you will not have to drive halfway around the town to get a part replaced.
without dealerships, that will -- hurdle too make make. there are many dealerships. get prime having to real estate. it is costly to make when you have a brand like tesla. you have a big online presence. those kinds of car buyers are comfortable looking at the vehicle online. of course they probably want to test drive it. that they can still do without having a dealership. >> i want to bring you the news on the bloomberg scoop. to buying --lose we have confirmation about this morning. agreeing to sell and transfer aviation finance division.
you need to hear about the stocks we are watching this morning, so let's go around the newsroom to collect thoughts. emery, you first. >> montclair likely to open fire today. earnings aree likely to proceed. they beat the highest estimates for four year earnings, and ever core saying the custom -- the company is executing strategy efficiently. paul, what do we have on the betting company, the bookmaker?
>> the results are out this morning, very much in line with the expectations they gave in january, so no big surprise area the u.s. -- no big surprise. the u.s. is what the market is looking at. liam hill is in a big position, the only book major that's involved in all seven states. , 33 million dollars, are about in line with market expectations. that should please investors. we may actually see gains from wpp today, even though they had another year of losses and another year of lost client. goldman seeing these results are better than expected. to 2%.e losses of 1.5% analysts expected one point 9%. it is not that far off, so expectations low, meaning more positive session for wpp today. thank you for joining us.
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anna: a minute to go to the start of cash equities trading. let's see how we are positioned. we are getting data out of the eurozone. we will talk about that in a moment, but we are looking at manufacturing pmi data. later, we get the pmi manufacturing data for the u.k.. let's keep an eye on what is going on with the pound. the oil price is up by three quarters of 1%. we have seen interesting conversation around the extent of --
the possibility of opec plus living on into the future. keep an eye on that. u.s. gdp adding comfort to commodities, perhaps. the story in asia has been a strong one. in china, lots of reasons to be cheerful around trade. the optimismexpect in asia to filter through to the european equity markets. let's see how they deal with that positive story on trade out of china, and the positive data. we had the pmi manufacturing i should number that are than anticipated -- better than anticipated in the market, something that was helping the chinese equities story gain momentum as we went through this morning session. combine that with talks on whether we could see a deal between trade and the u.s. in china -- it between the u.s. and china in just a few weeks. this is how the european equity market is growing. here is a look at the sector picture.
on a day like today, generally optimism around trade and global growth. we see very little red on the screen, a tiny slither of red. generally speaking, we are green across the board. >> we have 525 stocks that are gaining this morning. only 56 are down right now. we have luxury goods makers adding the most points to the stock 300, 4% gain. nestle is up as well. louis vuitton, hennessy. a lot of consumer staples and consumer discretionary winners holding up -- pulling up the stoxx 600. on the downside of the ledger. -- on the downside of the
ledger, you have london stock four on therr downside. they are few and far between, but we do have a couple of supermarkets. h&m is down as well as william hill. anna? >> good day for luxury. numbers fromlair the start of trade, and that is playing out nicely. we will keep an eye on the sector. european markets opening higher. is on then china that upside. white house economic adviser larry kudlow says the u.s. and china are on the cusp of a remarkable historic deal. really good to have you with us.
let me ask you about your expectations for trade. on the one hand, we have larry kudlow suggesting that the u.s. and china are on the verge of something significant. i also saw comments by one banker at the mp who says this is turning into something more than tariffs. these are tensions between the u.s. and china that will last for years. there is a different interpretation of the timescales. both views are correct. mr. trump wants strong equity areats president she needs a stronger economy. he desperately needs to see the tariffs problem going away for the time being. i accept the point that there is a long-term challenge. who is going to be the big dog on the block? china is going to be very keen to get there. so, what do you expect the street deal?
anything significant, or could the market be disappointed? the markets absolutely could be disappointed. there will be a deal that the suspension of tariffs will be confirmed. there will be no additional tariffs applied to china-u.s. trade. secondly, the possibility that is not even considered by the market, mr. trump turns tensions to europe. >> that is an important consideration, the next level of thinking. let's go to how you play around your strategy of global growth. you suggest we stay focused on quality and secular road, because -- secular growth, because you do not have great expectations for the global growth outlook. >> i worry that the bulk of market commentators are quite bullish on economic growth this year, in line with the imf view.
i think china is weaker than expected. i was surprised by the pmi data. i thought they were going to be weaker. china is a swing factor that is hard to predict. i do not subscribe to official numbers in chinese growth that are embedded in the imf forecasts. i am correct in saying china's economy is going to be slower than expected. what do investors do? with your view, does that mean you sell stocks because you are concerned about global growth? >> absolutely not. i definitely do not i cap that these levels. at these levels. the risk of the equity is way too high. that said, i think we need to be selected, so i am not buying cyclicals. therefore, i am well positioned in luxury names we have talked about today. anna: tell me about your
exposure. montclair has numbers that looked to be a strong story, up by 5.8%. how does that rub up against your expectations? lvmh has demonstrated compound earnings growth. if i am wrong on china, lvmh will be particularly well. james bevan is going to stay with us. we have a lot more to talk about with james today. it will bring you the stocks on the move. so far this morning, including wpp, which is rising despite another tough year. 1/res killing it, up six and 3%. ♪
anna: welcome back. a positive session underway in europe. the stoxx 600 up by half a percent. accommodation of excitement, i suppose, from the asian session around trade and also earnings news. let's get some of that earnings news. >> montclair beat the highest everest estimates. ever court says they are
delivering exactly as they should be. that stock of a percent. up percent even as they are telling investments that it will be a tough year. goldman sachs says forecasts came in slightly better than expected. what a move, up by 8%. man group to the downside, 2%. earnings dropped more than expected. immune tohey are not the struggles we are seeing in the industry. matt: thank you. let's talk a little bit about the fed. jay powell knows how to stay on message. the fed chair repeated his mantra of patience and says the u.s. economy was in a good place. outlining longer-term threats such as labor force and productivity growth, how will place solutions to the problems -- powell plays solutions to the problems.
but bill gross says the dovetailing of monetary and saysl policies borrowers will be able to bar a more. -- borrow more. bill: if monetary and fiscal policy are together, why can't the government have a $2 trillion deficit the fed is simply going to buy it, like in japan? they would say it would be inflationary, but it has not been because of the deflationary forces. yeah, i would say trump or the next president could go to $2 trillion. james bevan is still with us. i want tol interest ask you about, i am following , and a lot of
people are saying the fed is enabling donald trump as the biggest mmt president. what do you think about deficits don't matter and the u.s. government spending more? >> it is absolutely correct. deficits do not matter much. highld observe that the frequency data on the u.s. economy says the u.s. is slowing faster than expected. .hat, i do think, is worrying i do not anticipate that the fed will raise rates, and i think it will be suspending their quantitative tightening regime. anna: so you are quite upbeat? james: absolutely not. i am relatively cautious. anna: i misheard, i apologize. this is u.s. gdp. 4996 if you want to pull it up on the bloomberg. came in better than estimated, but it shows that slowing trend. james: i would make two points.
one, markets are moving up principally on the effective liquidity flows. they will -- when the bond market begins to call for money, and i think that will be a risky period, april-may. view, a longer-term analysts are way too optimistic about fourth-quarter numbers. behink globally we might looking at a corporate earnings recession in 2019. most analysts are still talking about a good up year. anna: with the recession being the earnings story turning negative what, two quarters in a row? james: absolutely. i am not calling it a bear market, but it reinforces the expectation i have that we should be sticking with quality and growth. being very nervous about overleveraged financials encyclicals. -- and cyclicals. interestinge an
question of the day which i think dovetails on your thinking on u.s. yields. ,he question from the mliv blog will the u.s. or italy have higher 10 year yields by the end of march? you are saying, james, at least in your notes, that if growth surprises to the upside, we could have a bond selloff, driving up u.s. and german yields. i do not know your take on italy yields. but what do you think about the possibility of that, and how would you answer a question of the day? james: i think there is a realistic chance that u.s. 10 year yield to get back above three percentage points if we get confirmation that the u.s. economy is on track. this relates to how far the european union and the eurozone are prepared to relax the stability pact on fiscal policy. in ank that we are still
environment where the politicians want to keep the show on the road, they will kick the can, and they will therefore keep italian yields relatively low. good place to leave our thoughts. us.s bevan staying with let's have a look at your sectors, the ones on the move. bloombergion on the tells us which sectors are moving through the upside and downside this morning, very few to the downside. telecoms and media are the only stocks moving lower. auto parts and household goods moving higher. , state intervention. we will look at why the dutch government decided to buy a 14 percent stake in air france, and what that means for the company. ♪
the dax up three quarters of 1% as automakers and auto parts suppliers rise the most of any industry group in the stoxx 600. air france has fallen more than 13% in the past few days, after it emerged that the netherlands has been building a stake in the business. annmarie hordern has the story. typically when a country is building a stake, we do not see a stock fall. >> this certainly infuriated the french. the french finance minister and dutch finance minister will be meeting today in paris. the french finance minister started this idea, in rental. and president macron built a renault ande not -- it upset the chinese government.
saying, i want to show you what happened to the stock price of air france this week after we know that netherlands built up that stake. you can see it taking a massive leg down. for some perspective, look at it against the msci airlines sector across europe. it is faring better. one thing you may not know is, with these french government holdings, they are performing less on the index than the cap iran. this is something we should keep in mind, because there seems to thisite a comeback with country and nation capitalism in europe. this story really puts it in the forefront. anna: annmarie hordern with the latest on that fascinating tuffle. let's talk about italy.
luigi demaio is confident the party will pull the plug on the , despite tensions. the deputy prime minister says the coalition will remain in place long after the upcoming european elections. endur goal is to reach the of the legislature. the government will last five years. it is part of the government's contract the last five years, keeping a full dialogue with the european institutions in order to spur italian economic development and see italy becoming europe's first manufacturing force. demaiohat was luigi speaking exclusively to bloomberg. james is still with us. marie westg story ann setting out. we had interesting contribution maio about the
government. do you see this in europe as a growing of al-anon, the government -- a growing phenomenon, the government with the rise of populism feeling compelled to get more involved? james: i would say there is a significant tension in the between theystem belief that market should prevail and the belief that jobs and infrastructure and cohesion is more important. thissense, we put up with for years with korea and china, one of the big challenges trump has put forward in his trade agenda. hang on, who is determining prices? because if that's what's going on, that's not right. he has been clear on that front, and i think that is one of the reasons mr. trump will focus on europe after the china deals. people say, come on, who is
going to be in charge of setting prices if your governments are going to have tariffs? matt: two does that leave as the biggest winners and losers? obviously the automakers come to mind as the eu charges a 10% tariff on autos coming in here from the u.s., and the u.s. only charges 2.5% on cars going over there from here? absolutely, when i think about the automakers, i would observe two variables. deals europe has had to with a change in emissions standards, which ultimately was a hiccup. the second challenge, if you were to stack up everybody's e-vehicles,in the markets thoroughly exceed most estimations as to how big the market will be. it is difficult to tell commercially who is going to be the winner. we have heard great news about tesla producing their new budget car, coming online and only losing the so-called infrastructure.
i think the european car manufacturers face a very torrid time. the issue is a lot that is in the price. i think there is a contrarian case for bmw. ofa: there are a lot headwinds for the auto sector, and one we might be pleased about is stability. i have a chart that shows the lack of volatility, the euro-dollar volatility cratering. we have seen the tightest quarterly range since the euro's inception in 1999. good news for european corporate if they want stabilitys in their currency. >> the stability we have observed relates to a very significant underlying tension between the political positioning of europe, encouraging the euro to go lower , and the premise that because the u.s. federal reserve policy is becoming easier, the dollar
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♪ we are 30 minutes into the trading day. bringing back the rally. stocks gain, as china shows signs of reversing its slowdown. sticking to the script. ♪ >> is this battle between central banks and low interest rates that continues to exist. the question becomes, can center makes inflate -- can central banks inflate?
promise.la's broken asla -- elon musk announces cheaper model three but the carmaker announces it will not turn a profit this quarter, as previously predicted. good morning and welcome to "bloomberg markets: european open." imf mellor alongside anna edwards in london -- i am matt miller alongside anna edwards in london. more than 500 stocks on the stoxx 600 going higher this morning. that gives you an idea of the rally we are seeing along that trade story emanating out of china, and washington to a large degree. up just over -- under 9%. we are seeing that having an impact on other luxury stocks.
the numbers may be did not impress, but this is a very shortened stock. wpp up 6.8%. that is another company that reported numbers this morning. it sees another year of falling sales. let's have a look at the downside. just very briefly, we have on the downside. william hill with numbers this morning. let's return to the geopolitics. matt: let's get back to it. there certainly is a lot to talk about after we had the breakdown of the summit, the kim-trump
summit in hanoi. we are looking at live pictures of kim jong-un leaving hanoi amidst some rainy w eather. let's right now get the bloomberg first word news with debra mao in hong kong. is confidentaio that neither party will pull the plug on italy's coalition government. after nine months in power, the alliance is being tested. there is almost constant sniping over issues from migration to economic policy. the tipping it -- the deputy prime minister still has faith in the partnership. >> our goal is to reach the end of the legislature. the government will last five years. it is part of the government's contract to last five years, keeping a full dialogue with the european institutions in order to spur economic development and see italy become europe's first manufacturing force. >> italy's prosecutor plans to indict benjamin netanyahu. the draft indictment sent tremors through israel's
political landscape. it comes 40 days before a closely fought election and could usher in the end of netanyahu's political career. msci will expand the weighting of china listed shares in a benchmark decision. it could see billions of dollars flow into one of the world's most volatile stock markets. it is happening at a time when a sudden bull market in chinese chairs is raising concerns that the market is overheating -- is raising concerns that the market is overheating. global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. anna: earnings reports continue to pour in as the season nears its end. stocks have gained 16% since softening out in december. let's break down the results and reaction.
the earnings season i guess has to be seen in the context. more than half of companies in the s&p 500 beat earnings estimates. that is weaker than last quarter, or 76% be -- where 76% beat. it is not as weak as europe, where 36% beat and 42% of companies missed their eps expectations. there were some bright spots in europe, particularly in discretionary companies. luxury goods suppressed winners -- surprised winners. the pain really concentrated in financials in the banking sector. more than half of firms missed the estimates. the outlook does not look much brighter. analysts continue to see a deterioration for eps in financials.
earnings estimates versus the wider benchmark has dropped now nearing a 2016 low versus the wider market. we have seen week trading results and ongoing litigation, keeping plenty of risk on the horizon. matt: thanks very much. a look at earnings expectations. let's get back to these live pictures of kim jong-un in hanoi. i am getting some conflicting reports. it looked like he may not be leaving, but at a welcome ceremony. he got there days ago. right now being welcomed to the presidential palace in vietnam. you can see kim jong-un shaking hands with looks like some military leaders in the capital city. here for a roundup of the week in geopolitics -- of course, iss featured highly --
dennis j. snower in our offices in berlin. let me ask you about kim jong-un and the failed summit with president donald trump. what do you make of the lack of a formal declaration or even the summit to begin with? dennis: this is more than a failed summit. donald trump has hauled kim jong-un onto the global stage, given him lots of credibility, has received absolutely nothing in return. this is not part of the deal. this is farce of the no deal. matt: what do you see as problematic? if he does get denuclearization -- a denuclearization treaty, i'm sure a lot of people happy about the iran agreement would be happy about this. dennis: i think to be driven by
such false hopes, when it is clear that there has not been adequate preparation in advance is as crazy as to hope that theresa may will sort it all out in the last moments. we would love to have these supermen and supergirl images, but they do not work in politics. anna: good morning to you, dennis. another area of geopolitical tension that we have focused on a lot this week is global trade. president trump said yesterday many times, you have got to be prepared to walk away. he did that in hanoi over the korean peninsula. do you think he is prepared to walk away from china in trade talks or will we get some progress this month? dennis: he is definitely willing to do it, because he has expressed that willingness and acted on it in the past. what he does not understand is that there is no contradiction between america first and
multilateralism. that is exactly what the global solutions initiative in our summit in berlin is meant to set up. that in order for countries to achieve their ends, they need to engage with one another when there are mutually advantageous opportunities on the table. trade is one of them. matt: a couple of days ago chancellor angela merkel said after a speech that she despairs having to explain trade to president trump. clearly she has tried, as have others. it does not seem as if he is going to get it. what do you expect for the u.s.-china trade agreement, u.s.-europe trade negotiations? dennis: i think those negotiations will be rocky. they will be full of uncertainty. uncertainty already is very artful for the economy -- harmful for the economy.
i believe other countries will need to step in. for every tariff that the u.s. imposes, it would be great if the other countries would lower trades, and thereby diver to other areas to send a clear signal and save the global economy. anna: we talk a lot about the conflict between nationalism and multilateralism. you have spent a lot of time thinking about this. do you see any country's managing to pull people from both sides together in a middle ground? is that wishful thinking? dennis: i think germany is playing a very useful role, as is japan. various other countries are doing it as well. these are countries that understand that there is no conflict between nationalism and multilateralism. in a world that is globally
integrated, we have to work together to achieve common ends. matt: just to be clear, things like u.s.-china trade negotiations or working with north korea for peace, you think these are good intentions, you just think the u.s. and donald trump are poorly prepared for it? dennis: they are not only poorly prepared. they do not seem to understand that this is not a zero-sum game. we can both gain. the globe has big problems from climate change, cybersecurity that can only be handled together. that is what needs to be done and that is the way to put america first. that is what the trump administration is to understand. anna: thank you very much. thanks for joining us. we appreciate your time on the program. dennis snower, president of the
44 minutes into your trading day. a positive session in europe, partly because of some of the strong data we got out of china. a private gauge of manufacturing supplies were to the upside. soundlypmi released these estimates. this comes ahead of next week's meeting of the national people's congress. joining us now from newcastle is freya beamish, chief asia economist at pantheon macroeconomics. thank you for joining us. your assessment of the chinese economy and what we will hear next week at the people's congress. what kind of reforms would you expect to see? freya: the reforms that we are expecting to come out of the congress really should be on the fiscal side of things. that's where they really need to move forward, from a broader perspective, at the moment. the targets -- economic targets
for this year will be made official at that meeting as well. the one that is really interesting is the government deficit target, which reports suggest will be increased from 2.8% of gdp from 2.6%. they have already taken quite a substantial fiscal loosening over the course of last year. the deficit is somewhere in the region of 4% or even larger than that. there needs to be clear thinking about how they will proceed with the division of spending between local governments and central government and potentially bringing more onto balance sheet, although i do not expect that to come through in this particular round of congress. that is kind of the main focus, in terms of the brought macro scene. there are a whole bunch of
miscellaneous reforms we need to see from china. one that has received a bit of attention recently is land rights, rural land rights. if there was movement on that, that could really help to increase productivity in the agricultural sector and would chime quite well with the efforts to become more self-sufficient on the agricultural front in lights of the trade tensions unfolding over the past couple of years. the: we had good news on pmi. there were some silver linings to the disappointing report yesterday. do you see some interventions by china already helping to support the economy and help to provide it -- revive it? freya: i think on certain aspects of the fiscal loosening that was undertaken last year and the monetary loosening that
was undertaken last year are helping certain sectors of the economy, particularly infrastructure growth should be picking up and q1 -- in q1 as local governments start to reissue special bonds after a hiatus in q4. that should be supportive to growth. also, the tax cuts we saw for households. households have had their taxes cut in october and again in january. there is limited evidence that is helping on the spending side and certainly there is evidence on the tax data that is -- that that is translating to a decline year on year. that's helping. the manufacturing sector, despite the positive print that we saw today, is still struggling. i think that is going to continue into the second half. the jump that we saw for the february data really comes on the back of quite a substantial overshoot of the downtrend in
the previous two months. some correction was justified really. anna: i am looking at a chart of chinese unemployment ticking up a little. how much is this part of the motivation for china to act? freya: the unemployment data is kind of -- i'm not sure it is particularly representative of what is going on on the ground. probably what is going on on the ground is worse than what is officially been presented. the labor market is such a sensitive issue. the official pmi's have been indicating job shedding in the manufacturing sector for many months now. the services sector has shown softening on that front as well. in terms of jobs, intel is probably of wage growth as well, we are seeing evidence of labor market deterioration. that is what the communist party is really focused on.
we expect them to continue stimulating the economy in the first half while those indicators continue to deteriorate. they are leading indicators. we are not -- lagging indicators. we are not expecting the overall economy to pick up until the second half. continue to see the authorities stimulate on the fiscal and monetary front until we see a trough in the second half. matt: all right. thanks so much for your time. really appreciate you joining us today. freya beamish, chief asia economist at pantheon macroeconomics. coming up, bill gross is bowing out. who will be the next bond king? we will bring you some of our exclusive interview with the billionaire cofounder of pimco. this is bloomberg. ♪
♪ welcome back. 53 minutes into your trading day. european equity markets staging a strong rally today. the bond king is bowing out. for many years bill gross was the biggest name in fixed-income. now as he retires, the cofounder of pimco names of someone who could step up to take the crown. he spoke with bloomberg's erik schatzker. bill: if i said no, that's
probably very presumptuous. to be aching, you have to have -- to be a king, you have to have a kingdom. pimco, $2 trillion. that the kingdom. relative to the size, always missed -- i was always so amazed. i could not convince myself. $2 trillion? that's bigger than bank of america, goldman sachs, jpmorgan. i go, what? if the biggest institution in the world aside from some japanese banks. i go, how did this happen? but it did. that was the kingdom. i would think you have got to have a kingdom. i don't know if that's really insible anymore, unless index funds. if you are the king, you are
just a puppet. the market is making the decisions. probably not. there are still experts in the bond market. i especially like scott minard. [audio drop] did, but ini certainct, it carries a burden. the crown is heavy. >> he who wears the crown, yes. >> you got it. >> are there any other pretenders, let's call them, to the throne you are watching whose careers you think hold
particular promise? so.: oh, i don't think i don't necessarily have a prejudice against jugs gun lock, but i jeff gun lock, don't know. i guess i would stick with scott minard. matt: that was the cofounder of pimco, bill gross, speaking to erik schatzker in an amazing interview. i highly recommend you check that out. the entire interview can be found at bloomberg.com. you will see later tonight, 9:00 p.m. new york time, 2:00 a.m. in london. in a fascinating headline it just crossing the bloomberg, tata set to be -- said to be exploring options in its jaguar stake. i am about to head to geneva on monday to talk to these people.
francine: john optimism, optimism emerges as a trade deal could be on the horizon. tesla troubles, elon musk warns the carmaker will not turn a profit this quarter but delivers on the promise of a cheaper model three. take on the state of u.s. politics and what the fed's next move should be. >> this battle between central banks and low interest rates and d is inflationary -- disinflationary forces. the question is whether central banks can inflate. ♪