tv Bloomberg Surveillance Bloomberg March 5, 2019 4:00am-7:00am EST
>> lowering the bar. china brings dunnage growth goal and announces a major tax-cut. winning over brussels. will theresa may pass her attorney general as macron lobbies for european renewal? almost $9e bond that million in we are live in tokyo. ♪ >> welcome to bloomberg surveillance. i'm francine lacqua in london. good morning. if you're watching from asia, good afternoon. we are also getting data are the
euro area for the month of february. pmi at 52.8 is that compares with the previous reading of 52.3. this is what i am looking at in the stocks europe 600. a lot of focus will be on the trade deal between the u.s. and china. investors trying to digest with china lowering the growth target means for their portfolio. 1333.uro-dollar, 1. coming up, we speak to the leverage any chief executive -- a lamborghini chief executive live from the auto show. let's get straight to the bloomberg first word news. >> hi. china is looking at what could be the slowest pace of economic growth in almost three decades. policymakers setting the gdp target this year from 6% to 6.5%.
it will give the government more room to maneuver. china is hoping for a gradual slowdown. this while it grapples with a debt legacy and the trade standoff with the u.s.. huawei is reportedly planning to sue to the u.s. government. bloomberg understands it will claim the administration overstepped by bending the equipment from its network. huawei is likely to say it is unconstitutional to penalize a group without a trial. the world's two largest economies are nearing the finish line on a trade deal. it could be prized by president trump and xi by early as next month. but the u.s. is warning china could still walk away from talks like trump did. you met mel look ron -- a man macron doubling down on his vision for an ever culture -- closer european union. he wants a climate bank to fund energy transition and a
regulator for internet platforms divorced greater transparency. approving bail for carlos ghosn on his third request. it's at the bond that under $9 million, but the tokyo prosecutor decided to appeal the decision. kyoto is reporting ghosn's release likely to be tomorrow or later. 100pent more than days behind bars. global news 24 hours a day on air and on tictoc on twitter. this is bloomberg. back to you. francine: thank you so much. the geneva international motor show is getting underway. one of the biggest event on automaker calendars. and as the industry deals with uncertainty and the threat of trump imposing tariffs on european autos. we spoke to the volkswagen chief executive about this issue. >> we have been talking to the
trump administration and a european administration because it could cost us. america is a very important market for our brands. porsche, audi mainly. we are trying to really avoid this conflict. francine: matt miller, anchor of the european open, at the big event standing by with another chief executive. over to you. matt: thanks. i'm here with the ceo of lamborghini. pleasure to talk to you. let me ask you about this electrification push. it is really the theme of the show but leonard jeannie is all about internal combustion engines. how much longer will that last? stefano: we are different from the others. no doubt about it, we have to be ready for the shift of the future. have in aere we will
couple of years. i don't want to say when exactly, not because we are not ready, but because still this product is an incredible success with our customers. matt: one of the things i wonder about is production. can you make enough cars to meet demand? or how many do you decide to sell as you are always selling out? stefano: that is the thing we are managing today. the trade and growth and right level of alexa dimi -- exclusivity is the point. han whatto be lower t the market is required because that is the value of our brent. matt: we spoke to the new ceo of audi. the brands of volkswagen are working more closely together to cut cost and be more efficient. how closely can you work with such a standout product with
normal carmakers? stefano: i think the great success we are having is thanks to the group that is benefiting on technology. in the future, we to maximize our uniqueness and it will be beneficial. we cannot go in the direction of the normal because otherwise we will dilute the value of our brand. matt: what about the racing side of things? you come from the racing world and you start to run what is mostly a luxury brand, but you brought it more towards racing. do you see it heading further in that direction? stefano: we are very proud because this year we won the second year in a row. we need to keep fighting for that and we need to make sure our customers are enjoying that kind of experience. i would say it is the right one. we need to see what will be the
future in terms of regulations. but so far, we are strong in this moment, we would be wrong to do another step. matt: what is a differentiator? when a millionaire walked into one of your showroom, he could or she could take a ferrari -- so much available. what makes a customer choose a lamborghini? stefano: we are dynamic, younger. if you see what is our success in social media, the numbers speak for itself. we don't have to say too many words. it's image, emotion. that's the reason we are successful today. i would say there is room for everyone, but we need to have our personality. matt: is the room for other models? getting ador is little long on the tooth. you have the hurricane. the turis.
what is the next product in the lamborghini world? stefano: we need to stabilize the portfolio. we don't have to forget that three years ago, we were selling 2300 cars, this year will be around 8000. we have to be more stable. in the future, we need to be ready, hybrid mobile. matt: there has to be a successor to the aventador at some point with its big 12 cylinder engine. will you be able to keep making those naturally aspirated big blocks? stefano: yes, it will be part of the new aventador, whatever will be the name. of course, it will be hybrid. that is our forever car. it will stay in the powertrain. matt: what about markets? when you look at expansions, i'm sure the u.s. is an important
market, but china has to take first place, doesn't it? stefano: the u.s. is still the biggest market and it is growing. expanding a new markets, for example, india. now getting more important. china, it is another step. matt: does the trade issue affect you? you have a lot of price elasticity. your customers can afford to pay an extra 10% or 20% if they have to, but how does it hit lamborghini, the trade negotiations with china and the eu? stefano: we need to be careful about it but we cannot do anything. our customers are not being affected, but we have not seen any affect so far. understand that the market is changing. the market can give you opportunities or risk, but that is the beauty of our situation so far and we need to react. matt: thank you so much for your
time. steafano, the ceo of lamborghin. francine: thank you so much, matt miller with a great interview. we will have much more with matt on more engaging interviews. next, the tax slow down as china lowers its growth charges and announces a major tax-cut. a tough economic battle ahead. we are live in beijing next. this is bloomberg. ♪
blind-sided many employees with a surprise announcement the electric carmaker will close most of it stores. many sales personnel only found out about the decision when the ceo made it public. until last week, tesla's store strategy seemed to be one of expansion. plans to proceed with a formal takeover for newmont mining despite the board unanimously rejecting a nearly $18 billion deal. is ceo says barrick definitely not risk drawing -- not withdrawing its hostile bid. francine? francine: thank you. china has lowered its goal for economic growth and announced a major tax-cut. speaking at the national people's congress, china's premier said the country must brace for a tough battle ahead. for more, david ingles joins us from the forbidden city. what are the key takeaways from today?
david: they have lowered the .rowth target to 6% to 6.5% the inflation target is at 3% but as you were mentioning earlier, it is these wide-ranging tax cuts so reductions in the vat. $300 million flag tax cuts and social security cost as well. what they are trying to do is leave more money in the hands of the private sector and consumers. thecine: talk to us about budget deficit target. david: right. they have raised it a little bit. the target is 2.6% of gdp in 2018 -- 2.8% is the target for this year. that is not the whole story because they also increased the amount of special local government loans outside the 2.8% the local governments can issue.
it remains to be seen whether or not they will issue this 320 billion worth and whether or not they will spend it, but that is as deutsche bank's chief economist told us that his plan b in k's tax cuts do not result in consumers spending more money. francine: thank you so much. what a backdrop, david ingles. i was a little distracted with a beautiful backdrop. joining us this morning, jim mccormick, global head of strategy at atlas markets. when you look at the trade concerns, the national people's congress and what they said about growth, is china the biggest concern for the world economy right now? jim: it is one of the biggest concerns, but it is also where the news has been most encouraging. the trade rhetoric has certainly sounded pretty positive. the actual economic numbers have been pretty good. what you get from the national people's congress is a
government that is very keen on stabilizing the economy. francine: what does that mean with how much the pboc will do? over going to see more tax cuts or different from 2014 where there was a real estate problem? jim: i don't think it will be a 14, 15, 16 where you had an incredible amount of credit growth. what is clear is china is set on stabilizing the economy. that means credit and credit impulses will start to improve. if you look at the impact china hat on the global economy last year, stabilization itself is a good thing, but i don't think people should be expecting what we saw in 2015 and 2016. francine: what do you make of the trade concerns? only going to find a deal or a deal, shake of the hand and reversal two months later? jim: it has been a difficult government to predict, the u.s. government. relative to what people were thinking a few months ago, we are now talking about the
tariffs being unwound. the news flow is very positive. we just need to see what the deal is going to be. francine: let me bring you to the chart of the china lowing growth china chart. what kind of gdp from china does the world need to make sure does not encounter a significant slowdown? jim: the level is important, but people probably make too much of china's level of growth because potential growth is falling. it is the competition of growth that matters for the world economy. the composition this time around is not going to be as positive globally as what we have seen in past years. it will not be all about infrastructure, real estate. it is going to be a focus on tax cuts and boosting domestic demand. francine: is there a danger because they focus so much on stimulate domestic demand that they are stimulating neighboring countries too much? jim: you see it clearly in the numbers, the asian pmi data has been very weak.
the region is under some pressure. i don't think this is going to be a cycle where china is going to lift all boats. it will be a positive modestly. francine: in the trade deal, are we going to see something about the stability? jim: i think that clearly the currency is on the agenda. it has been missing from recent statements but very clearly, the u.s. wants a stable currency. my guess if they are forced to come of the chinese will do that. nonstory is probably a for 2019. francine: what happens if it touches s even? jim: we are going back to some of the stresses people were buried about last year, even though seven is not symmetrical number. francine: jim mccormick, thank you so much from natwest. we are live from takokyo.
been approved bail. his release is in jeopardy. prosecutors appealed the decision after bail was approved. kyoto reports his release is likely to be tomorrow or later. and making sure he stays incarcerated ahead of his trial. to get his bail application approved, he agreed to reside at a japanese address, have cameras in his home, and cannot contact people outside. ghosn is not allowed to leave the country. joining us now is our editor. when will he actually know if carlos ghosn is getting out of i f prison? david: we are hearing from the side of the jail that reporters on the scene are packing up and leaving. word has been going around that the release would not take place tonight. we have the example of ghosn's colleague greg kelly who was also arrested. he was granted bail. when that happened, there was a
similar scenario where the prosecutor appealed the tokyo courts decision. that appeal was overruled. he ended up walking out of jail at 11 p.m. at night. the latest we have is that reporters are leaving the scene. we don't expect that to happen tonight, as you mentioned. kyoto is reported to expected to happen tomorrow morning. that is the latest we have on when we will expect he is let out. francine: what can we actually glean from the timing of this court decision? dave: well, it looks like this was a win for the new legal team. they had built up to this, they had sent a letter yesterday to japan to calling on respect the u.n.'s rule as regarding prisoners. list.n. has an extensive of requirements for fair treatment of prisoners. it is called the nelson mandela rule.
more than 140 of them, very specific. as you know, japan has a long history of enthusiastic participation in the u.n. pays 10% of the u.n.'s budget. that is a big pressure point for them to push, and it seems that may have been one of the things that work in ghosn's favor in terms of granting bail. he did appoint a new legal team. part of the reason for that was he felt there was not an aggressive enough approach. now, they are pushing this line that japan is under global germany for this and that may have helped -- global scrutiny for this and that may have helped contribute. francine: if he does get out on bail, what will be the focus going forward? dave: once he gets out on bail, the defense will have to start putting together a picture of what its case is going to be. what we have seen so far has
basically been a narrative that is driving at the court of public opinion, where they have suggested that this entire case is built on a kind of coup by nissan as they try to push him out unfairly. that is a hard story to put together in court. they will need a lot more evidence. they will focus on gathering that evidence and bringing that narrative forward. jim: dave mccombs, thank you for the update. francine: coming up, we speak to the chief executive of russia's largest dealmaker. we will ask about the biggest investment plans and meanthe trump tariffs for his business. this is bloomberg. ♪
the survey we are expecting is up 49.9 which means it would be a contraction. we have had a net the u.k. which has been mixed. yesterday, we had construction. not a lot of people build houses in february because of the weather. if you look at some of the concerns, i think the market is positioning because of exit instead of the pmi. pmi service is better than expected. february, it is coming in at 51.3. composite also better than expected at 51.5. you look at the data, i'm looking at pound, great chart, 131.82.ay, pound at you look at the attorney general who is in brussels to see what you negotiates with the eu.
i don't know how difficult it is to actually understand the health of the economy because of the data points here and there. it will be all depends on what brexit deal we are left with. you'rethink what supposed to see in the u.k. is that there has generally been a slowdown. in what investment looks like still a relatively sound consumer. to are really not going to get out of this. one of the big themes in the case effect has shifted from political uncertainty to economic weakness. francine: let's get straight the bloomberg first word news. huawei is reportedly planning to sue the u.s. government. it will claim the administration overstepped by banning the tech giant's equipment from its network. is likely to argue it is unconstitutional to penalize an
individual or group without trial. the opposition leader in venezuela returned. he flew straight to the nation's biggest airport during the maduro two acts against him. act against him. world must understand as well as venezuela that the game has changed. this is an opportunity for transformation in our nation. viviana: donald trump announced plans to end trade preferences for india and turkey. he informed congress of the move. it starts a 50 day countdown before the president can act on his own authority. a tokyo court approving bill for carlos ghon.
the tokyo prosecutor decided to appeal the decision. to release is likely to be tomorrow or later. is expecting more than 100 days behind bars after being accused of breach of trust. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalsits and analysts in more than 120 countries. this is bloomberg. russia's largest steel maker is planning to meet the rising demand for electric cars and wind turbines. according to data from markets, the global electrical steel market may reach almost $40 million -- $40 billion.
nlmk is less likely in the u.s. with the steel tariffs. talk to me a little bit about steel demand. how much of it is coming from china? how concerned are you about china having to downgrade their growth? chinese is half of the consumption in half of the production in the industry.it has tremendous impact on everything we do . where going to have 1% growth compared to 4% in the previous four years. the chinese economy becomes much less steel intensive. structurally, it creates a problem for the industry. francine: talk to me about the overcapacity.
how much of it is there? when will it come down and does it mean the pressure -- that there will be price pressure on steel for years to come. grigory: there are different estimates, but somewhere in the range of 400-500,000,000 per year. it will stay there long-term before we see healthy demands. francine: you are telling me there is capacity, but what i understand is that mlnk is ready to invest. grigory: in these conditions, you have to build a very resilient business model.
they are very low on the cost curve. their present in seven countries. we want to be the last man standing if the structural troubles proceed. we want to be bigger. that is ambitious. we going to add just 10% of production. it is more aggressive in terms of quality of our product portfolio. francine: talk to me about tariffs and relations between russia and the u.s. and russia and europe. does it hurt your business? grigory: it hurts the whole industry. we have to continuously redirect one countryrom
to another. u.s. is a big market for us. the 25% duty really hurts. francine: how quickly can you redirect -- if you're selling to the u.s., you are telling me that because of tariffs or sanctions you want to resell it. how long is that process and which countries do you see having a lot of appetite for your product? grigory: of course it is an ongoing process. you really have to find the nichses. you see a traded truce or deal between the u.s. and china, does that help you? grigory: it would definitely help. china is a huge consumer of steel. it would be good for the whole industry and consumption. francine: are your hopes that we will see a deal?
grigory: it changes every day. francine: we are really in a changing economy. would look at driverless cars, ai, how do you see that impact the demand for steel products? ory: electric cars, those other products that require steel. that is very different than what is normally mentioned. francine: thank you so much for joining us today in the studio. in the meantime, we are getting breaking news out of the bank of england. the central bank of the u.k. launching a new liquidity facility in europe before the scheduled brexit date. the bank is saying in a news conference or in a press
conference today that weekly option for march 13 are prudent to allow u.k. lenders to access euro funding. even last week we saw something with mark carney talking about derivatives. that they definitely planning for any kind of brexit scenario. the bank of england already offers dollar options. we will have plenty more on the boe. in the meantime, president trump takes on india and turkey. we will tell you what he is threatening to pull preferential treatment from the two countries. that is next. this is bloomberg. ♪
surveillance." storyn,ith our top gdp -- china has set its gdp growth target. it will give policymakers more room to maneuver. the top bracket will see a cut of three percentage points. percentage taxne cut will be made to second highest brackets. deficit.sed budget that marks a small increase from last year's goal of 2.6%. president trump is once again trying to counter what he believes are unfair trade practices. yesterday, the u.s. president notified congress he plans to terminate key preferences for india and turkey.
currently, they are allowed duty-free entry of about 2000 products including textile materials. joining us is bloomberg's managing editor for global emerging markets. how much of a surprise is this and what does it mean for india and turkey? justin: it is a surprise and a sense that it could come at any time at all because the various protagonists in this debate have been talking for some time. i think the talks with india go back to april last year. when appears to have happened is that mr. trump has lost patience ai r the state by that he will withdraw india and turkey from the system of beneficiaries under the trade agreements. there is now a 60 day countdown period to the point where the
actual existing arrangements are done away with. francine: thank you so much. is jim.whats does this mean for the trump psychology? jim: i think the real problem here is that most people we speak to want to see trade protectionism as a 2018 story, that time it is winding up and trade relations are improving. i think this is really a story that will be around for a long time. improve, wetions have potential tariffs on autos in europe. trade protection is here to stay any see it clearly in the economic data. francine: is this protectionism? this is ending key preferential treatment. jim: it is, but it is a net new
cost to doing business. i think that is the concern is that little by little, you are chipping away at a global supply chain, at a way of doing business that has been in place for 20 years. that reads a lot of risk around global industry. francine: what does it mean for india, is specific? the primecoming up, minister has had this escalating spat with pakistan. jim: i think it is clearly a negative at a time when the market has been concerned about elections. i think to jump back into india, you had to get through the elections and see what happens. francine:ng markets because of fed policy? jim: we do and because of what is happening in china and because of valuation. valuation across emerging markets is very attractive after the movements last year.
francine: economics, finance, politics. this is "bloomberg surveillance." look at that glorious day in the u.k. let's get straight to the bloomberg business flash in new york city. reportedlyon musk blindsided many employees with his surprise announcement the electric carmaker would close most of its stores. many salesnderstands
personnel only found out about the decision when tesla made it public. says the impact from brexit will be hard to quantify but that the u.k. is an important market for its audi portion vw brand. the ceo says he is open to eliminating eu tariffs on cars imported from the u.s. >> i don't think we have to protect our european continent from 10% import tax on american cars. i think it is just not necessary. we are competitive. viviana: jpmorgan will reportedly take on a profitable job of overseeing blitz stock in the early hours after it goes public. it is a coveted role for banks because it comes with the potential for more commissions on trade. that is the bloomberg business flash. the french president
has called for european renaissance. published, he shares his lessons from brexit. ofwrites, brexit is a symbol the crisis of europe which was not able to provide its people protection against the great shocks of the contemporary world. he sounded the alarm about ford --erference in the upcoming foreign interference in the upcoming elections. let's focus on europe and brexit. us.is still with how much of a game changer will the european elections be? jim: i think they are clearly important, perhaps less than we thought earlier this year because of what is going on in the growth economy. clearly, they will be the most important elections we will see in a generation. francine: what does that mean
for the fabric of europe? jim: think that is unclear. if the the center wins or the and where back into a much better political environment. if the extremes when, we are probably starting to worry about the eurozone again. francine: what do we worry about? spreads are the euro breaking up? jim: think first usa about spreads and then see what happens. you worry about spreads and then see what happens. today we asked on our markets blog, will italy be a negative catalyst for european assets in 2018? maybe.m going to say
there is a growing risk of elections. the outcome could potentially be more positive. you end up getting a more right of center government. francine: where do you see most value when it comes to europe? is at the currency or bonds or elsewhere? jim: i think it is probably equity. the interesting number to me is that the spread between 10 year bund yields and docs earning is the largest expense since the eurozone debt crisis. the market is priced for recession. equity looks cheap, fixed income looks expensive. if things turn out, the euro probably goes higher. francine: higher compared to the dollar? jim: it would be a euro story. francine: if the fed is the only game in town that can still hike, why would the dollar a weaker? beenour dollar story has range bound first half, weakness
second half. the weakness comes on the back europe and aent in recognition that the u.s. is not exceptional as it was in 2018. what i would say is where i see aexit going is that there is large political risk premium priced across u.k. assets. we don't think you know don't brexit is likely, we think the probability is close to zero. we think there will be some kind of deal that gets us into the transition. into 2020. next week, we will have a lot of clarity as to where it is going. francine: what is being pressed into the markets? isthere upswing in the pound the theresa may deal gets voted through by march 12? clarity willthat be very positive for the pound
and u.k. assets. the market has been right to price in the concerns of the worst possible outcome. in its clarity that is not likely and i think we will have some of that next week. in the grand scheme of things, relative to where it was, there is still a reasonable amount of upside. highink hyman one 30's -- s-140s. or it is ar the deal softer brexit. are most likely outcome is some form of deal. we look at clarity on that next week. francine: it is interesting if you look at euro-dollar cable, you can see the 113.26 is what we were talking about. thank you so much. we continue in the next hour. tom keene joins me out of new york.
we will be talking brexit with a former conservative party leader. we will have plenty more from brexit and plenty more on your markets. i just had an interesting conversation on steel. the main story today, china lowering its growth targets but also cutting taxes as the economy continues to slow. gdp targets released on tuesday in the annual work report to the national people congress is now arraigned -- arranged. it is a shift to a band of a previous practice of just using the brexit number. this is bloomberg. ♪
growth goal and announces a major tax cut. winning over brussels. theresa may talks with the attorney general as emmanuel macron lobbies for european renewal. bail. gohn is granted good morning, everyone. this is "bloomberg surveillance." top storydoubt, our is china and this correction when it comes to the growth target. they are now pointing towards a range. tom: by live the range of you isder what the difference between 5.9 and 6.0. thrilled that steve majors is with us in minutes. francine: and of course it links to the trade concerns we have with the u.s. and china. let's get straight to the bloomberg first word news in new york city. viviana: policy makers in china
are time to pull off a gradual slowdown of the economy. beijing lowering its goal for economic growth to a range of 6%-6.5%.% -- china is struggling with the debt legacy and trade standoff with the u.s. in tokyo, the former nissan chairman's release from jail is in jeopardy. been behind bars since november over allegations of financial misconduct. prosecutors have appealed that decision. they could arrest him again on new charges. congressional democrats stepping up their investigation of president trump. to house judiciary chairman making sweeping demands for information on the administration's activities, business and potential ties to russia. they're asking for documents from 80 people and
organizations. the president called the investigation a hoax. making a last-ditch attempt to get a brexit deal. she is sending her attorney general to brussels to try to negotiate changes to the most contentious part of her agreement, the irish backstop. deal has aeds, may's chance of getting through parliament next week. if not, brexit could be delayed. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. almost did one screen today. day. an autumn day -- odd the curve not doing much. stronger dollar against money. let's go on to the next effort 14.1.he vix
gold under $1300 an ounce. francine: i am looking at european stocks. they are edging higher.we had a little bit of a mixed session in asia. and investors awaiting further signs of the chinese-american trade deal. it gives us a little bit of an idea of the risk on mood or risk off mood tom: that is today. we showed yesterday the american five-year. the university of michigan statistic. let's look at swap market in europe. you can see a regime of inflation. down we go to this new regime, set way low. maybe that is a precursor to a conversation with mr. major. francine: absolutely.
this is what i am looking at. this is a very simple chart looking at chinese gdp. we basically compare it to the china bloomberg monthly gdp. you can see there was a little bit of discrepancy, but overall, it is just to remind all of our viewers that our top story, 2019 gdp target in china set now in a .5%.e between 6%-6 now, we are joined by steven major, the group when it comes to fixed income. always a pleasure to speak to you. thank you so much for coming in. is anything we heard from china today going to change their appetite for treasuries? steve: lots of those charts seem to be going down to the bottom right-hand corner. that sort of tells you it is a global story heading into the bottom right-hand corner of the
chart. the demand of treasuries from other countries, china or japan, doesn't seem to move very much. the real story is the increased domestic buying. in the last 12 months, there has been an additional $2 trillion of purchases of bills and notes by domestic investors. that is the answer to the question people always give me, who is going to buy all of those bonds? if the price is right, there is no lack of demand. the real yield is quite high and positive. to people in europe or japan where really old are deeply negative, the u.s. positive real yield looks interesting at a time when the breakevens take people into tips. the u.s. 10 year yield seems to be stuck in a range.
its flawed by the level of ioer and capped by what is going on in china. china's response to the growth challenges, monetary and physical. its cap demand from outside. people in europe and japan are buying treasuries at certain levels. to 42-290 -- 242-29 0 range. how do you feel right now out of consensus? are people catching up with you or do you feel lonely looking for 2.5% gazillion years out? steven: i think you can see on the forecast. last her, there were 62
forecasts. this year, i think if we rebranded charts, you would see the majority of people might be clustered around the current spot level, 2.5% for u.s. tends when it is currently 270 doesn't seem like an aggressive forecast. it doesn't feel particularly out of consensus. it feels boring which is now one my focus is on curve, swap spreads, inflation link, relative value, that kind of thing. tom: i want to link back to china. could you please focus on the linkages of china slow down or eu slow down into these rates. and inflationes getting out in front of weaker gdp? ven: you are right to point out the global into linkages.
china tends to lead global inflation. chinese yields, the five-year swap fell from 4% to below 3% in the last 12 months. the biggest the story on fixed income was that but nobody was talking about it. that puts a cap on u.s. yields. the whole china story is completely interlinked. i think the only way it can come to the conclusions you have is by incorporating the second-biggest economy in the world into the framework. what they are doing is contributing to the downward pressure on yields outside the country. francine: it is always very concerns.he layout when it comes to neutral rates, what would make you change the
view? the team in new york have figured out it is not going to take very much of a shift to get the 2019-2020 dots to drop. it is about the median number. how many people need to change their mind? not very money. one would do the trick to make a meaningful shift. that doesn't seem unreasonable given the fact that the fed seems to have stopped hiking. we are starting to look along the other side now. francine: the market is also pricing in the possibility of a rate cut. how improbable is that? is theythe complexity have to stop shrinking the balance sheet. that is what is happening by q3. they can't cut rates without tricking the balance sheet. the earliest is really 2020.
there is also the possibility that if they were to ease, they wouldn't do it in the conventional way. why we assume they're going to cut rates first? there are so many things we don't know. i'm a bit long of don't know, which is why 250 is the 10 year forecast, because i can't see how we get the low. tom: one of the names before that was bloomberg "i don't know." help me with the fed's balance sheet. should our viewers and listeners be concerned with the dreaded qt? steven: they should focus on the liability side. it the amount of excess reserves in the system, how much liquid assets to that banks need.
it seems to be that that is the defining feature. how far can they shrink the reserves? the other point i would make is that qt completely different from qe. what i am saying is each $100 billion of qt from here is potentially more powerful than the previous one. with qe, it is the opposite. on the way out, it is proving to be quite powerful. than there is the question of the multipliers from one region to another. u.s. dollars is different elsewhere. francine: thank you. steve stays with usn. thcoming up next, a conversation you don't want to
viviana: this is "bloomberg surveillance." shares of salesforce.com are lower in free market trading. it gave the revenue forecast that fell short of estimates. the top seller may not be able to keep growing at it previous rapid pace. vodafone plans to sell about $4.5 billion of convertible bonds to help pay for its
acquisition of some of liberty global units. it will sell the securities in two tranches. that is the bloomberg business flash. francine: thank you so much. the renault chief executive says he doesn't want to comment on the downfall of his former boss, but instead on meeting business targets for 2019. >> you can imagine that i cannot comment. priority isduty and to make sure our team remains as will us tosed execute our plans year after year. we are now in 2019 and we are on exceed our plans.
we did not find anything wrong, anything nonconformity except we are sorry about oversight. -- versailles. we will finish all investigations by the of this month and we will know everything. matched joins us -- matt joins us now. what did he say about the alliance? : he did say it makes a difference and he says they will continue to work together with nissan in mitsubishi. he was showing me their new car behind him what was the first car completely of the alliance. the entire platform was built by and for the alliance. he said in the future, 80% of their production will be on alliance-based platforms.
they do intend to stay in the alliance, at least from what he told me. they see it almost as a completed merger, although we know that it hasn't been completed.that was one of the things carlos gohn was pushing for and is now in question. francine: give us a sense of how were no could change under new leadership? what did carlos bring to were no that the new chief executive has to do? gohn really brought the stability for this alliance. that is i think what investors are most concerned about right now. . they want to see that stability back brought in a new chairman and are rearranging their board. they're are looking to improve governance in any way they can. i am not sure that shareholders have faith yet in his hand when
it comes to the alliance. be out of hisuld hand because of the power of different governments. that is really the main issue, the main strength of that gohn had and the main problem with his ouster is whether or not that allianz is in question. tom: let's talk cars. ourguy two doors down from house in the 1960's had a were -- renault r8. are they in the game now? matt: from my opinion, not really. from my opinion, not really. they have products families maybe want. to have interesting things, but they just don't have the cool factor. maybe that will come back with
francine: "bloomberg surveillance." range.y is all the trumpted theme by the left. right now, we're going to go on another theory. this is germany in the chronic nature of negative yields. i didn't realize that we had negative yields since the number 2014.the german yield has been underwater . a good topic for steven major. give us a report on the efficacy of negative yields. steven: there is the money illusion created by the negative yields. if you have -40 duck boat --
demo, german khan trade underneath that. -60,u have the two-year at it doesn't seem unreasonable that the 10 year yield to be close to zero. that is where we are. it is just about the maths of it. it is a bit of a money illusion. tom: i understand that to the nominal space as well, but what does that mean for society? the ceo of commerce bank was sharp with our matt miller about trying to do business in the illusion of negative rates. is that where we are in germany? no one can get business done? ven: there is no doubt about it that there is collateral damage from this policy. it is the same in japan. you have to wonder why are we here because it is payback time for all of the excesses of the previous decade. francine: when will they be
repriced? steven: the ecb has to be on a normalization path, which means they have to be hiking rates. they probably missed the opportunity to do that this cycle. don't hold your breath. francine: we welcome all of your questions, so please keep sending them. we have one saying, can you please ask steven major whether he thinks the ecb will get to zero on the deposit rate in this cycle or before 2020? 2020n: unlikely before q2 because that is just over a year away. we must bear in mind that the possibility of a technical hike is there. may be some compromise has to be t.l.o..etween the later on, the weight of that which means we
could get towards zero in 2020. is a technical hike, not to be confused with a fundamental hike because inflation and growth are weak. the other point is, with negative rates, it could well be that a hike looks like a cut. did i just say that? the point is if you are taxing the banks, most of the deposits are in germany, that is a 40 basis points tax. if you change it to -30, you reduce the tax. francine: we will have to come back to that. steven major of hsbc staying with us. up next, we will talk brexit. this is bloomberg. ♪
before we get to viviana, i want to talk about this chronic nature of negative rates. marvin goodfriend writing a jackson hole said negative rates can be a great experiment but i would suggest that was not the chronic since we have seen. you mentioned sabres have been crushed. have the economists failed with the theory of negative rates? >> the indications they are looking for other ways to yes but iould suggest would be careful with negative rates because they might serve a purpose because if they reinforce longer expectations, that is part of the policy qe therk, combined with whole package can be powerful. there is collateral damage and the thing is, you look at japan that has had 20 years of zero and the cost has been borne by
the sabr and the industry. in return, the company has managed to function and you could argue there has to be a trade-off between the gains and losses. negative rates are a bad thing but how much worse could it have been without them? tom: let's get to the first world news. china is looking at what could be the slowest pace of economic growth in three decades. policymakers setting the gdp target in a range from 6.5% this year. of six target will give the government room to maneuver. china is helping or a gradual slowdown while it grapples with the trade standoff with the u.s. president trump is making another move aimed at unfair trade practices. he notified congress.
that starts a 60 day countdown before he can take action on his own authority. india saying with drop from the benefits will not have impact. in canada, the crisis with justin trudeau's government is getting deeper. reeling after high-profile supporters jump ship, the attorney general no longer back the government. justin trudeau being criticized about corruption charges. scientists appear to have passed another milestone in the global aids epidemic. a patient has a guess reportedly has been cured. patient reportedly has been pure. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. this is bloomberg. tom: thanks. it is the week of the ecb, of mario draghi but soon there will
be no mario draghi. ven majorajor -- ste with us. we need the doubt framed in europe with the future of the ecb. what kind of central bank does europe need? viviana: -- steven: they want t policies and that is difficult to imagine the change in changehip resulting in in policy. it is a committee that the sides and we tend overplay the personality side of it. it is continuation. is anot imagine there change of policy. on question is how to move when we have had unconventional monetary policy. by definition, you cannot reverse it quickly. getting out of the negative rate is not going to be easy.
moves will be technical. how can you -- tom: how can you do it with foreign-exchange? i do not understand how you can effect on science with a foreign exchange market of europe. it is theoretically impossible. how? steven: it is going to take time to educate people, the move on the current level higher is not necessarily a tightening of policy. fx is not just about rate differential although it does seem a high proportion of the commentary is based on rate differentials. it cannot just be that. it cannot be so easy. the move pointing towards zero in the future if that is going to happen, if they were to move in that direction later this year, next year, that it has to be managed in a careful way because there are investors in
.arked cash, in data securities the yield less so you do not want to damage and disenfranchise a section of the industry. it needs to be managed through a process of information and education. not people i speak to do appreciate the technical nature of the way the reserves managed. that will require training and education. francine: what do they misunderstand? japan, a couple years ago there was discussion around the reversal rate -- this idea you get to some point where the rate becomes counterproductive and they have only got to -10. there is no yield on the gdb. the effective rate in europe is close to -40, -38. to that techy elation. by adjusting that system, you can move the rate up towards -30.
if people misunderstood what was going on, because this is a relief for the core countries. it is like a rate cut. that needs to be clear to explain because you do not want pandemonium. the ecb is going to have to do this gradually and it is later this year or next year but, who knows? francine: are you expecting italy to be a negative catalyst? gdp --xpecting bunds and bdp to widen? steven: a deterministic view is to look at each auction and fear science spreads widening. if you are -- italian spreads widening. if you are a credit market, brexit, the u.s., china, whatever.
from last year, and the last six months of 2018, there were six deviation moods in 10-year gilts. that means 50 basis points plus type of moves. it does not seem unreasonable to worry about that given we have got european elections and event risk. it is tempting to look at italy as the source of the news. recession and in it is volatile -- it is vulnerable to an increase in volatility. francine: because of germans, some of the beliefs we have heard, what with the ecb look like under during -- german stewardship? steven: why would it have to change much? the design was based on the bund bund bankend --
anyway. all the candidates have been keen to stress that. you change the personality, does not mean we suddenly change all the policies. it is a gradual process. do not forget the design anyway. this has been important and timely. timely interview. he is a conservative but a different kind from scotland's. with francineth lacqua about the state of brexit and the state of no deal or deal. stay with us. this is bloomberg. ♪
viviana: let's get the bloomberg business flash. the maker of oxycontin reportedly is considering bankruptcy because of legal, caused by the opioid epidemic. hired advisors to prepare for a bankruptcy filing. the country faces lawsuits. elon musk blind-sided his own employees when he announced he was closing most stores. bloomberg learned many employees found out only when tesla published a public blog post thursday. shares have fallen 11%. jetblue is posting speculation it is about to order long-range planes. invited a place next
month. the background resembles seat covers on london's subway system. u.k. administers head to brussels in hopes of negotiating changes to the most contentious part of the brexit agreement. that is the irish backstop. if they succeed, they may have a chance of getting through parliament. brexit -- programs that members consider the backstop another -- an unacceptable surrender. , iain duncanw smith. thank you for joining us. if geoffrey cox changes his legal advice on the backstop, will that be enough to get the deal to close? iain: there are things wrong with this deal being done. the backstop is the single most important one because you have a backstop from which you cannot
leave. that means negotiations do not have to do anything because they know you will be petrified of falling. doing is trying to find a way in which he can legally ensure the u.k. can leave any backstop should we not reach an agreement at the end of the next year and a half. if he does come back with a legally binding arrangement, there is a good chance they will get this deal. otherwise there is not a lot of chance. francine: how many do you believe in the research group will vote against the deal no matter the changes to the backstop? is, it isi can say not just groups like this. think last time the prime minister lost the vote by 220 votes. there is more people than just a group of people. it is a general sense there is something wrong with this
agreement. the eu has to make his mind up if it wants the deal to go ahead. it has to be prepared to make changes. if it does not, then if it sits tight, that will happen. lead with nowill withdrawal agreement. that is not to say we will not lead with a deal. all the things we have to sort out will be sorted out. what they want is they want 39 billion plus from the u.k. but they will not be getting that if they do not make a move while jeffrey cox is there -- geoffrey cox is there. 2005. am going to back to people of- are the britain actually telling you as a conservative? iain: if you look at the polling, the vast majority want to get out even if they voted remain. get on with it. all the polling tells us and the same in my constituency, which
is the majority are happy to go out without a withdrawal agreement. that gets the higher scoring of the lot. we havebecause what seen with the eu in the last few months is not a nice site. it is a group of people you with think would want to do a good arrangement with us, but in fact have been slagging the u.k. off and making threats. it is not been that is a good way to behave. people have hardened up in the sense this is not a good organization. friday on 1672st when the dutch showed up in the river thames and it was terrible for house the second and then life -- charles the second and then life went on. what happens 90 days out from brexit? what happens when hundred 80 days out for brexit?
do you buy the doom and gloom? iain: i do not at all. when you have been attached to it -- an organization controlling, the eu, people get persuaded there is no light outside. when the u.k. after 40 years, still does the majority of its trade outside the eu, which is unique to the u.k., our growth markets are outside the eu. we have a surplus in trades which is like the united states. we run an enormous deficit in trade with the eu. outside we will do well. it is like another reformation. right.e: let me jump in. we know your position regarding to the eu but, i am trying to understand, if you had a choice between the risk of being trapped in the backstop or the uncertainty of trapped in an
extended e.u. membership, which do you choose? is simply,hoice unless this deal gets a change to the backstop, legally binding, it is unacceptable to parliament. that means we will be leaving very much without a withdrawal agreement. that is where we are heading. francine: how does the threat of an extension change your position on theresa may's deal? iain: it is not change anything because i ask the question, why would the e.u. want an extension for two months, because that is not going to change anything? if we did have two months, the reality is they are about to go to european elections. they reallocated all the seats the u.k. used to hold. if we went longer, it would be chaos in europe. if we left a year-and-a-half later, they would then have to if we leftvps even
because there was no legal president for them to stay out. the european union knows it does not want us to stay longer than the extra two months. wey are going to say, if have got a deal and you need a few extra weeks, but to stay an extra two months for no purpose is by all those who want to remain. they hope to have a longer extension of the euro too and then they will have a referendum. that is the reality. goingswer is, we are not to be extending. we will leave and if necessary, we will leave without a withdrawal agreement. we will have a agreement weekly that not a withdrawal agreement. francine: thank you so much, former tory leader. still with us, steven major. we heard an hour ago from the boe's. is the u.k. ready in terms of what they are trying to do?
steven: central banks will be ready and we have seen evidence of that in the past whenever there has been some kind of shock. on the actual vote itself in 2016, there was liquidity in those qe rate cuts. the central banks have their scenario emphasis on both sides of the journal. the ecb will be ready. this is just business as usual. you might have a question about the government. the central banks are ready. tom: steven major with us. -- iain duncan smith talks with us about a reformation. who to talk to about the reformation? lisa shalit, morgan stanley. stay with us worldwide in london. in new york. this is bloomberg. ♪
surveillance. on brussels, china's tech giant is grambling to get ahead of allegations but the country's authorities. reportedlywei planning to sue the u.s. government. it says the administration over stepped. -- huawei opening a security in brussels. will the eu be reassured by this? maria: a lot of european essentials, it is a full house and huawei will tell you, we are a company that does not view any of those allegations put forward by the u.s. we are as good as any american company but the european says this is a reality. they are not naive.
they know about practices in china. they are aware of hacking, .ntellectual properties they will say we have to keep an eye on this. can do a good job for less money. the cost will go up. europe has to balance the geopolitical tensions and the business reality of it. on thee: jeremy, huawei full-blown legal defensive. >> they filed two lawsuits yesterday. they are going to have this ban the u.s. has imposed this ban unfairly singled them out. you're not allowed to single out a single company. other companies have tried to use this tactic. it has not necessarily been successful. the u.s. government has a legitimate interest.
it was not an attempt to single out a single entity. the other lawsuit was filed by their cfo against the canadian authorities, claiming when she was arrested she was questioned wasout a lawyer, the this an unconstitutional interrogation that took place over several hours and she claims her civil rights were violated. it is part of this strategy of huawei to push back. tom: what do you look for in the next couple days? with the candidate issue, what are you watching for in the next couple days? jeremy: you want to see how the canadian government response to this suit, if they contested. they will but if they end up saying, we did question her improperly, that will be interesting. that case is going to drag on for a while. she is under house arrest in canada and hurt criminal case --
a criminal case will not come to travel ray while. ,ther than the canadians filing i do not think there is going to be too much immediate action. tom: jeremy kahn, thank you so much. coming up, we want to look at the equity markets and we are thrilled to bring you for a substantial conversation david perl of investments. this is going to be interesting given what you have lived through in december, january and in 2019. this is bloomberg. ♪ so with xfinity mobile
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market no one believes in. how to invest to get to the fifth of july. we focus on cash, use of gas and free cash flow. is the state of the union for china and the state is economic slowdown. members have a national people's congress. meetresident trump, chairman hate blair, the gentleman from the upper west side wants to speak to 80 trump affiliated people, to gentleman from fifth avenue. good morning. this is bloomberg surveillance. live fromnew york -- new york, i am tom keene. in london, francine lacqua. what a great conversation with iain duncan smith. what did we learn? francine: the common understanding is, because we understand from the european
, if there was to be a delight it would 18-21 months and theresa may -- or jeremy corbyn said he is willing to put a second referendum to the people in the u.k., we think the more hardline brexiteers are willing to accept theresa may which smith pushed back against. tom: he looks for a new reformation. policy makers in china are trying to pull up a gradual slowdown of the economy. asian lowering economic growth from a range to 6-6.5 percent, giving the government room to maneuver. the lower end of the gdp target would be as lowercase of growth. china is struggling with a debt legacy and traits get off with
-- trade standoff with the u.s. 9 -- u.s. carlos ghosn released from jeopardy, they'll set. overs been behind bars allegations of financial misconduct. prosecutors appealed that decision. they could arrest him again on new charges. congressional democrats stepping up their investigations of president trump, house chairman gerald nagler making sweeping demands for demands on gas sweeping demands on potential ties to russia. the president calling the a hoax.ation hoax -- theresa may making a last-ditch attempt to get a brexit deal. she is sending her attorney general to brussels to negotiate changes to the most contentious part of her agreement. that is the irish backstop.
--may's deal has a chance of getting through parliament next week. if not, it would probably be delayed. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. this is bloomberg. tom: thanks so much. we were going to do one string here, i did to -- two. ago.ike we saw two days pullback yesterday, 14.52. yen out near 112. francine? francine: european stocks heading higher. the looking at gold because risk on markets, 1284. let's focus on the main story impacting these markets. china lowering its growth, also
announcing major tax cuts at the start of its national people's congress. david ingles joins us. give us a sense of how difficult it was for the leaders of china to go to a range instead of that firm target. david: we posed that question earlier to an economist and what they were saying is, you look at last year and how some of the alreadys in china were slowing below the official rates. this is telling us something that was more reality in china. now -- 6.5% and now we have an idea what the worst case and the area can be. they talked about ways they will manage the slowdown, one of which was the first time not so much monetary policy but more
fiscal. they are reducing the value added tax and announcing this plan, $300 billion worth of tax cuts. ofncine: give us a sense what they can do to stimulate the economy. are they ready to go full hold? let's hope we do not have to get to that point. as far as monetary policy, deleveraging, they are keeping work reports. they promise to keep the leverage of the economy stable so we heard from a deputy governor of the pboc that the leverage was brought down by 1.5%. what they are trying to do is you have tax cuts and hopefully that feeds into consumption. you also have the -- they raised the amount of money governments can sell in terms of what they
call special local government bonds. if plan amost plan b does not work. you also have the pboc guiding money market rates, not so much to bentz mark rates lower. tom: you are outside the for bid in city and of course the moat as well. in the ming dynasty, there were talks of sprouts of capitalism. what of the sprouts of capitalism that will be affected by this chinese slowdown? look at the 40 page report, the work report and for the first time they singled out employment. economy exploiting to the world, exits savings. it is now about protecting employment. consumption was a bad story last year in china. moat,pefully like the
damage from whatever global headwinds there are. the for bid in city is a reminder of the past glories of the empire and hopefully steer the economy in the same direction. david ingles before the national people's congress and we emphasize to all our asian viewers, we are thrilled about our new type -- new china show putting together all our resources from beijing. on we do what we do bloomberg surveillance, which is conversation with smart people. lots to talk about on economics and we are thrilled david pearl of epoch investment's to join us today. you may not know the name, but you know their religion for free cash flow. let me start with you. , to goe is to go to em to emerging markets. hell of a run.
are you em in china centered -- centric? david: it is an issue of china's economy converting to a consumer economy. it is growing their entrepreneurial base so in cities, you see young companies create jobs and consumer spending. you are going to look like the united states. at barron berg, do you buy the consumer in china or can there be a legitimate talk about hard lending? >> for now, china has the money to delay the paying. the problem you have in china is why you have a 6.5% growth, inconsistent with a services driven developed economy, you build up the source of challenges which prevent that debt. these are key issues.
china has to admit growth cannot remain at 6% for ever and focus on consumer driven. francine: what do you worry about with china, that they do not have the tools to deal with downturn or they will push with anything that happens with that economy? china generates domestic savings. it does not have a major inflation problem. it can buy growth for now. smoothing to a more consumer driven economy is difficult. china is losing its momentum is a developing catching up economy. , you store up trouble for the future. francine: do you agree with that, david and does the trade deal between the u.s. and china, are you expect to get to come
and how much will that help the chinese economy? em is dragged down by this. china is taking less from the andging markets countries the consumers are more domestically driven. em is still in a tough spot, plus the strong dollar. will be a slower economy. we think the u.s. is one of the best places to be. we are the singular economy that has consistently grown. it is going to slow from the sugar high last year, but it is 2.5% growth. that is going to be hard in china. tom: i want to show the charts we are talking about. i do not think people are aware of the moving average. china wasn't sobering in 2000. they reinvigorated the economy and this is a log chart. the slope matters in the vector
at 6%. david, that is a sobering vector. there is a force that affects all. inid: this is a big change economic growth at its long-term. it is going to take a long adjustment in their economy. going from manufacturing, they have given up low value. anything like clothing is outside of china now so it is higher value intellectual property which is the crux of the trade issue that was brought up. thea has to figure out what balance is to protect intellectual property, to trade with world partners and still develop their own economy. china is trying to be a leader in technology but they have to play by the rules. that is a hard adjustment over the next few years. francine: thank you so much. both are staying with us. coming up on bloomberg daybreak, gary goldberg.
but i want you, kevin to inform our global audience and are a merion -- american audience to the general of the upper west side of new york is. kevin: let me be blunt. havingfull insight into sabena power to use a treasure trove to get documents from this administration. remember the michael cohen hearing last week. democrats saw how they can andnates the attention captivate the attention of america. couple their effort to with what the mueller investigation is doing and he said this on george sunday show.s abc they do not believe the mueller investigation is going to do all the investigatory work. at dinner and i was
trying to be kevin cirilli and i went down in flames. a letter in congress, mueller and very as prosecutors. hugh are you focused on -- who are you focused on? kevin: it is bob mueller's investigation for there to be any finality we have been following. with regards to chairman nadler, here is what i would say. i spoke with the democratic -- a democratic strategist who said democrats have to be concerned in the sense they do not want overplay their hand. polls suggest the democratic pathswants to see forward, one on the investigation front and one on the policy front. think back to the impeachment of winton. we know how that played out in the short term for the republicans. talk to me about
tariffs. the u.s. is delaying the china tariffs but president trump is going after india, turkey. why? kevin: they are lifting it on china. it's a multi-front trade war. in terms of the lifting of tariffs on $200 billion worth of chinese imports into the united states, that is a win not just for the chinese. it is a win for many in the u.s. business community which has been heavily against the president's tariffs. republicans had lobbied against the president on this front. the entire business lobbying community in washington, fueled by the business community was against that. it is a negotiation tool. the president could change his mind based on a tweet anytime he wants if the u.s. china trade talks do not turned the direction he wants. europe,ndia, turkey,
the president is a multi-front trade war. look for him to do more aggressive tariffs where he deems necessary. francine: thank you -- tom: thank you so much. washington that in as well. it drives for this conversation is you going to washington. on papa john's, it is simple. mr. shatner is out. he has agreed to resign. they will elect an independent director together. there is a dismissal of a delaware suit as well. there will be pepperoni pizzas and a cow zone to go -- cow zone to go. stay with us. this is bloomberg. ♪
viviana: this is bloomberg surveillance. , qualcomm lower in premarket trading. customer relations software giving a revenue forecast that fell short of estimates. it may not be able to growing at its previous rate. shares of the bank by season falling as much as 10%. there are reports the bank's predecessor helped launder money
tax fraud. some allegations have been reported to prosecutors previously. 4.5obomb plans to fell billion convertible bonds to pay for european units. the telecom company will sell security in -- $422 billion. that is the bloomberg business flash. tom: david pearl with us and callum pickering -- kallum pickering. how do you involve the pitfall of traps? import thing about free cash flow is coming you have to grow it. it is not about how cheap it is on a price to free cash flow aces. it only works if you can grow. you have to grow it modestly because otherwise the future value of the company is not
going to grow. tom: how do you grow in a time of revenue growth? where does that growth come from? david: you have to find companies that demand rose for whenever their products or businesses are. it is interesting. there is a dichotomy now and there has been for the last year , if you are a growth stock, it is about revenue. no carried out earnings. if you are not a grout -- growth stock, it is the opposite. it is about growing process. growth stocks can undersell. they can lose money. .hat is the issue for value stocks and free cash flow, you have to grow modestly and the u.s. economy can support mid single-digit earnings growth. francine: when did you expect, if you expect a recession of the u.s., would it come in 2020 or
would you discount the possibility of a recession in the next three years? we cannot see it at all for the next 12 months. there is no indicator and gdp wise it would be near impossible to have negative gdp growth now. could it happen in late 2020? it is possible. it depends on a bunch of macro issues. the good news is the fed, which is one of the big clouds is going to be restrained. that was one of the factors that caused a dip in december, the fear that the fed could have caused the recession. that is not an issue now. we are looking at world macro factors, the trade deal clearly though that is being discounted as more of a positive. we do not see -- the growth of the economy does not end because of the length. this is one of the longest growth recoveries we have had. the condition.
as long as inflation is moderate, monetary policy is moderate, it can go on a while. sustainable given what we see. it is out there. you worry about it but the opportunities are finding the companies that have not been bought up based on this economic growth. you.ine: thank investment partners, stay with us. andyg up next, our guest palmer. we will talk james bond and brexit. this is bloomberg. ♪
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what could be the slowest pace of economic growth in three decades. range,akers set the gdp target range from six point 5% this year. china hoping for a gradual slowdown while it grapples with the debt legacy and trade standoff with the u.s. president trump is making another move aimed at what he calls unfair trade practices. the chart -- the president 860 dayg congress countdown before he can take action on his own authority. in the us as with all of the benefit will not have much impact. in canada, justin trudeau's government getting deeper. the prime minister reeling after high-profile female supporters jumped ship. the former attorney general no longer back the government. trudeau has been criticized for efforts to snuff out corruption
charges. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. this is bloomberg. thank you so much. it has been one of the few success stories. target has over the years done better and they do it again with, store sales compare, back 14 years. that is an extraordinary number. they have a 5% sales number, back 14 years and they have a large digital growth as well. seems to be a constructive tone with target. you see a premarket with a nice 3% list as well. we will be looking at target through the morning. francine, i do not know about europe but target is one of the few successes we have seen. francine: when you look at big retailers around the world, target if you are in the u.k. is
probably in the lower discount ones in germany and they have been gaining market share and you put them against the amazon's of this world and wonder if there will be brick and mortars in the next 5-10 years. tom: we are keeping up-to-date on this. we are doing this on bloomberg surveillance's work, which is the back and forth on modern monetary theory. stephanie - d by kelton. in the washington post, lawrence summers weighs in. the former secretary treasury and an esteemed frontline economist. we have seen this movie before offering the proverbial free lunch. george h. w. bush was right, going on to talk of voodoo
economics. modern monetary theory is fallacious at multiple levels. --re is typically reason theorists typically reason in terms of a closed economy. the minimum government in france and the shorter government in germany did this and they were forced to reverse course. we have seen this before, haven't we where we can use debt forever to fund government policies? kellum: if you are a government rather than the private sector, rather than a central bank, you cannot go broke as long as you can issue fear if you do not have supply constraints. the government should just ireland spent. this argument is being sold, economies suffering from low equilibrium growth rates. this for me is a curious
intellectual backflip which takes a good short-term referendum to a long-term solution. tom: i took it back to pre-smithian. it jumps us back to a static age where we jump 150 years. the critical point for me and this is for american viewers, is the efficacy of making policy. the reason we got to a federal reserve in a central bank process was crisis. jp morgan sat down in 1907 and wrote a check and we got -- started a central bank. vehement t people suggested the -- the mmt people suggested the legislative branch. schroeder tried to do this. as you hitsoon supply-side constraints, you build inflation pressures and they do not necessarily show up straight away.
whereso crowd about government is pushing interest rates and reducing private sector spending. in much of the western world, we suffer from low equilibrium growth rates. this is a supply-side issue by firstexplainable stage technological change. we see big companies doing well with new technology well the rest of the at -- while the rest of the economy has not embraced it. we actually generate problems. we prevent that transition. now to thejump right gentleman with the double degree, a mechanical engineering. but theres is a way it is. david: the problem is, if you believe in capital, this is scary. it is the government being capable of doing things that cannot come mortals
up with. it is hard to run the economy. tom: and to execute those decisions. david: and to understand the consequences of the decision made. tom: interesting. kallum pickering and david pearl. thanks so much. i am looking at the ddf's. matt miller knows i am in love with the ddf's. i need to squeeze into an aston martin. matt: i am here with andy palmer. maybe the two of us can pull our money together and help you out. adjusting point. this kind of purchase is not to be taken lightly. how are the luxury sales going? aston: there is excitement around what we do. for us, the luxury industry is
very good. you saw last year we grew our revenue line by 25%. our volumes are up by 26%. 31%.w growth in china, up generally speaking from our underlying point of view, we are delivering on the equity story of long-term growth and we are happy with the way things are going. focus on thate we at bloomberg. i have got ask about the competition in a crowded space. we are seeing million dollar car after $2 million car. how are you differentiate yourself? what the utility customer to make him or her want to buy an aston martin as opposed to a ferrari? brand is important and that is why ferrari and member garney -- lamborghini fit in a
different space. you also have to play your strengths within that space. what is -- does an aston martin stand for? in our mind it stands or beauty. what we do better than anybody else is beautiful cars. that is where we try to take you to, whether it is an suv coming out in the new future -- near future, or it is a car like they won -- like the one you see behind us. it will always be made in the u.k. and made by hand. we are trying to see the valkyrie behind you. let me ask about that made in the u.k., the u.k. as a brand for you. does that continue after brexit? is that more difficult after brexit? andy: we are the only british car company to be on the london stock exchange in 30 years. our future is tied to the u.k.
we believe in the u.k.. we believe in the talents that exist. we could not make an aston martin outside the u.k. because those skills are here. doing,r the economy is we have to lead with it. matt: you have to think about the other part of your job and that is selling stopped. it is one of the biggest sales in the u.k. last year but it has been difficult with shares down more than 40%. how do you convince an investor he or she should buy aston martin shares now? andy: it is a growth story. it is a difficult story for some to grasp. if you know the car industry, it takes time to turn things around and make growth. this growth is about selling cars in seven years. copyright be, copy repeat.
we are three cars into the plan. the suv is coming. it will take time to build and the story is one of, we are a car company. there is always going to be the guys that do not believe the story. if we convince you to sell the story and you can see the story behind you. it is very real. if you believe in the story and to our patients, you should see that share growth. there is mentioned focus on the financial dynamics. tesla has had more issues than you have had with there's but also with the borders. how do you avoid that scrutiny or turn it to your advantage? do you boost unit sales? it is about -- is it about more models? andy: we are a luxury company. our bond initiative is 14,000. the average selling price which
, the to the the delivery best is to deliver the plan. behind me you see we are delivering on that plan. matt: i see the look on that. you are launching a new brand. it is a fully electric product. how much more expensive is that? andy: the industry will tell you the technology is more expensive than the technology of gasoline engines. on the contrary, it is easier to engineer. selling $300,000 cars is it is more able to absorb the cost. that is why you see more success in the higher rent, introducing electric cars in the higher rent than you do 35,000 pounds or $35,000. sense by going
electric. we go against the g appellee of rolls-royce and bentley. we also create an alternative and it is a clear message. that way we can yield space and give it back to the customer. matt: what is the customer like for lagonda? is the logon to -- lagonda customer looking for? andy: basically, it is concerned about the environment. does not want to be seen in a car that has a gasoline engine in it but once a brand. wants all the things that the aston brand will give you. that is, aston martin. that is what it brings to the
28an op-ed published in newspapers, he shared lessons. he wrote never since the second world war has europe and so essential yet europe has never been in such danger. butit symbolizes a crisis -- that has failed to respond to its people's needs. he sounded the alarm about foreign interference in the upcoming election, calling for europe wide body. still with us, kallum pickering and david pearl. -- kallum, this feels desperate. what is the level of anxiety when it comes to gdp in europe, and how will that translate into european elections? i doubt the recent softness will translate much into european elections,
although it is true the populace are set to make gains. that is a political story developed over the last 10 years. europe is suffering from a curious problem. the eurozone is younger in terms of the economic upswing in terms of the u.k. or the u.s. it has more to grow into. it is more exposed to the global cycle. a series of risks, the high oil price, trade wars, brexit, italian populace, the drop in exports, they always on european growth and now you have this cyclical dynamic of confidence crisis which needs to be broken by risks fading. tom: let's bring up the single best chart which goes to francine's quote from mr. macron. it has been a one-off regime shift in inflation expectations. we are at 2.5% and we have shifted down in 2014 to a new
inflation regime. is mr. macron and others -- is this a redefinition of euro sclerosis? the ecb has been trying .o raise them through qe the essential problem in europe is you have strong economies in the core with good supply side, germany, austria, the northern european economies. throw the u.k. and their surrounded by italy, france, which we need. tom: we are back to the currency. germany needs 130, 140, 150 euro. david: that was the problem in the monetary union. it was beneficial to both parties initially but now it is unsustainable. countries could borrow cheaply and germany had a low currency to export and now they cannot figure out how to solve your dilemma.
viviana: let's get the bloomberg business flash. at the geneva auto show, tariffs are the top. the trump administration is threatening higher duties on cars imported from europe. we spoke with herbert deese. have been talking to the trump administration, also the european administration because it is a threat for us. .t would cost us america is an important market for our premium brands. we are trying to avoid this
conflict. viviana: bloomberg spoke with a member of the d debt -- bmw board. >> we are not happy with what we see. we hope we get an agreement. viviana: that is the bloomberg business flash. you.thank target reports, let me bring up the tried and everybody needs to see this. we know the excellence of home depot some of that nobody understands what target has done. this is an extraordinary forty-year tarp -- chart of excellence. the big leap in the 90's -- 1990's and the persistent excellence is something. we speak. how were they doing? >> they are doing well. year, they do not
have the same kind of growth as amazon. in results today, they said a big portion of growth team from digital sales. they had five years of digital sales above 20%. they are filling a lot of digital sales in stores. what is mr. cornell doing? what are you going to ask him about in the interview as they defend themselves? m up, have you ever been in a gap? what are they going to do to not be gap? they have been focusing on over the last couple years is really leveraging their stores of the way to get people through the door and also with the way to fulfill online orders. one of the areas people are saying is they have not focused much on grocery.
because we had that result from amazon last week. a --francine, save them emma. francine: you are looking at labor. that is going up. can target pass that on to consumers or take a hit on the bottom line? our costs going up for target? they are going up for target. they said a lot of that having to do with digital costs are higher costs than orders bought in store? tom: very good. target of 9% per year. why do you own target? david: you have to believe they can turn it around and are going to invest four years. if you are a freak cash flow
profit oriented investor, they are basically telling you we need to invest big dollars to can be with amazon to have that kind of fulfillment, that electronic sales amazon has. walmart is doing it. everyone else is going away. part of this is they will be the last. you have cosco, target and walmart. tom: thank you so much for being with us today. interview with mr. cornell later today. much more coming up. please stay with us. this is bloomberg. ♪
a warning from china's premier as the country announces a race for growth this year between 6-7%. target raising its guidance, sees comp sales and the low to mid single digits. wheat, gold, oil, looking at all those commodities. david: welcome to "bloomberg daybreak." we have coals numbers out -- kohl's numbers out. it beat on comparable store sales. they did better than estimates on the earnings-per-share. 1.6%, not as much was earl