tv Bloomberg Markets Americas Bloomberg March 12, 2019 10:00am-11:00am EDT
from new york, i am vonnie quinn. and from london, i am guy johnson. vonnie: you're in westminster because we are awaiting a crucial vote. let's take a quick look at u.s. markets. we are going to talk about bowing because we are another down day on the stocks down, 4%. there are more regulatory bodies 737s.ing this hour it has been the european aviation authority. the faa is holding by its position that the boeing airplanes are airworthy but we shall see how this pressure piled on and whether it changes the faa's mind. itnload than 7% after downgraded jp morgan. a recent acquisition and --
questionable. wells fargo on the board moving tim sloan is on the hill talking about the sales practices in recent years in front of the house financial services committee. we are going to hear from marathon asset management ceo bruce richards. two big stories that of europe. downt, that is why we are at westminster and also what is happening with this boeing story. the u.k. -- the evolution the u.k. has had on this is changing. let's talk about the pound taking a tumble earlier as a the advice of the attorney general. nothing has changed on the irish backstop. that sent the pound tumbling. it has had a negative impact on the 100.
is being affected by the pound story. you see that. the other elements, this is saffron. this is the engine maker on the 737. interestings an one, this pregnant vote. the but is reserving judgment while brexit backers are saying changes were not enough. yesterday, we were curious all day as to whether theresa may was going to make that trip or not. she decided to. changes orsmall clarifications made to the legal language but ultimately it looks like the more brexit backing venture is -- have decided against backing this boat and that puts theresa may in jeopardy. guy: c is probably going to lose tonight -- she is probably going to lose tonight. that is clear. we are going to get emergency
business of the next two days. it is likely once theresa may has lost the vote, what we will then see is a vote on a no deal brexit tomorrow. there is no majority in the house. that, we will get a vote the following day on an extension of article 50. the question of that is, how long does that get put in place for? storiesone of the big coming out of the u.k. the other one is the boeing story. boeing and the u.s. federal aviation administration, really being the squeeze as the groundings pileup around the world. the european aviation of authority are said to follow the 73 max flights. let's welcome our guest. he joins us from dallas.
justin, for the europeans to break with the faa on a boeing issue is huge. normally it is the europeans who follow the faa on bowing and it is vice versa. how significant a development is this? justin: it is significant thatse there is usually difference between the two regulatory bodies. generally happy with that arrangement. we are seeing a definite flip. that increases the pressure that points to both boeing u.s. regulators and the -- that are still flying that aircraft in the united states and canada -- in canada and other places. it is a game changing situation. these: if the faa says aircrafts are air, can we not trust the faa? .ustin: you can
one of the issues that is most likely playing a role is the pilots in the u.s. that fly this plane are not coming out calling for any changes. they feel comfortable. they carry a lot of weight in this debate. until we see a shift from them, yesterday flight attendant -- a large flight attendant union asked for the grounding but the pilots have not taken that step. that is playing a role in terms of the carriers. up until now -- guy: up until now, boeing's response was it was going to change the trading manual. we do not know whether those flights were connected. whether these two crashes are connected. what can boeing do to deal with this situation other than saying, it went down to pilot training? what needs to happen is
get actual fact set of the situation in ethiopia and find out, is this related to the same set of causes that is believed to be responsible in indonesia? is this separate? that lack of information is what is driving regulators. error on the side of caution for passengers because we do not know -- have a lot of facts even ,hough the flight data recorder voice recorders have been .ecovered, it is too soon that information is creating an unprecedented situation. continental,d and down. american down almost 2%. southwest as well. at what point do the airlines lobby the faa to take these jets out of the air in order for them to recover? justin: we will not see the airlines lobby the faa for this
move. it is disruptive and they are assessing this internally and also going with government guidance. what is happening is the u.s. regulators are desperately searching for concrete back f --acts from the situation and if the kobe a to see if it is something completely separate because now it is that vacuum. in that vacuum, other regulators are taking action and not in the united states. vonnie: thank you. faa is notng the mandating action on the 737 max at this time. boeing will continue to engage with agencies and customers, so reassuring placement out of boeing. things to justin bachman. let's check on first world is. kailey: the federal reserve got more room to stay patient on
raising interest rates. a measure of u.s. inflation eased last month due to falling prices or cars. loot and energy, the toe index rose 1/10 of 1% .1% from a year earlier. a measure of small business optimism in the u.s. has snapped its longest streak in two decades. the national federation of business rose after falling for five months. progressive democrats in congress do not agree with nancy pelosi's comments on impeachment . pelosi does not want to impeach president trump unless there is bipartisan support. a congresswoman says it is too soon to say whether there will be an attempt to remove the president from office. the un's humanitarian agency is warning thousands of civilians are trapped in crashes between
warren -- warring factions. fighting on behalf of of governments, they have killed 22 people, including children. 3 million have been displaced. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am kailey leinz, this is bloomberg. boeing stock is taking a 5.1 percent.n this out of boeing saying the faa is not mandating action on the 737 max. boeing saying it will engage with agencies and customers. investors not liking this statement out of boeing. the following agencies around the world, saying they are holding 737 max flights. the u.k., australia and more coming out of the last
30 minutes and saying it one at operate 737 max debt till further notice. we will keep you apprised of the situation. boeing down 5%. this, guy is bloomberg. guy: it is. thes take a quick look at u.k. now. theresa may in the house of commons behind me. the pound tracking her every move. the expectation is theresa may will lose a critical look on her brexit deal. this is bloomberg. the time to adjust and eliminate a cliff edge when we leave, delivered by the deal. the full control of the taxpayers money. ♪
vonnie: from new york, i am vonnie quinn. guy: and from westminster london, i am guy johnson. vonnie: we are awaiting a brexit vote. we are keeping an eye on bowing. stock took a leg lower after boeing said the faa, the u.s. authority is not mandating action on the 737 at this time. after europe granted boeing 737, the u.k. halted them and several airlines that they were not going to operate them, including norwegians. we are awaiting more news. boeing is taking a hit to the stock on this news as the faa considers the 737 max airworthy. let's check the rest of the market action with abigail. sprawl --looking at
small moves. the dow trading lower, down 2/10 of 1%. the s&p 500 up 2/10 of 1%. we did see a rally in china. investors treading water after of the year. as for china, current volatility reminiscent of 2015. we see what happens then that we have a big rally for china back here. aople have been calling it bubble. it led to black monday, huge decline and others peter about to smile again sent losses. we are looking at big moves. it is worth keeping in mind because we could go further than people think. relativity -- volatility tends to breed volatility. it could spread globally. as for big movers on the day, let's take a look at what is helping the s&p 500 the most.
allergan higher. restructuring the company. f5 networks down on an acquisition. packer cut. boeing. let's take a look at a seven-day chart. boeing is down seven days in a aw some of the longest of year. plunging on the ball that from the 737 max. so many countries that authorities rounding the 737 max. bloomberg saying europe is considering points to pause and .he faa breaking, not mandating it could come down to the customers if we have customers not wanting to get on that plane, that could be a grounding. vonnie: the president has been tweeting. this is important. he says they are planning
something far too complex to fly. pilots are no longer needed. i see it all the time. we have theresa may talking. theresa may addressing parliament after speaking to a last-minute deal to revise the terms of the u.k.'s divorce from the eu. we are getting word the dup is deciding what it is going to do. an important of voting bloc this. the dup is saying it will not vote for the new deal. sufficient progress has not been achieved on brexit. let's get developments. your head of strategy and operations, meredith -- now has -- thatweight on this the dup has weighed on this, there was no reason for theresa may to go to europe in the first place. we are back in the situation we were in. what did she do next? she has little option but to
push hard for a last consideration of her bill. isthe deal and the consensus , it is going to be a loss but the key question is, the margin of defeat. which matters? if theresa may is able to get her deal with the loss of under 100 votes, there is a chance she could push to make one last final plea to the eu at the 21st march european commission meeting. that would allow her to eke out a third meaningful vote between -- before 29 march. it is unlikely. oveross will be upwards of 100 votes, maybe over 200 votes given the loss of a dup support and's attorney general cox findings. the key is with that margin of loss, theresa may will begin to lose control over the proceedings of the u.k.'s
divorce from the european union. is a lot toe contend with in britain now. we also have a lot going on in the united states with trump tweeting about airlines and airplanes and airline strategy. what happens with the faa? does it gets weighed by the president's tweeting? the president is free to tweak opinions but the faa is an independent body. they are going to make their decision absent politics. lets me go back to theresa may. what happens with a significant loss to her deal, we know we have onward vote scheduled for tomorrow on a no deal brexit, which we believe the comments will vote to take that off the table. we have an onward vote on whether to direct the government to extend article 50 extension. we think that is a given.
watch for parliament to begin to take control over the brexit process. by that we mean following those votes, look for parliament to put in place a cross party mechanism that would allow for mps to come up with some sort of arrangement to move forward. we think it is most likely going to be a permanent customs union that will still require withdrawal and a backstop. the way that you will see how -- begins to indicate preferences is a series of votes that will whittle down options. once those boats are taken, we would expect parliament would put in place some committee that would work with the government andlesh out a revamped deal take that back to brussels for onward negotiation. meredith, how would you have the general election?
where does that fit in the order of thinking? a loss forf we see theresa may, that is upwards of 200 votes. that is when her position begins to look unstable. 25% probability theresa may would step down in part because she is a fighter and we have seen that over the next -- many months the brexit drama has played out. if she has a devastating defeat and the margin is above 200 votes, we would expect there would be upward pressure on the prime minister to step aside and in that regard we would expect a more eurosceptic prime minister to step into the wake. u.k.what will it cost the to extend article 50? what would the eu demand and return? i am not sure the eu
was demanding anything other than getting a concrete view out of london and the house of commons. on the way forward with brexit. there is speculation as to what kind of extensions the eu is going to approve. whether that is a two-month extension or a three-month extension. of where that extension rests, unless we see a cohesiveness across that complicated mechanism where was the mps come up with a lowest common denominator amongst themselves, sidestepping up to now. we are likely to see a resolution to the backdrop issue at the end of june. that is markedly different than what we have seen today. the key question is, can we get to a customs union, a permanent customs union arrangement with
the withdrawal agreement and with enough of the assurance it is on the part of the eu, which we do not expect will go much further than brussels has done to get this deal past. vonnie: meredith. we have to leave it there. and of research, strategy operations. you see that brexit vote still ahead. we will also deepen eye on wells fargo -- ceo tim sloan. the latest from capitol hill. among others, follow that hearing on your bloomberg. that is -- started a few minutes ago. is notargo stock reacting. it is unchanged. we are keeping an eye on boeing as well as the president's tweets about airplanes becoming too complex and the faa does not mandate action according to the company. this is bloomberg. ♪
vonnie: this is bloomberg markets. i am vonnie quinn in new york. i amin westminster london, guy johnson. outsideguide westminster as the crucial brexit vote takes place in a bit. you are seeing live picture from capitol hill. tim sloan facing questions at this moment from representatives, including maxine waters, chairman of the house and agile services committee. he is putting prepared remarks. questions will come after that. it is on a pattern of consumer abuses. that is what the house is calling it. -- pretty uncomfortable for
tim sloan. it is not the first time he has testified on capitol hill. it does not get easier. not.absolutely he has been there for 30 years. he has a lot of experience with this institution and many of ,hose questioning today are what happened to wells fargo is the entire banking center. then it's to be a clear understanding of what went wrong and why. very much a culture issue as we hear. many questions will -- as well. this is bloomberg. ♪
the brexit debate underway hides me in the house of commons. aroundgetting debate 7:00 p.m. london time when mps will vote on theresa may's amended brexit deal. she is answering questions now is notdoes look the dup going to back her. it is unlikely she has sufficient votes. what comes next, that is what everybody is asking. >> it is already an intervention. i want to say a word about the border -- gibraltar. eu,een the u.k. and the under the interpretation of 184 as regards territorial skate. we will always stand behind british sovereignty for gibraltar. --nie: addressing currently
the issue of gibraltar. there is disagreement between the u.k. and spain about which direction gibraltar should be going in. it.who should control it is unlikely theresa may is going to have sufficient votes to get her deal through. we are expecting we will see another vote tomorrow on a no deal brexit and a subsequent vote the following day on an extension of article 50. after tonight, it is very difficult to call what happens next. vonnie: gibraltar is not that sticking point today. in the u.s., robert lighthizer will testify before the senate finance committee. we want to get an update on bloomberg's international policy correspondent michael mckee. what he has been watching. what will he be grilled on? michael: he is going to talk about the wto and the u.s. is desire to reform the
organization. the trump administration has done its best to throw sand in the gears of the works of the wto am a refusing to appoint judges that would here dispute panels. today, they hope members of the finance community will set up specific requests the u.s. would have in terms of renegotiating the deal. other countries have already been working on that. canada set up a working group to talk about wto reforms. there is movement towards changing the organization. before he is up, all the trade issues before the administration are going to come up. lawmakers will ask about the progress on nafta and how they are going to get that to the congress and, what is happening with the chinese? the question is, is ambassador lighthizer frustrated with the progress that is being
made? we understand he has wanted a more comprehensive deal but now the president wants a deal to ensure we get financial stability. sound like ate to broken record but nobody knows what donald trump wants. it is hard to know what position -- trade brett is tentative what the trade representative would take. they won a better deal with china. he argued that means changing china's industrial policies. the president does seem to have focused on what they are buying some of the bilateral trade deficit. it will be interesting to see what we get out of it. the trade representative and the treasury secretary steven mnuchin helped yesterday, the chinese negotiator. no new progress reporting. thanks to michael mckee, you can catch the full lighthizer hearing at life go.
-- live go. guide? -- guy? guy: this is the situation in europe. the big moving parts with what is happening with the uk's debates on brexit. the pound is down. -- trading soft. trading a little bit higher, the focus. what is happening with the banking sector? the pound story took a lot of the focus earlier on in the session, the pound coming down quite sharply after the u.k.'s general decided he could not change his advice when it came to the irish backstop and the pound tumbled on the back of that news. we saw a significant reaction. banks werethat the under a little bit of pressure
and moving in the opposite direction. stock, oncethe affected by this brexit story. we will continue to monitor the situation. you will be able to catch a live as well a little later on this session that is going to start at 7:00 p.m. bonnie in london on the vote that is going to take place in westminster. vonnie: one person keeping eight bdi on all this brexit and lack of development is ceo founder bruce richards just coming off of an investor. he joins us now. today, another vote in parliament. his -- is your base case a strong brexit? nothinghe base case is will be determined until the end. exits, either be a march which i do not believe brexit is
for now or kicked the can down the road for a few months, figure out a deal and that deal is a big no deal. as a deal has it been struck. it is going to feel more over time like a hard brexit. that is the base case. vonnie: what does that mean for investment? you have taken positions of the outcome of brexit. guy: we are waiting for the outcome. we are waiting for the upcoming europe to present opportunity. it is also germany is slipping. look at the most recent industrial production numbers. look at all the manufacturing numbers. then go to italy. i put this first quarter of 2019. now you are talking about the four largest economies in europe. recession and and the ecb recently invited
normalizing rates, keep rates low over a long time, say two or three years. several training treasuries are negative. the central banks actions are going to have no impact as the relation to gdp and economic expansion because you are tools at this kind. vonnie: you did have investments . are you holding onto those properties? guy: -- a nonperforming loans. we have taken over the property is performing well because we have to met -- we have to remember we are earning cash flows that are high and are funding wrote -- rates is the lowest cost in the world. we are earning a nice bread and as has started to come down a ,it as interest rates come down
it worked out brilliantly well. you gave our clients a lot of money already and we will continue to make money. vonnie: this goes back to the u.s. i know you have been on the lookout for leroy. bruce: i wish leroy wrote, how to spell bubble. we have thought a lot about that. here is the important points to realize. pre-2008, december 31 of 2007, $760ntire amount of billion. a $900 billion of a ratio to what you find it a high-yield market. of 3.2 times.o 3.2 times are
higher. our ratios exceeding height. -- including what you find in a company. we believe that hundreds of billions after please would fall -- of triple phase would fall to a high-yield, not your potentially for when i next recession begins, which we are earmarked. vonnie: can you name names? there are companies that could lead the -- blood the high-yield companies. are 789 companies following a 481 bonds. we started to build a sure and some of these names and the bigger opportunity for us will come later. pieces to pieces of these good companies. heinz craft is one name we are short.
there are others that represent this basket. vonnie: in the same areas? bruce: consumer stocks but other companies as well. vonnie: health care? bruce: a lot of energy companies debt market.r's companies should be semistructured. we have been in voiding -- avoiding energy from a high-yield play. the -- out there, it is it -- is it overblown? taylor: the thing that is not overblown is how light the lives are. prior to 2008, covered in might. and also withs is
that leverage ratio, the air was to terms of leverage per credit rating. vacs and youthe ad take cap castigates. we think of it is a highly leveraged this cycle. leverages are a concern but not until the economy slows. the -- starts to -- the false start to hits, that is because companies can kick the can down the road. you are going to see less , which is howlts you define the fall rates. it will be more of a wade of affect because you will likely have a slightly lower rate but you have just as many defaults. vonnie: we have something for the next time.
bruce: i can tell you about a log we are involved in. we are cutting the ribbon and they are going to be at the hudson yards with the grand opening. the country is -- company is $500 million. marathon is leading the bond holders group. it is a debt group comprised of loan holders and bondholders. ownsrivate equity sponsor markets and the company. in that process of doing this, we are going to be cut -- forgiving debt or reducing the debt loan. is markets. -- verya variable as it
valuable asset to have. and something that works out well for us as bondholders. it works well. it is a great company. increasing sales, increasing free cash flow and a greater financial stability. vonnie: we have to leave it there. but we will keep an eye on those names. that is bruce richards of marathon asset management. theresa may on her feet a dozen parliamentarians, discussing the debate that is going to be ongoing for the next few hours or so as we approach the and boat. what she said over the last few minutes is there is no evidence that the people have changed their mind on brexit. >> we back here time and time again and barbara but -- far
guy: i am guy johnson. vonnie: i am vonnie quinn. we are outside westminster, guy and a lot happening in the united states. absolutely. but the political events. let's update everybody with what is happening. the ambassador wrapping up his prepared remarks, ambassador lighthizer saying if the u.s. is china, better rules with if youcantly the u.k.
want to carry on following with the ambassador is saying, do so on your bloomberg live go. you will find out what he is saying currently. it is going to be interesting. the big trading story around the world as they focus. let's get back to one element of that which is a brazen debate. the pound taking a tumble early he caneoffrey cox says change legal advice on the brexit deal, in particular the irish backstop. ahead of tonight's vote, i am joined by james morris, vice chair of the conservative party. good afternoon. theresa may is going to lose tonight. is that the broad assessment in the house behind us? james: she is speaking at the moment. the debate is underway, clearly working to get a majority. it is vital we get a majority for this withdrawal agreement
tonight because it is designed to give certainty to business, which is what business has been saying to us. and delivering on the mandate that was given to was by the british people to deliver brexit, it is tough but she came back from brussels last night with legally binding changes, which have provided that reassurance of the backstop. this is a vital moment for parliamentarians and my colleagues to make the right political choice so we have certainty that britain will leave the european union on the 29th of march with a withdrawal agreement. the alternatives are presented to us today are that we need to get this deal over the line because if we do not, uncertainty will continue, we must bring this isertainty to an end so this the way it is the next couple
years. guy: the attorney general has not been able to change his advice, therefore if you are a member of parliament, what in reality has changed between the vote that is going to take place and the one that happened last time? if you look at his letter, he is clear what was agreed with brussels and what was legally bind the changes on the effect of ensuring if the eu was going to try and track the u.k. in a backstop arrangement against our will, we would be able to stop that from happening. it is also clear that the other thing we negotiated was there was a clear works stream about alternative arrangements for the irish border. the eu is committed in legal the u.k.eliver with alternative arrangements to the
irish border by the end of december 2020. engageeu do not clearly in endeavors to achieve that, that means we may not have to use the backstop at all. the attorney general was clear there are legally binding changes which have taken this withdrawal agreement forward. he did say in the circumstances whereby the u.k. and e.u. using best place to negotiate, have not come to an agreement. there is not a mechanism to identify the backstop. guy: what happens if she loses? do you think she is the right person to lead the country? the question is -- is, mythe question choice is for parliament to vote for this agreement. if the withdrawal agreement does not go through, there will be votes tomorrow and thursday.
the entire focus of the government to create a certainty for business is to get this withdrawal over tonight. premise or is in the house of commons explaining her position to parliament and this is a pivotal moment. it is a political judgment. respect the legal debate and technical jargon and this is a political judgment, my colleagues now to create business but also deliver on the mandate of the referendum. may has been unable to do so. therefore, tomorrow -- if she does not get through this evening, we have spent the last 2.5 years trying to create something that has come to not. naught.t. --
why should this government have credibility? james: that is a speculation about what may or may not happen. there are a number of my colleagues who voted against this agreement when it was last presented who are now saying they are going to vote for it. it is not a done deal in any way. -- focus of the government's government is to get this withdrawal agreement. landscape.litical needs to further uncertainty and chaos and that is something we are wanted to avoid. the vice chair of the conservative party. robert lighthizer is on capitol hill. will get the latest on his testimony next. this is bloomberg.
guy: live from westminster, ahead of the exhibit, i am guy johnson. vonnie: in new york, i am vonnie quinn. two hearings on capitol hill we are keeping an eye on today. one of them is robert lighthizer, the u.s. trade representative this. he is speaking to congress on the usmca which does not have congressional approval yet. he says it should spur perfection in the states and he hopes or progress on other trading funds, i.e. the pan and u.k..k. -- japan and the the u.s. has concerns about the wto. guy, inside the wto there is a
process outside the wto that has to be processed that both sides agree upon. on bothis a problem sides of the atlantic. the brexit debate is ongoing behind me. we are expecting voting to start. indications are theresa may is likely to lose another vote this evening, potentially with catastrophic effects to her brexit strategy. we will provide you with plenty of coverage on that from bonnie vonnie andie -- myself. ♪
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i am david westin. guy johnson from london on brexit happening four hours from now. and washington, alan levin kevin cirilli from capitol hill on simultaneous congressional oversight of wells fargo, trade negotiations and the split t-mobile mergers. y, i hear it is not looking good. goodit is not looking too on the weather front and political front. both seem to be combining. it is expected theresa may will lose another significant vote this evening. the reason for this is the attorney general and the u.k. has not been able to significantly change his advice as ae brexit backstop result of which the dup from ireland and