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tv   Bloomberg Surveillance  Bloomberg  March 20, 2019 4:00am-7:00am EDT

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this is the picture for equity markets, looking for a week start on the day. looking to factor in the weakness that happened because of concerns around trade into the european markets. this is the start of equity trading wednesday morning. let's see if we do move decisively to the downside. interesting to keep an eye on u.k. assets. we do have weakness coming through. theresa may saying that the government is going to ask for a short extension. we don't have the exact details or know when the next book will come, and that is the implication there will be another meaningful vote. does that mean the choices now between her deal and a hard brexit? if you dots to join up before we make that conclusion exactly. let's talk about where we are on the markets about weaker by .3%. .2% of0 not far, down by
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the if that gives us any clues as to where we are headed financials, a nice swathe of red. energy also a little bit weaker. we don't get many clues as to how risk on a risk off the markets are. an area ofeem to be weakness and some positivity coming through. we have some interesting stories out, lots of companies to keep an eye on. not getting many clues from the sector. what do you think? matt: looking at the moves. , i see stocks down. winners.1 losers to i see it as a percentage change, seeing it as a smaller gaining company. based on a google announcement it will start streaming with a controller and no consul --
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console. ubisoft is one of the gainers, a videogame publisher up by 1%, so far, that is the only one i see in the top 10. i don't see any of the top 10 losers. you can see wirecard is also a gain or about kingfisher again kingfisher asr, well. bhp group as well as iron prices come down. you are seeing these miners getting crushed. if you switched index points, you can see these companies at the top because they are so heavy, they are a real weight. .lencore there as well a weight on the stoxx 600 this morning. anna. anna: let's talk about these markets with our guest.
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european equities down by .3%. still waiting for opening prices both of these not yet open. , atkinson,now on set cio at saxo bank. let me ask you about trade and her latest thoughts. it does seem as though it took the edge off of markets yesterday and the u.s. and is waiting on what is going on in the asian session. what is the market pricing in around trade, do you think? >> they are all agreeing there will be a deal. it and xineeds jinping needs it. we will get a deal, but we will get a deal that is more rhetoric than actually content.
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the risk is have you implement it, ratify it? clearly, they're not going to use the wto. what i'm hearing is that they will be under further attack as we go into the g20. anna: all about implementation. matt: first off, i want to take a look at bayer shares. i'm looking at a year to gate -- to date picture. decimated,as become that is the definition, down by 1/10. this latest ruling on whether or not the weedkiller roundup causes cancer, they are down by 10%. let's get back to steen. you talked about the china deal, saying both of them needed done. but it might not be as good as
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we expect, markets are up 13-14% if you look at broader indexes. -- do they take a hit? steen: i do expect that. i expect will be a buying the room and selling the fast. it will be difficult. combination of what we are seeing in terms of global policy panic. performance,t the it has nothing to do with classic bottom of earnings. it has nothing to do with the framework. central banks widely panicking about the measures. the only thing they really stand out to me is that china is trying to engineer a transfer to
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the equity markets. the actual deal is announced, there is a good potential to see that china will outperform. the chinese cannot afford 2019 to be a bad year. inmarsat, we're talking about interest in the company that confirms the have been approached. providers.te will there be hopes for another renewed deal? story,g with the trade you said something really interesting. clearly, there is a lot of focus on opening up chinese markets. you talk about the rate of assent, the rate which it is catching up your actually, you say that allowing more capital
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and allowing us to be a calm part of the global markets will actually increase the pace at which it catches up. in a sense, we have to be careful of what we wish for. anna: if it is a competitive game, one against the other. >> the way to the economy works is that they can focus on what they do right now. today, there are more papers on artificial intelligence than in english. which is itself surprising. there is this tit-for-tat strategy also inside the chinese communist party. it is seen by them as getting authority, and there are two things that are not and never will be uniform. land reforms, because of the vested interest within the farming community and the financial market overall. the banks are still be
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facilitator of all of his credit. holding the markets creates an inflow. china has grown from capital exports to imports. a currentnning account deficit, but it will also mean the chinese authorities will have to give more room for foreigners to access the market. is an exciting combination, but a combination that will not come without its own battles. the cbc and china and foreigners wanting more access creating an even more competitive china. much, stay you very with us. up next, we bring you stocks on the move. bayer still down by 10% as they lose a trial. this is bloomberg. ♪
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matt: welcome back, this is the european open. 11 minutes into the trading day, looking at drops across the board terms of european equity indexes. let's get the individual stock stories with dani burger. >> you have the dax as one of the biggest losers, no surprise is dragging it down after losing a secondly over itsecond lawsuit
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cancer-causing weedkiller. it has 11 trials to come, analysts are saying it might be headed closer to paying some of these out. costs might be upwards of $5 billion. to the upside, one of the biggest gainers, inmarsat, $3.3 billion is the price tag for this one. a group of pe and pension funds sending shares higher. the premium is 24%, but we are not quite there, trading only a 15%. to the downside, montclair showers -- shares lower, its fourth largest shareholder exiting as part of strategic investment. it is pulling out, and this is a bigger loss than what the company sold prices that, at 36.5. we seeing shares at 36.22. anna: thank you, let's talk --out the u.k. and briggs it
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brexit, brusselsay is going to to ask for an extension. but some are not convinced and the ceo overall's is concerned about what a hard exit could mean for his supply chain. we spoke to bloomberg this morning -- he spoke to bloomberg this morning. >> all of this could help to ease it, to a certain extent. all i need is one part and i cannot finish a car. that was the ceo of rolls-royce speaking to bloomberg overnight. . let's speak to stephen yet jakobsen.steen we understand that theresa may is going to ask for a short extension. we don't know how long, but it
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sounds like until the end of june to avoid complications. does that mean we are back to talking about, if it is not extensible, does that mean we are back to talking about her deal or a no deal? the skip writers of house of parliament meet -- leave these other writers in the dust. wants,ot a option the eu and that is the pushback we have seen it they wanted clarification of why they are getting this extension. if it is to get a meaningful vote before or just after the end plate runs out, clearly, they will allow it. of was need to take note that they seem to be the most vocal. of course, the german and french is the most important one. anna: we also need to think about what the fico might decide to do.
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this all strategy relies on them being able to bring the deal back to the comments -- commons. steen: listening to tory members , it seems like the fallout from this is that if she does not get a meaningful vote, people will start challenging may, saying we need a reset, another leadership, another angle. clearly, she has lost her ability and integrity in not only the house of commons, but the eu. she keeps coming back with the same deal. it is the definition of insanity, repeating the same thing getting -- expecting different results. ,nna: when the clocks tick things change, i suppose. matt. matt: first, some breaking news on at ubs, saying investment revenues are down by one third year over year. ubs shares are falling in zurich by more than 1%.
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ubs coming down with a big disappointment for investment banking revenues. we see shares taking a hit in early trade. secondly, i want to bring you a chart. een, anna and i were talking about this during the break. it is fascinating, unrelated to brexit but i bring it to you now. this is a chart of deutsche bank. what i have got here in white is the price-to-book ratio going back a few years. we have started 2018 at more than half, so price-to-book ratio of more than 0.5. .e have fallen to 0.22 if you are wondering why they're are being pushed towards a possible merger with commerzbank, it is fascinating to see that they are only worth less than one quarter of book assets. let me get back to brexit before we get too sidetracked by
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banking doom and gloom. expect -- heavy seen a lot of finance moveout of the city of london and on to the continent? do you expect to see that continue as we are stuck in this kick the can quagmire? itbelle: it seems -- steen: seems to me that amsterdam has become a big place for corporate's to move out, the tax law makes it attractive. but amsterdam's clearly the winner. desperately, people just want clarification on the issue. to my mind, the bigger importance here is that people are too complacent about the ongoing weakness of the u.k. economy. we have a contraction of the credit impulse to the tune of 2% of gdp. if nothing changes, this credit impulse would taken very negatively and have to create a reassessment both by the bank of england, but also the market.
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did,g the top question we yes, i see significant outflows. terms of relocation and economics, i'm very concerned the markets are very complacent when getting an extension that would lead to absolutely nowhere. anna: thank you very much. up next, prices retreat ahead of today's fed meeting. can they bring it all back workaday dot plot downgrade the the thing to restart that? we discuss, this is bloomberg. ♪
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>> they are not going to change rates. we will see this week how dovish the fed is. >> they have shifted rapidly. >> from hawkish to dovish. >> it has been fairly spectacular. >> we have priced in so much dovishness, there is a high hurdle for them to say something that would tremendously push us. >> unlikely will get any change. >> what we're looking is for them to chase the dots. >> it is in the market price that the dots will move to zero. >> one is where markets are, one.. -- one dot. >> halting declines going
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forward. markets can expect details on size, composition, and maturity. >> the fed will be very cautious. matt: with the fed expected to hold rates steady today, market volatility has gone missing. most investors are waiting, but one group is stepping in. qantas'sy targeting snap up assets -- quants snap us assets. here to explain is bloomberg's dani burger. : there is a whole range of quants that like to buy when volatility is low. the lower volatility, the more assets they buy. they have had their best stretch in months.
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i want to show you another group, trend following quants. they like to buy when volatility is low, so here about the u.s. bond market, volatility has been sapped. so exposure to u.s. bonds which i have charged here is the highest over here in two years. banks cominghese up with decisions, any move in volatility or weakness in bonds, because these are so fast acting, they could quickly slip, leading some analysts we has spoken to concerned that this is the area to watch as we get the fed decision. today anna, matt. anna: thank you very much. steen jakobsen is stil with us. let me ask you more broadly about the fed. what is your expectation for how dovish they will be, and what could be seen as dovish by the markets?
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if the fed just catches up, that might not be taken as dovish. isen: the main takeaway whether there will be any announcement on balance sheet reduction. don't forget, we just what started -- just started this resurgence in november and december. the market is looking for an end the game of $3.5 trillion. any deviation will be seen as positive in the sense that it stops earlier. overall, it is not surprising to see the volatility or parity funds doing well. we are in a massive global ,olicy panic across the globe which i think was predictable in december. we do not have a credit cycle or business cycle. overall, what really concerns me on the growth side is that point to, the of curve trending at a new low.
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the bond market is starting to price in concerns in the short -- shortrms of growth end in terms of growth. matt: how important is the dot plot? i reminded viewers we have this on the bloomberg. how key is this? they always try to scare us away from looking at it, and how do you expect it to change? palo thee comments by other night, if you look at a painting and a look at the dots, you will miss the bigger picture, and that is it. i don't think it had any relevance, as i have said many times i have a golden retriever that is better at predicting federal reserve rates of a on any member of the fomc board itself. i think it is that important, it is the details, the microstructure. the plots by the end of today will be more scattered, a wider
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range. isple think the stock market reacting so much to global policy panic means that we will have to rein in some on the dollar side. . on the other said. hand, if youer react so strongly you might never be able to remove back to your position. anna: i would like to get your dog's opinion then. mention this in your notes, inflation expectations on the rise. why do you draw our attention to this? steen: the market is saying there will never be any inflation. as we come into the back end, we will see wage inflation coming through into expectation. will be two point 3-2.4, meaning that again, we could see the federal reserve hit -- pivot. anna: stten, thanks for joining us.teen, thanks for joining
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i'm off to talk to the labour party brexit secretary in london. up next, we talk about europe and what angela merkel has to say. this is bloomberg. ♪
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matt: 30 minutes into trading and here are the top headlines for you off of the bloomberg terminal. keep it brief. the reason they is asking -- theresa may is asking for a period.exit extension buyers meet sellers. with more than 11,000 cases turns itshe court attention to determining .iability and damages ubs says investment bank revenues are down by one third in the first quarter.
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shares are down 2% in zurich this morning. welcome to bloomberg markets. this is the european open. in berlin, we 30 minutes into the trading day. let's see what is shaping up in terms of the individual movers. down,n see 345 stocks are 232 are gaining. take a look at who is adding and subtracting the most points. here likeicals astrazeneca adding the most. ,e have others showing gains some of more than 16%. more than 16%. we talked about one of the biggest losers down about 11% taking the most points off of the stoxx 600. hardave miners getting hit with the drop in iron or prices
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-- iron ore prices. american, alllo of the big mining companies are down big end weigh on the index. waiting on the -- and weighing on the index. trade negotiators are concerned that china is pushing back on american demand. iny are worried changes intellectual property rules are not being met. some are to beijing next week for high-level talks. donald trump has announced stephen dixon to run the faa. the agency faces scrutiny in its role in approving the boeing 737 max. the job has been vacant since 2018.
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the new director needs confirmation from the senate before taking over. joe biden has decided to jump into the 2020 democratic race. as thed be seen front-runner in a diverse field of candidates. to capturey significant support from democratic donors. biden could announce his candidacy in the coming weeks. global news 24 hours away -- a and more than 120 countries. -- in more than 120 countries. merkel says that she will never take a germany first attitude towards the european union. to bloomberg's editor in chief john micklethwait about multilateralism in europe. the chancellor said that france and germany's visions were
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different, but not irreconcilable. >> each and everyone of us has different ideas about when we ought to reform. that has been the case in franco german history. alwaysand germany has seen if they could persuade all of the anna -- of vienna. when you look at how the euro was created, that was very much the case in point. germany argued and france argued has always been very different. france has always made a point for the stability pact not being so strictly adhered to. looking more at the impact.
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will do so in we look at the capital markets union. when we look at the budget of the european union. and if we leave britain outside of it, that is very important. will you take a germany first attitude? >> no. [laughter] i don't think so. we have been heavily criticized on copyright laws. france also wants to protect the startups. with brought in conflict that agreement. years,ight years or 10 we finally have common legislation on copyright and intellectual property.
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young people out there demonstrating against it. john micklethwait speaking with the german chancellor angela merkel. our guest is still with us. the chancellor makes interesting points. on the other hand, she has actually helped macron in furthering the eu. it seems like the finance minister is taking eight germany first attitude -- a germany first attitude. >> what is important is to talk about compromises. i think we will see different dynamics. germany and france will have a lot in common. they will have low growth and to go with the 0%
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interest rate policy. i am very much betting that the whole story about the him in t concepts, that you spend money will not come to fruition. we will sing -- swing toward populism. i think are many and france will stand together as they did with the birth of the eu to defend the new europe. incoming is an agenda in europe then needs to move forward to consolidation of european companies. in that context, you can put deutsche bank as well. as you alluded to yourself, if at 9.5e so many trading
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germany isxports in at recession levels of 45 pe. i think the rhetoric from merkel clearly indicates compromise is coming. i am fascinated to get your take on modern monetary theory. you mentioned that you don't agree that you can just spend money without raising it in order to reduce the economy. -- two goose -- to goose the economy. but the twitter generation applauds it? >> absolutely. corbyn is embracing it. t is about using
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taxes instead of monetary policy. i think one of the compromises that yes, we can violate the 2% stability pact feeling, but only if it is infrastructure. t will do, as long as we spend on infrastructure creating productivity, we will be allowed to deviate from this. german be exactly the lack of growth, that benchmark trading is so low. there is a sense of urgency. will come from germany, not , fromalways expected spain and greece. matt: the cio at saxo bank, thank you.
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into this session, we go back to dani burger. dani: woes continue for the european banking sector. first-quarter revenue fell by one third. the ceo calling it one of the toughest quarters in years. you see shares down more than 1.5%. we see some gains up more than 2% having to do with a new gaming platform from google. game makers like ubisoft benefiting from this way of getting to consumers. console makers might be a touch weaker on the news. rio tinto down more than 3%. iron or prices are falling today, so a lot of miners are really wearing on the overall equity index this morning. anna has split, but i will
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pick it up there. will be next, officials expected to present a more dovish outlook. could the central bank b paving be way for easier money -- paving the way for easier money? this is bloomberg. ♪
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back to bloomberg
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markets. this is the european open. 44 minutes into the trading day and you are seeing a little bit of turnaround in terms of the equity index figures here. the ftse and the cac gaining. buyer isn't helping, down 10% this morning after difficulty. thedot plot referring to fed chickens. the dovish -- thickens. willovish expectations come to a close this evening. markets are looking for details on the balance sheet. former fed governor randy crossed her positive vice, take the dot plot with a grain of salt. voice says take the
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dot plot with a grain of salt. wrecks a think that they will be patient -- >> i think that they will be patient for quite some time. matt: we heard from a number of people that we should not take the dot plot too seriously. a goldeneard that retriever is better at forecasting rates going forward. but the market does pay attention when it moves around. is that going to change? >> it will not change. people will inevitably pay attention to what the fed members are thinking. the economy is slowing specifically and i expect the expectations to come down a little bit. so you expect the dot plot to move down a little bit. takexpect the fed to
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interest rate increases off of the table for 2019? >> we think the fed will be cutting interest rates, hike and the december probably the third quarter. quarterobably the third . essentially, they will explain when qt will stop. by $370 billion. that raised the amount of financing needed to be raised by the markets to $1.5 trillion allowing for the enlarged budget deficit. that is why rates went up. the stance is easier and the economy is slowing down. there is no reason to expect that they will be easy. what if the u.s. and china
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come to a good trade deal? that theou assuming u.s. and china don't come to a particularly effective trade deal? >> i'm not. not at all. the reason for the slowdown is that the damage was done last year by the huge hike in the dollar and the chinese yuan. it imposed enormous penalties on everyone else because it made imports much more expensive. it made foreign debt much more expensive. becamesame time, exports much more competitive because of the yuan going down. and the emerging-market bloodbath last year led to a stereo the programs which -- to austerity programs, which is slowing down sharply.
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it is spreading to the united states. it is a latent effect of what has already happened. recessionou see a coming, charles? i was reading a column by gary shilling, admittedly a noted bear. fed raisesf the rates again, it could push us over the edge? will, itt think they is a much more market sensitive fed then we have had before. than we have had before. but we don't expected because the u.s. is slowing down. it is not going into recession as we see it. the consumers are helped by much cheaper oil prices. to some degree, they were hurt by the drop in the stock market by the end of last year. but we had quite a bit of recovery. we are two thirds of the way
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back from the september or .ctober peaks it is just modestly less buoyant than before. matt: charles, thank you for joining us. have specialwill coverage of the fed decision this afternoon. tuned for that. it is really an evening event in london, and afternoon event in new york. 2u see coverage starting at p.m. new york time, 6 p.m. in london. reeling from its day in court. the german conglomerate slumping the most since october, losing more than .1 of its value. this is after claims that roundup weedkiller caused cancer. what could the next steps to be
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for buyer, for the payout? loss areast round is but that doesn't mean it is the final verdict. liabilities and damages will be determined. they still have the chance to prevent -- present some evidence. it is not looking good and the second case the buyer lost. a groundskeeper in the school was awarded $80 million. some think that buyer is indeed liable for that product. matt: and there are a number of cases to come. >> definitely. .here are about 11,000 cases
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it would be a huge signal to these other cases. analysts predict that if it is the case, buyer might want to move to settlement. .t could cost $5 billion that is quite a lot for a company that made it $89 billion last year. matt: thank you for joining us. this drop in your -- in bayer is really weighing on indexes this morning. bloomberg terminal users can interact with the charts that .ou have seen and, you can see the entries used for battle of the charts. that's coming up. this is bloomberg. ♪
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the: welcome back to european open. we're almost 55 minutes into the session and you can see that we have turned around and equity indexes with the exception of the dax falling by bayer. chartsr battle of the today. it dani burger is going head-to-head with justina lee.
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i have a chart of palladium. i don't need to tell you that this metal has been hot. it has been used in cars to help cut emissions. see it interesting is we absolutely surge past gold. the gains have been really incredible as demand for cars, especially in china, has weakened. how demand didn't look so solid. car demand didn't look so solid. but the price has gotten very close to $1600, matt. matt: very interesting stuff on the price of palladium. let's go over to justina lee. would you got? justina: -- what do you got? justina: theresa may may have trouble pushing a deal through parliament, but what we have in the upper panel is etf tracking
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the mid-cap. in recent weeks, inflows have been accelerated with january actually posting the biggest record monthly influx. and march seeing some good numbers. good proxy for sentiment because it is made up of a lot of domestic names. we can see that the ftse 250 has been rising against the large caps. people now see the risk of a no deal brexit as lawyer -- lower. valuations are looking quite attractive. investors feel like the worst case scenario will be averted. matt: what an incredibly difficult battle this is for me to decide. hand, palladium reaches a record high and my love of cars pushes me to vote for you, dani. on the other hand, we're so close to brexit.
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the possibility of a brexit end is in sight, admittedly small. so i will vote for justina. that is it for european daybreak. surveillance is up next. ♪
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and theresa may face a
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fight over the extension. leaders want to prevent a delay. investors wait for the details that the pivot to rates approach inflation and the balance sheet. and president trump has a net beat note on trade talks with china with u.s. officials concerned that beijing is backtracking. good morning, everyone. this is bloomberg surveillance live from london. i am francine lacqua. taylor, there is quite a lot of corporate news action. down looking at bayer quite significantly after losing the first phase of the roundup trial. and of course we have the fed. morgan with bayer, stanley maintains they are overweight but there is a lot of optimism regarding the trial. losing that trial about cancer and the roundup lead thing --
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central.g will be and it is fed day in the u.s., one of my favorite days. new 2%lation is the inflation. francine: breaking news out of bmw, earnings falling well below last year's level. we understand that they will embark on an efficiency drive to offset the impact of some of the trade conflicts. 2.6% withe bmw down that news coming out in the last couple of seconds. let's get straight to the bloomberg first word news. >> british prime minister theresa may will not ask european union for a long delay to the brexit deadline. it increases the chance the u.k. could lead -- leave the block without an agreement.
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it could lead for a tense moment between european leaders and the eu summit. president trump sounds somewhat optimistic. china may be pushing back against american demands. chinese officials shifted their stance after agreeing to changes in the intellectual property policies. they have not gotten assurances that the u.s. will lift tariffs on exports. beganresident joe biden telling some supporters he plans to run for the democratic presidential nomination. is expected to announce his intentions in the coming weeks. he is 76 years old and leads in primary voters. ubs ceo says conditions have been among the toughest in the years. the swiss bank cutting thousands
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of jobs while building the world's largest private banking business. taking as of bayer dive in europe after losing the first phase of a trial involving the roundup weedkiller causing cancer. they will nudge them closer to a settlement resolving more than as000 lawsuits costing bayer much as $5 billion. powered by more than 2700 journalists and analysts in more than 120 countries. global stocks mixed today as investors try to understand exactly what is going on in the trade dispute with china. expected federal reserve policy decision today and news on trade, what it means for global growth. i am looking at two-year treasury yields that will the
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top of the fed target policy range. we are nine days away from brexit and you can see the pound currently, if i bring that up withou, i will sure that you. i will bring it up in the later hour. futures getting a little bit of a lift this the s&p was negative to slightly flat yesterday. i am really interested in the russell 2000, the small-cap to isolateing themselves from some of the international trade headwinds that we will be speaking about later this hour. the russell outperforming this year. and we are awaiting some comments from jay powell today saying that the economy looks .ood but they will get that the 10 year is trading at a very narrow range. it is the narrowest trading range in any quarter going back
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to 1965. we just got breaking news out of bmw, they are basically warning of a profit slump. this is hurting share prices. it is down 2.5%. they basically warned that earnings will fall well below last year's level and that means they will have an efficiency drive to offset around 22 billion euros, offset the impact conflicts. will had to brussels tomorrow to ask for an extension. she will not be asking for a long delay. but the extension poses a risk the u.k. could be differing -- deferring.
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maria, let's kick it off with you. it's the eu is very clear. the u.k. needs to choose what they are asking for. do they want a long extension or short extension on the eu side? maria: a lot of it will depend on the content. the prime minister will ask for a short extension. measure, aen to the short extension only makes sense if the prime minister is sure that she can get the deal cleared by the u.k. parliament. given the fact that she lost by triple digits and nothing has changed, the eu is very skeptical about this. it would almost be an ideal to the solution, at this point needing to see a more complete reset in the strategy. to aome people may be
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year-long extension. a lot of this will depend on what prime minister may says in the letter. we expect maybe another emergency summit next week. bymay not get a resolution friday. a million factions are against theresa may. do we have any insight into what she wants? it will basically make the hardline brexiteers mad. and you have to organize yourself. >> it is difficult to game this out. one thing she is committed to is taking the u.k. out of the european union. where reached the stage there is a lot of speculation about how long the extension can be. and she can keep her cabinet
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together and her government together. the three months until june has been put forward as a kind of way to avoid taking part in european parliament elections that are due in may. and you have the longer nine months or one year. brexiteersr to keep on the longer it gets. side, it would perhaps be the best. taylor: i want to talk a little bit more about the second referendum of the eu dropping hints at. -- that the eu is dropping hints at. seems like they are a little more active, perhaps, than they have been in the past in u.k. politics. maria: it is a good question itause up until a week ago,
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was too late and prime minister may said that she wants to leave the eu. been skepticalas about what he thinks. he thinks if we go for a long extension, maybe that means that we need to put this to a new vote. the be that means a general election. he clearly hinted that something fundamentally needs to change. not seen.l be it fundamentally comes down to prime minister may. this is really the time to go back to square one. francine: thank you both for joining us. saga was closer to an end and it got a lot more dramatic and confusing. thank you for joining us for cross-border reporting. we will see where labor stands
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on a second referendum and we will see where they stand on that long or short extension. 1030 in new york, london. this is bloomberg. ♪
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francine: this is bloomberg surveillance. we are getting a little bit of news on bayer. s&s trading started a couple of as soono, we learned -- as trading started a couple of hours ago, we learned that bayer will be, in a couple of months to come, losing the first trial regarding the weedkiller causing
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cancer. to our news flash. >> north hydro is recovering from a massive cyber attack. the norwegian company says it is not clear how long it will take to restore computer systems. ofro is the leading supplier aluminum parts to industrial customers. the trump administration has opened a new set of government super max's.o the they are wondering how boeing certified the 737 super max. roadshowlike the lyft was a success. the ipo is oversubscribed at the current price range. investors will likely have to pay a premium when it starts trading next week. and that is the bloomberg
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business flash. francine, taylor? francine: back to brexit. the pound is falling after the prime minister's office is the u.k. will not be asking the eu for a long-delayed brexit. dual risks could return in the summer but have traders have generally seemed more -- no deal risks could return in the summer, but pound traders have generally seemed more optimistic. for the be enough central bank to increase rates in august? joining us now is peter dixon. he is an asset management senior analyst. nice to meet you in person. overall about the concern about brexit, we are nine days away from the april 29 deadline. it is more confusing. what does it mean for assets? peter: the market has been extraordinarily lax. the market has dipped to
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month-long lows. they have low positions in sterling. thehe moment, i think market still thinks that for some reason that the government will put out the fire last-minute. parliament has already said no hard brexit. all bets are off. francine: what does it mean for the economy in the u.k., the pound, and the boe? something to take into account is that there is a lot of uncertainty. week,is the event next but after that, it will not be a very long time. it will not be forever. i think the extension will be -- i think there will be another one after another one. peter, i wanted to talk
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to you about the pound. we are a little bit undervalued. you feel that u.k. equities are a little bit undervalued? i'm not sure i would say that. maybe a little bit, if anything. news, the silver lining , we would start to see equities rally again quite sharply. 70% of earnings are generated internationally, given the global slowdown. .here is more headwind are -- taylor: we are awaiting comments from the
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boe this week. but reporting inflation, does that help the boe that you are getting no more disinflation in the u.k. really looking at inflation at 2%? frederik: inflation is no issue for the bank of england. growth is decent. this is something that the bank of england will have to commence later on on the strength of the job market in the u.k.. but to see what happens in brexit, in terms of the longer side, the picture doesn't change for the bank of england. francine: i want to come back to something you said at the start. there a concern that we are the risk of accidentally crashing out? frederik: of course. the fact that the no deal option
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is on the table is extraordinary. the timeline after the referendum, we get nowhere. and having covered greece for several years, i don't want to draw a parallel with greece, but it is a hard decision. and that is why the no deal option has to remain with the threat on the table. and there are parallels or not between brexit coming up on bloomberg daybreak, the secretary to the treasury interview at 7:30 a.m. in new york, 1130 a.m. in london. and this is bloomberg. ♪
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francine: this is bloomberg surveillance. ireall big news, taylor, on bmw. 20 minutes ago from bmw that earnings will fall well below last year's level. and we're just hearing from the executive chief financial officer of bmw that these 2018 results will not meet company expectations. the share price down 2.4%. taylor: it is what you should be watching outside of bmw.
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visit was likely to keep the key rate for an eighth straight meeting. york, six p.m. london, the fed announces the latest policy decision, watch to see if we get any movement in the dots. i will go right there. peter and frederick are still with us. are theyots helpful or a distraction at this point? frederik: it is a good question given the way every single fed a member tends to be a bit more hawkish. there is this gap between the market pricing. the question is how far lower they will go. it is an extreme step for today.
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this is how the fed will react to market pricing. francine: what does the market misunderstand about the fed? peter: being called out by the fed the last few months, i think that one of the concerns is perhaps the way that the fed has appeared to some sort of political pressure. markets have to realize the fed is not operating in a vacuum. backdrop of athe very difficult political situation in washington. that theydo you think are more political, or is the fed just a huge institution? jay powell is not no one. they are looking at political pressure? frederik: the timing of events definitely validated the idea that there was a great deal of pressure. at -- that both
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trump and jay powell said at the end of the year. when the fed is facing is more relevant. higher than the end of last year. it is perhaps more dovish than some have hoped for. francine: when you talked about loved,nt -- taylor: i peter, when you talked about 2.5% inflation is the new 2%. frederik: i would love to see the banks more open to inflation target. the fed is reviewing the monetary policy framework. this is a little bit more theoretical. imposes what the fed did.
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if that is actually a problem in the data, so far, so good. francine: -- taylor: peter and frederik, both of you stay with us. following german jay powell's remarks starting at 2 p.m. in new york, 6 p.m. in london, we will do everything. 2%,ill see if we get above getting to 2.5%. that is live at 2 p.m. eastern. this is bloomberg. ♪
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. ♪ francine: this is bloomberg "surveillance." francine lacqua in london, taylor riggs in new york. let's look at what bmw is doing.
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one of the biggest corporate stories in the last 30 minutes, bmw warning that earnings will fall well below last year's level, citing the ongoing trade conflict. bmwes are down in beer w -- and bayer shares are down after they lost with regard to roundup. let's get straight to the story on bmw. bmw, how surprising is this if you look at share price down from 3.5%, can it get worse? >> a can probably get worse and the company said as much this morning. profit guidance is lower than they expected and could get worse if market conditions deteriorate. this is a company and industry
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that is in a perfect storm. the trade dispute between the huge financial outlays to get into electric cars and brexit, that is another element. they are all contributing to this unhealthy mix, and the other carmakers are caught up in this as well. taylor: does that -- francine: does that mean we will get similar news from other carmakers? it is especially true for bmw because they have a huge facility in the u.s. in spartanburg where they make their suvs. they have brexit breathing down their neck because of the many ini.
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audi came out with similarly gloomy comments and the geneva car show, the mood was not great. people are questioning the future of this industry. car moment?peek are people rethinking the need to own a car? , thatift to electric cars is something european and german carmakers have not mastered. taylor: another story we are watching is bayer. you had a few analysts coming out and saying if the share prices fall to their 2018 low you could see them be a target for activist investors. is it too soon to speculate on whether this country does company is really facing -- company is really facing problems due to one trial loss? >> they are already under
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pressure. it emerged in 2018 that paul singers hedge fund which is very active, they have a stake in bayer and have expressed a desire to split the company into two. share has, bayer's bounced back until today, and a ase start to 2019 was seen shielding them from this pressure, but after the verdict came in, there is down to 20 -- bayer is down 20%. they are under pressure whether from an activist and there could be a strategic buyer who comes in and sees the value on the pharmaceutical side and that they do not really want the crop side, and you split it up. francine: thank you both for
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joining us. witht miss our interview chief executive of bmw a little bit later on, harald kruger. that is right here on bloomberg. , inflation the u.k. seems to be picking up a little and some ofpricing the computer games pricing. looking at the breakdown of this inflation, it did accelerate. this is for the month of february and it is mainly because of an increase in the cost of food, tobacco, and computer games. viviana: we begin with u.s.-china trade talks, china is pushing back against u.s. demands. plansators shifted their after agreeing to changes in their intellectual property laws. they want guarantees tariffs
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will be lifted. week, robert lighthizer and steve mnuchin had to beijing. all of the fires at a petrochemical facility have burned out, the fire beginning on sunday. a plume of smoke a mile into the sky. authorities say there is a chance fires could rate night. brexit was supposed to boost the number of jobs in frankfurt and now a potential merger between deutsche's and commerzbank could lead to a job loss of 10,000 in the city. job losses that high would be difficult to offset. bill gates rejoined the world's most exclusive club. hittingune once again 100 billion dollars, making gates and jeff positives -- jeff
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bezos the only members. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. anchors.y bloomberg francine: thank you so much. back to the u.s.-china trade story, for the latest we are joined in london by craig gordon and peter dixon and frederik ducrozet are still with us. thank you for sticking around. when you look at donald trump and what we're hearing on the trade, we have conflicting reports. yes, they are getting along and we will have a trade deal and now there is backtracking from china. craig: donald trump has always been the most optimistic person
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when it comes to a trade deal. he wants a deal very badly and thinks it will make the stock market go up along with his reelection chances. hard-nosede pretty negotiators in the white house, and they are trying to crack down on china and produce the intellectual property and those things that have been slow in coming. on the chinese side, they are looking at the calendar and they realize we are heading into 2020, and maybe they could give him less and still get a deal. a lot of back and forth going on. 2020,ne: in the race for we understand mr. biden can tell his supporters he will run. how many people will we end up with on the democratic side? craig: we are up to 15 and we
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could end up with 20. the only one that -- ones that matter in the race are joe biden, beto o'rourke, and, harris. you have the choice at a very old hand, a steady hand who was vice president for a long time and marv a centrist. beto o'rourke is a fresh face. , and some further to the left, elizabeth warren talking about breaking up tech companies. if you are a democratic voter, you have a shargh's board to pick from and it will be a battle of the soul of the democratic party. taylor: it is a very wide range of candidates coming in and i'm wondering if that helps or hurts them in terms of not having a
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clear message to confront 2020. have toou probably can much of a good thing in this matter. we are heading into april 2019. there is a lot of time for this to sort out. in 2016, there were something like 15 republican candidates. one year there were the seven doors of the democratic party -- dwarfs of the democratic party. what would be nice a year from now when the voting starts in iowa and new hampshire, that there are that many people duking it out. this is a pressure test for these candidates. joe biden has run for president three times before. the process is designed to basically pick a new president who would be willing to step into the job. democratic voters will have some tough choices and will have to make up their mind.
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taylor: what is the clear message -- health care, immigration? what is the democratic message? craig: there is really only one thing democratic voters will care about, who can beat donald trump. they are looking for the trump killer who can stand toe to toe with trump on a debate stage. we watched hillary clinton do it with not always great success. the message they put forward to the american people, that is when a primary is designed to be . you have a wide variety of voters in the democratic party luck whenave had more it comes to centrists. even barack obama was thought is a liberal but was more of a centrist.
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democrats have to decide what message will prevail and it will be messy. a lot of democrats want to stick it to the rich and break up the tech companies that i think middle america might find less popular. it will be fascinating to watch. francine: talk to us about the mueller reports. they said they would have a busy week. one well the report the out? craig: we were told this would be a good week to be on alert, but predicting that is a dangerous game. we think it is closer to being finished none not, but bob mueller has been a master at keeping his cards close to his vest. francine: does this have an influence on dollar dynamics? frederik: you would think so, but what the dollar has been doing for the last few months, it has been flat. the range has been very narrow.
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the markets are waiting for something to come out of this and clearly there was a lot waiting to come out, but we will see what it is. francine: thank you all for joining us. bloomberg, peter dixon and frederik ducrozet stay with us. donald tusk saying they will release a letter on brexit today. they say the letter will be interesting. we will wait for that letter to be released. we will discuss brexit and mark currencies next. this is bloomberg. -- more currencies next. this is bloomberg. ♪
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this is bloomberg "surveillance." thanal shares rise more 20% in 2019, beating full profit expectations despite italy's slow down. i sat down with the chief executive and he says the company is looking at acquisition opportunities. >> we want to grow within your because europe remains -- europe because europe remains our primary market. we want to grow significantly in the management because we will -- in theerests height of markets in brazil and asia. francine: is this part of the pillar of your strategy? >> absolutely. we set key targets on dividends.
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we are beginning to grow every year the dividends, remaining in the range which make the dividends more sustainable. francine: you are in international company that you make a lot of your profit in italy. what kind of economy do you worry about italy will be two or three years from now? >> italy represents one third of our business. we are working on the international diversification of our group because we are growing faster out of italy been in italy. -- then in italy. italy remains a very solid part of our business. goodtalian economy has basics. have the best -- in europe,
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exporting all over the world. italy is a wealthy country. it makes a good economy. , thanks to the diversification of business, we are resilient. if the economy is growing, our property business is growing. ,f the economy is slowing down people are spending less and investing less and saving more, that is our life insurance and asset management business. francine: are you worried we are in a slowdown phase where potentially we could see recession starting in china or the u.s. and spreading across the world? issueession is not a real because we are also in the savings business, the money management business.
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when it economy's are slowing down, people are saving more. are slowing down, people are saving more. facte are aging and the that they are aging creates many business opportunities for us in health care, pension management, and long-term care. the trends for us are very good. francine: that was the chief executive of generali. we are getting more breaking news out of bmw. bmw warning that earnings will fall well below last year's level. embarking oncally a 12 billion euro efficiency drive. this is cost cuts to counter impact the effects of trade.
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bloomberg, we on speak to the chief executive of blue -- bmw, harald kruger. do not miss that. ♪
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♪ this is bloomberg "surveillance." shares of fedex are tumbling in the premarket. the service cutting its annual profit forecast for the second time in three months. global growth and rising costs are hurting fedex. disney closing $71 billion acquisition of 21 -- 21st century fox is an attainment. -- entertainment. bob eiger is promising to billion dollars in cost sailings which all but assures -- cost savings, which all but assures job cuts. francine: let's get back to our central bank in europe, the
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european central bank. mario draghi will be replaced and a lot of speculation on who could take over and if that changes anything for monetary policy. the question i feel like has been picking up speed -- is europe feeling -- becoming like japan? frederik, thank you for sticking around. you have the ones saying europe is in a mess politically and it is going down and others say the fundamentals are strong. is it becoming more like japan? oneerik: that is the number topic we have with clients, the japanese nation of the economy -- ifanese eyes a should you look at australia and new zealand and the u.s. where long-term rates are much lower,
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that is the thing europe is having the same problem as japan used to have in the 1990's. of tradea huge amount imbalances and growth. francine: what about the democracy -- demography? frederik: the demography is more open to it. back in the banking sector, that is the core -- what people have in mind when they think europe is becoming like japan. the yield curve is closer to the japanese government. in that case, yes, it is an issue. the longer negative rates remain in place, the bigger the problem for banks. they will have to address it
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eventually. taylor: talk about your calls on the euro. three-month risk proposals, investors are the least bearish going back to may. is it a euro strength story or dollar weakness? frederik: i think it is largely a euro strength story and the road two main factors behind our all for a moderate rebound in the dollar. the growth differential is the main driver. the currency has been stable and the drivers have been stable as well. we see improvement in the german economy. going forward, we see some signs of improvement in france. even some improvement in italy. the second driver is what the ecb has done and will do. the ecb is successful and reflate in the economy, that
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aphis translating stronger. we are higher than the lows we have seen with the ecb. hopefully we will see normalization on the interest rate side. then the euro should strengthen perhaps to 1.20. francine: coming up in the next hour, we speak with kate moore with black rock. we will look at some of the corporate's we have been following. bayer and bmw under pressure. this is bloomberg. ♪
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♪ francine: brexit hard all, therese -- hardball, theresa may
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faces a tough fight as the e.u. puts pressure on the prime minister to prevent a long delay. -- switchtails about to inflation and the balance sheet. president trump sounds an upbeat note on trade talks with china but some officials are concerned beijing is backtracking. and good afternoon if you are watching from asia. we are getting a lot of corporate news today. we're keeping an eye on bayer. they were down 10% after bmwerns with a trial, and saying they will not meet expectations for 2019, and will embark on cost cuts. taylor: you wonder how much this is a trade story. striking an
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optimistic tone about china and trade that they were able to get isough this, but bmw starting to get nervous about trade and they are not able to forecast through fiscal 2020 because of the uncertainty. francine: we will have a closer look at these corporate's. let's get straight to the bloomberg first word news. viviana: british prime minister theresa may will not ask the e.u. for a long extension. that increases the chance the u.k. could leave the bloc without an agreement. meeting lead to a tense in brussels. the e.u. is expected to release a letter on brexit. sounding somewhat optimistic on a trade deal with china and some of his negotiators are expressing concern. shifted theirals
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stance after agreeing to changes in their intellectual property policies. the reason they have not given assurances is because they believed the u.s. would lift tariffs. telling some he plans to run for the democratic nomination. he is 76 years old and leads in early polls of primary voters. first-quarter revenues at its investment bank falling from a year ago. the ceo saying the conditions have been among the toughest in years. they have cut thousands of jobs while bidding -- building a private banking business. plaintiff blamed roundup for causing cancer and they believe
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the decision will not bayer -- nine bayer closer to a settlement. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. let's do your data check, the fed data check. i did not looking -- look at pound which is moving sideways. i looked at the impact of u.s.-china trade talks and the downside on stocks. the 10 year treasury yield slipping. renminbi at 6.6947. taylor: we are getting a left in t in equity markets -- lif the u.s. equity markets. i am focused on the russell and domestic markets getting out of
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the trade. you have seen the small caps outperform the large caps on a year to date basis because we have a stronger dollar ahead of jay powell's comments. we might get a dovish build. the 10 year yield, 22 basis points has been the range this sincer, the narrowest 1965. francine: a great stat. theresa may is heading to brussels to ask for an extension. a spokesperson says she will not ask for a long delay. this is after pro-brexit ministers objected to being in the bloc much longer. joining us now is david merritt. just when we looked like we could find a solution, it seems are confusing and more difficult to call.
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do we know what kind of extension the e.u. and theresa may want? david: the problem is there is no agreement on either side of what sort of extension should be offered and agreed upon. we might not even get an agreement at the summit. you just heard that they will ask for an extension but will not be long. that is to appease the brexiteers. what is the definition of "long"? what does short mean? will let uss letter know her timeframe. francine: does that mean theresa may is trying to keep her party together? thehas tried to keep hardline brexiteers in her party with her party. she is trying to keep the tories together.
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david: reports yesterday that there was a fractious cabinet meeting and the brexiteers are ready to walk out if there was a because it means participating in the european elections of the summer. fears of that would be a symbol of the failure of the government. they want to have this result sooner, and mrs. may seems to have caved to those demands. bit wheneld a little it comes to the more extreme. all throughout this process, it is about trading the fine line and keeping the warring factions of her party together. she has kept the government in power, at least in name. we will have to see how the next few days play out. we will get that letter and the
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response from the european union , and we will have to see how each side plays it. taylor: i asked you yesterday and i will ask it again -- what are they hoping to get done that they have not been able to get done in two and a half years? theresa may is saying, we have to get on with it. david: the only thing theresa may can do is try to get her deal through, or a slightly tweaked version. the idea ofblew off bringing the same deal to parliament so she will have to get something different, possibly arguing the circumstances have changed enough it is worth another throw at it. another third attempt at parliament ratifying her deal. that is set for another cliff edge at the end of june and if she is ruled out no long
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extension, that is an interesting proposition. the brexiteers may say, we are perfectly happy with no deal and we will drive britain to the destination. an enormous amount of uncertainty for markets to deal with. francine: david merritt of bloomberg news. what you should be watching today, central-bank action. ratel will likely keep its at 6.5% for an eighth straight meeting. the fed announces the latest policy decision followed by jay powell's news conference. now to talking us about all of the central-bank action and said they is kate moore of like rock investment. -- blackrock investment. you are going to save us with fed day.
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sort of talk level and fold this within your world in equities, what are we expecting from jay powell? kate: i need to -- i think we need to take a global look at what has happened to policy. the feds dovishness -- fed's dovishness has opened up central banks around the world to have a more easing and dovish stance. this has led to a rally in risk assets or has been a significant contributor. i do not think there will be a significant message change, but if we come out of the meeting and the dots signal members think we could raise rates one more time, i think the markets would get a little skittish. taylor: within this phenomenal run, we have massive dampening
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in volatility across all asset classesithin fx -- within fx and liv-ex, going back -- the vex, going back -- the vix, going back. kate: the volatility point is super important. the last 10 years, how many times we have complained volatility has been exceptionally low and difficult to explain, we have had the market grinding higher but participation has not been strong. flows into risk assets have been very tepid if at all. we have seen investors raise cash levels, sell into the rally, and take profits. it is not a well loved market rally and there has been low volatility. a lot of sitting and waiting as
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we go into first quarter earnings and policy meetings. tough to talk about brexit and trade. francine: it is clear the fed is putting inflation expectations at the heart of this major review, but if we have an agreement on trade between the u.s. and china, is trade -- inflation positive or negative? kate: i think it will be positive. people have gotten excited about the fact that the u.s. and china are talking. the agreement to talk and the substance of any agreement on trade are pretty different. we need details to lead to something lasting so we do not have a situation where we are constantly revisiting our relationship with china, and we have to feel like both parties win a little bit so they do not come in through the back door.
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francine: what does that mean for dollar? kate: i find dollar forecasting extremely difficult. there are times i would have recommended we would have dollar strength. i genuinely believe the chinese economy is in good shape so it is hard for me to make a call that the dollar would appreciate meaningfully against china. against the euro and the pound, there are people who are far better at forecasting that stuff than i am. francine: kate moore of blackrock stays with us. starmer, u.k. shadow brexit secretary, coming up in 15 minutes from now. we hope to have a clearer view on what labour wants and how they will vote if there is another meaningful vote in
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parliament. ♪
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♪ this is bloomberg "surveillance." falls warning profits will well below last year's level. they are launching a $14 billion savings plan. carsrade war and electric -- bmw saying pretax cost will fall. the trump administration is chao askinglaine for a wide-ranging review of how the government and boeing certified the. that is separate from a criminal probe.
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lyft is oversubscribed at the current price range. and will want a piece likely have to pay a premium when trading starts next week. that is the bloomberg business flash. taylor: despite an optimistic view from president trump, u.s. negotiators are concerned china is pushing back against their demands. the shift in stance in beijing is due to a lack of assurances that tariffs would be lifted. still with us is kate moore of blackrock. thatis the biggest risk markets are not pricing in? tariffskeep extending and think we will get a deal but we may not? not: the bigger issue is what will happen in 2019, but
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over the next couple of years. the global technology sector is decoupling. there will be a u.s. and chinese standard and that has implications on supply chains, and will lead to a more ongoing and perhaps fraught relationship between the u.s. and china. we are worried we may get an additional relief rally as talks continue, but bigger issues are on the horizon. we are watching chinese companies invest aggressively in technology. if you are going to invest in global technology stocks, you have to own u.s. and chinese companies. taylor: you are traveling to china and again this year -- china again this year. there were some signs the tariffs were hurting them but i have heard china's economy has
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started to bottom out and we may be see signs of improvement. how does that fold into equities? the second derivative, we have focused on the economic side. we are seeing small policy measures take root and we will be watching activity closely in the second quarter. household spending is more important than the industrial side last year, and tax cuts in china, we will see if that leads to a better multiplier in growth . some of the new policy players rules, if that leads to better activity and better sentiment, that could have a multiplier factor for the chinese economy. we are optimistic the second quarter will look better than the first and the worth is --
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worst is behind us for slowdown. francine: i keep hearing that investors and money managers are more worried about the slowdown then trade concerns. how should we look at the slowdown if the pboc is managing it in the correct way? kate: it seems policymakers are on top of the growth slowdown. , what end of last year sense of urgency did they have about growth? a five or six out of 10. by the beginning of 2019, they would have rated it more like eight or nine out of 10. there has been more focused on monetary policies that will lead to better growth outcome. for risk asset investors, the chinese economy is in good shape and for confidence to return.
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as we get a little bit of progress on the trade talks, even as i was saying that we have a much longer relationship that all on the technology front that will last beyond 2019, that will allow the markets to grind higher. taylor: kate moore of blackrock stays with us. coming up, we speak to the chief executive of bmw, harald kruger. shares up about four and three quarters of a percent that they will miss profit guidance. this is bloomberg. ♪
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♪ riggs in newtaylor york with francine lacqua in london. tom keene taking a third day off. time now for our single best chart. let's fold this into kate moore's world. this euphoria we are seeing in the world, and the rally we have had, investors are not paying for protections. here is some of the protection investors are not willing to pay for, down to the lowest level since 2018. cash has beenrole playing in the portfolio and the pivot at a fixed income, people
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do not want to pay for protection. kate: investors have been fading the rally for the past 10 weeks. the massive value d rating we had -- the rating we had at the end of 2018, we were position for this year but no one was expecting a 12% to 13% rally in global equities in the first 10 weeks, and they are skeptical. has driven the market this year is a re-rating, not an upgrade of fundamentals. earnings downgrades have been across the board and this is important that no one is super excited about putting new money into the market. ,f we get good news particularly on the fundamental side, or a slight change in guidance with companies saying the first quarter was better than expected and it was
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supposed to be the lowest point, there is potential for people to add money to their equity allocations throughout the course of the year. francine: kate moore of blackrock stays with us. follow our coverage of the fomc decision followed by chair powell's remarks. a lot of the focus will be on inflation and how they are looking at things. mixed stocks pretty today, investors trying to adopt before theand -- end fed talk. this is bloomberg. ♪ this isn't just any moving day.
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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. ♪ francine: this is bloomberg "surveillance." i am francine lacqua in london, taylor riggs in new york.
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let's get to the bloomberg first word news. viviana: we begin with trade talks, china is pushing back against u.s. demands. chinese negotiators shifted their position after agreeing to changes in their intellectual property laws. they are looking for guarantees that u.s. tariffs will be lifted. steve mnuchin and robert lighthizer travel to beijing next week. all fires at a houston petrochemicals store facility have burned out. the blaze at the intercontinental terminals so -- chancey -- there is a flames could ignite. brexit was supposed to boost the number of finance jobs in the deutsche now bank merger could lead to a loss of 10,000. job cuts that large would be
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difficult to offset. bill gates rejoining the world's most exclusive club. the fortune of the microsoft 100under once again hitting billion dollars. that makes him and jeff bezos the world's only senti billionaires. jeff bezos is way out front almost $146 billion. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. taylor: of course, it is fed day. the fed decision is being anticipated as investors watch the dot plot as what -- and what did it to patience means -- pivot to patience means. how should you be navigating the markets around today's decision?
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us, andcadonna can tell kate moore of blackrock is still with us. if the dots are proven to be more of a distraction than a help? carl: the fed does not love the dot plots getting so much attention in drawing away from the scrutiny of the statement and tone of the press conference. the dot plot sends important signals about the bias of the committee and well they have been signaling ambivalence of whether the next move would be a cut or a hike, the dot plot suggests otherwise. we were looking for two hikes as of the december meeting. i think that flattens out but not entirely, so our expectation is we should see one hike and the dot plot today and half of a rate increase priced in for next
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year. the fed has caused but they are not done with the tightening. taylor: talk to me about inflation, because when we talk about inflation targeting, and economist said 2.5% is the new 2%. are you worried if inflation runs to hot the fed will get behind the curve? carl: they would love that problem. i was intrigued by the 2.5% is the new 2%. 2%looks like 1.5% is the new because the fed has been struggling to hit that inflation target. only one of the last nine years they have hit target. that could be the game changer for the fed this year so we have what isurselves, different in 2019 is that we have absorbed the excess
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capacity and the labor market so we are getting more wage pressures. the impact because labor is a dominant cost in almost every industry. households will have increased buying power and increased tolerance of price increases. it is a demand push and a cost pull type of effect on the inflation outlook and that could change the fed's outlook this year. i suspect if the economy continues to grow above trend and the labor pressures are present to a greater degree than the past, they will see a firmer inflation outlook and could be back in the game the second half of this year. francine: when you look at your interest rate schedule you laid out, what else makes it phone herbal? you mentioned dollar strength --
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vulnerable? you mentioned dollar strength. that the fed has been open they are concerned about external headwinds, noting slower growth in china and the possibility of a recession on the european continental, or sluggish growth. outlookes a risk to the , although i struggle to find an incense -- instance where the u.s. market sunk into recession because of slowing external growth. relativelyis protected from that type of shock and much more isolated from other g10 economies. we have a sluggish q1 growth profile, slowing external growth, the government shutdown, these factors will make q1 gdp
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look lousy. the fact that we have an inventory correction underway in the first half, but once we get through that we will see in q2 that things bounce back significantly. q1 weakness, q2 rebound. when we see the economy on healthy footing with more inflation and labor costs than the fed may anticipate, they have to evaluate the landscape for what is appropriate policy in the back half of the year. francine: should chief executives worry about on a jury policy? the fed risks -- monetary policy. kate: we have all been talking about this for the last couple of years. we want to get to a place where the markets are more focused on fundamentals and less on policy decisions. here we are still incredibly
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focused and concerned on every word, every town, every -- tone, every bit of body language from policymakers around the world. if growth picks up and the second quarter because of the seasonal factors and we are getting inflation pressure but not much, that is a great environment for companies and should be a great environment for stocks. companies are making smart decisions, especially those with high labor intensity sales, about other incentives to lower the costs. how are they protecting their margins when the labor market in the u.s. is tight and that could impact their profitability in the next few quarters. taylor: we have actually seen gross margins hold in as the
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higher cost of goods sold were able to pass to consumers. the margins were showing signs of weakness, in part because of the higher input costs and labor costs. is that something you are nervous about as companies cannot pass on the higher wages? kate: there have been people banging the jerome of collapsing -- drum of collapsing margins two to three years ago. management teams are much more defensive and streamlined and their operations and decision-making than 15 years ago. this idea that they want to protect their bottom line is much as possible should be in everyone's investment process, that we do not have to worry is much about companies investing huge amounts of money and over long time horizons without
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seeing the fruits of that in the near term. there has been a psychological shift which is good for equity holders. let's see how well they can manage the near-term if the labor market leaves them to have significant pressures -- leads them to have significant pressures. francine: kate moore and carl riccadonna both joining us to talk about the fed. of next we speak to keir starmer, the u.k. shadow brexit minister ahead of theresa may saying she will not ask for a long delay. the chief negotiator well meet with keir starmer's boss, jeremy corbyn. we will talk about that next. ♪
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♪ viviana: this is bloomberg "surveillance." shares of fedex are tumbling in the premarket. the service is cutting its annual profit forecast for the second time in three months. fedex has been hurt i slowing global growth and rising cost from its acquisition of tnt express three years ago. baby food maker wants to go ipo. it could raise as much as $1 billion, going private from the new york stock exchange during a wave of d listed chinese firms. disney closed at $71 billion acquisition of 21st century fox. employees are bracing for thousands of pink slips.
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promised to billion dollars in cost savings, all but ensuring epic job cuts. francine: back to brexit, with less than 10 days before the u.k. leaves the e.u., theresa may heads to brussels to ask for an extension. the labour party is trying to shadowwards its own -- brexit secretary keir starmer are pushing for a referendum. edwards.nna anna: here sharp -- keir starmer is here with me. the response we have heard from the government, a request from a short delay is being sought. does that box you in two-way binary choice between her deal
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and no deal? mr. starmer: ion troubled by this suggestion -- i am troubled by this suggestion. to seek a short extension if we have not got the deal through by today would be in his words "reckless." backrime minister is going to the only strategy she ever had, putting her deal up against no deal and introducing a new cliff edge. anna: so we are boxed in with that. no deal became more likely? mr. starmer: if we have not got the deal through today, it makes no deal more likely, his words, not mine. moment, what we really need is true leadership and finding a way through the impasse by allowing parliament to have a greater say.
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it is the opposite of what parliament wants to happen. anna: theresa may wanting to sheg her vote back and if could win, she could bring it back. what is your assessment of when it could happen? mr. starmer: it could happen next week. anna: are you ready for that? mr. starmer: two preconditions the prime minister has put on it, she has to win and the second is she has to persuade the proposition she wants put on the table to be voted on is different to the deal we voted on last week, perhaps a tall order. anna: what was the labour party strategy be? with a back an amendment to call for a vote on her deal or back an amendment for parliament to have more say? mr. starmer: there is at least two different issues in play. one is an amendment which is a
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process amendment. it says parliament needs to find a way to break the deadlock. whether that is indicative votes or some other method, there is a yearning for mps to say this is where the majority is, and go from there. i do not doubt that will happen next week. the kyle wilson amendment is to the meaningful vote and that depends whether the prime minister puts down a meaningful vote. that essentially said if a deal gets through, they would be subject to the lock of a public vote. anna: hillary benjamin was tabled once again and it was only narrowly defeated last time. will there be time before another cliff edge deadline to get this indicative vote process through parliament? what could happen in that
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timeframe? mr. starmer: the indicative votes could happen. what people want is a mechanism so parliament can say where is the majority? they lost by a veritable margin last week and they will say, we cannot have another three months of this my deal or no deal we have had for the last two years. i think there will be this attempt to take over the process and come to a decision across the house. met withemy corbyn members of other parties who want to revoke brexit. the labour party he wants a labour version of brexit. it did not seen that common ground was found. mr. starmer: the purpose of those meetings is to bring people together and see if there is a way forward. what it demonstrates is that leadership was apart from the prime minister to the
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opposition. across parliament, they are saying, we need to break the impasse. whether it is in parliament, the business community, or more generally, people are desperate for the impasse to be broken and that will only happen if we find a majority in parliament. anna: what is your understanding of the e.u. position? if parliament takes control and another decision is sought, that will involve another ho host -- whole host of conversations. if the red lines change, there will be a different time horizon. mr. starmer: my understanding is pointrussels wants is the or the purpose of any extension. what you are trying to achieve. i think they would be encouraging of a process that question, whathe
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do you want to do with extra time? until we get there, we are going forward without a purpose. i do not know for sure and do not think they will try to dictate what parliament does next, but i think they would be relieved if they got an answer to what is the purpose. anna: if we end up in another referendum situation, what kind of questions should be on that paper? should it be remain and a tory brexit or labour brexit? mr. starmer: the kyle wilson amendment as it has been named, goes on the proposition that the deal or any deal that gets through is subject to a lack of being confirmed. you could have a simple question of whether you confirmed the deal or not. those circumstances remain the default.
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is there a majority for having another question of some sort put back to break the deadlock? beso, what that will be will a question for parliament. anna: -- mr. starmer: i do not think a labour brexit can be on the ballot. i have always said i would vote remain in any further referendum just as i voted last time. anna: do you think jeremy corbyn exitppy to let the u.k. the union? mr. starmer: jeremy can answer that himself. he did vote remain last time and has been clear and open in that. depending on the options coming jeremy will no doubt be asked that question. anna: he speaks for the independent group now. some of your thoughts and policies around brexit, or your
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need tows on brexit chime with there's. have you been tempted to join? mr. starmer: i am staying with the labour party where i am caring on my work. viewabour party is in my the only party that can be effective opposition and can get into the government as soon as possible to change the many things we need changed. anna: keir starmer speaking to me on "surveillance." francine: anna and i will be heading to brussels later today and will have full coverage of the e.u. summit which seems to be the pivot point to understand the e.u. position. the labour party just released an email and we have a copy. they are making a final demand, saying a backend debate should be called in parliament.
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also coming up, more on what the pound does next. ♪
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francine: now to a bloomberg scoop related to the boeing
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saga, and off-duty pilot saved the lion air 737 max 8 or flight from crashing. he was traveling as an extra pilot in the cop that and correctly -- cockpit, and correctly diagnosed the issue, allowing the crew to save the plane. jetline day, the crashing into the jobless see, killing 100 -- jobless see -- sea, killing 189 on board. was boeing at fault? occasions, and now three with the details have emerged about the flight the day before the lion air crash, this was not in the original indonesian crash report.
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we knew there had been an incident that we did not know it was only because of the good fortune of this third islet getting -- pilot getting a free ride in the jump seat and pointing out what they need to do to switch off the system and save the plane. francine: it is an unbelievable story and we will continue watching it closely. plenty more on your markets today, it is fed day. anna edwards and i head over to brussels as the brexit saga continues. well we have a long or short extension and will the e.u. grant it? ♪ you.
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this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. ♪ alix: byron in trouble.
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a settlement could reach over $5 million as stock plummets. powell takes the stage. can dovish dots match investor expectations as the market prices in a rate cut? and brexit battle over delay. the eu pushes back on long extension. the next shutdown -- the next showdown looms. david: welcome to "bloomberg daybreak." i am david westin, alongside alix steel. spring. a gross margin of 34.2% compared .o an estimate of 32.9% net sales put much right on. -- pretty much right on. alix: pretty good quarter from general mills. all


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