tv Bloomberg Markets Balance of Power Bloomberg March 20, 2019 11:00am-12:00pm EDT
from bloomberg world headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics meets the world of business. more twists and turns on the road to brexit, and google's big fine from european competition authorities. let's start in washington. president trump is going to ohio. why? kevin: the president in ohio will tout manufacturing on the news that treasury secretary steven mnuchin and u.s. trade representative bob lighthizer are headed back to china next week to continue u.s./china trade talks. meanwhile, across the state in lordstown, ohio, just outside of youngstown, a key balogh ground portion of the state, general motors -- a key battleground portion of the state, general motors continuing with plans to shut down a plant.
meet the other 27 leaders and tries to get them to agree to her request to extend brexit to june 30. david: the extension depends in part on what happens during those 90 days, what will change. they say they will not change their position, but she cannot take the old deal back. who is going to give? reporter: french president emmanuel macron has said he doesn't feel like he can back the extension without guarantees. could it be a second referendum, something may has repeatedly ruled out? a neutral issued most eu leaders feel they haven't had any clarity from the u.k. for the last few years. david: now we will go to
brussels on google's big fines. this is not the first time they have been in the crosshairs. reporter: no it is not, it is the third. it is 1.5 billion euros. over the past 10 years we've seen google faced three different cases. it's been quite a shock for the european union to tell google to set up and listen. they say they will make some changes and resolve some of these issues going forward. david: they talked about the android issue and the fact that google is going to people in europe and saying you can pick a different search engine if you want. reporter: the idea is to open up to competition. they say google's actions have stopped other rivals getting into this market. the idea is now when you start up your android, you will get a prompt to get a different kind of browser or search engine. this might give other companies a chance to get into these markets that have been dominated by google for so long.
there's also other issues like shopping. in general, this is a way to try to deal with this and get more competition for europe, at least. of ford.w you news out bloomberg's craig sure dell is here.- craig trudell is reporter: in a plant south of detroit where they built the mustang, they are talking about building a mustang inspired electric suv. for a while the plan was to build that in flat rock. they ended up wavering on that plan and shipping it to mexico, and jim hackett talked about the idea that the reason for that was to free up capacity for autonomous vehicles. they are now sort of switching gears here again, where they are going to make electric cars in that factory. they still plan to use that factory to make autonomous
vehicles. this fresh plan is sort of a third changing of gears, if you will, also suggesting that maybe they don't need so much space for that autonomous vehicle capacity as they thought. david: maybe a little more electricity and a little less autonomy. when we talk about this investment, what does it mean in terms of jobs? there has been a flat rock plant there for a long time. reporter: they've also announced recently that they are going to go down to one shift at that plant. this plan is through 2023. the reporter on this story talked about the idea that this is sort of a sweetener on the uaw talks whichr are going to heat up the summer. they are playing the carrot approach where gm is very much the stick.
ford is dangling this and saying here's some investment we could make happen. it sure would be a shame to lose that if things get too contentious this summer. david: flat rock, youngstown. reporter: exactly. david: now it is time to get a check on the markets. for that we had to emma chandra in london. emma: we are looking at a little bit of risk off sentiment. red across the screen for all the major indices. if you take a look at the nasdaq, down less than 1/10 of 1%. the s&p 500 and the dow jones. indicating some investor caution ahead of the federal reserve result of their meeting later this afternoon. also, investors looking for actionable news with regard to the u.s./china trade war. the s&p 500 really started to
take that leg lower on those headlines at a resolution may be further away than had been anticipated. we are looking here at the s&p 500 over the course of two days, and you can really see that yesterday, and today's slide really a continuation of that. in earnings, still making news when it comes to individual stocks, we are looking at general mills rising around 1.5%. stock having its best day since september 3. sales beat margins and they boosted their outlooks for the full year. fedex falling around 4.5%. it was down more than 6% before. this is after they issued -- or cut their profit outlooks for the second time in three months. we will talk about that in a little more detail later. bmw down around the same amount as fedex after warning of a prophet slump, pressuring other auto stocks as well. let's take a quick look at oil. theaw a big spike in
oil price about 40 minutes ago as inventory fell more than expected by some 9.6 million barrels. energy sector stocks have raised losses, and the energy sector now the best performer on the s&p 500 today. david: thanks so much to emma chandra. up, theeantime, coming fed dots speak louder than chairman powell's words. what to watch for in today's fed rate decision. we will talk to james sperling. this is bloomberg. ♪
we turn now to courtney donohoe for bloomberg first word news. courtney: president trump heads to ohio today to visit a factory operated by general dynamics that builds tanks and other is set tohicles, and grow from 400 employees when he first took office to 1000 by the end of the year, an attempt to take attention away from the general motors plant where the president promised to bring back jobs that is set to close. british prime minister theresa may is set to ask the european union for a three-month extension on the brexit deadline to come up with a deal or leave without one. may goes to brussels tomorrow with a meeting with other eu leaders. the trump administration has opened a new front in the government and cory into the 737 max 8 -- government inquiry into crashes in a's two wide-ranging review of how the faa and boeing certified the 737 anotherarate from
investigation the inspector general is performing. this saturday, anti-terrorism forces will be used to help secure public buildings in france. they will not take action against protesters. violence flared up during last week's protests in paris. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. donohoe.ney this is bloomberg. david: for federal reserve will latest rate decision -- the federal reserve will announce its latest rate decision this afternoon. when we talked with chief white house economists kevin hassan yesterday, he said we should expect 3% growth to continue despite what the fed and economists are telling us. >> we've got a recovery that is accelerating. i think that is really the headline of the report. the state of the economy is strong, and serving well those who most need it.
that boom is going to continue for at least a few years industries. david: we welcome now james sperling, former chair of the white house economic council under presidents obama and clinton. do you agree we have a strong economy that is getting stronger? guest: i agree that our economy shows a lot of stability at the moment in terms of low household debt, the labor market is relatively strong right now, so i think in that sense, and the household and worker sector, it looks pretty stable. on the other hand, i really don't think there is virtually anybody but my friend kevin hassan there who is projecting that type of sustained growth. i would say most people are looking at growth in the 2% to 2.3% range for 2019. as saw the atlanta fed be
low as less than half a point in the first quarter. there's some real risks there which he is not going to want to mention in his capacity, which is there is a degree of political risk out there. you have not only brexit, not only the u.s./china trade issues, but a president who is often willing to risk destabilizing the economy over fights a government shutdown, et cetera. that could get worse as he has his troubles. if we have a big government shutdown issue this year, a fight over the wall, it is going to take place in the context of a debt limit increase. so the stakes are going to be much higher than just whether the government shut down will rattle markets into thinking there could once again be the risk of a default. david: one other aspect of the president is he likes low interest rates. he's made no secret of that fact. it's made a question of what the fed should be doing right now.
if we are really having be sort of growth mr. hassan is describing, should we be raising? listen to what bill dudley had to say about the possibility of raising rate hikes. >> if inflation starts to drift higher, the fed will be back in play may be as early as the second half of this year. david: if you were back at the white house advising the president, would you expect them to be prepared for increased inflation and may the possibility of higher rates? guest: that is the irony in the situation, which is i think the fed is probably making a reasonable decision, though it is certainly a dramatic turn from december to see the expectations go from three additional rate hikes in 2019 to evenero rate hikes, and people speculating about a cut in 2019. obviously the fact that the market in the fed is looking at
that is because they are assuming that the white house economic report is wrong. they are assuming it won't be so high as 3%. they are looking and seeing core inflation not really rising. they are not expect in gdp to be as strong. they are seeing a lot of political risk. it is my hope that the fed is also asking themselves whether they are too worried about hitting the 2% target, which is to say that after you had such aperiod of low inflation, whether it should be ok to tolerate having core cpi or core inflation go higher on the idea that they might be able to do even better in strengthening the labor market, giving more people opportunity, and we are not even really seeing recently the idea that when wages are going up, it is necessarily pushing core
inflation up. i think that the fed turned to me seems to be a reasonable one, looking at the economy, thinking about what is the right fed policy. should you be willing to let it go above it for a sustained period when it has been below for a sustained period? none of that is consistent with somebody predicting 3% gdp growth for the next three or four years. david: we have a little bit of a tale of two economies here. maybe there is some concern there. and we look for tea leaves in part of the markets. i will put of a chart that shows you the s&p is on the rise, while the yield curve. is declining usually you don't have that -- while the yield curve is declining. usually you don't have that. those numberscing in the white house, would you be saying we should beat paying
attention to the bond market? guest: i think the world is different right now. i think there's much less of a clear, direct connection between , and what i would be telling the president is you are very lucky. you came in after barack obama came in and inherit a really horrible recession. you've inherited a strong, growing economy. be stable. be smart. don't do these reckless things that can rattle the global economy and the u.s. economy. appreciate what you have. don't screw it up. that would be my message to them right now. i do think there are some things you look out for in the economy that are a little worrisome. about wase worried the volume and quality of
corporate debt. it is not like a perfectly rosy scenario out there. but i can tell you that for a lot of people, it is political risk and volatility, not just in brexit, but coming from this white house that is part of their concern when looking at the forecast for the next year or two. david: another form of political risk is the election in 2020, where we have a growing list of candidates taking specific positions, quite a few of them following bernie sanders to the more left side of the party. talking about things like medicare for all and various different social programs. you have now written a piece about economic dignity. how does that leaning or direction in the democratic party fit with what you are trying to espouse? guest: when i say we should make economic dignity our singular goal and focus for economic policy, what i am asking is that we focus on what is the end goal
for people. in other words, i do think that this push to ensure people have a greater degree of economic security, a greater degree to care for their family, to make sure people are not deprived of the greatest joys of family life due to economic deprivation, that they can pursue their potential and purpose and work in an economy without domination or humiliation, that should be our focus. i think the fact that you are seeing people say we want to have a bigger vision, the want to make very clear health care should be available to everybody, i think that is a positive thing. from an economic dignity perspective, you don't say it is one way or the other. you don't say like howard schultz did that it is un-american to do medicare for all. on the other hand, you don't say that is the only way to get health care is a right. you are willing, perhaps as fdr did, to do some experimentation
for different means for increasing economic security and dignity, but you do hold to a higher standard. you're not ok with just saying let the chips fall where they may. so the notion that some of the republik and's plan can be a "pro-market -- the republicans' "pro-market" planned, but it is not acceptable for our economic dignity and pro-economic policy. sperling, great to have you today. thanks very much. the business roundtable has released its first quarter ceo economic outlook survey, and it shows a darkening forecast. u.s. ceos now see a slower pace of 2019 gdp growth. the outlook has hit its lowest level since 2017.
♪ david: our stock of the hour is fedex, shares falling the most since september. , chander is here with the story -- emma chandra is here with the story. they have cited story,r global growth and undoubtedly the u.s./china saying,lks and brexit, "if you could tell me if we will deal, i could give you a better answer." here in the u.k. with regard to
brexit, you mentioned that they have reduced outlook. this is the second time they cut their outlook in three months. now saying they see revenue for the year at $4.5 billion. they had previously said about $6 billion. all of this at a time when packaging companies should be getting a bit of a boost by that boom in e-commerce. that news today wiped out about half of its year-to-date gains. david: thank you to emma chandra. up next, google gets a third fine from the european commission for violating anti-competition laws. that is next. this is bloomberg. ♪
european union to extend the brexit deadline to june 30. it is not clear if she will get it. the spokesperson says the european union commission president warned may against any extension past may 23. this is likely to make for a tense meeting tomorrow when may and other eu leaders gather in brussels. fires at athe petrochemical storage facility have been put out. the blaze began on sunday. authorities say there is still a chance of fire at the intercontinental terminal facility could reignite. of the fires sponsored -- profit officials to cancel school for thousands of children. the u.s. supreme court has told the lower court to look at a privacy suit involving google could -- involving google. the court took up the case -- they do not resolve the issue the court took up the case to address, class-action settlements that do not provide
compensation to affected people. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. , the: speaking of google european commissioner announced a 1.4 9 billion euro fine on google for uncompetitive practices involving its advertiser services in europe, bringing the total of fines against the company to 8 billion euros. we welcome bloomberg intelligence senior analyst and the director of global development for the buyer group and the director of the fordham group for today's antitrust acts segment. -- angst segment. explained with the latest of the google cases. jan: this is a fine that has been expected. the was the problem european commission had with what google was doing.
they provided an advertising network for third parties. if someone searched on a googlearty website, provided the third-party advertisements that were relevant to that website. it was forcing those third-party websites to enter exclusive agreements. competing agreements cannot get into the website. where google had 80% of the market, it had a foreclosing effect on these competitors. that was the problem the european commissioner had. david: are they still doing that? jennifer: they stopped doing it a few years ago. the fine has to do with the wrongdoing that you said was occurring for 10 years. david: here in the united states , you said they own the platform. unless there's something wrong with it they can sell the stuff on their platform. >> the law is different in the u.s. than in the eu. in the eu they do not have to go to court. they do not have to get a judge to agree with them.
here they would have to go to court and get a judge to impose that fine. the law allows the kind of behavior in the u.s. that is being condemned in the eu. the justice department for the fcc went to court, they would probably lose? james: i do not know they would lose. it is fact specific. -- theory of leveraging is has been rejected by the supreme court so they would have to find a different theory. that would be difficult. david: in europe, they are on appeal. this is not adjudicated even in europe against google. jennifer: the differences the commission is able to impose that penalty. you cannot do that in the united states. the appeals probably have to do with the previous find the commission waged on intel having to do with loyalty rebates they think for closed other competitors. intel got a good result. it took a long time.
was the upper court said something is wrong because the european commission did not consider whether there was a foreclosure defect and whether there was a harmful effect on the market and this needs to be reconsidered. this has given hope to google, to qualcomm, who are all appealing similar fines from the european commission. david: it is not just google. we have reports spotify has filed a complaint with the competition authorities saying it is not fair for us because apple has its own streaming music service and if you want to use ours you cannot go through the app store. it is much more difficult to do. jame: it will play out the same way. you will have the eu which has a much broader policy for antitrust enforcement, different law it can use, and you will see an intensive investigation of that. over here, whether it is private litigation or the antitrust agencies, that will be more of an uphill battle. the law does not accommodate
looking at these downstream markets so the platform here is allowed to be in these other markets. you would have to prove harm in that market. the policy is quite different in the eu. david: this is an instance of the eu having tough competition laws, may be tougher than ours. james: there was a merger in rail and the two countries wanted to create a industry champion to fight off the chinese that were entering the market. the enforcement agency over there found a standard horizontal merger analysis that it was anti-competitive. now there is a move afoot to have a different regulatory political body oversight that can change those decisions.
it is a brewing fight and, ironically, france and germany are the most aggressive on the antitrust enforcement in their own countries. heads and thatg will play out soon over there. david: understand it antitrust analysis -- i do not remember a time were on both sides of the atlantic people are questioning standard antitrust analysis. this is a little like elizabeth warren saying let's change the law against the googles and the facebook because they have too much power. antitrust is become popular again. idea we have industries that have become more and more concentrated and that is causing problems. too much political power or contributing to wage inequality and many blame lax antitrust enforcement for all of what is
happening and for the platforms that have so much power. we see this wave, not just in the eu but in the u.k., which wants to strengthen and enforce its antitrust policy, but also in the u.s. i think it will be a big issue in the upcoming elections. david: there are times where we do rethink our approach to competition and antitrust. we did in the 1980's. is it possible the world has passed the current antitrust by? oppression and you let the things get as big as they could and it has to be good for society. james: the antitrust law in u.s. is court made law. you have decades of defining what consumer welfare is, what misconduct is and it is very mature and settled. if there is going to be a change in the u.s., it would have to be a legislative change. that may be a bigger challenge. new ineu, the law is
terms -- look at intel vacating the court of justice. that is the first decision. we will have google decisions. we will have qualcomm decisions. as it is now, those jurisdictions are focused on consumer welfare standard that comes out of the chicago cool -- the chicago school of price and efficiency and not some of these other values. at least in the u.s., that will have to be a legislative move. david: jennifer, let me ask you the tough question. what we are seeing a lot of out of the competition authorities in the eu has to involve tech. the tech companies in europe are not nearly as powerful as they are in the united states. or are theycidence freer to go after the big tech
because they are not homegrown companies? jennifer: in some sense she is freer but if you look the statistics for the european commission, what you see when going after tax abuse, it is fairly even. we see big tax that, those are american companies. there has been evenhandedness by the european commission in terms of how they apply the rules across the board. it just happens to be the dominant companies are these big tech platforms and they happen to be american companies and those are the ones under the microscope. david: thank you so much. that was today's antitrust angst segment. coming up we turn to the former british ambassador to washington to help us make sense of the latest machinations of the united kingdom to extricate itself from the european union. that is next. this is bloomberg. ♪
david: you're watching balance of power. theresa may informed parliament that she has written european forission president to ask an extension in the deadline for brexit until june 30. to take us through whether she will get it and what it might mean, we welcome sir peter westmacott, former u.k. ambassador to the u.s.. he joins us from our london bureau. we were watching this morning. i was on the air as theresa may made some news, as did jeremy corbyn. what comes next? peter: it is an extraordinary complicated day. yet another day where people are talking about constitutional crisis, to the extent that now we have an emergency debate in
the house of commons so that mp 's convention about what the prime minister is doing or her language when she told them they had all been indulging themselves too much on your -- on europe and the mother of parliament. she sent off her letter to the european commission saying please may i have a delay from the 29th of march deadline for the implementation of brexit. the immediate reaction from the commission are you will not have the day you want. if you want a delay, you can have until the 23rd of may, the beginning of the european parliamentary elections, or you can have a longer one, but you will not have that one. that is a spanner in the works. mrs. may says i do not want to long extension. that is apparently because she has, under a lot of pressure from brexiteers who fear a long extension might mean no brexit. she has asked for a short one,
but the trouble with a short one is we are not sure what she would do with those few weeks and the europeans are saying we are not interested in considering any kind of delay unless you tell us what it is for. have you have a package through parliament? are you going to call general election? are you going to have another referendum? amount ofcertain confusion in european minds about why she wants the delay. the omens for the european council that starts on thursday reaching agreement on the british prime minister's request are not great. onid: what we are watching the left of our screen is the emergency debate taking place as we speak in parliament. she has requested by letter this extension. did she have the authority to do that? eu said you have your extension question does parliament -- your extension.
does parliament have to ratify that? peter: a good question. twice are deal has gone to parliament. she wanted to give it another go yesterday by the speaker of the house said that would be difficult and the votes were not there. she can ask for an extension. she can, if the speaker allows it, resubmit her motion to parliament. parliament will have to sign off on an extension if she gets that agreed by the european side. all of that is a lot of work to do in the remaining few days before the official deadline of march 29. i remind you that if nothing else changes, if there is no new law voted through the british parliament, the default position is united kingdom leaves the european union at the end of this month with no deal. david: which raises in my mind -- is there a possibility we could bumble into a brexit with no agreement at all when no one
wants that result? brussels does not want it. theresa may doesn't want it. not even the labour party once it, but if we just fumble our way forward, we may end up there by default. peter: one of the problems is there are people within the european -- within the ruling conservative party who think that is a good idea. not a majority, but when you do not have a majority in the parliament, it means a small number of noisy people can hold you hostage. that is part of her problem. without a majority, even 20 or 30 who think crashing out with no deal is a good idea, they have considerable influence in the way the prime minister moves. she was intending to ask for a bullied byy, but was the hardliners and asking for a shorter one.
that is the problem. the majority of people in parliament do not want us to crack chat with no deal. the government itself does not want that. from the point of view of our other european colleagues, it is a lousy idea because neither europe nor the united kingdom is ready. , because certain things are in place. , thet a positive decision possibilities there we could find ourselves jumping over the edge of the click. david: -- over the edge of the cliff. david: you've been involved in many important negotiations. this one we are seeing played out in brussels and london. knowspossible theresa may exactly what she is doing and i say that because she has this plan, she lost it by a large margin, the second time the margin was not as large. is she wearing down the opposition within her own party so if puts this to a vote a third time or fourth time,
between now and june, that will end up being brexit? peter: the plan was to run down the clock, having been overwhelmingly defeated the time,time, 149 the second a majority against her deal -- not much of a deal and it -- as the majority shrank, she thought that if she does it another time or twice more she might finally get it over the line. the problem with that is the speaker of the house of commons has put a spanner in the works by saying you cannot keep bringing this thing back to parliament after it has been rejected unless it is substantially different. the problem is the european commission has said it will not be substantially different. you have your deal. we ratified it. that is it. that is the problem for her. ivid: at the same time, learned in school parliament
cannot bind itself. if parliament wanted, they could overrule the speaker, could they not? peter: nobody is talking about that. back about has gone 400 years in terms of parliamentary code and procedure. he is a powerful figure at moments like this. the rest of the time he is largely figurehead calling order and telling people to pipe down. you may be right. if you are, i'm not aware. there has not been any discussion of parliament voting to overrule the speaker. even if you try to come it is certain there would not be a majority to do that. all the signs are that even from downing street, the prime minister is going along with the ruling and therefore she is not going to put in for another vote . i do not think the votes were there to get her package through. the idea of attrition, getting there in the end by doing this, seems to have gone away and her reluctant decision to ask the european commission for an
extension so she can have another go at this thing once , or to changed it a bit make time for a general election or a fresh referendum. david: speaking of spanners in the works, we might call a wrench in the works, what about jeremy corbyn today that if they do get a deal it would be put to the british people as another referendum. is that a serious proposal? could that happen or is that posturing? peter: i think it is a serious proposal. it is a variation of one that has been kicking around for the last couple of weeks. the idea of putting it to the people has been voted on to some other amendments, for example saying we will prove theresa may's deal if she puts it to the people. you can at that qualification to a variety of different possibilities like an extension of the deadline, like an alternative package.
there is another version which is can we have some votes now that we have an extension so we can test the will of parliament on other alternatives and then put them to the people as a fresh referendum. i think this is becoming more of a possibility. if it only ends up to be a short extension, either the 23rd of may which is what the europeans that are saying, or the 30th of june, which is what theresa may has asked for, or all the more so if it is an extension of several months, then you have time for other possibilities, including another referendum or -- those things come back into play. not so much because the anti-brexiteers are saying we've got it wrong, but because there is a sense we are in deadlock. we are in constitutional crisis and this has become the way to resolve that deadlock. david: fascinating. thank you so much, sir peter.
that is sir peter westmacott, former british ambassador to the united states. israeli prime minister benjamin netanyahu will visit the white house next week for two days. there will be a meeting with president trump on monday and a dinner on tuesday. the visit comes just a few weeks before the israeli general election. live from new york, this is bloomberg. ♪
david: new developments in the boeing crisis. we now have a bloombergs who -- a bloomberg scoop about what happened the day before the line air crash. help from an unexpected source that may have saved the flight. we are joined by bloomberg's alan levin who broke the story. it is a chilling story. explain what happened. the night is before the lion air accident on october 29. the same plane is flying to
jakarta. very shortly after takeoff all sorts of alarm bells go off. including a stall warning, which is dangerous. the pilots are having a difficult time handling it. we now know it is the exact same series of malfunctions that led to the accident the next day. they are struggling to figure out how to handle this. this third pilot who was riding a long in the back of the is the one who determined they should shut off the motor, which was driving the nose down. that was the key factor. david: does this get reported up the line? boeing have sent out a message to all of the pilots to do this? alan: we know after the accident, the next day, it took a week or so to figure out what
happened, and that bulletin was sent out to pilots all around the world, which has left people scratching their heads as to how you can have another accident in ethiopia. the answer was they did not realize the severity of the issue on that earlier flight, which would've been october 28. no warning when out after that. david: a chilling report. thank you so much. bloomberg's alan levin reporting from washington. coming up, the fed decision at 2:00 today followed by chairman powell's news conference. bloomberg television will have special coverage here. this is bloomberg. ♪
european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close. guy: european stocks tracking lower. we do see a focus on the brexit story plus idiosyncratic stories affecting markets. one market in particular, the dax is suffering. the pound is trading lower. a statementipating from the head of the european council shortly. bio is the big corporate story. a massive moves lower for the german chemical company. this relates to the roundup story, a weed killer related to cancer, there relates to the acquisition of monsanto. the stock tracking lower. the other big story out of europe is the warning of the