tv Bloomberg Daybreak Americas BLOOMBERG March 21, 2019 7:00am-9:00am EDT
jay powell says it may be some time before they adjust monetary policy. dude, where is my equity rally? u.s. yields reported 14-month low. a conditional extension. why theresa may is back in brussels where she make it an that ifn on brexit, parliament passes her deal in the next nine days. avid: i'm david westin regiment alix steel. march madness begins. i have done my bracket. alix: let me guess. duke? daved: no. there is a great piece about the extent to which the ncaa relies on the tournament for their money. they don't make money on football because they don't own the playoffs. this they own. $800 million by 2023.
80% of what they get. alix: there are some things happening. there is legal stuff. scandals about college admissions. daved: investigations on the recruiting thing. says is a new ruling that you can't get together and limit, at least when it comes to college expenses, decant limit with the players get. they really should kind of get salaries. alix: the question is will the nike shoes hold up? david: make sure they don't fall apart. alix: is going to get super hairy. t go toyou can go to brk selector on bracket. your own bracket. markets, doo the you think after the fed was so dovish equities would be flying,
selloff on the dollar. that is not really what we are seeing. futures are now flat. even higher against the euro, and that makes sense. you see the bond rally. yields down by one basis point in the u.s. the outperform or is in europe. -- outperformrer is in europe. markets not seeming to understand how to digest the dovishness. david: are things that that? -- bad? it looks pretty bad to me. 8:00 this morning we would get the bank of england's rate decision. we look at the weekly jobless claims. at 11:00, president trump will participate in the business roundtable's quarterly meeting. xi jinping is in rome as italy becomes the first g7 country to join the one built, one wrote e roadtive -- one
infrastructure. let's start with what mr. powell had to say yesterday. the data we are seeing are not currently sending a signal which suggests moving either direction, which is why we are being patient. we feel our policy rate is in the range of neutral. the economy is a growing at about trend. inflation is close to target. it is a great time for us to be patient and watch and wait and see how things evolve. david: patient we have heard before. he went further and said how long he will be patient for. ble at the idea they are still neutral. they got assigned the fed has moved to an accommodation stage. a lot of people are questioning why they needed to do this so soon. a lot of people thought we would get here eventually, but why
now? i think that's why you are seeing a little bit of reticence to buy into this just yet. people really don't know what is really behind this change. alix: but there are some indicators you can look at that says maybe things are worse and we thought. the atlanta fed gdp now forecast pointed to growth at about .4%. new york fed recession indicator. it feels like maybe we are not looking at great shoots. maybe orange juice. peggy: i think that is right. chairman powell did point to some of the question marks we have globally. we are such a global world. he pointed to the slowdown potentially in china and he talked about brexit. some of those things weighing on the fed. genuinely dovish jolt for the market. romaine: you mentioned the jolt.
there is an issue of predictability raised by a lot of folks yesterday on bloomberg. they don't feel like the fed is predictable. that is factored in as well. there is sort of a good side to this. the fact it is hard for the market to get a read on what powell and the fed are looking at. alix: obviously bonds were flying yesterday. the market. w, but the u.s. is now more subdued. the equity market goes nowhere. what does that tell you about what the market is reacting to? romaine: what they are reacting to his what they have been reacting to for the last three decades. you really don't bet against the bond rally, especially in this environment. look at what is happening around the world as far as rates. you can make money in bonds for quite some time, maybe on the front end of it, and you have a signal from powell eventually
there is no -- there is no impediment to the rally, at least not in the near future. david: do you want to go into risk assets or be cautious because what it says about the future? peggy: one caveat is even though investors are digesting this and causing with the news, they are -- they are being given a signal that they can plan our the fed is going. investors tend to like certainty. tendi get certainty, they to be able to move into riskier assets. 2.5%e been stunned by the rate on the 10-year. it's incredible. a year ago we were talking about the 3% and how far above it we would go. david: one place with no certainty is the u.k. parliament. theresa may had quite a dramatic day. that is the third story involving private. one way to sum up away a lot of this reacted was from a man
it was a former attorney general. mild spoken. this is what he said in parliament yesterday. i have never felt more ashamed to be a member of the conservative party. i could have wept seeing her reduced to the straits. what do you do if you're trying to get your arms around brexit right now? peggy: it is just a big mess. it seems like theresa may is saying june 30 is it. we keep seeing this bar moving. it does not seem like he's indicating-- she's if the june 30 thing doesn't work she would resign. david: is that the right city to be in? they said we will give you an extension if you get your deal through parliament. romaine: i think the right city for her is anywhere other than brussels or london, get out to the rest of the u.k..
this is about the eu and the u.k. and a fractured united kingdom that can't agree on what it wants to do. sure, they had is referendum to leave but no one seems to agree. we are seeing that fracture play out in this process. until you get a coalition in the country itself we will still be dealing with past june 30. alix: what is the position bias? romaine: most people think we are heading for a hard brexit. i don't think anyone thinks whatever the new deadline is, if it is june 30, that will be resolved by then. alix: thank you so much guys. breaking news concerning biogen. the stock halted. they decided to discontinue the global phase three trials for a drug that was sent to help alzheimer's. it was a mild cognitive impairment but it was supposed to help. the family it was not based on safety concerns but the results of a fertility analysis.
david: this is not the first time this has happened with alzheimer's disease. drug companies have tried to go out and invest money. it has been really baffling. it is a terrible time to address that. futility, not because of safety. coming up, powell's cause. investors digesting the fed's dovish tone. this is bloomberg. ♪
>> growth is slowing more than expected, just as strong global growth was a tailwind, weaker growth to be a headwind to our economy. we don't see data coming in that suggests we should move in either direction. it suggests we should remain patient and let the situation clarified itself over time. inflation that's a little below are target, particularly headline inflation will be meaningfully below target. it does show a slowdown. on the other hand we see the underlying economic fundamentals for growth this year as still very positive. jeanna.e welcome now do we take him at his word? he decided it will not do that for this year. . he said we will not do anything this year. jeanna: the fed maintains some
optionality. -- you wouldve to be a heavy lift to convince the markets they are going to change the messaging. their outlook for now is that inflation will be benign, particularly the nine on a headline basis that the first part of the year and probably throughout much of the year. there is no reason for them to be too aggressive on rates. it's important to note they target asymmetric inflation goal. not only do they wanted up to 2%, they want it higher than that because it has been low for such a long time. they are saying no rate hikes this year. there is still one in the dot plot projection for next year but it's barely hanging in there. they could raise rates or cut rates in those are equal chances. david: chair powell took us off the autopilot. no more autopilot. jeanna: the watchtower markets reacted to that in december.
the fed had previously been rolling its balance sheet off at its predetermined course. they changed their minds on that. they will start tapering that off later in the spring. by the end of september we will be done tapering off, done rolling off the balance sheet. holding steady in letting the reserves come down a look at more. alix: thank you very much. prompted-turn policy scott meyer to what about risk of economic shocks. >> i'm surprised here. the role of the fed, the federal reserve, to take a punch bowl away as the party is getting going. they basically have returned the punch bowl. they are encouraging everybody to have a drink. i think they have swung a little too far. alix: joining us now is ira jersey and then mindel. mendel.ben
>> the idea that the fed will be on hold maybe forever. that is one of the reasons you can get a flattening. as the economy progresses and , we canificantly better wind up with a steeper yield curve and maybe 10-year curves in particular moving back up. i don't think it is a meaningful change in trend at the moment. alix: can you continue to buy it was equities at 2.5%? ben: i think you can. it's important to recognize the reason for the shift yesterday. i don't think that was a reaction to incoming data in its purest form. it's a policy experiment they are carrying out. this is the fed from the inflation forecast out the window. there is a high degree of skepticism about the forecast,
reasonably so. they have been telling us inflation will be higher than it actually comes in. chair powell has expressed a skepticism of model-based measures of the underlying structures of the economy. that is not that helpful. underlying yesterday's summary is the idea that inflation is falling. it easily forecast out the window and you think inflation is falling, the best forecast of the future is today's inflation. to percent, to percent, 2%, 2% going into the future. 2%, 2% going into the future. is important to recognize the limitations at how dovish the fed will be this year. david: let's explore your first statement about coming up data dependent. john authors wrote a piece about looking at the recession indicators, several of which are
produced by the fed. powell may be bending to the evidence of economic trouble ahead and not pressure from the financial markets. maybe it is more data dependent. i will put up the terminal the atlanta fed gdp now. there is more data supporting it. quarterll be a qeak -- weak quarter. the u.s. business cycle and emerging-market central banks. on the business cycle, expansions don't die of old age, they are murdered by the fed. there is a clear sense in which this expansion will not be murdered by the fed. alix: that is definitely true. he is taking that risk off the table. that to the question of u.s. equities, if the expansion is going on in your observing the business cycle, you have a
default position which tilts slightly the risk. ira: an interesting think about the business cycle argument and the fed murdering economic isles, which i agree with, the fed has to look at the market. when you get yield curves that are as flat as they are with the two-year versus the 10-year and 13 basis points, it is when the federal reserve tresses against that and hikes after the kurds are flat that was up being a policy mistake. the market is saying we are at equilibrium. we think this is sustainable. that is why we have flat yield curves. if the fed continues to interest rates, they made a mistake and did not listen to the market or feel the market. i don't want to quote a tweet necessarily. this is an attempt economic the same policy mistakes at the fed made for the last 40 years. david: let's go to last december. yesterday iwell say blew it in december?
maybe. i think it is the trend of that. if they are signaling additional hikes. i think being more dovish in the statement after that hike and saying we will be patient now after we spiked, that would have felt much different in december than it did now. the tweet i jokingly quoted my fifth force them to hike anyway. alix: fairpoint. point. where is the outperformer? ben: we have learned a few things. the fed is leading the way in terms of the dovish moves. there been global spillovers from that move. the fed is being followed by the ecb, paoli by the bank of england in the sense there is an urgency to hike. they will be followed by the
broad swath of emerging-market central banks were you have a mild hiking cycle last year that leveled out. it will probably accumulate into a cutting cycle this year. when you think about outperforming the bond, everyone is moving in the same direction to a certain extent. that, young said probably prefer the u.s. as the leader in that process, and also as the one with the most to change in the event we are wrong about what is going on in the economy. there was a powerful demonstration of the end of last year. you had a massive rally in treasuries. that is your safety if you're wrong. david: we will continue the conversation about the bond market and credit in particular and bruce flat at 8:30 this morning. ira jersey, thank you for being with us. boxng up, boeing's black
david: the investigation into the second crash of a boeing 737 max 8 has expanded with the fbi in the united states, department of transportation offering a full audit of the aircraft frenchcation even as authorities work with the blackhawks and ethiopian officials to determine what caused the most recent crash. open -- welcome now chris jasper from london. give us a sense of where this is. what is going on to find out what happened? data from the black accessed already been in paris by the french regulator. that was at the request of the ethiopians. that is now gone back to addis ababa.
a full investigation is due to start there. the ethiopian agencies will be inisted by the french ba, tsb officials with the u.s. -- ntsb officials with the u.s. are there. officials of the u.k. and other authorities. there is a gathering of expertise to try to get to the bottom of this thing. we expect to get a preliminary report within a month, possibly earlier given the urgency. david: we have always 737s grounded around the world. there are increasing reports that there is a problem. some pilots have had this problem and corrected for it. what we hearing from boeing? chris: certainly the training aspect seems to be an issue. some pilots around the world
said they were aware of the installation of the mcat system, the system we believe took over the plane and both the ethiopian crash and the lion air crash last year. it took over the plane and was basically responsible for crashing. the pilots were unable to do anything themselves to bring the plane under their own power. some pilots in the u.s. say they weren't aware of the system and how to override it. others say they were. there are differential reports we're getting. alix: what are the potential criminal charges boeing could be facing in the u.s.? is lookingand jury at that, gathering information. it would be unusual but it's not out of the question. there are so many investigations
going on in parallel now. we learned, for example, the justice department, the department of transportation and the fbi were all looking at the issue of the faa's approval .ertification of the max immediately after the lion air crash and this was something no one was aware of until yesterday. alix: thank you so much. coming up, pushing brexit to the break. theresa may has the brussels to me with the eu on a possible extension and what conditions that comes with. this is bloomberg. ♪ want more from your entertainment experience?
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just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. alix: this is "bloomberg daybreak." the story in the market is what do you do with a dovish fed? it for the equity market, you are selling equities. banks are getting hammered.
the curve continues to flatten. for the action you have to look at the bond market. a serious rally in the bond market. one curve that is steeper but the outperformance leading the rally over in europe. the currency market is next. you have sterling dragging itself lower. now .6% on brexit uncertainty. the other is the norwegian currency that is up. true, i think that is certainly in new zealand. alix: those two, but other than that, i don't know. ecb, fat, i don't know. , fed, i don't know. viviana: the new zealand government is starting a buyback
of weapons. the ban goes into effect immediately to prevent people from stockpiling on the guns. from president trump on john mccain in ohio. the president said he was not think last year for mccain's general. mccain harmedinks american veterans. in addition to his decades of service, mccain served in the u.s. navy and was a prisoner of war for 5.5 years during the vietnam war. farmers are paying the price for some of the worst flooding ever in the midwest. governors in nebraska, iowa, minnesota and wisconsin the clearance state of emergency. farmers already are coping with falling income in the fall of president trump's trade policies. global news 24 hours a day on-air and a tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana
david: this flood story is terrible. the farmers, this is where they have to plan for wheat. they need this to dry out quickly. alix: you have the worst downturn for the ag sector since the 1980's. we will talk about this and many other things later on "commodities edge." one mover in premarket is biogen, down by over 20% premarket. taylor riggs at the details. taylor: shares have been halted pending news. they are now off by about 25%. and analysts we heard from the bloomberg terminal said they were indicated open from about a $24. the lowest it was this june was back -- the less than it was
this low was back in june. if it of a setback for all of these drugmakers who are struggling to find a therapy for alzheimer's. from a statement from the company saying it will discontinue the trials based on results of the study that was unlikely that therapy would work. is right around the $240 stock price range. this means for boosting their deals and a stagnant drug pipeline they had going forward, what this means going forward. david: thank you so very much. we will continue to follow that important story. european leaders are in brussels today for the first of two days of meetings where they will have to address brexit. theresa may is in town to pursue her request for a 90-day delay. francine lacqua is on the scene. give us a sense of what is going on.
we will only give you extension if we get a deal. francine: that would be a technical extension. we understand theresa may in the next couple of hours has said a formal letter offering an extension. there are two scenarios. first an extension. we will move the date from march 29 to what will be june 30. and a technical extension that says we will extend it. it may not even the june 23. with a grant a technical extension until may 23. double the if parliament votes -- that will only be of parliament votes for this withdrawal agreement which twice they did not vote for an the third time the speaker decided they could not vote for it again. then we get into uncharted territory and the clock is ticking. days, a about seven
day, friday, a week from tomorrow that by law u.k. leave the eu. david: the government does want to have another vote to get past the speaker of the house of commons to get it done. is there any indication it may be moving in theresa may's direction? she has lost to both but it is narrowing. is there any prospect she will get the deal through? francine: the million dollar question. there is the possibility. what we have heard from theresa may's site is if you run the clock down, three days with the possible crashing a scenario, that would focus the minds of mp's. the building voted against a couple of weeks ago. does she have the numbers? at the moment it seems unlikely. mp'she np -- do the suddenly freak out? possibly. anything can happen at this
point. david: thank you so much for your reporting from brussels. we will come back to you. francine lacqua. alix: freak out or cry? that's the question. david: she told him yesterday they were indulging themselves. alix: ben, how would you be positioned her brexit? ben: it helps to keep your i on the horizon. we will consider the following thought experiment. maybe it is two months or two years from now, maybe longer. what is the most likely outcome from here? is something like a doorway-styled european economic arrangement with the eu. and that is the end game, we expect sterling to be stronger. yields to beld higher. if you're taking the long view and you think incrementally any type of delay, whether it is the
technical delay just mentioned or a generic longer-term delay, it pushes you slightly incrementally in that direction. that will give you a sense to how to potentially position for that. if your of that mind, that is your main scenario and you get some type of delay, it is currency stronger and yields higher. david: eye on the horizon. ben will be staying with us. in rome, chinese president xi is citing the first memorandum of understanding for a g7 country for his one belt, one road initiative. tom, give us a sense of this significance. and theropean leaders united states is not a disaster. picture is the more trade, more investment, more
global integration is a positive. good for growth. that concern is that chinese investment, chinese trade deals come with strings attached. here is the united states trying to circle the wagons, trying to get its allies lined up behind the idea that china is a risk, they should not have chinese telecoms, they shouldn't have chinese investment in strategic industries. here is italy, one of the biggest economies in the world, apparently opening the doors to china and saying welcome in. alix: tom, thank you very much. is that kind of europe's savior, china? ben: because against the grain of what has been going on over the past couple of years. this was the cover of the economist magazine. globalization. -- it isgeneral trend on the cover of the economist.
in any event, it is true. they have had a slowing the global trade intensity of growth. you have had a slowing of cross-border transactions, whether it is capital or goods. i think it's refreshing to see them cut against the grain. gets interesting to see the seed -- it's interesting to the world outside the influence of the u.s. i do think we see near-term implications of this beyond the fact it may be does suggest the bottoming of the globalization trend. alix: globalization. we have to get on that. thank you very much. we're following the story of biogen. $240,uld see shares at and that basically means you're wiping out where he closed yesterday by a third of its market value.
they are basically saying their alzheimer's drug might not be working. david: it is well on its way. it is done more than a quarter. it underscores the very difficult nature of these biopharmaceutical companies. they make these big bets over many years and it can all blowup on you. taken be worth nothing. -- it can be worth nothing. david: it was just a study. it might not work. it is not a safety thing. it is only the fda said we don't like it. the drug we are all betting on my not work. david: this is not the first time that of company has invested in alzheimer's and found the problem just too difficult. alix: which one is it? nightshade or night star. equities continue to plummet. night star. we will be following that as we head into the open. much more coming up. this is bloomberg. ♪
>> this is "bloomberg daybreak." coming up, and it was a joint interview with bruce flat and howard marks of oaktree capital. ♪ alix: here now is wall street beat. first up, deutsche bank ramps up wealth management. they cut back the securities unit. lloyd's of london's toxic culture. 18 women highlighting a culture rampant with booze an your persistent harassment. and trump tax reform causes freak out to new york.
nearly 11 million taxpayers are aning out on a eulogy 312 -- but he live $320 billion. jason kelly, new york bureau chief. it is right that deutsche bank is ramping up, but it is also cutting. they will hire more people but also cut a lot of managers. jason: it is a dramatic overhaul here. every bank wants to do this, which is why it will be that much tougher. we heard from ubs that they are investing heavily, but it is down 9%. this is not a flip a switch easily scalable business. you have to get boots on the ground, even as deutsche bank said we are hearing about it in europe. david: is a relationship business. you don't do that overnight. if you havemably
these banks competing to do this, they are competing for the talent and the people who have relationships. it is probably a good time to be a wealth manager. alix: just lend u.s. banks are doing so much better overall. the second story is a staggering business week expose. 18 women who have about 300 years of experience in this industry for lloyd's saying it is a meat market. if there are any kind of experiences, they are discouraged to reporting it. jason: i have to talk to gavin finch a little bit about this story. it is a must read but it is hard to read. you read it and you are looking -- hold on. what year is it? david: it is, between the 17th century in the 1980's. paper, but they are
e acting as if nothing happened since 1982. jason: it is somewhat isolated to this particular business. one challenge that lloyd's has is they can only do so much further their own people. they tried to ban alcohol. what ultimately happened was the whole industry around insurance is just booze-soaked. story is it isd almost april and that means tax time. there have been some rude awakenings because of the new tax laws, particularly in high tax states. jason: these are our neighbors, david. the new york suburbs is where this is hitting. taxpayers. we are talking about $323 billion people will lose out on.
you mentioned something as we were coming on the air. this tax reform was supposed to be about being simple. the simple aspect is you will pay more money. david: it is not that simple because of the weight tax laws are, and states are saying here is a collocated way to get around this. that makes it even more complicated. alix: that means moving to florida. a lot of people in the industry who are inticut -- connecticut now hit florida as the primary residence. jason: always a lawyer. david: banks and jason kelly. you can tune in to him every single day from 2:00 to 5:00 eastern time. alix: another story, the first regulated, fully independent and institutionally-focused dark pool. of make it dark was just granted its first digital asset trading license in bermuda. ise to discuss the launch
alex gordon-brander. a dark pool for crypto. what problem are you trying to solve a treating a dark pool? alex: people are trying to trade crypto today. if you want to try -- trade bigger than tens of thousands of dollars, you're talking about massive cost. $10 million, in moving the market by as much as 1%. slippage costs. for trading with otc brokers charge you an arm and a leg. we are bringing the dark pool tech that has taken up massively in the equity and fx markets in to last market into crypto enable people to trade in large sizes without moving the market. alix: do they want to trading crypto? bitcoin futures got hammered. they will not offer futures contracts. alex: there are about $10
billion today being traded in crypto on exchanges. the equivalent amount being traded off exchanges. there is definitely trading out there. this is a growing marketplace. look at 2019 as the year the crypto grows up. it is not clear everyone's approach will work and i think cboe's clearly hasn't but there is massive interest on the is to shuttle side. david: by bermuda and why dark pool? there are exchanges in new york that are regulated. why not one of those? alex: dark pool first. there is a good 100 exchanges traded crypto. but there is no dark pool in the crypto landscape. essentially liquidity is so fragmented across these exchanges. what we need is a central warehouse for liquidity that all
of these exchanges and other venues can use it clear liquidity between them. why bermuda? digital assets are a different beast from a regulatory perspective. anti-money laundering concerns and custody concerns are different from traditional assets. that had a regime thought through how to regulate these assets properly. there is really only one top-tier global regulatory regime that has done the work, and that is bermuda. the u.s. is still pretty fragmented. the ftc will probably regulate bitcoin and other digital assets. they get license. only are doing is standing up for something that hits the highest bar we can find globally and we will be a position with the u.s. is ready for having a clear regulatory share. alix: how quickly will it be adopted?
alex: we have a pretty large pipeline of interest. we will be stepping things of slowly over the first three to four months. this is from a bitcoin trade perspective. we will see a pretty significant slowing 2019. the important thing to look at is in the next 10 years we will see stocks, bonds, fx, real estate, all the assets traded on legacy platforms, we will see move over to the digital asset space. our larger goal is to be a central trading venue for all trading of assets. david: it is not as cryptocurrency. alex: it is not just cryptocurrency. alix: bond trading becoming automated. alex: absolutely. one of the things here is we're not just bringing dark pools into blockchain and crypto. we are bringing blockchain and crypto into the concept of the
dark pool. there has been some controversy around dark pools in the equity space. the dark aspect of not showing your traits to the world is one thing, but it's also darkness around the rules of this thing. are they waiting to pounce on regular clients? we are bringing dark pool into the light. and cryptoockchain technology to create transparency in the way you access liquidity and creating transparency in the trade behavior by keeping the orders hidden. david: dark pools into the light, i like that. alex gordon-brander, thank you very much are being with us. biogen's setback. plunging in premarket after whole thing in late stage drug trial. this is bloomberg. ♪
david: this is what i'm watching. it is biogen. the shares are down more than 25% in the premarket after they halted late stage trials of an experiment of alzheimer's drug. welcome now matt. max, explain it to us. max: this is one of the last big late stage studies in alzheimer's and it is something biogen put is a centerpiece of its pipeline. this was their big bet and it has fallen apart. this is something they and a lot of investors probably should've seen coming. not just because of the rich history of failure and trying to treat alzheimer's, but the history of failure with basis of the approach targeting the beta protein. there have been multiple billion dollar massive trial failures, most recently by eli lilly a couple of years back. consensus isc
moving towards believing either this is not the way we should be targeting alzheimer's or this specific approach these and other drugs have taken is fundamentally flawed. especially after this big block. alix: what happens to biogen now? max: they are under pressure to do something else. a lot of people will start paying attention to other problems. the biggest is multiple sclerosis. sales are flattening. the biggest neighbor drug is about to face competition, too. alix: max, thank you very much. we are moments away from the boe's rate decision. this is bloomberg. ♪
biogen, after it was discovered about their cure for alzheimer's was unlikely to be effective. we talk to brookfield asset management ceo bruce flat and oaktree capital cochairman, howard marks. fed goes all income fomc sees no rate hikes this year. the bank of england is on deck. david: welcome to bloomberg daybreak on this thursday, march 21. we are awaiting the bank of england decision. alix: so basically nothing changed. 75 basis point rate was unanimous. the brexit headlines are going to be interesting. they say brexit could prompt policy moves in other direction. they reiterate gradual limited tightening will probably be needed. they see the limits for companies in terms of their readiness for brexit. david: joining us from london is guy johnson, coanchor of "bloomberg markets."
guy, it is not easy trying to discern the future these days. good thelutely not brexit vote is now so impenetrable that the bank of england has no choice but to wait and see. the bank is reiterating that rates could move in either direction on a hard brexit. the market simply doesn't believe that. it believes that the bank of england would err on the side of caution. not much reaction in the markets. there wasn't much anticipated surrounding what was happening here with bank of england. the pound has been weakening on morning, not on the bank of england, but on what is happening in brussels. theresa may is expected to arrive around 1:00 london time. it is all about exit. alix: you are also looking at markets pricing in no hikes at all. at some point you would think the boe would have to start changing the narrative to keep
optionality. guy: anything that is what it is string to do today, saying that if there is optionality, we could move brief in the direction. it doesn't know what the outcome of exit will be. we have a few days to go, just over of weeks to go before potentially a hard exit. that still need to be part of the narrative. the bank season as a tailwind that could move in either direction given such a scenario. you have to wonder how effective monetary policy would the in this scenario. the pound is expected to move sharp to the downside. would the bank been into that or against that? i think that is a question the bank is asking. the expectation is that the bank would not hike rates if you were to see an inflation shock generated by the pound moving. alix: there you go. bloomberg's guy johnson, thank you very much. joining us from london, is james
foley. as guy pointed out, the cable rate is holding at 131. what is the range we will have to keep looking at them as it up?uncertainty >> as guy mentioned, we are over a week away until we might have a hard breadth that. i think if you look at the valley of sterling, it is the best performing g10 currency. ois in sterling to reflect the fact that the market believes in no-deal brexit will be avoided. that has been the consensus, but we are just about a week away and the probability of a hard exit is still there. actually, a hard brexit could still happen in the market is concerned. we are now being told a vote in the u.k. parliament on theresa may's deal could again take race monday. that will be the real focus. if she does get enough votes and
the deal is passed, there will be some relief in the market. whatf she doesn't come a is going to happen? i think sterling could really begin to react negatively unless there is news that the u.k. market could potentially revoke article 50. alix: from the boe perspective, when will this start to matter for markets again? >> i think it depends when we know what will happen come up with respect to brexit. if sterling does take a significant lag lower because of brexit, a hard brexit come the bank of england would have to think long and hard. wethe market assumes that have a disorderly brexit, it would be detrimental to the u.k. economy and the bank of england would be unlikely to hike interest rates. however, the bank has left that
option on the table and continues to believe rates could go another direction. what would change it for them would be if inflation expectations began test like. . there is no indication -- again to spike -- if inflation expectations began to spike. that is when they might have to react to try to bring inflation and sterling back to line. alix: jane foley, please stay with us. in the meantime, the focus is on brexit. we are looking at a live shot of the labour party. he has gone to brussels himself, meeting at the summit with european leaders. our colleague, francine lacqua is on scene. francine, start with jeremy corbyn. what is he doing in brussels, what can he accomplish? david, we actually
caught up with him as he was walking into the e.u. commission, he wouldn't tell us exactly what he wanted. the labor line is that so far there want the agreement to be renegotiated and to focus on a customs union. i think he is trying to be seen as a real opposition to theresa 's plan, and also trying to understand the lay of the land in brussels. it is difficult for him to negotiate anything at all with brussels, but we also heard from jean-claude juncker other find it very difficult to negotiate with theresa may. power is not within the u.k. government, it is within parliament. her deal was watered down twice, and now the house speaker saying that they can't vote other time on the same agreement. so i think this is about getting to know each other a little bit, maybe stealing a little bit of the limelight from theresa may. i think it also helps juncker and his team to try to understand where there could be
some commonality in parliament to get this deal through. has over said it is not our problem, this is a parliament or u.k. problem, we don't know what you want. ofil we have a better idea what westminster will vote for, there is a problem. david: when more question. take me forward to the 29th, for that matter, the 30th to read assuming for a moment and there is a hard exit, do the wto rules kick in midnight on the 30th, what happens? we don't really know exactly what happens, but this is the assumption. if we go back to the 29th and , politicaleresa may posturing, let's say she gets an extension today, late tonight and the extension is linked to
her putting a backstop to parliament. let's say parliament says no to the deal. we understand through our reporting that she would come back to the au summit, called for an emergency e.u. summit. it would be difficult for the e.u. to say no to that, and she would ask for a longer extension. that would be the best case. we also understand from the e.u. side that it would be tied to current conditions. that they wouldn't want to interfere with actual u.k. politics, but would say, you still have to stick to it withdrawal agreement, or you can't take part in any nomination of the commission president. they could get a 12 month extension. and then, they would have to go back to parliament to get it translated into law. remember, there was always a chance of in a written the going around wto rules. alix: thank you so much, francine lacqua. foley.ith us, jane
james comer how do you deal with the volatility and uncertainty? do you hedge it? jane: you have to deal in sterling, and many others are possibly avoiding it. it is difficult to trade because it is dependent on political outcomes and difficult to addict these outcomes right now. not as the market is short as it was on sterling at the beginning of the year. that comes back to the confidence that one way or another, there is a will to avoid a hard brexit. alix: jane, we will be sticking with you. breaking news from ford, a new chief financial officer. his name is tombstone. timpent 20 -- his name is stone. he interestingly spent 20 years at amazon.
bob shanks is retiring effective june 1. tim stone will become the new cfo at ford. ford stock is up just a tad. alex kiki it seems like all these companies are becoming tech companies. in general, animation, technology. david: that's right. coming up, house pause. the fed chairman is in a wait and see mode. more on that next. this is bloomberg. ♪
today, shares of levi strauss began trading on the new york stock exchange. the iconic retailer raised $623 million in its ipo. levi strauss benefiting from a rebound in the global jeans market. brexit is prompting second thoughts for this health care company. the international hospital operator is considering the u.s. and singapore. the health care operator hoopster is back its ipo until next year. next order of business at disney might be several thousand job cuts following the acquisition of 21st century fox. the ceo promising to billion dollars in savings, almost a commitment that all but assures epic job losses. one business that could be impacted, the movie production unit. that is your bloomberg business flash. alix: thank you so much. powell saysy interest rates could be on hold for some time.
speaking at his press conference, after officials slashed their rate hikes this year to zero, he said it global risks. >> data suggests growth is slowing more than expected just as strong global growth was a tailwind, weaker global growth can be a headwind to our economy. we don't see data coming in that suggest we should move in either direction. it suggests we should remain patient and let the situation clarify itself. inflation that is a little bit below are target, particularly headline inflation this year, will be meaningfully below are target because of low oil prices. the data shows a slowdown. we see underlying economic fundamentals for growth this year as still very positive. alix: joining us on the phone is my next guest of societe generale,. hello. when you look at the monster revving here seen across all about markets, what is the best
position right now. >> to me the global bond market magic atr gauge this point. a variety of factors are leading to the rally in bonds. you had an over-dovish fed yesterday and today we had a lot the brexitrseas with fears, the bank of england bunds.l as to me the bond markets are spooked by the developments in the u.s. and overseas. alix: do you play it steeper or ?lat and >> we have considered -- consistently held to a steepener view. the rally in the bond market has been mostly led whether -- mostly led by the -- and i think that is where the market action
will be in play. very muchand is still tied to set expectations. jane,. it's as to the way everyone has reacted to one analyst said, looking at various recession indicators, several of which are produced by the fed, it seems like powell could be sending to the evidence of economic trouble ahead. what is that economic evidence? ago,told just a short time we were told that there is slowing in global growth, but it is not dire. all of a sudden, i feel like we are almost panicking. jane: i think if you go back to the beginning of the year we had some of the large forecasters revising global growth. and you haved it, had others do that. the oecd revised their forecast for global growth. the german economy was negative
,n the third quarter last year estimates saying they would bounce back have not occurred yet. so look at japan, there isn't a huge amount of optimism about growth, growth is expected to slow. china is also having growth slowdown. you put these things together, you have suddenly perhaps a much more bearish outlook on the global economy than we had at the end of last year. , does ite factors perhaps explain why the dovish outlook from the fed hasn't been a little push the stock market higher? if you look at risky assets this morning, they look wobbly. i think there are looking through the fed's support of lower interest rates, looking through why the fed was dovish, and beginning to feel a bit spooked. alix: and we were talking about treasury markets.
10 year treasury yields, lowest since january of 2018. ubadra, what will be the long-term floor here for 10 years? >> we are looking at technical shortly, and i think we could easily get to 2.42 in a short. of time. david: jane, what does that do to the valley? i want point does the dollar start hurting? is the fact that everyone else is trying to be more dovish on the united states protect the dollar? jane: if you go back to really simple factors that drive currency, and you think that a more dovish outlook for the fed is negative for the dollar, but if you look at today, the dollar is in recovery. there is a dovish outlook for g10 central banks, with the exception of norway, which hiked interest rates today.
so this isn't necessarily going against the dollar at all. the dollar does have the safe and ifappeal, things are looking wobbly in the financial markets, the investors will move back to the dollar. david: thank you both. coming up, i agenda stocks sink in premarket trading after announcing it is costing research on its alzheimer's drug. biogen. this is bloomberg. ♪
technology, technology, technology. i am looking at tencent. we should be focusing on tencent. a huge increase in cost of cdenue operating expenses by oh's, cloud, and tv production. sound familiar? david: they do have some investment in gaming. alix: and then there are competing with alibaba and amazon. all of that, you have to spend money to grow. david: the third company we are watching is i agenda. we are joined by the next guest, on the telephone, he has a hold rating on hydrogen with a price tag of $43. it seems like they haven't yet that did not pay off, paul. guest: good morning. thanks for having me. you're absolutely right, and i think the concern from investors is that when you look at the
theanies revenue base, departmentsl these have some growth overhang. they did not diversify, and this is why we are here. ,avid: do they have a plan b something else in the pipeline that might take the place of this alzheimer drug that doesn't seem to be working out. guest: may be. they have another target in alzheimer's, a drug let focuses on another biological target in alzheimer's, but it is invalidated. in a rarelso programs diseases, but at the end of the day, there is no clear growth driver in the pipeline that you could garner confidence to replace what this drug promised. alix: do you have a new price target? >> at this time, the do not. we have not updated our model. alix: when would you?
or do you need to see to feel forecast,in your 324 versus others were downgrading price targets to 200, 250? comment on when or if we update our price target. we thought the stock or trade between $200 and $240. i think that valuation assumes investors will not ascribe little value to other assets, and also looking at long-term biogen.sk in there is an event, the american academy of urology meeting coming up in may. novartis will be presenting data -- american academy of n eurology coming up in may. novartis will be presenting data on another of the companies growth drivers, and i think people will be looking at that. david: so if the price has to do with what an investor might want
to pay on the stock, what about if another company wants to take a look at that and say, that is attractive? they might try to buy the company? >> it is possible, but i am not sure that this type of megamerger is really involved right now. the analog people might point to is the bristol deal, but look at opposition. bristol shareholders speaking up saying, we don't want you to buy a deal that is oriented around cash flow but still implies a long-term growth overhang. for biogen, yes, there are some promising high assets that probably aren't really priced into the stock. but ultimately if you are in buyer it looks more financially deal.ed as a and if you can't get a conviction on some of these pipeline projects, i just am not sure. given the opposition with bristol shareholders, i don't think there will be support for a megamerger like about. david: does this raise questions
about the sector of biofarma more broadly? think any time there are major failures, there is a bit of a risk-off. at a want to say the writing was product,ll with this but it was well known to be a very risky product. you had a failure from another drug a month ago that had almost the same mechanisms. lilly had a failure as well. so i think folks will they that this drug was doomed from the beginning. alix: paul, thank you. coming up, an exclusive interview with two guests. don't miss that. this is bloomberg. ♪ this isn't just any moving day.
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european banks getting hit. a monster rally in the bond market. in the currency market, the dollar is confused. a dovish fed yet currency does not know where to go. the cable rate down. that is a brexit uncertainty story. theone current steeper as 530. earlier this month, brookfield agreed to buy majority stake in oak tree capital. the deal would create one of the world's largest alternative money manager. erik schatzker is with bruce flatt and howard marks. k: neither of them has been on television since announcing the deal. we are delighted to have bruce flatt and howard marks with us. whose idea was this? >> our view was this is one of
the great credit businesses in the world and we follow them for years and howard is obviously a legend in the markets. them and talked and talk about this transaction. barry: it was your idea? it was your idea? in transactions you learn a lot about the other side when you go through rougher time and that is probably good for the result we got. erik: howard, you've been telling your clients for 17 years what it would take for oaktree to be acquired. why now? howard: not for 17 years. 17 years ago. there was a rumor we were for sale and in my year end report i published the five criteria for
a transaction and i said they have never been satisfied, i assume they never will. happened until this transaction came along. forththe criteria you set are being satisfied. what about the timing? the now factor. howard: i am not a market timer. this is a fundamentally sound transaction. our entry into it at this time has nothing to do with the timing. as bruce described -- bruce: no one should infer some sense of where you think we are the credit cycle. howard: not at all. this is a forever transaction. nother it was or was ideally timed, which i do not have a view on, it would not matter. erik: y brookfield? some people wonder why you're
not tying up with another firm in the same industry that might use a little help in credit, could be a carlyle aura kkr. -- or a kkr. >> there are no other firms with the have to of brookfield -- heftthe half -- with the of brookfield, with their list of offerings like ours with the same reputation and the same growth record. and the same culture. we think the culture is important and we agree on that. at any point recently or in the 17 years since you wrote that note to clients did you seriously entertain other offers? howard: we never found anything that satisfy the five criteria. 2017 you told me december
it was unlikely brookfield whatever by another asset management. what changed? bruce: you always have to eat your words sometimes. i would say it is not something we've ever thought of often. bigger andnts get the offerings need to be larger, the one area we were lacking to be able to deliver is credit. enoughsiness is large that it can be delivered to our clients. many of the other things we could've looked out or even building ourselves. it takes a long time. given the scale of our business and the relationships we have, we just needed something larger. erik: were you finding yourselves losing mandates
because you were not able to satisfy that demand for credit? bruce: i think more positively. i think the additive nature of this to our institutional relationships will be highly positive because we will be able to deliver a number of these products on top of our private equity strategy. private equity real estate infrastructure, private strategies, which are large scale. erik: erik: to what degree was this a matter of being able to compete better with blackstone? bruce: there is room for many of us. 30, 40, 50, $60 trillion market. there is an enormous number of managers. we compete with lots of people every day. this is about us delivering for our clients. it is not relevant who else is out there. there are great institutions out there like blackstone. erik: i asked because you
compete with those other firms. clients ises, your deciding to invest with you instead of with blackstone or carlyle or kkr and the list goes on. bruce: i think there is room for many. this is a $50 trillion market. a lot are doing this themselves. some are giving it to others, some are giving it to us, there is a large institutional world. erik: this may be the biggest shakeup ever in the alternative asset management industry. how do you expect the other players to respond? howard: i was asked that last week. will this set off a wave of consolidation? the challenge is who else will you find like brookfield? criteriaink about the
we've been discussing, the culture, the meshing of the products, there is not a second candidate. like topeople would produce combinations, but i do not think there is a natural one is obvious as this one. other firmsere are in credit, hbs, oak hill, owl rock, and just as oaktree was there still principally in one asset class. do both of you think the future , everys a full suite scale operator to have a full suite of product? the institutional world is large. there are specific managers that can deliver specific products and they all have their niches.
we are dealing in large-scale with many institutions around the world. having a suite of products is helpful. it is just different. erik: do you agree? howard: i agree. what you were emphasizing worthy of choir -- were the acquirees. i ask you are the acquirers? if you are credit manager and somebody with credit activities is looking to combine with you, then you have conflicts and overlaps and so forth, which are less attractive. erik: do you or don't you think this will or will or not set off a wave of consolidation? howard: away is an exaggeration. i think you'll start seeing -- a wave is probably an exaggeration. i think you will start seeing mergers. bruce: i think so, but not that
many. erik: credit is something you needed and did not have. what else does brookfield need but still not have? bruce: for what we want to do, which is serve our clients the best we can and deliver them the products in a multi-fashion around the world, we can build from here. the same thing i said to you last year. we do not need ever by a manager to build the business we want to have. i will say it again. with the proviso things always change. i do not think we need anything else. who knows what unfolds in the world in front of you. erik: and what about the growth trajectory. i will invoke that name again. blackstone is laid out a path to $1 trillion of a u.n. -- of aum. do you have one? bruce: our goal has always been
to deliver services to clients them,ant, do the best for earn returns at industry-standard or above, and from that earn a high return for our shareholders. if that means we will have higher aum, great. if it means lower, that is fine. for 20 years it has met the firm group. -- the firm -- it has meant the firm grew. we do not have goals -- we will do what is best for our clients,. . doing this with oaktree and asving than -- leaving them the business -- howard: bruce mentions if there is a time for them to grow they will not grow. that would probably be a sluggish period. one of the beauties of this conversation is oaktree is not known for asset growth.
it is known for ringing returns out of tough periods. that illustrates the attraction of the combination. erik: one of the shrewd things howard and his partner were able to do in recent years was by 20% stake in double. what you think that is worth? bruce: it is in the numbers. our guys did it. is a great firm. they've done a wonderful job with building the business. we are in on controlling investment. bruce and howard will be running the business. they will figure it out. erik: would you consider making a similar offer? bruce: it would be up to howard and bruce. are both two self-described value investors. you pride yourselves on buying low and selling high. how did people like that agree
on the terms of a deal like this? i think you have to understand this transaction was not price oriented. we do not sell because we thought we were getting away with something. they did not buy because they thought they were kicking us off at a bargain price. it was a combination. price was a matter of fairness. in this case, the price was set between brookfield and a special committee of our board of directors representing the public shareholders. we were not involved in it. that is as it should be. erik: howard, bruce, great to have you both year at bloomberg. and david, what unique opportunity to talk to howard marks and bruce flatt about their deal, arguably the biggest shakeup in the alternative management industry. david: we want to go over to
brussels, where theresa may is speaking. are you preparing to leave the country out of the eu the week tomorrow? >> what is important in parliament delivers on the result of the referendum. i hope we can do that with a deal. on atill working parliament that can agree on a deal so we can leave in an orderly way. what deliver -- what matters is we deliver on the vote of the british people. what matters is we recognize that brexit is the decision of the british people. we need to deliver on that. we are three years on from the original vote. it is now the time for parliament to decide a short extension gives us that opportunity to decide to leave the european union, to deliver on the result of that referendum and i hope that will be with a negotiated deal. we have just been
listening to theresa may addressing the press just before she goes into the eu summit of the european leaders in brussels , where she is asking for an extension. i wonder there was a slip of the tongue. to give parliament an opportunity to decide, then she opportunity say an to leave. alix: her deal will go through. 17th time is the charm. coming up, drilling companies compete with u.s. shale. that is next in today's follow the lead. this is bloomberg. ♪
democratic presidential candidate john delaney. time for follow the lead, a deep dive into stories making headlines in moving markets. today we take a look the state of deepwater drilling. one of the leaders is diamond offshore. i recently shut down with the ceo mark edwards and began by asking about market competition. of our clients have suggested deepwater is profitable at an oil price of at least $50 and below. some of suggested it could be $40 and below. that is comparable or competitive with their alternatives. in the long run, the deep water projects compete effectively from a full lifecycle perspective with onshore. in a lot of cases, can compete
more effectively. we are in the money as a deepwater driller at $40 or $50. alix: is echoing to be on average across the board or this one particular area? marc: that is a good question. there is a particularly large deepwater player out of europe who is suggesting their entire portfolio of deepwater gets them the right return at $40. alix: wow. total, are allp, suggesting there in that range. deep water is very profitable at today's prices. we have is them timing of the cash flows. these are long-term projects. alix: what will be the next generation technology that will make drilling faster? marc: one thing i tell our employees is we are not a drilling company, we are a
manufacturing company. we manufacture wells. if you step back from that and you apply lean manufacturing principles to what we do, then i think there are further costs we can take out of the industry. when we come to innovation, we are looking at other industries and taking best practices from those industries and applying them to our industry. pressure control came from aviation. it came from the power by the hour that the airlines use when they source their engines from rolls-royce, ge, etc.. you do not buy the engines. that is what we brought into our space. again, we're using aviation technology like the simulators used to train pilots. tool thatpredictive simulates 10,000 failure modes and tells us, without human debate, what to do.
blockchain drilling. that is starting to come into our space. we are managing data and a lot of it in terms of trying to drive efficiencies. alix: where will we see the most activity this year and next year? marc: it is somewhat counterintuitive, but the u.k. and the north sea is picking up quickly. that is traditionally been a high-cost area. in talking to some of our clients, the u.k. can compete for capital today as effectively as any other space around the world. australia is picking up and ultimately the gulf of mexico. behind that, there will be opportunities in mexico and brazil. those are going to be the main areas of pickup. jonathan: that was part of my -- alix: that was part of my interview with marc edwards, diamond ceo. stay tuned later for more my interview and what kind of
alix: what i am watching is the rally in the treasury market in 10 year yield, lowest level since january of 2018. what do you do with the 10-year today? >> clearly yesterday's move was a big surprise to the market so the market reacted. i am still surprised at the fed because the balance sheet, we were hoping would end. i thought that was priced in. the question in investors mind is what does the fed no we do not know. what spooked them? that is why if you watch risk assets, if risk assets head lower because the market is
worried about the outlook rather than the reaction from the fed, i think interest rates have room to go lower. i do not think the front end is where does look attractive, 2.4%. you are taking on so much more risk. for the 10 basis point pickup. 10-year might start to stall around 2.40, 2.50. data worse seeing from here, i think treasury rates can decline more. given where we are, i think a patient fed, they do not look patient yesterday, i would say the front end is where you see significant flows. alix: if that is the trade for treasuries, what about in europe? you want to look out performers. priya: right. even the fed, a lot of fed
decision is based on external factors. if global growth deteriorates, then certainly there is a lot of room to declining rates. with brexit the risk reward is not attractive because you're as well ash european u.k. political risk. a reach for yield comes back, if the recession fears are justified, then treasuries will be the outperform or. i think we are at that inflection point. alix: priya misra, thanks for joining us. david: a short look at biogen. pulling anwn after experiment on an all-time are struck. joining us for more is bloomberg's taylor riggs. taylor: so far we are off about of, the lowest since july
2016. they need to boost their deal flow to offset a stagnant pipeline of drugs. jeffries looking to settle around the 200 to do 30 range -- to 230 range. their value is now $241 a share. 200all consensus remains dollars to $250 range. rbc say biogen is trading below 240. alix: that sums it up for you. that wraps it up for bloomberg daybreak. , jonathan ferro. this is bloomberg. ♪
chairman powell retreat is from week. fed officials signal no hike in 2019. president trump keeping tariffs on china until he is sure beijing complies on a trade deal. prime minister may heading to brussels to secure a three-month delay on britain's eu exit. here is your price action this thursday. negative nine points on the s&p 500. down .33% on the fx market. the dollar bounces back against the euro. in the treasury market, a monster bit yesterday relative to the calm in the last few months. story.n with our top the total retreat of the fed. >> i'm surprised. >> pretty much what the market was expecting. >> they are overreacting. >> you deliver a dovish surprise. >>