tv Bloomberg Daybreak Americas Bloomberg March 26, 2019 7:00am-9:00am EDT
u.k. parliament takes control of brexit. yield curve debate. goldman sachs says recession --k is low, while others wo .thers warn it will weigh on welcome to "bloomberg daybreak." it is tuesday, march 26. i'm alix come along psy carol massar. -- i'm alix steel, alongside carol massar. francine: nice to be here. president xi jinping talking about in bracing the world at this point. alix: embracing the eu, really. [laughter] xi says the eu and china must cooperate. and saying competition
is constructive between the eu and china. it is a reminder at that as the u.s. isolates itself, you still got cooperation in the rest of the world. yesterdayhe markets, you had that dramatic buying in the bond market, and now we are taking a break all across the board. as an be futures up by 15. very much a risk on feel. yields up by five basis point. crude getting a nice bid as the risk filters in. the question is, is this an oversold day? francine: i also feel like we i also feel like we are marking time. let's get to your morning brief on this tuesday. see conferencell board consumer confidence data for march. at 1:00, the u.s. treasury will
sell $40 billion of 2-year note's. finally, at 3:00 p.m., san willisco fed president give a speech at the commonwealth club in san francisco, talking about managing inflation. good luck with that one. alix: exactly. joined by bloomberg metro strategist -- bloomberg's macro strategist. me how longe asking is she going to be at number 10. let's put it this way. not only do i not think she will be switching on the christmas lights this year, but i very much doubt whether she will be giving away in easter eggs as well. alix: vince is laughing, the let's go to events. [laughter] vince: i love the easter egg comment. alix: just because you have
parliament taking control of exit, that doesn't mean the options get any easier. vince: everyone is talking about how may has lost control. parliament has been able to agree on anything so far. if they muck this up, it falls back into her lap later in the week and they have no choice but to initially vote on her deal or no deal. see thee continue to british pound swinging between gains and losses. i do wonder if this means, with the british parliament taking control, does this mean we are getting closer to a resolution? they are saying, enough of theresa may. we are going to take care of this. reporter: perhaps, if they are forced to actually do something. we are getting closer to the deadline. they have until friday to come up with something.
otherwise they have until april 12. if they don't come up with a new deal, it is a hard brexit, and that is it. perhaps even the parliament members who are arguing and trying to take power away from theresa may are people who do not want brexit. they are talking about referendums, about possibly rethinking or softening the terms. all in all, it seems like people are viewing this as a positive for the u.k.. for now. our next story is the relationship between yields and earnings. this chart shows the change in treasury yields as that orange line versus global earnings upgrades versus downgrades. there's a three month lag when you have the curve continuing to flatten between when you see more downgrades than upgrades. lisa, that should tell you there's actual earnings decay going forward if yields continue to flatten. lisa: yes.
typically you get this sort of relationship where, when people start buying government bonds, that typically is indicative of a weaker economy and indicates less confidence elsewhere, so you should have that expressed in we are than expected earnings -- in weaker than expected earnings. you could have the federal reserve taking a more dovish stance and that could turnaround. in europe there is temporary pressure having to do with electric vehicles and other issues. in china, there could be an agreement there. this is less clear than it's been another times. carol: is the yield inversion the result of outside use outside the united states, or because of concerns about the mastic economy -- about the domestic economy? vince: clearly the global economy is slowing. that means bond yields will come
down. but you have the fed funds rate, which the fed elevated for the last year or so, at a level so the short end can only go so far. the fed is the one inverting the yield curve. for all the worries, it is the short rates up. disagree. a minute, i vince: they are the ones who brought short rate ups -- short rates up, and that put us in position for inversion. carol: let's get apple on this tuesday. shares a little higher this morning, up about 1%. the company switching from being hardware to a services company. big bird andopla, oprah yesterday. [laughter] carol: we are seeing some support today, but nonetheless, this is a reminder that companies have got to move to
binning on the market and where the growth is. vince: i can't wait to signed up for jennifer aniston documentaries to come on apple tv. alix: it is a morning show! jason: the advertisement --lisa: the advertisements look very serious, and you can't do a morning show that a serious. honestly, i really feel like there was very little they announced. they didn't give a pricing. short on details. we knew that the newspaper services signed up for this, some of them declined. others omitted major parts of their services in agreeing to sign up for this. there are a lot of questions here whether apple can truly compete with the netflixes of the world with this offering that is supposed to revolutionize their entire business model and move away from iphone sales. vince: what's with the credit card? i thought there was apple pay?
carol: it is connected to apple pay. vince: i didn't know that. lisa: they've got 1.4 billion apple users. that is a huge audience. but to what end? they've been trying to build out the consumer brand. carol: this sort of leads into the whole idea of consumer lending. i don't know if that is necessarily an apple consumer. carol: i think for goldman, it is more getting into the mass market and a larger consumer base. this is something goldman has been working on. vince: both they and j.p. morgan, trading isn't cutting it anymore. alix: ok. thanks a lot, guys. really appreciate it. find all the charts we just used and more at gdb go on your on yourt g tv
turn emil. bloomberg -- on your terminal. bloomberg has learned that nissan has paid tuition for all four of carlos ghosn's children when they attended diversity between 2004 and 2015. the perk was part of his employment contract of 1999, when i'm guessing stanford wasn't $80,000. carol: we are saying it is going to be at worst -- going to be worth at least $601,000. if they wanted this executive, this would have been par for the course, especially when you got children and families working overseas. before we start to judge -- alix: i don't know, i've never heard of a company paying for someone's college tuition before. carol: for such a long time, carlos ghosn was the man everyone wanted in the auto industry. i don't know. alix: coming up, parliament takes the brexit wheel. what direction will that steer
♪ carol: british parliament takes the wheel. lawmakers have seized control of the process from prime minister theresa may, but the number of options on the table -- theresa may, with a number of options on the table. now with us is anna edwards. what is the latest from the parliament in the takeover from theresa may? the takeover of sorts at least extends over the next 24 hours or so. parliament succeeded in gaining control of the order papers, the
political agenda, for the next when he four hours. we are going to see these -- the next 24 hours. we are going to see these indicative votes on how to go forward on brexit. each mp gets a ballot paper and gets to mark their favorite options or the options they would tolerate. they might be asked to rank those to try to speed up getting to a place where we have a better understanding of what mp's will actually vote for. that doesn't necessarily mean that will come to pass. this is important because theresa may and the executives have suggested they don't have to take orders from parliament. this pointt able at to say yes, we will enact. they feel that would be full hardy to do so. you can't commit to something you don't know what it is going to be. this is a process that is going to unfold, and at least it will tell us a little more about what mp's will support, even if it
doesn't come to be the plan that passes. alix: where does this lined up -- where does this wind up leaving theresa may and her third meaningful vote? anna: she said yesterday she won't bring it today because she doesn't have the support, but crucially, she could still bring it. that is why i slightly downplay the line that parliament has taken back control because we could see theresa may trying to bring her meaningful vote number three later this week. there have already been signs the threat of a softer brexit crafted by parliament or chaos in the commons has already been successor really -- already been successfully persuading jacob down from hisack position. it has brought at least some of those brexiteers who refused to , whichy before on board may make it slightly easier for her to get support from her deal. that said, the more she risks
losing support from the other side of the party because if they can see a way forward away from the prime minister's deal crafted by parliament, then they may be tempted not to grab back theresa may a third time around. once again she is walking that tightrope within her own party. carol: very tricky. what about the issue over the irish border? is that really the only thing holding up brexit, or is it several other issues? anna: there are a whole host of other issues. this is one a lot of the talk is focused on. if the dup, the northern irish party comes on board. they don't like the backstop. alix: thank you for joining us. , a global from london
investment strategist. do you play on this? guest: i think it is difficult to say. it seems most likely at this stage that parliament is going to struggle to come under consensus for any other strategy, which almost brings --'s back onto the table brings may's withdrawal deal back onto the table. carol: it is interesting when you look at how this process continues to drag on. they length of it at this point, it doesn't matter if it gets wrapped up in a couple of weeks or if it goes on another year or so. guest: i think it is indicative of where things are going, where people want things to go. i think that is for it to be cleared up as soon as possible because that uncertainty has been weighing on the u.k. economy. you've been seeing that with the figures coming out in the number
of confidence data over the last couple of months. the idea is we don't want to know deal brexit, but we wanted to be cleared up as soon as possible with some kind of deal, be that theresa may's deal or maybe something slightly different. alix: i want to pit it --carol: i want to pivot and talk about some big net has been a focus for global investors. is downplaying the inverted yield curve. that shows you where we had recessions going back to the 1970's. the purple lines show the proportion of the curve inverted. as of late, right now it is not as high of we've seen in recessions of past. do you agree they make a good argument here? guest: i think they do make a good argument. there's actually a whole host of reason to not get too worried about the inversion. there is a signal we need to be
confident of, but we also need to see it inverted for a longer time. need a deeper inversion than what we've been seeing, and maybe spread across several cuts. this is not just concern about the u.s. economy, but is more reflective concerns outside the u.s. with regard to their hiking cycle being paused and maybe even cutting come of were itponses to that signal that is coming. none of this to me suggests recession should be a key concern in the way you would be pricing in the last few days. shah will be sticking with us. pivot up, more on apple's into a service company.
♪ carol: apple announcing a slew of new digital service at a star-studded event yesterday at their headquarters. joining us is bloomberg's taylor riggs. we've seen the stock move a little higher this morning. taylor: apple has increasingly been trying to go into the service businesses, now at about 15% of their total revenue, or $40 billion. in the last five years there's been an increase from only one of the fourth-largest conservatives of revenue at only 10% of the total. new gamingced a and service video, along with a credit card. take2 and activision actually
ended higher after the announcements were slight on details. gaming is one of the negative reactions we are getting from this stream. that.i. analysts saying the games obstruction service is likely to have appeal for most mobile gamers, and lacks must have exclusive content. within video streaming, also getting other reaction from analysts. in order to move the needle, they need a business the size of netflix. wells fargo saying they are left with more questions than answers. chatham road saying it is not going to be a netflix killer. goldman sachs saying it is unlikely to have a maternal -- to have a material impact come up with the exception of apple arcade. falling below the key to hundred day moving average in my
terminal, but again, up about 1% this morning. still have to see if that support level holds in. more, with us is seema shah of principal investors. what did you think of the announcement? >> it had a little bit for the bulls and a little bit for the bears. on the bear side, there is a lot of breadth, but not much depth. i think there's some issues on the pricing and what is going to happen. what is most important is you step back and say this has to be the long game. apple is not in a to try to make this quarter or this year. it is in it for the long game. long in'm curious, how an environment where investors can be a little bit impatient?
apple is one of your largest holdings. mark: i think the strategy is a good one. i don't think anyone on the sell side would argue with the strategy. just how long is it going to take to execute? if they gave us and if of a clue yesterday that the strategy remains good, execution is going to take some time. i think it could take a couple of years before you see meaningful movement in eps because it is a very big company. but from a strategic standpoint, we think a lot of the things are based of the surface. lot. that is a will you want to pick up some shares right now, or just hold on? mark: we are going to hold onto what we have right now. we are a pretty big holder already. but i will tell you, if this more.it, we won't buy
alix: when you say earnings decay, it is really the change in the upgrades versus downgrades. tech has been hurt in that. is that a future warning sign for you? seema: look at the macro backdrop in the way tech has -- it isng with interesting that there's been so much focus on the pricing and the fact that apple hasn't announced the pricing. if you look back to q3 last year, apple got hit partly because of concerns about its selling in china. china will be stabilizing or expanding quite strongly by the end of the year. in that case, maybe it is going to be a buying session, but from
a short-term spect if -- short-term perspective, there's a lot more than just the simple dynamics. alix: thank you so much for joining us. seema shah will be sticking with us. coming up, the single biggest driver of global deals talks real assets and where he sees the most opportunity. that is coming up next. in the market, feels like a risk on kind of day. the question, is it an oversold move?r o a legit the dollar turns lower and yields move higher. this is bloomberg. ♪
automakers seeing their biggest declines since september yesterday, but able to plan their way back -- to climb their way back. xi jinping of china talking about cooperation with the eu. a weaker dollar story. you see the yen really the only one negative against the dollar. the safe haven bid comes off. you had a big buy-in yesterday, now seeing selling. feelmentioned, the risk on accrued. carol: let's get an update on what is making headlines outside the world of business. viviana hurtado is here with first word news. senate majority leader once to put the so-called green new deal to a vote to expose divisions among democrats and force some of the party's leading 2020 presidential candidates to take a stand only better. a vote could come as soon as today.
today in paris, chinese president xi jinping meeting with french counterpart emmanuel macron, german chancellor angela merkel, and european council president jean-claude juncker, saying china and the eu need to build post strategic confidence by modernizing multilateral trade. israel carrying out dozens of instant -- dozens of airstrikes across the gaza strip. this is the latest violence which begin with mondays rocket attack. it struck i home in central israel two weeks ahead of the -- it struck ans home in central israel two weeks at of the israeli elections. i'm viviana hurtado. this is bloomberg. alix: duke energy is one of the
united states, and is starting to work on mitigating climate changes after three big hurricanes hit operations around both carolina and south carolina this past year. i spoke to the chairman and ceo about the company's investment in the grid, and how to pr event climate change. >> my heart goes out to the communities that have been impacted. in the southeast we have been impacted more by hurricanes. a wildfire risk is not front and center for us. with think about that risk is something we have to manage well. we continue to invest in our grade for hardening and resiliency, and of course, having a response. i think that at a patient is going to be really important if we continue to work through what the weather. alix: what about technical things like more sea walls or something like that, that you now have to start investing?
>> i think adaptation is a key part of that. talking about targeted underground sensors, self-healing techniques that , things that can withstand more hurricane force winds, moving transformers away from floodplains or areas that afternoon floodplains. all of those things are being abouted, and we think california and florida talking about refocusing as part of the element. alix: part of the conversation was baby we can go ahead and build power lines under the ground -- was maybe we can go ahead and build power lines underground. what does the grid look like for you? alix: it is going to be some of all of those things. there's not one silver bullet .olution to this
we also think investment for hardening and resiliency, moving away from floodplains, putting up structures that are more able to withstand hurricane force winds. it will be a little bit of all those things. it was interesting, during hurricane florence you had what had happened from hurricane matthew. which areas were vulnerable? where have the floodwaters gone? what should we expect? alix: that was duke energy's ceo. yourwards, i was like yeah, have to pay for it, though. all of that cost a lot of money. about if you are think utilities generally, it is interesting is a how much they are allocating. alix: and she said if you need to spend it, you spend it. manages $40st
billion in equities and assets at blackrock. what did you think of that? guest: i think she is dealing with the realities of a real asset owner in the 21st century. fundamentally climate change is as investors for 30 and 40 years, we have to consider that risk factor as a material exposure for our assets. what you are seeing is the complexity of it. clearly we have capital available for a very modest return. [laughter] >> but the reality is that has lives.rn in dollars and it is not a question. of the cost being born it is a question of -- question of the
cost being born. it is a question of who should share the price. facing with climate change, it just gets costlier and costlier, so we have to talk about who is paying for it. where do you ultimately see the money coming from? will it be a common nation of public and private? is it being put to work? jim: it is, but when that is put to work, somebody has to pay for that capital investment infrastructure. it is through you were through tax for structure. that is where it gets complex areuse all of those problematic. alix: a lot of funds have raised their own area for infrastructure funds. then you also have low yields
again, which is going to really increase the competition for these kind of projects and capital. jim: i think we are seeing a trend that has been substantial, that aggregation or accumulation of capital has led to more competition, particularly at the low risk end of the spectrum. so if you've got a mature asset in a developed country, there's going to be a lot of competition. what we are seeing in this point of the cycle is a real premium on this. the challenge isn't that someone is there who is willing to take a lower caste. challenge is that their underlying standards are weaker, --the carol: where is it that investors are finding the best return? jim: it is where there's a little bit more complexity. where there's construction risk,
where there's operating complexity. but i do think where there's more going on with the asset that requires expertise, i think that is where you are seeing better relatives. it would mean taking the power energy centerhis and takingania, risks in new window and solar. alix: wind you take on too much political risk, and when you take on the right kind of risk? upgrading wind and solar and having backups seems like a good idea. there is the developer and risk. there's no control over that risk. it is tied to politics, legal challenges, et cetera.
it is very uncertain time frames and costs. it turns to strategic's to take on that exposure. i do think that where the capital comes in is where the risk compartment is. it is something you can put your hands around, you can have the expertise to manage that exposure and look for that premium return for taking that. carol: what is the interest in natural activity you're seeing when it comes to the -- the actual activity you're seeing when it comes to this? jim: it is an increasing factor in our industry. there are two elements to it. yhe first is our universit is responding to our risk factors.
5% of the institutions at rdh. today was our renewable power fund in the market at the they have is like gone farther in these stakeholder institutions are demanding more of the boards and the return teams are looking for that vacation. alix: can you find those specific properties, though? jim: it's tough, but it's not esg.there's a wind farm is any real estate asset you look at, esg can apply factors and -- amented accordingly
playing policies around governance. it's a whole range of factors you look to apply to your assets. alix: such a pleasure. always good to catch up with you. us. back and see climate change is becoming more and more relevant to central bankers. according to federal reserve bank of san francisco reports, they say it could affect the economy through elevating credit spreads come up greater precautionary saving, and an extreme financial crisis. joining us is see bashar -- is seema shah of principal global investors. what is the global fallout from that? seema: you kind of referred to it before. how do they respond to it? when we are looking at a global growth slow down, it is probably one of the factors in which it is ultimately going to fall
behind. when we think about what is going to be the next financial crisis, probably the environmental side isn't the first that comes to mind, but over a longer time period is becoming more important. carol: there's costs going into stop or slow climate change at the front end, but the back end, if we don't do it there are incredible costs, economic, corporate. when do we start to kind of a line are thinking that it is better to get ahead of this. seema: i think most people would agree. you need politicians that believe in climate change who therefore then believe their priorities. if you are going into a global , these are then things that tend to take priority.
is "bloomberg daybreak." the head of one of japan's largest lenders isn't overly concerned with the inversion of the yield curve. exclusive, he says the federal reserve shifted gears to soon. he added the fed would have had more ammunition to coverage in waited more.'d had uber confirmed it is buying fori-based rival careem $3.1 billion. the deal will be uber's priciest
ever. a ruling keeps president trump from blocking critics on twitter. --ederal judge recently previously he couldn't because -- attorney esther --alix: journalist, we confront how to buy things online. you're a journalist. you are allowed to have opinions on twitter. tool: but we are allowed block people who get a little crazy. but trump, we want to see with the president does. the idea is they are pushing back and saying it is a public forum. point.hat is a good
we turned out to wall street beat to cover three things this morning. first up, carlos ghosn, nissan said to of paid tuition for all four of his children to attend stanford university. then, extorting nike, don't do it. lawyer michael avenatti has been charged for embezzling money from a client and defrauding a bank. enactment -- and --ouncements that carol: let's talk about carlos ghosn. this is what everyone is reading about on the terminal. [indiscernible] [laughter] my cohost onkelly, bloomberg radio. this is an exclusive. let's talk about it. jason: stanford, four as his kids went there, and apparently
nissan paid for them to go. as a highly unusual perk. now, we should be fair. a lot of executives include reimbursement for secondary school, high school. anybody we know who's been a banker who lived overseas in china or london, that's part of the deal. this isn't a case of nissan paying the school for the kids to get in. that is different. alix looked at me like i was crazy. [laughter] carol: employment contracts can be a little crazy, like jason says he only likes green m&ms in his dressing room. jason: it makes me feel healthy. [laughter] he doesn't have a dressing room, by the way. part of this, obviously,
is the narrative of ghosn. charged on claims of nike extortion and theft. this could not have gotten any uglier in the last 12 hours. jason: this was one of the most bizarre things we've seen. you had these consecutive tweets where aven body says coming up -- where michael avenatti says big press conference. i'm going to blow the lid off a big scandal. 40 minutes later, the u.s. district attorney in new york says we have arrested michael avenatti for attending to extort nike. carol: he says i never attended to extort nike. well, what did you want to do? jason: more to come on that for sure. of course, avenatti is a big
enemy of the trump administration, and donald trump specifically taylor: he represents -- specifically. he represents stormy daniels. this is a guy who is well known, and donald trump jr. was tweeting about this as well. carol: apple already wanting to make a movie. alix: it does see he had information about nike funneling money through best about players. we don't even know if that isn't necessarily true. jason: that is the other piece of this. there is an ongoing scandal related to another college scandal, not the one we've been talking about. carol: billionaire bill ackman has a new structure, and apparently it is working for him. jason: it appears to be. obviously the last couple of years have been up-and-down when it comes to pershing square, for sure. that did not go the way he thought they might. .aa being another
alix: here's a strategy, just stop talking to the media. [laughter] jason: and maybe focus a little bit on march madness. carol: let's talk about march madness. it is part of this wonderful charity we do at bloomberg. anderson is in the lead as we go into the sweet sixteen. gary cohn is a past winner. he is in second place. there.ht up alam.a dedicated uva -- uva alum. a lot of folks have duke, right? jason: $250,000 goes to the
♪ carol: i grew up in new jersey. anyway, like many states on the northeast, they've been trying to legalize marijuana. everyone is looking at a new, big market, and thinking about tax revenue. new jersey tried to put it through in terms of their legislature, and didn't have enough votes to get it through, so the mayor -- rather, the governor, said this is something
they wanted to do, but they may have to give up on it for 2019 because they've got budget negotiations to go through. what is interesting is we been seeing the northeast looking to really go all in. we seen it out on the west coast. the northeast kind of slowing down. new york having trouble getting it through. an industry with about 5 billion in revenues by 2020. sachs'sming up, goldman head of earnings research will be with us. peak oil demand along with slowing growth. we will get the fresh takes. this is bloomberg. ♪
brexit. alternative measures are on the table, from a second referendum to canceling brexit. crude sees demand plant coming in 2025. we speak to jeff curry chemical and sex's head of commodity -- jeff curry, goldman sachs's head of commodity research. apple announces a credit card tied to apple pay. we speak to mastercard of america. welcome to "bloomberg daybreak." i'm alix steel, alongside carol massar. good to see you. bearently if i'm going to taking a cab in midtown, it is going to be good. viviana: new york might be the first --carol: new york state might be the first across the country to impact congestion pricing to improve the subway system.
it looks like they are moving forward. alix: they reached consensus monday. i want to point out two things. one, how do they get around manhattan? two, if you think i will take the train and not a cab, you've got to fix it first. ix.25 minutes delays on the s carol: i hear you, but they are trying to get rid of the traffic. alix: the question for the markets, is this an oversold balance, or is it actually a risk on rally that is sustainable? you have a mixed dollar, as in the futures higher, yields higher as well. were buying stocks, selling bonds, buying commodities. how long will that optimism last for? alix: kind of an interesting -- carol: kind of an interesting time when it comes to financial markets. let's get to your morning brief. we will get tilting permits data
for the month of february. --10:00, we see the confid the consumer confidence. at 3:00 p.m. eastern, san francisco's fed president will be speaking at the commonwealth club in san francisco about managing inflation. alix:. parliament takes the wheel lawmakers -- parliament takes the wheel. lawmakers seize control of the brexit process from prime minister theresa may. joining us with more from my spinster -- from westminster is anna edwards. what happens in the next two hours? anna: the next 24 hours sees indicative votes on brexit, for what mps want to happen, on which they indicate path forward
for brexit they could possibly support, they would like to see or could hold the nose and vote for. maybe they will be asked to rank their choices. some of the choices every new and still being crafted. once that process takes place, -- the eu's monday may get aheresa may vote. we could get more clues as to where brexit goes next, or they could be used as a way to try and galvanize support for theresa may's deal. remember that meaningful vote number three could still happen, but it would be very difficult to get it passed. alix: oh good, more uncertainty. [laughter] alix: thank you.
when you talk to any central banker or economist, they highlight risk. joining us is stephanie flanders , and here in new york is jeff curry. goldman sachs expense global growth to drop in the first quarter. walk me through what green shoots in your world you see that gives you confidence on global growth. oil, you look at energy, you say peak demand. anything oil right now in the u.s. has moved above the previous peak levels. we look at oil demand even in europe, hanging in there. if i look at the world through the lens of commodity demand, it doesn't look that bad. china, it demand in is flat year over for year. the world doesn't look great, but it doesn't look like it is falling apart. carol: i've got a chart here that takes a look at global pmi numbers, specifically looking at
the euro zone, your white line. the yellow line is german manufacturing. the redline is china manufacturing, and the purple line is u.s. manufacturing. you can see how it is all pulled back here. when you say what you are seeing in terms of some of the commodity demand, how do you reconcile those? >> let's take germany. if you look at the hard data, exports out of germany are a-ok. what's going on is there's an inventory cycle. there are concerns about brexit. one thing that is not highlighted is levels were low from the drought last year, so you couldn't get activity into germany. we see it in oil. things like diesel and distillates are stocks tremendously. alix: that is the glass half-full. stephanie, you have a half-empty
view? >> economists are also expecting things to pick up in the second half of the year, the darkest time before dawn, if you will. i thing we can see some of these underlying forces. if we just look at europe causing all of that concern last week, it is very much the lack of momentum that is the concern for manufacturing side, crucial for germany in the short term. if you look at the underlying sources for consumer spending and growth in the euro zone economy, it is looking pretty solid. there's no reason even in the fridge dated today. the little bit of negativity i would throw in there is that we have wide understanding in the markets that, if anything does nowrong, the authorities have limited scope to maneuver. that is particularly the case in europe. the risk is we are going to face in the next year or two,
whenever you get doubts about the global environment, there is that risk that it becomes a self fulfilling prophecy because people in the markets start to , and you could be in trouble. carol: jef, how concerned are you that there is not enough dry powder should the european need to do something? jeff: when you look at the engines of growth, it is really the u.s. and china. in terms of ticking about what happened in january, the chinese demonstrated they are willing to pull out the stops with that credit number. you've taken the tail risk out of china, and also here in the u.s. the data is not that bad, and the fed has a dovish tool now. you put it altogether, i would look at the hard data versus the pmi's. markets are doing this. carol: but they do move
financial markets. that weighs on sentiment, right? two ways,e's only through new plant investment or buying durables like houses and cars. , soon't do any of the above that is starting to be cut off. alix: stephanie, come inside the bloomberg. 10, andoking at the two, 30 year bond yields. surprisean upside lower that would yield than we think? back aie: i would go little bit to that question of underlying momentum here. it is not that we are seeing a bid risk in the short-term, but
if you think about what is going to drive the next stage of the cycle, that is where the marks come. the u.s. particularly could continue to see that earnings squeeze, but also crucially increasing wage costs, and able -- and unable to pass on those returns. we don't know whether or not that could end up reducing the momentum in the economy. i certainly take the point from jeff. china is crucial. we will probably see more and more positive data in the next six months, but that underlying drive for recovery, i still question that. alix: does that keep you neutral on commodities? what would make you positive? jeff: you need to have tail risk to the upside. the problem is you don't have strong enough demand to create real tight markets. copper is one of our favorite
ick -- one of our favorite picks. right now you have tightness in oil that will last until those new pipes come online in the u.s.. after that you are dealing with excess capacity. that is the problem commodities space. alix: stephanie flanders of bloomberg economic, thank you so much. jeff currie of goldman sachs will stick with us. this is bloomberg. ♪
management will invest nearly $550 million in canadian power producer trans alta. the deal allows brookfield to convert investment into equity interest in trendsa -- in transalta assets in the future. duke energy is looking for new ways to deliver power to its customers. the ceo has ideas to create value and opportunity for shareholders. lynn good speaking at the energy finance summit in new york. >> the pace of innovation is just accelerating. i thing about renewables, about battery technology, even great investment. things like new sources of energy. 1/3 natural gas, 1/3 nuclear, and about 1/3 renewables. alix: do you have a favorite
renewable? >> it is all about solar in the midwest. we will have opportunities for wind generation. over time, offshore wind will become more attractive for coastal areas. says the company works with a variety of utilities across the u.s. to arel customers who interested in renewable solutions. alix: thank you. while leaders of the world's biggest commodity trading houses are in switzerland, some interesting calls coming out. viol sees oil-- trading in the $60 range. of goldman sachs is still with us. what is your possibility in
terms of the range and how that plays out in your supply and demand. jeff: do you like this market today? it is tight. the physical market has to drive the paper market. david branch drove paper print higher. you have a really tight market today, but you have that capacity coming out of the permian going into 2020. this is an ideal environment for investors, at least for oil. the carry along right now is about 8%. alix: there is some question wheng out, the dynamic of you have technical concerns and considerations, and the permian could prevent that huge supply coming online. there are issues building b pipeline. to yours that factor in call? came inoductivity gains
fields and the just ticks. growth is coming -- and logistics. growth is coming out of chevron and exxon. they raised their outlook profile to one million barrels a year. so it will get built. we will see that type of growth going forward. do you have capacity coming on, core opec has got to exit the current cuts. when you look at 2020 and beyond, you've got a lot of pressure. if you think this market is kind of like the 1990's, we stayed backwards. you always had a tight, prompt market. chart thateat reminds us all of the impact shale has had. what kind of visibility do you have? jeff: over the next couple of years, you are really range
bound. if the low end of something bad happens, you probably go down to 45 or 50. if you get really tight last year -- tight like last year, it could go up to the $70 to $80 range. investment is down. alix and i were talking before the show about big oil becoming a --energy because of de-c because of de-carbonization. if you look out five or six years, you start to see a shortage due to the investment. i like to be careful about calling those big structural bull markets. people were talking about it in 1995. it didn't happen until 2004. alix: what is your prediction for the back half? opec delayed their decision until june. what is your base case? tof: we go back to $60, up
$70. balancedet will be most likely by the end of april, early may. they will have to start talking about exit strategies, and they want to because they want to keep that backhand low. it reduces the ability to hedge. viviana: what do you see as the impact -- carol: what do you see as the impact on the renewables market? jeff: if anything at this point, it is a race to the bottom between gas and renewables in terms of the underlying cost. , the japanesem korean marker, trading right now. we have too much gas and too much renewables right now. alix: the key to the back half of the year in your call has to
do with what is going to happen to iran, i'm sure. exports really diving after those sanctions. how do you factor that your balance call -- that into your balance call? jeff: let's look at north korea, iran, and venezuela. which of those three current and ministrations has the best chances of forcing regime change -- current administrations has the best chances of forcing regime change? venezuela. change, places like japan are already cutting off their imports. we are comfortable with that 300,000 number. we think the administration is going to focus on venezuela. carol: thank you so much, jeff currie of goldman sachs. coming up, a fresh blow to boeing. aval airbus just clenched
alix: time now for bottom line. first up, i'm watching apple. the take away after the service's announcement yesterday is investors see potential, but just not quite yet. there still remains some questions. citi says it was a boost to every angle of its services, but it won't be a major catalyst because consumers are slow to change their behavior, and they are not like the first movers anymore. carol: and you are just adding another thing to the list of things you are watching, another streaming service. let's talk about samsung. they came out with a rare profit warning that definitely surprised investors, although it didn't rile them too much this morning. they said first quarter results will fall short of estimates as prices for memory chips and displays slid more than
expected. they are talking specifically about slower orders from data center owners like amazon and alphabet's google. alix: we are also looking at boeing and airbus. airbus secured a $35 billion deal with china. joining us from bloomberg opinion, brooke sutherland. it wasn't just that, but also macron hinted they could be in for an airbus order as well. >> the interesting thing is this airbus order has been floating around for the better part of a year. originally it was supposed to be an $18 billion order. it cut airbus off guard and they were like, wait, what now? this has been an on-again, off-again talk. it is really interesting, the timing of this coming to fruition at a time when the boeing 737 max 8 is grounded in china -- is grounded, and china
led the way on that grounding. it is considering dropping the 737 max 8 from that list of goods. it is hard not to read this as some sort of slight on boeing, or at least an attempt to send a message of sorts as far as trade conversations go. carol: i thought boeing was getting close to a software fix. brooke: they are still in the process of working on this. it still needs to be certified by regulators around the world. the faa is close to certifying come about regulators in europe and canada are going to be a different story and want to take a more stringent look at this. carol: you follow these big industrial companies. these companies have severe problems. what is the likelihood for boeing's recovery, especially when you have other countries placing orders with airbus?
brooke: i think boeing is a bit of a different story from ge. boeing has a very strong backlog. it has a lot of cash generation. i think this is definitely a problem for boeing, and they are going to take some losses in the short run from the grounding of these planes and maybe miss some deliveries, but perhaps these were overbought in the first place. if you see the ones rethinking their orders, it has been lion air and places that were maybe thinking ahead of themselves. plane,and if you get a you get a boeing or airbus, right? brooke: you don't really have any other options. alix: michael, your thoughts on boeing? michael: this is a great american company that has huge impact on the american economy. i guarantee they have 10,000 people working on this problem. it is not like they are sitting there throwing their hands up
and they don't know what to do. they have the smartest people in the world working on this problem. when i look at great american companies, i want to own them because great american companies find ways to solve problems. alix: i love his enthusiasm. [laughter] alix: always a pleasure. thanks a lot. coming up, minutes away from the latest read on housing and potential warning signs flashing from the bond market. confusion. doesn't mean we will see wicker earnings, or does the yield curve signal a whole that of nothing -- weaker earnings, or does the yield curve signal a whole lot of nothing? this is bloomberg. ♪
the dollar is next. euro-dollar at the lowest level in a week. you have the dollar-yen on the upside. the yen coming up on the safe haven bid. increasing attach, 16 basis points. crude is also part of the risk on rally. 8.7%, muchrts down worse than estimated. january revised lower as well to 11%. permits also disappointing, down 1.6%. january revised down as well. both indicators not looking that great. carol: that is significant. the question will be is the case there is not supply, you would assume there would be more demand to build it. i'm just looking at the treasuries. i am not seeing much of a reaction.
we will see how that plays out on the equity side of things in terms of the housing stocks. alix: they had a huge rally so it will come off of that. michael, how do you see these numbers? q1hael: every time i talking i sit around and say why's it so slow? why is the data so slow in q1? 12 months we will be saying q1 is so slow. we have residual seasonality with economic data and you can see it in housing, and some of the retail sales numbers. q1 is slow and we are still grappling with that like we do almost every year. carol: new home groundbreaking falling by the most in eight months when it comes to single-family homes. is it a case that consumers are worried at this point? michael: i think you have some
kind of aftershocks from the december selloff. you get this negative shock to consumers and that echoes through the month. housing in general the start of the year, you get seasonal slowness, worries about the economy, worries about the stock market and we are still dealing with the ripples through the economy. alix: in china you have the new year and china has become more important to the global economy. this time is different because the yield curve has flattened. how do you look at it? is it a material thing nor is it not? michael: i've been told the bond market is super savvy, and us equity guys are just playing with trucks -- with toy trucks in a dirt box. the yield curve is expressing slower growth. there is obviously impact from abroad. have the world's date of yield. there is impact from them on our market.
look at credit. l q d, hyg are at their high. was the yield curve worried about that credit is not worried about? i think it is slow growth and right now is not some imminent recession indicator. alix: to that point, there was a great chart from a bloomberg opinion columnist. take a look at the yield curve versus upgrades and downgrades from the s&p. what he found as they wind up tracking each other. as yield curves flattened, you will see more downgrades to earnings that upgrades. in that respect, the bond market will forecast -- what you think about that? michael: that is absolutely right. people will be looking at growth stocks again. tech stocks. growth will reprice for a much slower pace. 70 pieces to these puzzles. yield curve, jobs data.
i do not think the old curve is the magic bullet. i think it could shape up to be better. a good points because i wonder about folks getting pessimistic, bringing down their expectations about growth and corporate earnings. good would be setting up for a surprise in the second half of 2019? michael: first-quarter earnings grow. what if they grow? what of the worst of the growth declines are behind us? could set up at her. carol: what do you like? tohael: if we are going price in slow growth i think you have to go back to steady revenue, people with subscription models, the tech names. you have to cycle away from the industrials which of had a great run and look at the recurring revenue companies where they have a steady flow of revenue. those will start to become more popular until growth rebounds. alix: thanks very much.
the building permits for housing starts for february missing expectations and january revised lower. this, next a look at capital flows to emerging markets turning positive in january for the first time since july. joining us is damian sassower, bloomberg intelligence credit .trategist welcome, everybody. damian, talk about the emerging markets. guy,n: i'm a fixed income but the key in does not play with tonka trucks. if you look at what is going on,
we are talking about the inclusion of china a shares into the index. but china% free flow will rise and take 20% of that index to 40%, taking agent 80%. carol: what is it take to get there? transparency, comfort level. of the liberalization economy, allowing investors to come in and move their dollars more freely. that is the key. timell take time, but in china will be a big player within the global emerging market. alix: when you take a look at what we have seen in the zoo the yield curve comes down, what is that good for? >> we think this opportunity in china is exciting. it is a historic opportunity. china represents a little under one third of the benchmark. this new market, the onshore market is vast in opportunity.
it was included in the index last year at negligible weight, just under 1% yes the onshore market is approximately as large as the u.s. market. the second largest economy in the world, the second largest stock market and it is barely represented in the index. we think it will go up to half of index weight. we see this strategic for asset allocation opportunities. carol: you both keep think over time. what kind of timing are we talk about? damian: you will see saudi arabia and argentina added to , you might see taiwan and south korea moved to developing markets. a lot of moving parts the a-shares -- china the consumer sector in china,
which is a big theme, it is barely represented in the index. get a-shares, you will lot more consumer names in the index that will help round things out. asha: i agree. in terms of china -- in terms of timeline, china is going in with more and more weight every year. the a share market is going to quadruple in 2019. we think it will go up at a similar pace going forward, a three to five-year opportunity. there will be this wall of capital as passive investors need to allocate for china. active investors will find this market attractive. you have 3500 stocks and incredible opportunity for a systematic approach to finding stocks with strong fundamentals. alix: the flows we have seen are just starting. we talked yesterday about the flows going into china. we are seeing flows continue
into emerging markets in china. i would expect there is some resolution around trade tariffs and some sort of conclusion about i.t. -- about ip theft and technology. that is the positive momentum the market will need to go forward. nothing to do with the eco-market or trade, this is a fundamental shift. asha: that's right, and there is opportunity to find stocks with strong fundamentals. there is opportunity in industrials, natural resources, and you are targeting the local china opportunity. you are targeting local domestic demand. you can get much further down the spectrum. we do see opportunity and within the stock market. about localou talk domestic demand, what you mean specifically? asha: the consumer sector is one that stands out. some of the largest household name we have never heard of are well represented in the a share
market. in any other market, the conversation is about the of g. what is that -- the conversation is about efg. what does that mean if investors are pushing back against companies and their carbon footprint? asha: it is becoming more important in the investment space and i think it is important lens to lose -- to use when looking at chinese investments. we see it in terms of environmental risk. china is the highest polluter. at the same time it is one of the most regressive markets in targeting emissions -- aggressive markets in targeting emissions. issues areent important lens to use to evaluate security. damian: i'm an avid reader -- just in terms of low volatility investing, the china a share market is unique because it is
detail oriented. there are anomalies that are phased out of the u.s. market that are still present their. -- that are still present there. it is cheaper to hedge your currency in em than in developed markets. there is a lot of opportunity for you to take active approach to emerging-market equities. alix: great stuff. carol: thank you so much. amian sassower and automate -- and asha mehta. viviana hurtado is here with first word news. the white house now wants to declare the entire obamacare unconstitutional. it is a risk ahead of the 2020 election campaign. a complete reversal would eliminate aza subsidies and allow insurers to charge more to people with existing conditions.
facebook says it has removed hundreds of pages connected to iran. the content was meant to impersonate political groups and media organizations in an attempt to influence political thought around the world. it is latest step in the social media companies investigation into unethical behavior on its platform link to iran. new york is poised to become the first city in the united states to introduce congestion pricing. put electronic tolls in place for drivers entering the busiest stretch of manhattan. it is used for repairs to the city's subway system. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. apple attempts, to change the way we use credit cards. we will's to the mastercard
viviana: this is bloomberg daybreak. coming up later on bloomberg ceo.ts, bernard looney, bp i'm viviana hurtado with your bloomberg business flash. mcdonald's is reportedly spending on dynamic yield. it is the largest acquisition in 20 years. dynamic yield is a tech company that will help create personalized menus for mcdonald's customers.
losses are growing in step with sales. the company said it had users paying for shared office space. international growth helping the company double its sales from a year earlier to $1.88 billion. the losses more than doubled. they exceed $1.9 billion. purdue pharma reached a settlement before his trial for opioids in oklahoma. the company is accused of illegally marketing the painkiller. causing financial devastation to local communities. the first in a wave of lawsuits stemming from the u.s. opioid crisis. other companies including johnson & johnson faced similar claims in oklahoma. that is your bloomberg business flash. alix: time for although the lead, a deep dive into stories making headlines and moving markets. today we will take a look at
payments following apples reveal of its new product. taylor rates market reaction to the applecart. taylor: we know it will be called the apple card and customers will get 2% cash back on purchases through apple pay, 3% on purchases through the app store. 13% to 24% apr bring and there will be no annual, late, or foreign transaction fees. they will partner with mastercard for the payment network and partner with goldman sachs. we are getting reaction. our fin tech analyst says it is unlikely to the disrupt the u.s. credit card market because the features are similar to other credit cards like chase. apple is banking on using machine learning to make it easier to understand where you are spending your money and how to understand the bank statement better. payifer bailey at apple says they have restocked the credit card. alix: thank you very much.
carol: joining us is craig vosburg, mastercard president of north america. mastercard partnering with apple. mobile payment services have not taken over that much. less than 1% of the global payment services industry in the united states. how is apple going to make a bigger difference? craig: this is a continuation of a trend in the digitization of payments, an important trend in how consumers interact with the world around them. we has something mastercard have been investing in to ensure our technology is equipped to meet the needs of consumers, when and how and where they want to pay. today mobile payments is a small percentage of overall payments, but certainly you look at the amount of engagement we as consumers have with mobile devices. the prospect of that increasing over time as contactless
payments become more important, we would expect those trends to increase and we will be prepared to support that. alix: how did you win the contract? craig: as is the case, it is competitive, but we've been working with apple for many years. we were one of the first partners to be working with them on apple pay. we developed technology that was important in supporting the launch of apple pay. mastercard's tokenization capability, which is the ability to take that 16 digit number on your card and translate that into a scrambled number that cannot be hacked or dakota door broken in the event it is compromised or stolen. that was an important fundamental technology in enabling apple pay and that is a fundamental technology in the new apple card. is that a trend you think
will become more pervasive? no number on the card? craig: it could. we want security to be at the highest level possible. reduce friction and make payments convenient for consumers. it is a digital first card. historically we has consumers would get a physical card first and then when you use it online you translate it to a digital -- you might type in the credentials or get a token pushed into a device. this is digital first. the token because of your phone and the information needed to transact online or using the device on a contactless basement is ready to go. alix: how many new customers due to like this could give exposure to that you otherwise would not get? what is the upside? craig: we work with many partners across the ecosystem. we work with financial institutions and other partners
who are organizations that have affinities with large consumer bases. apple and goldman sachs are iconic rands that have large following. apple in the consumer space, goldman sachs newer in the consumer credit space, but to be associated with apples brandon be a part of the payment ecosystem will be a great opportunity for us to get exposure to more consumers. carol: is there something about apple specifically you think is going to jumpstart a lot of consumers -- in china, everything is done on your mobile phone. different here in the united states. is there something about the apple brand that you think will jumpstart a lot of americans to start paying digitally. craig: consistent with those trends we see in terms of digital engagement and usage, there is a segment of consumers who are deeply engaged with the apple ecosystem. 1.4 billion active users.
craig: the way this card, with how mastercard is enabling the credentials to be tokenized and pushed into the phone after the application is submitted to goldman sachs and approved, those payment credentials we are pushing the phone. they can put in that secure element instantaneously. that is going to be of great benefit to people who have that affinity for the apple ecosystem and apple devices. we know there are a lot of people who are engaged heavily with that brand and those devices. we feel like that is good place for us to be, along with many others where we are looking to your products in the hands of consumers who use them the way they like to use them. alix: craig vosburg, mastercard president. thanks for coming. coming up, energy's transition. my conversation from the summit in new york. alternative energy, carbon emissions.
alix: here is what i am watching . i will be heading over to the bloomberg summit in new york city. it is their huge yearly summit about reducing carbon emissions. big-name companies and investors. i will be talking to prominent individuals. one is bernard looney, as well as make gentle -- as well as meg gentle. import u.s.nts to national gas. the rumor is saudi arabia could be buying a stake. carol: other trends you see overall? alix: everyone wants to be in alternative energy guy. even if you're in oil guy, you want to be front and center with new energies and save can reduce carbon emissions. carol: back to our conversation about climate change and the impact it is having.
you have the san francisco fed worrying he could impact the global economy. we already seeing you in terms of increased costs for companies and sing -- and cities. alix: for lng, we know we need the export facilities, but how we get them built and what the cost is. then your customer i will sign you up for the lowest possible cost to bring you to me, but i still need to build the business. carol: you have to make bets. alix: i'm excited. thank you, carol. a pleasure to have you here. coming up on bloomberg markets -- the open with jonathan ferro, a pimco global economic advisor. this is bloomberg. ♪
inching higher. strategists downplay the bond market price action. apple's expansion beyond hardware underwhelming. lack of details testing investor patience. parliament seeking control of the brexit procedure. 30 minutes away from the opening bell. good morning. here's your tuesday price action. futures falling on the s&p 500. the euro softer. treasuries a little softer. yields up for basis points to 2.44% on the u.s. can you -- u.s. 10 year. lining up to downplay the significance of curve inversion. >> it is just a data point. >> i would not get obsessed. >> it is morant an amber alert signal rather than an alarm signal. >> if you look at the