francine: sterling suffers its biggest fall since 2010. battle begins. cameron makes his case to stay in the eu. the largest bank posts a fourth quarter loss primarily due to bad loans to energy companies. , i would notlondon have predicted that. tom: when you were gone on your

i want tovacation, learn from you and your guests in this hour what this means. i really don't understand the importance of boris of versus david. francine is going to make me smarter this hour on brexit. we know that it's uncertain. we know there is volatility, but no one knows how it will play out. it's a dangerous game. says a limited cease-fire in syria may be within reach. to suicide bomb attacks killed at least 140 people. islamic state claimed responsibility. the u.s. and russia have agreed on a truce. it would not cover terrorist

groups. the u.s. called up peace talks with north korea after the recent missile test. north korea had demanded that a peace treaty replace the cease fire that ended the war in 1953. the driver blamed for the killing of six people in michigan appears in court today. he will be arraigned for the killing in kalamazoo. passengers inuck between the shootings saturday night. they appear to be random. cruz are thend ted only candidates who can keep donald trump from winning the presidential nomination. in scored a decisive victory south carolina. the results prompted jeb bush to drop out. a new law your for apple warns that a court order to unlock an iphone threatens the privacy of

millions. ted olson says it would open a pandora's box of privacy issues. his wife was killed in the 9/11 attacks. global news 24 hours a day. --have more than 150 meters news bureaus around the world are in -- world. tom: sterling's front and center and we will get to that. francine will give us a briefing. futures are up pagan. the dollar is stronger. oil is churning. i guess that's good. next screen, if you would. the mix closed friday, that's remarkable over what we've seen for the last few weeks. i put up euro sterling so i

could impress francine. brent crude is 33.95. higher yields, but flatter yield curve. under 100 ande is that's a big deal and worth watching as we go to a lot of economic data. i am impressed with your data board. this is my data board. i mark the dollar against the pound. thatn stanley wrote johnson's decision would be key for sterling, given his popularity with the british public. we have very few polls at the moment. we have a great interview with the opec president coming up. the pound is falling. overall, european stocks are void my minors.

i want to show you stocks. dubai stocks are entering a bull market. i know you disagree. low climbed 21% from the they had on january 21. anything above 20% suggests a bull market. tom: maybe. dubai is doing better. oil is finding stability. help me out with this. this is sterling. this is not euro sterling. from 1890 when we started bloomberg on the economy. i put trendline back 30 years. this is one standard deviation. francine, what does weaker sterling mean for british exports? you've got a new bentley. do i need a new bentley with

weaker sterling question mark -- sterling? tom: it helps. tom: we have to stop the show. the storealways go to at the top of harris. you always do that. francine: it does have an impact. pounced ranks was one of the big issues that mark carney was pointing to just a couple of months ago. this helps. it's whether this signifies that the economy is not growing as much. there were a lot of pound bears. it's going lower, whatever happens. lowestuffering its and poor'sce 2010 johnson said he would back brexit. let's bring in jpmorgan chief

strategist. also with us is simon kennedy. thanks for joining us. you been doing a lot of work on brexit. swayunclear to me how much boris johnson has in this. simon: that's probably exaggerated. , he reaches the other parts of the conservatives that they don't reach. he has a populist push and a former journalist, you have two figures in the outcome. before, businesses were reluctant to step up and talk about the outcome. bey worried they would locked together with george galloway. two legitimate

political leaders stepped up and saying we went out. that gives them a lot of cover and potential for a bigger campaign than what david cameron wanted. we have four weeks of campaigning. four months of campaigning. it's unclear how they draw battle lines. it means a lot more volatility on the pound. this will take the biggest plunge. we always expect this is the much more on sterling. it's fairly stable. stephanie: there is no particular funding issue that the government is going to have in response to this i back up what simon says. theou are grappling with impact, it speaks to this broader question of what the question is going to answer your

in they are going to answer the question, do you want to be in the eu? you will only get the answer yes. if they go after the question do you not like elites and establishment politicians and do you prefer people like boris johnson or even donald trump? then it's a more uncertain answer you're going to get. if it catches this anti-mainstream populist agenda, the brexit could do much better. at donaldyou look trump and porous johnson, they say they are acting on principles. they don't need focus groups. hillary clinton and david cameron are traditional politicians who do it by the book. they are the people who are much harder to transmit a political

message. tom: i am fascinated by what happens if we see a 139. what does that signal and who does that signal within the united kingdom? people of united kingdom really care about currency levels? stephanie: it's not something they are monitoring and it's something we talk about psychologically important barriers. that resonates with the public. they will be voting on do you want a stronger or weaker pound. do you want to go back to an old kind of didn't that is not beholden to its european partners and doesn't have all of this regulation? investors, traditionally that has been a key. barrier -- key barrier. tom: we are almost to big figures away from it.

simon kennedy, thank you so much. he is with bloomberg. we will continue with stephanie. in our next hour, we are thrilled bring you sanford bernstein. the rumor is he grades brutally. c's. about quality futures are up 23.

tom: you need a data check to get started on a monday. futures do better than good. up 204 thatare would put the dow at 16,000 562. that is a theme if you will.

inould note curve flattening the united states. that is the back story here as well. let's get to our bloomberg business flash. they are feeling the strain of the global slowdown. managers index for the eurozone has fallen to its lowest level in or the year. oddsew data increases the the pcb will add stimulus. for $107 was just sold million in hong kong. they estimated it might go for me 5% higher. it is in the exclusive neighborhood. housing prices in hong kong have fallen 11% and are expected to drop this year. are being investigated by u.s. regulators for their hiring practices in asia. europe's largest bank says this deals with candidates linked to government officials.

banks are being investigated for hiring candidates with connections in order to generate business. that is your bloomberg is this flash. francine: let's welcome stephen morris. stephanie is still with us. hsbc shares plunged after bad loan charges. what do we think will happen next? we have an idea to their exposure to energy. we expect them to cut costs. there is a lot of speculation among analysts and investors that they might have to cut deeper to handle their return on assets. talking executives are a lot more about the broader environment. they are to get on the economy. if revenue improves this year

and china starts growing again, we could have a good year. if it doesn't, they may have to cut deeper. francine: this is huge bank. do we talk about them splitting? of companies coming out and they had very similar issues. stephen: the number of businesses that hsbc is aroundng, it's somewhere 83 at the moment. they have cut a lot of countries out of it. they are selling a larger unit in brazil. they had to cancel the sale. they are shrinking, do they have to do this deeper? are they able to shift as much as 100 billion in investment as they planned? it was more of a wait-and-see. tom: i understand you are on the restructuring watch. are 87 banks trying to get

this done. let's bring up the chart. we show this a lot. there is the wonder boy. the white line is jamie dimon and jpmorgan. as you know, there are a zillion banks in between here in terms of performance. but me ask you the dumb question of the morning. re there too many banks? stephen: there are too many banks in europe. inmakes most of its profit revenue around asia. we are likely to see some consolidation. that's what i was calling for in the banking sector. tom: with super tuesday coming big to fail bank in the event states can do business across those super tuesday states. that's not true in europe, right? stephen: that's not true.

it can get less true in the future as we deal with the possible exit from the european union when we have the referendum. hsbc is talking about this today. what is the strategy going to be? the have said they would move 1000 acres progress. they would not be able to do business anymore. that could be another force for consolidation in the region. fromine: stepping away these banks, we need to make sure that despite regulations and the concerns of the downsizing that european banks fulfill their first mission, transmitting liquidity to the real economy. chart of: i like the jpmorgan. i endorse everything comes at about jpmorgan. beeninancial sector has the center of one of the negativity in the market.

you have a lot of individual bank issues, whether it's a italian banks or the exposure of certain banks to china or the exposure of other banks to latin america. it's a collection of issues that you add together into this feeling of negativity and worries about whether banks are going to play a big part in the recovery. it does feed into what the central bank might be thinking. we had signals from mario draghi thet efforts to stimulate economy. the initial reaction was we are going to have a further move into negative territory. is that really the right thing to do for sentiments and the wherer economy in a world we are focusing on the downsize of bank strategy? time.n interesting we want to make stupid they their park and we have wanted them to get the forefront of the recovery this year. tom: we are not seen in all. she is with jpmorgan.

she gets to stay around because she likes our charts. give us a call. whenfrancine's speed dial you figure which bank is under next. in our next hour, one of our .ost popular guests we get huge response when he is on. he is been very cautious on growth. he is more optimistic now. he joins us in the next hour. ♪

tom: you need a monday data check. futures are up big. the 10 year is up. sterling is way weaker. crude is turning. i guess that helps out. i would note curve flattening as well as we await a raft of through the week. let's go morning must-read. we go to london to talk about super tuesday. francine: we are truly global. i picked out something from the financial times. he talks about donald trump's takeover gaining pace. edward was talking about a lot

of the establishment continuing to think that mr. trump will prove an exception to the rule he will get the nomination. it. you look at stephanie: how does it affect hillary clinton's chances? it changes day-to-day, but she is looking better than she was a few days ago. if it were a donald trump/hillary clinton paddle, -- more excitedare about her as a mainstream candidate. suggests he iss dealing with the stages of grief. we have not gotten to acceptance. there was an over estimation of these other candidates. there were expectations on wall

street that he would be stronger than he was. francine: there is a bed of indignation -- that of indignation. tom: i think people have moved forward. it lasted about six hours on saturday night. people are looking forward to the global audience. i can't convey the fun of super tuesday. amazing how you've got four key states led by texas. this is a massive geographic span for the two front runners. francine: up next, we are joined by the head of u.k. rates strategy. ♪

tom: good new york morning. the rangers were doing it last night to the red wings as well. a beautiful new york city

morning. it's just getting on in february. that's for me to go right now, london. >> thanks, tom. there may be a limited cease-fire soon in syria. john kerry says the u.s. and russia have tentatively agreed on terms. two suicide bombings over the weekend underscore the problem of having a truce hold in syria. 100 people were killed. isis claims responsibility for both. hong kong group has been arrested in connection with the lunar new year right. he has been charged with inciting others to take part in a riot. toll is rising from that record-breaking cyclone did hit fiji. 18 people were killed. the cyclone tore through fiji with winds reaching 177 miles

power. that is the strongest storm ever in the southern hemisphere. thousands fled to evacuation centers. killinger accused of six people in michigan makes his first appearance in court. jason dalton went on a shooting spree saturday. they call the shootings random. tolary clinton in -- wants increase her edge over bernie sanders. she will win big saturday in the tuesday.olina global news 24 hours a day powered by our 2400 journalists. francine: thank you so much. the pound is suffering its biggest ball since 2010 after boris johnson said he would back britain you -- leaving the eu.

john, welcome to the program. when you look at the brexit, the pound is heading down. it is these expectations since the scottish vote. it's not going to get better. john: not until june the third at some of the way. the middle ofat november, sterling was 7.5% higher than where it is now. most of what's happened since then has been neutral for the u.k. or positive. we would put most of that down to the worries around the referendum. now we know what it is. francine: we were talking before about brexit and we don't

understand what the question will be. voters will answer the question if they want to leave or stay on an emotional level or whether it will be based on facts. we have polls we can trust. stephanie: we are going to have a much narrower vote and people would have predicted. i would push back on the expectations. it will be weaker going in. i wonder if it will bounce back afterwards. there is a risk. the uncertainty will not be resolved. even if we vote to stay in this time, it will be quite close will make it likely that another conservative leader or future prime minister will commit to another referendum. that uncertainty will still be seee in sterling and we can economic reasons for sterling to be weaker. tom: i want to congratulate you on your ubs note.

let's go over to the bloomberg. weighted sterling. this is stronger sterling, weaker sterling, down we go. stephanie worked for all the banks that collapsed. up we go with a modest recovery and then we really rolled over here at 140. is the united kingdom and london and export economy? john: no. it isn't. it hasn't been for a very long time. that's one of the reasons why you hear people saying it's a decision to leave the eu. there is a huge trade deficit. i think this fall in sterling is interesting because of its speed

and because it is not a bad thing in a world of lacking demand and weaken inflationary pressures. accelerates, as we would expect it to, it could become much more problematic. for now, it's a blessing and in some ways positive. tom: can you put a trade in on it now for sterling rebound? wino you have to wait to brexit is plus or minus? john: there is a chance it does not bounce back. that will intensify if the doubts around the referendum lead to a different sentiment and economic activity, which is certainly possible. investors to be defensive and cautious in way to see how things pan out in four

months. stephanie: you talked about how the world had moved in the uk's direction it. i think the lesson of those previous times were you had the big fall in sterling in 2008 and elsewhere, you did not see a big impact on exports because what was going on in the global economy. what's much more valuable is what's going on in the market. the trade deficit hasn't gone anywhere. have this into the egg thing. -- big thing. francine: it may mean that we go back to referendum. trigger a new referendum for scottish independence. could that trigger a new referendum? stephanie: they would like to commit to another referendum. i think the oil price so much

would be much more concerned from a nationalist side of if they would win. there's no point in calling another one if you're not going to win. tom: how will the opposition respond to the slow of the last 24 hours. there is an opposition across the u.k. do they maintain silence? stephanie: you have the unusual dynamic of an anti-populist forces and people have not talked about this unexpected leader is someone who was formerly now staying in the eu. he has been very ambivalent. he may not get the support for staying in from the labor party that you might have had under another kind of leader. things in what themselves might not determine the outcome, but added together

you could get a sharp result. francine: stay with us. coming up, we will speak with a former algerian oil minister. that is at 6:30 a.m. in new york. this is bloomberg "surveillance." ♪

francine: it's cheaper if you want to come on holiday. boris johnson won the uk's most popular politicians. he will campaign for britain to leave the eu in this referendum in june.

tom: this is what we love best about bloomberg "surveillance." they are lining up terrific perspective. asked on sterling in the u.k. economy. looking at a broader strategy for europe as well. the overlay here is negative interest rates. pratt will join us in the next hour. let me go to you. your team at j.p. morgan, the next step is lower rates. is there a so what to that? is it bankers with nothing else better to do? stephanie: the lower bound of interest rates is not zero. that is an interesting thing that we have learned. when talking about the financial response to the japanese move earlier this year has highlighted that it may not

be zero, it's not that far from zero. you get into such complicated dynamics with the banking sector. it is such an important part of this recovery. to systems have your and you try to protect against people hoarding cash, this is not a road you can go very far down. given what we have seen happen to market sentiment, you can do something the european central bank has changed its mind about. and the three months two-year spread as this. it's like a cutesy pie fishhook. we see fairly any curve steeping. aat's it going to take to get steeper yield curve across europe? lead to theoing to view that there are more negative rates ending and stronger data will pick up inflationary pressures and wage

inflation and so on. coming jan the next year or two. we thought we were getting there months ago.. six those expectations have been -- partly because of his happened to the data domestically and the influence of negative rates elsewhere and the differential moves. itncine: when you look negative rates in europe, it seems harder to handle them in japan. we spoke to takeshi fuji maquet. he says this is a mistake because the doj is trapped. is it a mistake? is it harder to get it right? stephanie: they are struggling on the currency and that's such an important part of the strategy. it's hard to judge the japanese

policy apart from this is aonment where there reluctance to believe in higher rates coming around the corner. , that them inlate a difficult position. europe is slower than the u.k. and the u.s. has been faster than japan. they are in a slightly stronger position. they are trapped now. they are trying to keep in a holding position and the power they've looking to get is not happening. francine: what is your take? we are not talking about negative rates in the u.s. john: i still think it's unlikely. as down on the u.s. and its aspects. we don't see much more at 70 four a while. there is no need to cut into negative territory. when you look at the ecb, they are cutting rates to a degree.

that is coming from a lower base. some of the data is significantly better than it was. that's why attempts to weaken negative rates aren't working. there are questions for these banks to address. tom: women very united kingdom centric this hour. kingdom and the united bundled together versus a lot of other currency dynamics around the world. even with weaker sterling, is it really us against them? is it a sectional breakup of currency regions? john: i don't think so. one of the things that has happened is they are beneficiaries of some of the drops in oil and commodity prices over recent months. there is a rebalancing of demand and that is why the dollar and the euro have strengthened.

sterling has its own story. because of the drop in oil prices, he would say that is a supply driven factor. they should be balancing these economies. sense, their fortunes are bound together. tom: this has been very valuable. thank you so much. the -- we only speak to him when pitchers and catchers return. that is next. we will look at the american economy. futures are up 22. this is bloomberg "surveillance." ♪

francine: we need to tell you what we are watching in the coming days. david cameron will appear before the parliament and make his argument against a brexit. the panda's light of the most since 2010 as investors weigh the possibility.

there is a congress in barcelona. , republicans hold their caucuses in nevada where donald trump is continued his -- believed to continue his winning streak. let's get to bloomberg business flash. >> brazil's ptg is selling off a swiss bank. for have agreed to buy it one $3 billion. it is based in zurich. he has denied any wrongdoing. are cutting sales and trading jobs to reduce costs. foreign-exchange has been hard hit. the world's 12 largest banks have cut foreign exchange stocks by 28% since 2010.

a new study slammed hollywood for a lack of diversely. ap, films andhe tv shows by major studios are whitewashed. an epidemic of invisibility for women and minorities. the report comes from the university of southern california. tom: thank you so much. on the foreign exchange issues, pratt will join us from new york university. say legendary with sandra bernstein. legend, we drag out an update on the global economy. i know we are not in recession. directionale on the call of slower gdp. what is the state of the u.s. economy right now? is it a point experiment? >> i wouldn't use those words.

the state of the economy as we continue in a slowdown that is over a year old, we discussed how the manufacturing set her was turning down -- turning down. contracting the last few months. i'd year ago, the size of that downturn in manufacturing made the overall economy outside your window start to decelerate. that made us asked the question , if notg rate hikes now, when it? it's not going to get better than it was back then. people are saying it might have been good to have done it earlier. if you fast forward to last ofmer, the service sector

the u.s. economy began to turn down. he went from manufacturing going down and services rising to both of them lower. tom: the thing that is so important here, you don't do studies the way others do. you work in the same question of is it to america's? is it a bimodal america right now that are economists and our politicians have to deal with? the short answer is yes. we are seeing to america's. we see this slowdown. we see this on a cyclical view. when we look at something like employment, the fed has 49% unemployment. -- 4.9% unemployment. tom: why are we so miserable? this is what i got over the

weekend with a basic summary. he is correct. to thingsbut i listen from here in london, i wonder if you are expecting growth to slow. you are not expected to get better. are you expecting a recession in the u.s. 14 months from now? world trade is not getting better. the u.s. will be affected by weakness worldwide. tom: something is happening to give it broader perspective. every other major economy is slowing. we are all slowing now. themhat unusually, none of are in recession. we look at the indicators to see if there is any sign of an upturn. sign of.s., there is no an upturn it.

that really challenges any central bank. it's very difficult to imagine that there is going to be several rate hikes in a row. , looking at the slowdown and the fact that it wasn't going to turn up, when we contrast that to the fed saying we're going to try to go for four times in 2016 or wall street saying we could see four times, they ran into the economic cycle. francine: are we going into recession? it doesn't work that way in terms of the indicators. looking at them now, looking at the next couple of quarters, we don't see any sign of an upturn. there will be another recession. there is no way around that.

we have had 47. it is not imminent at the moment. there are two scenarios, either a soft landing or a recession. brad will join us in the coming our as well. he links strategy to tactics at banks. that is a nice way to get monday started. futures are up 21. dow futures are up 181. curve flattening. it's a gorgeous new york and you need to stay with us. bloomberg "surveillance." ♪

camera to-sterling --

speak to parliament this morning. arkets churn, and there is curve flattening. in this hour, the clear and present superiority of american banking. trump -- he triumphs. for too many americans, the recession is perhaps permanent. it is "bloomberg surveillance." is washington post birthday. happy birthday, didn't work span. -- i love your briefing in the last hour. if you were to have an american cup of coffee in new york today, how would you explain what has occurred in the last 24 hours in ?our united kingdom francine: to put it simply, it is probably a little bit of a mess.

when david cameron comes back from brussels, he says we have a deal that we need to stay in the european union. then you have the popular london mayor, forest johnson -- there is a lot of copy about his reasoning, but he decides he will campaign for the u.k. to leave the e.u. it puts david cameron in a difficult position. tom: i have always been taken by the fractious nature of parliament. how will they greet the prime minister today? will be a lot of questions. david cameron on the one hand is extremely brave because he said his cabinet could choose whether they are for or against brexit. there are a lot of skeptics in the u.k., and now they will have a legitimate voice. tom: we will see that in the coming weeks and months as well in the united kingdom. here his first word news. >> john kerry says a limited cease-fire in syria may be within reach. he has announced that the two suicide bombers killed at least

43 people. he says the u.s. and russia have agreed tentatively on terms for a truce. it would not cover islamic state or other terrorist groups. the u.s. called off peace talks with north korea after the recent missile tests. for a long time north korea has demanded a peace treaty replace the cease-fire that ended the war in 1953, but the north koreans balked at a u.s. demand that the country halt its nuclear program. the uber driver blamed for the killing of six people in michigan appears in court today. jason dalton will be arraigned for the killing in kalamazoo. police say he may have picked up passengers in between the shootings on saturday night. the shootings appear to be random. --ew lawyer for apple former solicitor general ted olson says they would be a box of privacy issues opened.

it is a big blow to british prime minister david cameron and his fight to keep the u.k. in the european union. one of the country possible popular politicians, london mayor boris johnson says he will campaign for the u.k. to leave the e.u. a national referendum will be held in june. johnson is among the favorites to succeed cameron in the next election. marco rubio and ted cruz are casting themselves as the only candidate who can keep donald trump from burning the republican presidential nomination. trump scored a decisive victory in south carolina, followed by rubio and crews. saturday's results prompted jeb bush to drop out. the next test, the republican caucuses in nevada. tom? tom: bloomberg politics through the week, getting you ready for super tuesday. texas, georgia, tennessee,

urging you, alabama -- with a southern field, you wonder how donald trump will do against senator cruz. we move forward to super tuesday. let me get to a data check. we have been through it this morning a couple of times. next screen,, please. almost back to normal. that are equity -- better equity. flattening below 100 beeps earlier, that is interesting. hintz about to brad this. francine, what do you have? francine: i benchmarked the pound against the dollar. 1.4154, the pound falling the most since 2010. mayor johnson is one of the most popular politicians and will campaign for the britain -- for

britain to leave the european union. then makes a very uncertain. fx traders do not like that. gainingre all overall after we had the miners up, the banks not doing so great. tom: very good. continuing the theme of a spanner, let's go to bloomberg right now. this is the spanner in the u.k. economy. weaker sterling, stronger sterling, brad hintz shakes his head on this. down we go again, one standard deviation off. for sterling. in i would suggest for those in the 'sited states it is francine spanner, talking about possibly a wrench as well. lakshman achuthan is with us and he has been giving us a briefing in the previous hour and we move forward with him on the american

economy. it has been way too long since we have spoken to brad hintz, nyu professor. formally with sanford bernstein. you are doing a wall street see, right? brad: actually, you get grades as a professor. wheres is actually one you would think that if you were easy you would get good grades. ,o, you have to deliver content and so you are balancing between being the hard-won and entertaining and delivering. these kids are spending their own money. the kids, are they going to go to wall street? todaywas an article -- you know the carnage that is out there -- are you standing up there in front of class and saying there is a future utility banking? brad: no, i think there is a

future on wall street. the question is to the current players, becoming utilities, is there another group that is coming out? yes, there is a future on wall street. we are in a period where you are seeing the banks transition. we do not know whether the end point will ever be above their cost of capital, or whether -- but in the end, we are not seeing capital markets go away. there will be capital markets. there will be players. questionve gotten this in less eight months. our goldman and morgan stanley banks? do you think they are banks? no. lakshman: no, but -- tom: are they going to be banks in five years? lakshman: they will be banks in five years. you can see it with what is happening at goldman.

their deposit base is still small and they have no retail operation, but think about bankers trust. goldman is the modern version of bankers trust. tom: francine, jump in here. bitcine: we have a little of breaking news. this is iron ore going up above $50 for the first time in a very long time, the first time since october of 2007. thishe iron ore rally -- brought the banks to the turmoil that we saw. brad, my question is to you. when do the markets come down? markets calm the down? what you are seeing with the banks, the investors do not have confidence in the banks. there was a survey done in december, and the survey was 150

institutional investors around the world. -- the not believe institutional communities do not believe the banks will beat their cost of capital in the next five years. that is astounding. that means 11 years of below your cost of capital. what you are seeing in terms of what is happening in the marketplace is the banks have turned into trading vehicles. they are no longer the widow and orphan stock out on the dividends. if the cycle is turning against the banks, you do not want to own them. that is clearly showing up in the way the banks have been hammered. since the beginning of the year. francine: this points to my and are -- to my mmr. writing for bloomberg this there is talk about uncertainty politics and economics, occasional periods of

prove calm, likely to frustratingly short. even if you are an outsider to wall street, does that mean you keep coolheaded, or do you try and find value possibly away from banks? lakshman: i think you probably try to stay coolheaded at all times. and look for value where you can. but stepping back from the cyclical view, which is the next several months, a couple of quarters, and looking at the large backdrop, i think what is going on here is maybe a little bit less about recession risk, which is a big deal if there is a recession. but more about, are the wheels coming off the big plans that are in place? when you talk about an 11 year trend, that is a little disturbing. when you look at these kind of broken --s been

negative interest rates, what is the plan? who is in charge? that is unnerving and it is pulling back all kinds of big decisions. tom: i want to take issue with our headline on iron ore. ,ere's the iron ore chart breaking above 50. all you need to know is a percentage move off this carnage is deceptive. here is the move up, which is correctly reported by bloomberg. but, brad, this is like citigroup or bank of america, 2005 or 2006. percentage moves off the bottom that we have seen can be deceptive. lakshman: this is catching the falling knife. it is tempting, but a lot of fans have been cut. to an earlier point that you tradeaking about global -- when you have all the major economies in the world slowing down, it is tough to get terribly excited about a bounce like this. tom: 10 seconds -- are negative

rates going to steep in the yield curve? you are in class, the bill is ringing -- does the bell ring anymore? are negative rates going to thehen -- going to steepen yield curve and make jamie dimon happy? brad: no. tom: brad hintz with us and lakshman: agathon -- lecture matches and as well. bloomberg radio this morning with steve reese, doug kass on your equity markets. bloomberg radio worldwide. ♪

francine: welcome back. away from market turmoil is

political turmoil. the pound falling emotions 2010 after london mayor says he will campaign for britain to leave the european union. when we look at the cabinet of david cameron, cameron saying he has renegotiated with the e.u. and he wants to stay in, but the cabinet is split on whether they want to stay or leave. tom: thank you so much. she will be in the following states until next tuesday. vermont, arkansas, minnesota, arizona, massachusetts, oklahoma, alabama, virginia, tennessee, georgia, and texas. megan murphy will get us forward to super tuesday. let me cut to the chase. what the senator cruz need to do to take his texas and do well against the trump juggernaut? megan: ted cruz will do what he did in iowa and what he did with less success -- what we have seen over the last week with him. he has one of the best organizing teams for businesses, and he will get the evangelical

teams out. the 73% evangelical turnout did not work, and those voters are going for donald trump in much bigger measures than we expected. he is going to reset, focus on what he did in iowa, targeting the heavily evangelical, christian voters who do like his policies. he has to bring out the message that he is the man of the plan and that donald trump is still a fiction as the man with the plan. tom: procedural changes over the last 2, 3, or four super tuesday's -- there were lessons learned. does the establishment cause their own headaches? megan: i think they haven't some respect in the way they have conducted this race, and there is continual hope there will be consummate -- that they will be a consolidation behind marco rubio.

have 11 states, super tuesday, we go on to march 8 with a few other big states. we have florida. we are looking at a map where looking at the percentages we have now, donald trump holds double-digit leads in many of these states. even if you award the delegates on a proportional basis, donald trump could very well run the table. the 11e seventh of states is massachusetts. i will suggest that bernie sanders will do better than good in the people's republic of cambridge. oklahoma, above it -- alabama, tennessee, georgia, texas -- does the secretary wrapped up her nomination late at night on a super tuesday? megan: it is interesting you brought up massachusetts because the polling is closed between her and bernie sanders. we think he will take vermont. he will focus on minnesota as well and other caucus states. the nevada win for her was a game changer.

six points is not narrow in the field of politics, and he gave her a chance to reset her campaign and dampen his momentum. look at, poised to again, coming out of super tuesday with hillary clinton, in a strong position unless he can refocus again on wall street on the acceptance of business, on income inequality, and we see a real turn among youth again. but the momentum is with her right now. francine: to a more basic question -- no republican has ever one new hampshire -- has ever won you have chan south carolina and failed to win the nomination. how will this time be different? megan: i do not know if anything will be different. focus on theill suburban areas around nashville, reaching you, areas that he thinks he can pick off delegates by targeting small segments of the population. but marco rubio may not win a state until well into march. it will be very hard for him to

identify himself as a front runner and establishment candidate without winning a state. tom: we will speak to you many times as we go to super tuesday. lecture an afterthought is with us -- watchmen ashes sign -- is with us.uthan lakshman: think about it. we are sitting here at full .mployment, headline inflation i am just telling you, on the headlines, you're told, the 4.9%lishment is saying unemployment, inflation recovering, what is the problem? but the market is jumping, and the outsiders, sanders and trump, are doing well. tom: we have a great single best chart for you on the commodity miracle this morning. brad hintz is continuing with us as well, from new york university.

on politics, you need the conversation, the inside of "with all due respect." i have not seen mark halperin and john heilemann in 100 days. ♪

us, lakshman achuthan with brad hintz with us as well. stephen roach in project syndicate with a blistering criticism of negative rates, drawing false comfort from , overlyation

accommodative monetary policies have led to massive bubbles in asset and credit markets, resulting in major distortions in real economies. this is the functional equivalent of mourning another surge of zombie lending. -- the functional equivalent of promoting another surge of zombie lending. read it. how do bankers were in this environment? is one of the other issues that has brought the banks down. you have negative interest rates -- how do the banks make money? deposits and loans. they are going to face some interesting issues here. to 12.ian monahan, 18 this is not in the textbooks that you are using. lakshman: we are in uncharted territory. we are undertaking huge experiments. i do not know if anybody fully

appreciates that. roach -- at the university of new haven, they have good pizza. do you agree with dr. roche, that it directly leads to asset bubbles? lakshman: the market is focus on everything a central bank does. every day in the morning you are reporting on that, so there is something to it. without a doubt, there are huge unintended consequences from these big, big what i would call experiments. brad: and it is things you do not want to talk about, right? constraintsl three and there are complaints about liquidity. you put leveraged constraints on banks, and you have repose popping into the marketplace. let's face it. the central banks are very good, claimsy the pope

infallibility. tom: we need to continue this discussion, and we will do it this morning in our last block with brad hintz and lakshman achuthan. francine, an important guest on oil next, right? francine: coming up we speak to the former algerian oil minister. we will be asking about supply and demand, but also whether he thinks -- whether opec can regain control of the oil price. when you look at the four countries that decided to freeze production, they are pumping at full capacity. what does that mean for future's going forward? we will discuss that next. ♪

tom: maybe the single thing you need to know this morning -- curve flattening, even with higher yields up three basis points, 1.78 on the 10 year yield.

the difference between two and 10-year yields, under one basis point, -- nymex crude with a one dollar lift as well. we need to get to bloomberg first word news. ehra: there may be a limited cease-fire. the u.s. and russia have tentatively agreed on terms. two suicide bombings over the weekend underscore the problem having a truce hold in syria. at least 140 people were killed. islamic state claimed responsibility for both. the death toll is rising from that record-breaking cyclone that hit fiji. at least 18 people were killed. the cyclone tore through fiji over the weekend with wind reaching 177 miles per hour. that makes it the strongest storm ever recorded in the southern hemisphere. hundreds of people have lost their home. thousands fled to evacuation centers. russia wants to fly surveillance

planes equipped with high-powered digital cameras over the u.s. both countries have signed a treaty allowing observation flights. u.s. officials warned that flights with digital cameras may help russia collect intelligence on the u.s. an international agency in vienna will decide. the uber driver accused of killing six people in michigan makes his first appearance in court. police say jason dalton went on a shooting spree in canada in senate -- on saturday. they called the killings random. hillary clinton is hoping to increase her edge over bernie sanders. clinton scored a solid victory over sanders at saturday's caucuses in nevada. she is scheduled to win big. a week from tomorrow, 12 states and one territory will hold primaries and caucuses. in auto racing, it was the closest finish ever in the daytona 500. won by oneon

second. global news 24 hours a day, powered by our 24 heard generalists -- 2400 journalists. arabia agreed in go hot to stop global surprise -- global supplies. intoil glut will persist 2017. let's get straight to our guest, the former opec president and a longtime oil minister. chakib khelil joins us from d.c. thank you for coming on the program. can the saudi's defined market forces forever? do they even have control over the price of oil any longer? chakib: i think we are in a new phase, i believe, and with this idea of a freeze, i think it is a good start, that i think we could -- we have many reasons to

believe that the consensus may be building with opec, non-opec. but even if there is open consensus within these two, opec may you ready to do something this year because the market is going toward stabilization by this year. saudi arabia has achieved its objective. increased production by 2 million barrels. last year's oil production was 1.5 million barrels a day. it is achieving its objective. i believe that most of the large countries are achieving their maximum capacity, so it is about time they achieve some consensus. francine: is this a desperation move? when you were president of opec in 2001, it was the last time we

saw cooperation between opec and russia. can opec trust russia to freeze production? chakib: it did not really work in the past. possibly this time there may be some good reasons why russia may be -- and also other countries, like norway and mexico? -- like norway and mexico -- may toto achieve some consensus stabilize the price because everybody is urging opec with the economy and establishing markets. francine: i know opec will never talk about the price of oil. now that you are a consultant, give us your predictions. chakib: well, i think this is the reason that i was saying consensus may be reached, because once we have a stabilization of the market, then what? what happens then?

i think there is a need for achieving some idea about what the price may be, and work on that basis to achieve stabilization. but also work on the tremendous overhang that we have, the oversupply, which is more than 500 million barrels in the market. so i think this year -- is it 60? chakib: stabilization is going to be about a lower price this year, but this is the reason why there may be a consensus to see whether $50 is reasonable, whether $70 is more reasonable, and i think it is a question of achieving some kind of agreement between producers and consumers. maybe the target will be around $80, which would be tax-free for consumers and producers. francine: thank you so much, the former opec president. tom, with some very rare

insight. he was the president of opec the last time we saw a russia and opec coming together in agreement. he is suggesting that it was not always successful. tom: the tripod of opec /non-opec, and the united states on its own. we are going to continue this up -- this conversation. we have a couple of ideas to get your week started as well. coming up on "bloomberg radio, hugely on theersial, doug kass difficulty of an equity market. stay with us. ♪

tom: vonnie good morning, every. "bloomberg surveillance."

we welcome you on monday. let's get right to our bloomberg business flash. euro area is feeling the strains of an economic slowdown. falling to its lowest level in more than a year. the firm says it graciously -- it greatly increases the odds that the -- for $107ust sold million, less than expected. analysts estimated -- the home is located in an exclusive neighborhood. housing prices in hong kong have fallen 11% in september and are expected to keep dropping. banksays it is among being investigated by u.s. regulators for hiring practices in asia. largest banks as the probe has to do with candidates linking to government officials. banks are being investigated. that is your bloomberg business flash.

tom: thank you so much. sigel best chart right now. brad hintz with new york university. and lakshman achuthan. view have a constructive on what commodities mean. this is our chart of the year. down we go. we have updated it. crb. , and i haveed over extrapolated out the pre-china broom -- the pre-china boom trend. do you suggest that we will just have commodities come down even further? chakib: i do -- lakshman: i do not assume a lot. i do not assume conversions to the mean. overcapacity in reaction from the over investment following the last crisis in 2009. low interest rates, china doing what they did. a huge capacity build and a cyclical downturn, which is

going right now with the major economies in the world -- europe, japan, u.s. -- all having lower long-term trend growth. so all of that adds up to too much capacity and falling prices. tom: bring the chart up again. you and i know the extrapolations are a dangerous game. the bottom line is, do you just assume that we have had such a misallocation of resources due to funny monetary policy and the like that this trend gets back to the trend that goes back years and years and years? brad: it cannot. commodities have to be tied to the growth of global gdp. so in the end, the worm cannot grow -- get bigger than the apple. and so what you are really picking up -- you are picking up a small chinese economy that grew rapidly, and as a result,

it used a lot of the capacity. ultimately commodities is going to be driven by global gdp. along see india coming and pulling things, but nonetheless, you do not end up with these kinds of things going on forever. i was very interested -- if stability means $50, $60, oil, i just want to remind everybody that over the last several decades, recessions have been associated with the fed tightening, some sort of attempt to tighten, along with oil price shocks. oil price shocks mean the rate of change in the price. so if we are in the 30's and we go to the 50's, that is a fast rate of change. tom: but, francine, if we are in the 30's -- let's say $34 on

brent and we go to $28 on brent, that is a rate of change as well. francine: and we are seeing the angst in the markets driving the price of oil up 3%, down 3%. if we are seeing slower growth around the world, and if you believe that will continue, is that what we are in the price of oil, or is it what investors keep telling us is just another oil supply problems? brad? you are talking about global growth, right? a fact that global growth will continue declining. is that will we're seeing playing out of the price of oil? brad: in some ways. but if you think of oil, oil is -- the price of oil is determined by the small amount that is traded in the marketplace. underf oil is produced long supply contracts, so what you are getting is more production being stored at this

point. you have a point where capacity has totally filled up all the tankage. -- ore point, investors producers, rather -- have to cut back. how do they cut back yeah go once you start -- how do they cut back? an oilery costly to shut glut, and that is what we see this lag in terms of the oil market responding. no one wants to be the first one to shut in. tom: i do not have your resume in front of me. you are chevron,] brad: a very long time ago. tom: what did you learn about investment allocation in big oil? brad: remember, oil companies do 100-year production. do a value calculation, it goes out over -- tom: so what do they do right

now? what do they do with the rate of brings up? brad lakshman: brad: you shut in, you do not invest. and then ultimately it works its way out. with the do you see research based on his pro-observation? is investment shutting down? business -- nonbusiness investment is absolutely shutting down. there is too much capacity, so why invest? the cash is starting to get constrained because your profits growth is hurting. so that is not there. and then let's talk about the , confidence. who is confident right now? -- cash,ree c's

confidence, and capacity -- are working against you. tom: the must-read of the day on bloomberg, a terrific story on foreign exchange staffing on wall street. we will touch about that with brad hintz here. coming up, with pimco, richard clarida. from new york, "bloomberg surveillance." ♪

tom: it is 6:49. every day we do a forex report. yen weaker, but it has been all over the place in the last number of days. euro-sterling and cable -- those are the two major pairs, and they signify a weaker sterling. the ratios are flipped, so it is a little confusing. francine? francine: in the last couple of minutes, apple has been commenting on privacy issues on the company website. they are suggesting the company and congress will discuss privacy implications, apple saying they will participate if

congress is involved in privacy issues. this alights to what we heard with the debate that has going on in the last several days, the fbi asking apple to get access to the iphone for the shooters of san bernardino, apple saying, no, because this will have global implications. fbi, wector of the understand, wrote to apple saying that this is a matter of national security. we have never seen a case like this before. tom: that is the key phrase to me, that "we have never seen this before." we will have more on that through the day. charlie rose spoke with manhattan district attorney vance.rance -- cyrus this is a fractious debate, to say the least. right now, lakshman achuthan and brad hintz are with us. what you need to know about brad

hintz, his storied career within corporations are he then went to the dark side and worked for lehman brothers. -- then sanford rubenstein sanford bernstein, where his black books became required reading. theyl not kid you -- literally were a status symbol. you were cool before the land of the pdf, when you would walk around with a brad hintz black book. if you were to write to black book today, how would you filter in where our liquidity is come and where our risk-free rate is? does black rock or center bernstein have a clue where the risk-free rate is? brad: you can guess at the risk-free rate, but you realize they are being managed. but they have been managed in the past, too. tom: but the chronic nature of this -- the time function of our financial crisis, rogoff and reinhardt, 7, 8, 9 years, were

there. does the chronic nature of this continue? yet. we are not out of it the real issue in terms of monetary policy is, the central banks around the world -- they are kind of like the wright brothers. they have the plane up in the air, but there is no handbook to learn how to bring it down. this is on-the-job training in terms of -- tom: at kitty hawk, they have better service than the delta shuttle. just so you understand. economics,from your over bread's wall street. lakshman: one thing that comes to mind -- over the last several years when we handle qe in the -- itut in liquidity, the had it down -3% a couple of years ago.

so we had a big move if you are looking at those effective fed funds rates right now. may be more tightening that has occurred than one may realize. but when you talk about where unchartedow, which is territory, new territory, they are not where they wanted to be. the u.s. was not going to become japan. we were not going to make their mistakes. we were going to go bigger, more, longer, all of these things. do it right. the ecb and the fed and the bank of england was going to follow in the fed's footsteps. but what has happened since we last spoke in december, there has been a huge seachange. back-checking is -- backtracking, to put it mildly. that this kind of new experiment is not really something they have -- tom: i would point out, ellen zentner at morgan stanley talked

about how the economy is giving the fed tightening it does not want right now. francine: i am still unclear about what exactly happened since december. lakshman, you are still talking about the shift. we see the u.s. presidential and onn, brexit, fundamentals are we seeing something that we did not see in december? or are we seeing pure market nervousness? lakshman: one is a recognition on fundamentals, just the data -- gdp is down at a three-quarter year low. sales and income are at roughly 1.5-year lows in year on year growth rates. so recognition that fundamentals are decelerating, not accelerating, is one thing. the second is that the fed will not be able to do a true rate hike cycle. the japanese, where you had abenomics launched in 2013, find

2014 with 0% gdp, and 2015 with 0.4% gdp. even when you become japan and do everything possible to not be japan, you are unsuccessful. you know the story of china. so the big, huge countries doing big experiments that are not working out, and the fundamentals, when you measure growth outside your window, are slowing. even europe just now, you see the market data. francine: what is the catalyst? in shanghai, will it once again be central banks? lakshman: the central banks will try to get together and do something orderly. that is the way opec is trying to do something orderly. the question is, does it work that way? i am not sure that it does. we are not forecasting a recession today, and that is wonderful news. it is not imminent yet. but eventually, it will happen. what are we going to do then? tom: thank you so much.

lakshman achuthan with that this morning. and brad hintz, thank you so much. i want to get you back soon as we look at utility banking. kaufman nailed this, saying we are going back to a more basic -- brad: that's right. tom: we are there. brad: you are seeing these banks make the changes. slowly, but we're making them. tom: futures up 22, dow futures up 1.87. "bloomberg " will continue the discussion this morning. gary shilling with us tomorrow. ♪

matt: a surprising loss at europe's biggest bank. the great big split.

johnson races conservative --nterpart, david cameron, for goes all in on self driving cars, planning to triple its investment. we will hear from the ceo. matt: welcome -- matt: welcome. it is -- stephanie: welcome. -- : he is stephanie: you my friend, are with us in the u.s.. jon: happy to be here. lots going on in the market this morning.