>> at rallying on stocks. removing limits. the countries leader, could he be here to stay. and do cheap bank. deutschecutive -- and bank. the chief executives's plan to stay on track.

♪ it good morning. welcome to bloomberg survey is. i'm in london. let's check on the market. the rally coming through. treasuries pretty much stabilizing. a lot of want. testimony on tuesday. wednesday we hear from him again. the euro, looking at the pairing of the dollar. looking at the dollar, pretty much unchanged. coming up on bloomberg surveillance, we are live with the world congress in barcelona where we speak with the chief executive. ahead of the election, the chief of staff for the ministry. later on, we will speak to steve

whiting from citigroup. now, let's get straight to the bloomberg first review. >> china, scrapping limits on presidential terms. ofonstitutional provision ours that head of state from more than two consecutive terms in office. a committee wants to change that. comments were supportive, others work article and mocking. and may be willing to hold talks. the white house will see the first step toward denuclearization. closing ceremony, standing near ivana trump. ties should develop between them and pyongyang, washington. and a plan for mexican president to visit donald trump this month or next has been postponed

indefinitely. it comes after the washington post report that during a phone call last week, president trump refused to deny or confirm that mexico would be paying for the border wall. ad wanting written to seek new agreement. leader jeremy corbyn fleshing out details today. the move files pressure on theresa may whose rebels in her own party also want the same. .nd suffering a defeat unexpected loss in pro-government stronghold. ruling uninterrupted for the past two decades and showing the potential if they band together. could energize. the former italian prime minister urging politicians to

combat violence ahead of next week in elections after street battles against far left and far right activist. i shadow cast over the campaign and unhappy memories of when extremists.arred by >> it is important for everyone to give a message against violence, and against all violence. it has to be because today is it good day. and the smash movie black panther has joined an exclusive group of only four films earning $100 million in its first week. forecast.ney's own it takes the two week earnings

to 400 million dollars. and 120 countries. bloomberg. >> thank you. let's kick it off. treasuries it retreated from multi-year highs. keith speeches from fed chairman jay powell. he is set to speak before the house committee tomorrow and the banking committee today's later. it is the first speech as fed chief. will he be willing to accept inflation rising as high as 2.5 percent. discussing ahead of his appearance. now, we go to head of research at an investment firm and the managesment firm who 5.5 billion pounds in assets.

thank you for joining bloomberg surveillance. it?y february, is that we think obviously fundamentals are fine. especially in europe. we think despite that corrections observed in february, variations are excessive. most importantly, technicals including liquidity have imbalance. in particular, independent markets where etf is holding up large positions. we think we might see much more severe correction in the months to come. >> when you look at your research, what is the one word you wish you understood better? >> definitely inflation. central bankers themselves say they are not sure.

i think we are coming from 2017 when inflation surprised us on the downside as essentially to 2018 where we had a couple upward surprises. the economy will remain strong but inflation is somewhat deteriorating. especially in europe, for example we see the pmi for example is fluctuating or coming down a bit. and inflation is rising. in europe, we see cyclical pressure. we see it et ting. probably it is going to make it in 2018. >>'s or anything with the markets misinterpreting what the fed is saying? converge.looking to we are moving their now.

important,it is inflation has hit its target in the future pope -- future possible outcome. quitedium-term could be -- >> i will show that in a second. in the meantime, fundamentally strong, right? more of a correction will spread to the credit market. does it mean that could get a lot uglier? >> i could see volumes a lot higher. the finale collated. what we see is when you see despitetios in europe that 10% or 12% correction, when also 3.54at ratio and

aroundeld, the yield 2.5%, there are obvious questions. especially in an economy that will not be forever growing at such a pace. we think we might be entering into a risky. go back in history, we might be closer to the time like pre-1987 before the crash where you have a time with collectively 4% or 5% up and down moves. more volatile ahead. >> that would be treated by what? >> and balances in particular. -- imbalances in particular. liquidityee the daily difference. lots of redemptions at the moment.

lowest as it, the has been in the past 12 years. bonds themonly traded basically have tripled or quadrupled in the last weeks. this leads to significant questions. specifically about the corrections in the coming months. >> is a major correction in the economy?fect the real are you looking at that in your research? where do we go from here? here is the two-year treasury yield. repricing if you look at the dots. more moves are priced in. >> i would like to come back. if you look at total returns ,esterday at stocks and bonds both negative. when you have such a force, you

tended to see some de-risking. that could make the market shaky. we areack to treasuries, seem quite a substantial rise already this year. already the bias remains. eventually we're going to break 3%. we do not really want to fight this market action. there might be a force. i do not expect to be sounding havedifferent from what we been told this week. i am not too worried about that specifically. the bias remains. i think the whole story about stagnation is being questioned right now. it might conclude that the national right -- rate of interest is not as low as was concluded.

could see some sense of the correction. >> what kind of correction? a violent correction? or a slow correction? >> i suppose there is a self-directing mechanism. when the bond yield increases too much you tended to see downward corrections and equities and that turns to cap. indeed, many assets are priced richly and if bond yield increases too fast, that creates a difference there. the flash crash we saw the early this month obviously was murray much focused on the u.s. equity. the fundamentals were there. it clearly planted the seed of that correction. the volatility actually in a lot of funding were caught unaware. the premiums and volatility, i

closuresve seen a few of funding. we've seen a lot of people that had to unwind at the highest volatile position. thatusly, we have had balance of view on the fact of high evaluation. -- valuation. you need to think about what happens on the other side of the trade. we will see what can happen. you very much. stay with us. stay with bloomberg surveillance. plenty to come up, including air sends hangups. we will ask the chief executive how his plan is going more than one year into it. beyond 2023.

this is bloomberg. ♪

markets, economics, finance, politics. this is "bloomberg surveillance ." let's get straight to the bloomberg business flash. nejra: deutsche bank has formally announced its intention to show shares in its asset management. the initial public offering will take place in the earliest available window. the move kicks off what is usually a four-week run-up to the ipo. it will sell existing shares held by deutsche bank and doesn't plan to issue new ones. weinstein co. is set to file for

protection from creditors. the board failed to revive a deal to sell the studio to investors who ran the small business administration from 2014 to 2017. the studio has been looking for the cofounder was fired in october amid allegations of sexual assault and harassment. theung has grabbed spotlight of the mobile world congress in barcelona with the launch of the new galaxy x nine. the company is banking on features such as emojis, camera upgrades, and stereo speakers. concernsants to calm about a possible slowdown of its component business and j wiley's ability to manage the company. goldman sachs informed that stocks would plunge if the treasury yield hit 4.5%. its scenario calls for a 10-year yield of 3.25% by the end of 2018. a stress test indicates such a

move would cause shares to tumble. an economist also said under such circumstances america's economy would probably suffer a sharp slowdown, but not a recession. that is the bloomberg business flash. francine: it has been a pivotal week for brexit talks. labor party leader jeremy corbyn will deliver his roadmap for a deal. he's expected to say that labour would support a customs union. this may cause rebellion by pro-e u conservatives. what does this all mean for the markets? look at brexit, i don't know whether you follow the political machinations. we understand there may be an alliance between corbyn and some conservative mp's that want to remain in the e.u. or do you look at fundamentals and what carney says? >> you have to follow the politics.

eventually the nature of the deal is going to impact the economy. we are going to listen to prime minister may at the end of the week when she tells us what she sees in terms of a trade deal. corbyn, that move from put some pressure on her. she has pressure on both sides. she will have to revisit some of the red lines. one is the customs union. i think on some of those, she will have to be a bit more accommodating. francine: is it possible to say how it will end? >> there's a huge expectation about may's stance on all this and i think we will know more in the next few days.

the u.k. has a lot to lose in this and the european union is having a hard stance. this is a precedent and sets a precedent for potential other countries. i don't anticipate to ceu weakening. francine: thank you both. stay with us. ericsson has signed a strategic agreement at the mobile world conference in barcelona with china mobile to develop the internet of things opportunities together. the latest research critics more than 20 billion connected devices by 2023 related to the internet of things. the partnership will support china's one belt, one road initiative. caroline hyde is back and she's in barcelona. caroline, over to you. welcome back. caroline: francine, so great to be back with you. erickson, wonderful

to speak with you again. we are hearing about the partnership with chinese players. you're looking at the internet of things. we are hurtling towards this. is europe getting on board with 5g as quickly as asia and the u.s.? borje: it is fair to say that north america and northeast asia are way ahead here. at the same time, we see a number of european operators gearing up to prepare. we are seeing europe really starting to rev up the engine. the u.s. have an interesting take. there's even talks of nationalizing 5g in the united states. have a fairly we well functioning model. --know that if we

[indiscernible] we know that the private operators, service providers, will invest in the network. just look at how quickly the operators have evolved. we see that happening in five years. caroline: you don't think we should see nationalization in the u.s.? borje: we can see private operators and private capital provide infrastructure. caroline: your delivery, you say, could happen by 2018, but sizable deliveries by 2020. how sizable? borje: it will be a gradual ramp up. we said that we will start to see the first deliveries this year. we will start to see enhanced mobile growth coming next year. we will see it ramp-up from there. bebelieve in 2023 there will one billion handsets for 5g or

subscriptions for 5g. it is a fairly quick ramp up. caroline: what about 2018? last time we spoke, you had been in the job for a month. they want you to be the turnaround king. can you be it? borje: we put in place a focused strategy last year and we are executing on that. we see great traction with our customers. we see that we are building a lot of momentum with customer orders where we are increasing our market share and gradually returning erickson to better form. of course there's always challenges. if you look at our company, we have one area where we need more focus to continue to turn around. caroline: that being official services? borje: yes. caroline: what will it take?

could you break even by this year? borje: we will gradually see improvement this year. see performance as we move into software led and more efficient service deliveries. caroline: do you think the activist investors that are starting to come to your shares, will they give you that breathing space because they want harder cuts now? borje: for us, we put a strategy in place. we've communicated that and we are along those lines. caroline: what about your media service business. you didn't get to sell all of it. borje: we never wanted to sell all of it. we wanted to keep a large part. medium content distribution is a key area for our customers. we needed was more

capital to develop it further and participate in what we think will be an industry consolidation in that area. that is why we sold 51% of it. caroline: this time next year, what will you be able to tell me? borje: we will be very optimistic. 5gwill start to see commercial deployment of and running. we will start to see devices coming. cases being see iot much broader and much widely adopted. caroline: industrial perspective for the consumer? borje: they will start to see very rapid deployment. caroline: what could this mean in terms of your own business growth? how is this going to fend off the competition. borje: we need to be on 5g. we are increasing our investment. we hired 2000 rmb engineers last

year to make sure we are technology leaders in 4g and 5g. caroline: always great to have time with you here. the chief executive of ericsson talking optimistically. francine? francine: thank you so much. caroline hyde joined by the ericsson chief executive. let's take in the corporate space. deutsche bank has announced a plan to sell shares. the initial public offering will take place in the earliest available window. the move kicks off what is usually a four-week run-up to the ipi. ourmore, we are joined by finance reporter. steven arons is in frankfurt. good morning to you. when will we know when the ipo will happen? they've left the door open to basically delaying the ipo. as you said, it is usually a

four-week period. they are now in touch with investors. that is when it should become clear. it will be really difficult to delay the ipo once again? is this a positive for deutsche bank as a whole, or just the asset management unit? you could argue that it gives it more flexibility, it values the unit properly, but also gives it more flexibility to grow. >> that's right. many investors, many analysts say it is a mixed blessing for deutsche bank. what is theirng most profitable unit by far. last year it had pretax return and tangible equity compared with just 1.4% at the investment bank.

it is really profitable. they are selling it, or at least a minority stake in it, but it is also a good thing for deutsche bank because it shows they can pull up the strategy announced a year ago. the ceo of deutsche bank has been struggling to implement much of that strategy and to show investors and people at the bank that he can do it. it will probably boost morale. francine: thank you so much. steven arons, our financial reporter in frankfurt. when you look at deutsche bank and some of the troubles and travails it has had, today they are saying, we are ipo-ing the asset management. is it something you would be looking at? investing, not be but i think from the asset management standpoint, the cycle of valuation, it is probably a good time for deutsche bank to do that trade. now new leadership,

solveo, and it will also potential conflict of interest, detaching from the bank. i think it is probably positive. francine: you are invested in banks, genoa in italy, but also in greece. do you see an opportunity because you see consolidation or because certain banks aren't lending directly to the enterprises you are trying to fund? >> we are trying to find imbalance around europe. areas where there is an imbalance between supply and demand of credit, we are trying to step in. banks or european finance division like consumer finance. time there is an which we feel there

might be a good value to do. francine: thank you so much. let's get to another top story. we are doing around the world in 60 minutes. china set to repeal presidential term limits in a move that would allow xi jinping to rule beyond 2023. a provision that bars the head of state from serving more than two consecutive terms in office is in place, but the carty committee -- party committee says it wants to change that. enda curran joins us with the latest. what does this mean about president xi's ambitions? >> good morning. i think it underscores just how powerful president xi is in china, at least in the near term. he's very much in control and he has the opportunity to drive through his agenda one way or another. economists ando

investors, they say it offers a sense of stability. longer-term, it opens up much bigger questions around when mr. xi will eventually move off the stage. certainly it is a case of doubling down on one of the more powerful leaders in recent decades. francine: was this well-timed? i think it is fascinating timing. we had the anbang takeover last week. we are heading into an important few days of meetings where they are going to sign off on big personnel changes ahead of the party conference at the start of march. and of course we have the top china economic advisor to mr. xi going to washington for talks on trade. we are getting these big headlines out of china and it looks like xi is taking his opportunity to send home how

powerful he is and to reinforce that he's going to be with us for some time. francine: what does that mean for the economy? does it mean if he has a good handling of the economy, it can be stable for longer, or are there any words of warning for business communities? >> people are saying today that it really reinforces the near-term agenda of tackling pollution, cutting down on debt, and of course continuing the innovation, the push to move china up the value chain. near-term it is probably where we were. we hear about the need to curb risk. they may tolerate a slower pace of growth. mean that china will be retreating from its economic agenda that we've seen over the past few years.

it doesn't also mean they would be retreating from the world stage. xi was on board for internationalization and pushing china's influence around the world. francine: thank you so much, enda curran, chief asia economics correspondent. always a good day when you get to speak to enda curran. what would a centralization of power mean? china, overallt for 2018, is it a minus, positive, or neutral? a minus.ly less of there was lots of concern about china. this news, i don't think it is much of a market mover. that is going to raise questions about what type of democracy china wants to embrace, and there will be comparisons with russia. near term, it is probably a

smart policy. the many concerns that investors have have somewhat retreated. there is still risk. something that has helped is the weak dollar. clearly that doesn't help to stem the outflows. one risk is leverage. there's a lot of leverage in the chinese economy. increase, continue to that will create some dangers. francine: what do you make of the people's bank of china? we heard about anbang. we covered it on this program. there were allegations of fraud and things like that. does it show the resolve of the pboc and authorities in general to deal with this? >> i think so. but you need to find the right pace. it is a pretty narrow path. if you need to tackle this debt problem, make sure the economy keeps growing.

luckily, though global economy is very strong. in europe in particular. in the u.s. -- that makes the whole process a bit easier and i think it is the right decision. francine: we heard from an advisor to the people's bank of china that policymakers this year are likely to refrain from intervening in the currency market. what is that a sign of if that is true? u.s.think the fall of the dollar has been greatly supported. their concerns were about outflows and the danger that this created for the economy. when the dollar is weak like this, those outflows are much weaker. if we had a surprise recovery of the u.s. dollar, that problem would come back. that is not something that we have. francine: thank you so much.

signal. distress less than a week away from italy's election, an otherwise coolheaded market showing signs of panic? we will go through the possible possibilities of what happens in italy. this is bloomberg. ♪

francine: this is "bloomberg

surveillance." i'm francine lacqua in london. italy heads to the polls on sunday. voters spirits have also been dampened by a messy economy. italy is the worst performer in the euro area despite 14 quarters of growth. investors have been more sanguine. the bond market saw the country's 10-year spread over germany bounce. have markets reached a turning point? head of theow, the italian treasury and chief of staff to the finance minister. so, thank you so much for joining us. just a reminder, especially our foreign viewers, we cannot talk about the polls, but are you concerned that some of the reforms or some of the investor confidence can be wiped out

monday? >> we are not concerned about that. itese have been qu successful five years, especially the last month and the last year, seeing acceleration in growth in the country. i think the italian public in business,rge but also households and families, our understanding the importance of structural reforms , and i don't think there is any appetite to go back to the two-deal system. francine: we are neutral here on bloomberg and i don't want to spend too much time on who is saying what, but there was talk at some point of decreasing taxes. are these false promises? are they promises that will be reversed, or is there real danger? you've done this all your life. >> there are ways to reduce

taxes which are compatible with a sustainable public finance. reform isme beneficial to the country. some of them have been done in these years. for example, the reform of the tax administration. down fromtax went 27.5% to 24%. some taxes have been cut in the area of real estate. others provide relief to families. everything has to be done in accordance to the european rules on budget and finance. francine: why is the italian voter anxious? >> i think the crisis has been very deep in the country. there have been a lot of lack of confidence for a long period.

in the last couple of years, particularly the last months, we see confidence coming back. we see growth coming back. we see an acceleration of growth. this is due to reforms. this is due to italian entrepreneurs, which have been resilient. export is good. i think we have a very important surplus in the trade balance. one of the highest in the world if you look at manufacturing. the country coming back from the crisis by strengthening its strength, which is manufacturing. francine: people don't necessarily see that. is there too much of a difference between what the government has done and the common person in the street who is thinking of voting either far right or far left? >> it is possible that there's a lag between the economy and the recovery and what people

perceive and appreciate. in certain areas of the country, you see that families and people are seeing that. you see jobs coming back. this is very important. unemployment is still high. youth unemployment is high. that employment at the same time has been raising. for the first time, we see raising of employment. this is a very good sign for the economy. francine: talk to me. failing over parts of a bank in genoa. where do you see opportunity and why do you see opportunity in italy? >> we don't use the word failing bank, because the bank successfully raised capital in the equity market, but we have

in terms of long-term partnership with that bank, taking over consumer finance investing a lot of money in italy -- i think italy from -- i think there's a perception that is often wrong, especially northern italy, where effectively economic data are fairly strong and we are of the view that this .s a recovering economy some areas of finance are to their liking. that is obviously an attractive level. it is kind of bridging a get a between supply and demand. typically, we are of the view that some of the so-called failing banks have a sustainable path to recovery with new

management, new leadership, and definitely we think that most of those banks will have the ability to recover, possibly by also consolidating. francine: i'm looking at the spreads between german and italian bond yields. i think the first circle, when mario draghi said, i will do whatever it takes, then you see the purchases. how much higher could that be if the ecb were to stop some of their measures? >> we are not too worried about the ecb. it will create some widening pressure on spreads, but initially it is bund that could suffer more from that. regarding the election, we are not so much worried about the near-term implication, moore the

long-term implication. the banking situation is improving. the trade situation is improving. we are worried about the fiscal situation. we would be happy with a higher primary surplus. regarding this election, we think there's a 75% chance they will have a hung parliament. we don't exclude the coalition. even that, you talked about the fiscal stance, that is probably the weak link. the promises that they are making on the fiscal side. if we have a hung parliament, you need to see what type of coalition, narrow or very large. if it is a narrower coalition, i think the market would like that very much. on sunday, we look at how for

the italian performs. i think that will define the reaction. francine: how worried are you that the government doesn't hold, that we have a hung parliament? >> we don't include that you would have elections again in 2019. we put a probability around 20% to that scenario. the president definitely will try to forge a coalition. francine: you were the one spearheading the movement for milan to take some of the business one brexit happens. what is the question you get most from investors? is it on politics or infrastructure? we have some interesting questions about politics, but also questions about regulation. no concerns about the labor market reforms. confident wee are

can hire people. we can lay off people in italy without much trouble. tax system is fine. what you've done in terms of personal taxation is great. it is working well. we have taken packages for managers and individuals which are quite appealing. there are issues about the speed of the bureaucracy. this is something which the new government should address. francine: thank you all for joining us. stay with me. up next, the inside scoop, a little deeper into the politics of sunday's italian election. we will also put it against france and other countries. this is bloomberg. ♪

francine: markets, politics, economics, and finance. this is "bloomberg surveillance ." let's stick with the italian elections. telling them he won't support the five-star movement, but less outspoken about a possible alliance with berlusconi. still with us, fabrizio pagani. he worked in the prime minister's office and held a series of advisory roles. -- gentlemen, thank you for sticking around. we were talking about the italian politics. what worries you when you look at the italian economy? we talk about euro. this is one thing the political class has little impact on. at what level is euro really

damaging for italian exports? >> i cannot give you a number, but a very strong euro would not help. let me say that the italian businesses, which has been weathering the crisis, because many went out of business -- those which survived are very strong and resilient. the italian recovery is driven by exports. ,nternal demand is picking up but not as fast as we would like to see. exports is very important. obviously a good chunk of italian export is european. it is not affected by euro level. i cannot give you a number. francine: if you look at europe, it seems strong in general. there's a lot of investors taking interest, apart from ray we will come to.

at what point does euro strength start to be a problem for italy, but also for the rest of europe? >> i think it has started to bite a little bit. when you look at earnings, u.s. against europe for example, but also the fact that the pmi's are plateauing, already euro strength is a drag. 1.25, 1.30, then it becomes a more significant drag. francine: what is ray dalio seeing? i interview him every year in davos. he is so sure. his team are confident. they are shorting the big european stocks, but not everybody agrees with him. >> i think ray dalio is wrong about europe. i am of the opinion that european growth is stronger than the u.s., and we saw that in 2017 with the numbers. u.s.o think that the

valuations, as we were saying earlier, 23 times or 22 times ratio in the stock market doesn't sound so appealing on paper. as i said, there are quite a few imbalance and uncertainties about global markets. we think it is entering a new regime, but in terms of relative value, europe is francine: more appealing than the u.s. , ray dalio has a massive short on them. fabrizio: they are definitely fixed. i think what we have done by addressing a few hotspots we had, including monte dei paschi, has been successful. monte dei paschi is in the hands of the treasury and is doing business as a normal bank.

is over. year, we had a massive number of transactions on npl's. in 2016, 16 billion. in 2017, 100 billion. and the old numbers have gone down by 25% last year. francine: thank you so much. the head of the italian treasury. loic fery. up next, tom keene joined me out of new york. we will talk to richard colonel of blackrock. we will talk markets and politics. ♪

francine: rally on. global stocks extend a two-week upswing, but how could jay

powell move the markets? limitsrepares to remove to presidential terms. could the country's leader be year to stay? deutsche bank prepares to list its asset management arm as soon as possible. raise enoughan money to keep his plan on track? good morning. this is "bloomberg surveillance ." doubt, a lota about china, but also we will look at deutsche bank and politics in italy. tom: there's a lot going on. italy, it is a winter wonderland. there's no other way to put it. francine: the pictures were incredible. i'm not used to seeing rome under the snow like that. beautiful. .hat is the vatican i wonder, when "bloomberg surveillance" shows up on friday morning, what we will find. tom: extraordinary.

francine is going to be there late in the week. francine? francine: let's get straight to the bloomberg first word news. here's taylor riggs. steps: china is taking that could allow president xi jinping to stay in power indefinitely. the communist party is set to reveal presidential term limits that keep the head of state from serving more than two consecutive terms. that would do away with the orderly succession system adopted after mao zedong. is taking ause wait-and-see attitude when it comes to north korea. kim jong-un indicated he's willing to hold discussions with the u.s. a white house spokeswoman responded, we will see if that represents the first test toward north korea ending its nuclear program. mexico's president has indefinitely put off plans for a white house visit. that is according to officials familiar with the matter.

the "washington post" says the trip was canceled because in a phone call president trump would not agree to publicly say that mexico won't pay for the proposed border wall. in the u.k., the labour party is putting pressure on theresa may over brexit. labour says it wants a new customs union after the split. that leaves may at the mercy of rebels in her own conservative party what a similar deal. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. first data check for the week. equities, bonds, currencies, commodities. we will show the dow in a moment. dow futures up 149. oil elevated. not that we are near $70 on brent crude, nevertheless oil has my attention. the fix, look at the vix.

extraordinary an pricing after the good friday. , 25,309.ettling brent crude, 67.23. i don't think we can ignore that $70 level. francine: we are keeping a close eye on that. following their asian counterparts higher. if you look at the treasury yield, steadily below 3%, dollar weakening. investor focus is shifting back to monetary policy. two appearances this week from jay powell of the fed. i'm also looking at gold. it is a good benchmark. over to thego bloomberg here and show a little bit of mathematics. it is mathematical monday. call it trigonometry monday. the dow, down we go. level, and this

is very cool. odal is a textbook sin dampening function. -- bring you come down it up here, anthony. you come up and you go like this. like this. that is what we are in right now. that is a very normal thing after a pullback. little bit. francine: i like trigonometry monday. mine is not trigonometry focused. did do is look at the two-year yield, which is the benchmark that a lot of people are looking at to see what jay powell does. treasury yields seem to be marching higher. it is a simple chart. algebra light, but news have a.

as we mentioned, we must talk about the markets. we must talk about what comes tomorrow as investors prepare to listen to jay powell's first appearance as federal reserve chairman this tuesday and then on thursday. joining us is richard turnill. always great to speak to you. thank you for coming in. are you expecting any shift from fomc, or will it be study as they go? richard: great to be here again. we are thinking the fed is going to continue to raise interest rates gradually. unlikely we get any shock out of the statements. the market has already repriced significantly between three and four hikes this year. toortantly, it is very hard envisage a scenario where the fed raises interest rates more than four times this year. we are expecting a continuation of study normalization of

monetary policy. francine: what does that mean? a quite the repricing of treasuries? richard: you showed the two-year yields earlier. if you look at the short end of the curve, much of last year, the market was highly skeptical as to whether the fed would do what it was telling everybody. the markets have come around to that view. it looks to us that there is some value at the shorter end of the curve now. when you look at those two-year yields, for the first time in many years, you are getting compensated for inflation when buying short-term treasuries. you have two-year yields well above 2%. small, but positive real returns. what we've started to see is flows coming back into fixed income. we think yields are starting to

stabilize. we are a bit more cautious about the longer end of the curve. tom: let's continue on trigonometry. i know you wanted to do that when you entered our headquarters in london. turnout talks about stability, this is a huge deal. when i studied a million years ago. when you start dampening down, that is a sign to stability. which way does blackrock think equities and the correlation into bonds, which way will this break when we get to this dampened point? markets calling the over the short-term is always difficult. what is in courage and is that some stability has returned to the market. particularly the bond market. that is the big risk we see to equities. notike in bond yields

associated with a rise in expectations. forward, we think this creates a very attractive environment for investing in risk assets. we still think equities offer the highest potential for return going forward. we see the u.s. equity market now being driven by exceptionally strong earnings. emerging markets continue to attract strong investor interest. tom: are really can't say enough about stability. theirea of what we see with the dow and the s&p 500 dampening down like this is really critical on this monday. francine: i was trying to get you a chart up, which is why i was looking down. overall, i don't know whether there's going to be a lot more volatility. we were expecting it to possibly spread to the credit market. can it still? richard: we think we are in a

low volatility regime going forward. we are in a period of economic expansion. historically, that has been associated with relatively low levels of market volatility. gotng said that, we've levels of volatility that we have never seen before. some of the factors which drove those exceptionally low levels of volatility have gone away. particularly some of the technical factors in the market. some of the financial instruments that were being used to facilitate that, they've gone away. when we look forward, we still see this as an environment where volatility should stabilize. tom: very good. richard turnill with us this morning. lots to get briefed on. outstanding,our,

linking the profits of american corporations to our greater economy. stephen whiting is with citigroup, their global chief strategist. richard turnill to stephen whiting, it doesn't get better than that. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. deutsche bank has kicked off the initial public offering of its asset management unit. the bank formally announced its intentions. that begins what is usually a four-week run-up to the ipo. deutsche bank is expected to sell a 25% stake for about $2.5 billion. the weinstein company is said to

file for bankruptcy protections. a deal has broken down. partners such as netflix have been pulling projects in recent months. come out with its response to apple's iphone x. the galaxy s9 has augmented reality-based emojis, camera upgrades, and stereo speakers. samsung is hoping the new firm will calm concerns about jay y lee's ability to manage the company since being set free from his prison sentence. that is your bloomberg business flash. steven: francine: thank you so much. let's get on to china. the country set to repeal presidential term limits. a constitutional provision that bars a head of state from serving more than two consecutive terms in office is in place, but the party committee says it wants to change that. our chief asia economic

correspondent joins us with the latest. talk to us about the timing. how significant is the timing of this for investors? >> it is quite significant. the head of the annual was a parliament where they will rubberstamp the plan for running the country, we know that in the near term it reinforces the economic agenda in china, which is one of cutting poverty, tackling pollution. ist we get from this move that xi jinping is not only in control, but doubling down on his authority. fors a very fair message policy in china in the near-term at least. francine: what does it mean for president xi's ambitions, and does it make the economy potentially more stable? >> i think it does add to the narrative that they've been building, which is that they are

serious about de-risking the system. they want to slow the pace of credit creation in the economy and moved to a durable path, perhaps take some pain with a slower pace of growth to get them on a more durable footing going forward. long-term, i think it raises issues of successorship and questions about when president xi might leave the stage. tom: 42 years since the death of years since this was put in place. i was stunned. what was it like on the streets of shanghai, the streets of chengdu, the streets of hong kong, when this announcement was made? , it lit up the internet. a lot of surprise among the citizens, for sure. the broader narrative has been in place for a while, that xi

jinping has been cementing his place as one of the most powerful leaders in china in decades. down thatst doubling is very much in charge. to the chase. i don't want to get you in trouble, but they talk about him as a helmsman. putin. xi and mr. essentially modern dictators? certainly the term is an authoritarian regime in china. he has consolidated power around him. he's taking a more forceful role in the economy. to your point, there's a sense that china isn't going fast enough on the reforms process, that they could be doing more to open up the economy.

in that sense, they've disappointed expectations. authoritarian is the term i hear most people use. francine: we are hearing from one of the advisors of the people's bank of china, saying policymakers are likely to refrain from intervening in the markets this year. do you believe, and what kind of signal would that be to the markets? the market reaction seems very muted. china, look forward for the most important thing is the path of growth going forward. we've been surprised by how strong chinese growth has been so far. that has been reflected in the currency and those comments around the central bank stepping away from intervening currency markets. what we would expect to see is policy reform shift to focus on the improving quality of growth, stepping away from a focus on explicit growth targets, putting

more emphasis on deleveraging of the economy, and we expect to see some slowdown in the pace of growth. what is critical is that a gradual slowdown and a managed slowdown in growth, one in which we don't see a flight out of chinese assets, one in which we see emerging markets continue to do well. francine: enda was talking and writing about anbang. is there just much more appetite to kind of solve the debt crisis, and does that make you confident about future growth? richard: there's much more appetite to address the high levels of leverage within the system. solving the debt crisis is going to take a long time. it is going to be a significant period of transition over time. where we are much more confident today than the markets were back at the beginning of 2016 was that the process can be one that

doesn't lead to a hard stop in the chinese economy. tom: thank you so much. enda curran, we appreciate it. we look forward to your briefing on this news from the political moment of china. coming up, we have a wonderful show for you today. fox,f with jon ferro, pimm including a briefing across asset classes. please stay with us. from new york this monday, this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua in london. tom keene is in new york. let's head over to germany. deutsche bank has announced its intention to sell shares in its asset management unit. the initial public offering will take place in the earliest available window. the move kicks off what is usually a four-week run-up to the ipo. it will only sell existing shares and doesn't plan to issue new ones. joining us is steven arons. he joins us from frankfurt. thank you for joining us again. when you look at the deutsche bank turnaround, how dependent is it on the ipo of this asset management unit, which you could say is the crown jewel for deutsche bank? steven: it is.

interestingly enough, the turnaround is not really dependent on the ipo. ,hen they announced their plans in march last year, they were constrained by low capital, but they pulled off a capital increase last year, which has reassured investors about capital strength. the capital proceeds from the ipo of the asset management unit. it does show deutsche bank is continuing to deliver on the promises it made last year, especially against the backdrop of not really delivering on the other promises. francine: so, a successful offering would mean what for the deutsche bank chief executive? it would besteven: an achievement. it would show investors that he's delivering on a strategy. on the other hand, to sell something that is good is not

really that difficult, especially in a market such as the one we are in now. i do think it is a milestone for deutsche bank, but they are selling something that is profitable, a unit that is generating cash for them, so people are divided about the pros and cons of this deal, and it is hard to say, apart from showing they can deliver on some promises, whether it is a good move for deutsche bank. francine: it is interesting because some of their rivals have done this. tom, i don't know whether you have a chart that we can show on deutsche bank, but it would be interesting. tom: the chart shows they are going nowhere. that is all there is to it. steven arons, you've got to be kidding me. they are going to bring 2 billion euros on this deal. is this an embarrassment? is this the ultimate desperation? steven: it did look like an act

becauseration last year market rumors were swirling about deutsche bank. investors were very concerned about its capital strength. they raised 8 billion euros last year. it is not an embarrassment, especially if they can fetch a decent price. if they sell it for a lot less, then it would show even this particular asset, which is a good one according to many people, is not selling very well. francine: thank you so much, steven arons from frankfurt. coming up next, the conversation with charles myers. we will be talking u.s. politics and brexit. this is bloomberg. ♪

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tom: good morning, everyone "bloomberg surveillance." francine loquat and london. int's francine loquat london. here is taylor riggs. taylor: the communist party is twoto repeal the ban for consecutive terms that were removing only formal barrier to xi staying in office indefinitely and would conclude china's departure on collective leadership. the trumpy warns administration's changes to obamacare will boost it to the double digits. payments for obamacare's insurance plan by 18% in 43 states. those are states where there are no limits on comprehensive coverage. hearss. supreme court arguments today in a case that could have a huge impact on labor unions and politics.

the issue? whether government-employed unions can finance agreements to cover them. a loss would cut into the money that humans donate to political campaigns. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. tom: taylor, thank you so much. now we consider washington, the ramifications can cut too many different ways with back-to-back trillion dollar deficits anticipated, or maybe it is as simple for the president's desire to hold a military parade on veterans day. that is speculation over the weekend in washington. here with us is charles myers and richard with us from blackrock. charles, wonderful to have you this morning. how is the president doing? i thought it was a clumsy, quiet weekend. what is your focus for march? charles: i think it has been

quiet, although he was tweeting up a storm over the weekend. i would say that when you look out over the next couple of months, the biggest priority for the president on the economic front is to try to get the infrastructure bill through congress. i do think it will give through. infrastructure has been a major issue for the democrats for many, many years and there is very widespread support for the democrats in congress, and we will see a bill work its way through congress over the next few months to the tune between $200 billion to $300 billion, adding a lot of stimulus to the economy at a time when it does not need it, but on top of the tax cuts, on top of massive deregulation, and big increases in defense spending, this economy will do very well, and booming. i think we will see 4% gdp growth later this year. tom: my theme for the next hour

aloneness of the president. do you buy that idea? isrles: i think that somewhat true. the biggest issue for the president today is the ongoing three investigations. there are three concurrent investigations at the moment. the house, the senate, and robert mueller's investigation. the house and scented -- the house and senate investigations are -- robert mueller's investigation is independent. the investigation has been expanded to include obstruction of justice and financial crimes.

i think there will be evidence that will come out of both collusion and obstruction. and i think as robert mueller gets closer on the issue of money laundering, and he is going after the children and after jerrod, i think we will start to see trump react. there is a very high probability that robert mueller will get fired over the next several months. things like that will create all sorts of political uncertainty and more market volatility. francine: there is a great story our bloomberg- on terminal in on our website, going through the latest memo, the rebuttal by democrats. you're calling it by the adam schiff memo. it is a great read. charles, do you believe that president trump will resign or be forced out in the next several months? charles: i do, actually. there is a good chance he will follow -- he will fire robert mueller.

he is per. everyone for that possibility, now mentioning twice that he thought about firing him last summer. he is doing that to prepare everyone so when it happens, the shock is lessened. whennly other time is richard nixon fire the special investigator in the 1970's. even with robert mueller possibly fired and replaced, if -- ifmocrats a non-house house,ocrats win the they will go after the president on the three main issues. will pardon the children get pardon by mike pence like richard nixon did. francine: some are saying conspiracy theories. we don't know yet. but for the markets, do you

start modeling a mike pence presidency? beenrd: the markets have resilient to political risk. everything -- every time you get of political movement it is by the dip. what matters is the macro environment and what that does to earnings. the fiscal elemental at 1% to gdp and will supercharge earnings, so you are looking at u.s. earnings environment through 2018 where we will see the strongest earnings growth we have seen in history during an economic expansion. has yet extent of that to be fully priced into the markets. seewhat we are starting to is the second round effect.

effect. when we speak to companies, what we hear increasingly

♪ francine: good morning, everyone. tom, let's talk about the markets and a little bit about volatility and returns. goldman sachs says stocks could plunge 25% if the 10 year yield

-- joining us is richard turnill and charles myers. simple, this is a really s&p 500 chart in 2014. good morning to our radio listeners. every time there is a red circle, there was a little bit of a correction. much moreng to see volatility from this point? or is volatility back? charles: i think volatility is coming back. again, after eight or nine years of artificially low volatility in the markets globally, we are now entering into an extended period of elevated volatility over the next five to seven years, driven in large part i policy events, events in the political and geopolitical area. anyone who thinks that brexit is

going to be a walk in the park or very smooth i think is being delusional. and i think there has been a real disconnect in the markets that we started to see a correction of that disconnect earlier this month where we saw a huge spike in volatility is people are starting to realize we are facing some pretty big political challenges in the form of brexit, trump, etc. ma: -- richard: we are more optimistic. the latino the has been low, but -- volatility has been exceptionally low. market volatility has been low and remains low because we are in a very low economic environment, a very, broad-based expansion. if you look at the volatility of cpi, the volatility

numbers are at record levels. so volatility moves and low regimes. what could kick it out of that and have we seen it? the answer is a sustained rise in volatilities always, always associated -- is associated with a pick up and macro volatility. the next recession is still a number of years away. we still think this is a lower volatility environment, not the extreme lower volatility that we have seen. dips in the market are not unusual, but that does not mean we are going into a bear market. tom: richard, when you are in your meetings and you are wired up with 20 people on the phone. what is the mood on crowding out? are we going to put out so much credit paper that we began to crowd out the private sector? charles: that is a great question, tom. what could potentially cause a tougher environment going forward.

outlook looks very robust, so the focus is what is happening in terms of the bond market and the yield curve. we are going to see a significant and supply. a very large fiscal stimulus. on the short end comes supplies will increase by 80% over the next four years. and that will put steady, upward pressure on bond yields. the reason we think that crowding out is not an issue and a dramatic rise in yields is unlikely to play out is that the other side is this huge glut of global savings looking for yield . this year alone, we will see $22 trillion worth of new global savings. and we still see that savings looking for higher income returns. even in the last couple of weeks, what we have seen is positive flows into bond markets coming into etf's, into mutual

funds, even into this period of turmoil. thischarles myers, does limits the degrees of freedom that chairman powell will have? yeah, i think potentially, but in the short term, the fed has been signaling that they will continue on a very steady course of monetary tightening. one of the concerns i have though looking beyond that in the medium-term is that this president will have had the opportunity to replace four of the fed governors, and what could make an argument that at some point, you may see a fed that is less independent than it has been in a very long time. this is a president who has built his career on a lot of leverage multiple times in fact, and i think in the end, we will really want to have rates as low as possible, especially to keep the economy going, and to help

not only the midterms, but 2020. francine: if what you say is right and the fed is less independent, what does the president actually want? unclear if it is a weak dollar, a high dollar? what kind of people would he put in place? dollar, thishe administration has been all over the place and they have contradicted themselves. for the markets, it has been quite confusing to figure out where they are. do they want a strong dollar, a weak dollar? in the end, i think a weak dollar policy is much more consistent with an american first overall economic agenda of trying to restore the manufacturing base and promote exports, but on the fed itself, us haveou know, all of become incredibly accustomed to a rerate independent fed. at some point, you know, i would not be surprised to see the president and administration put

a bit of pressure on the fed to keep rates lower longer. a booming economy is the best -- isthis president has the best thing they have to run on three years. francine: thank you so much, charles myers and richard turnill, both staying with this. coming up, a conversation with analyst. speech.jeremy corbyn we will talk brexit and italy next. this is bloomberg.

♪ >> we reject -- francine: that is the u.k. labour party leader jeremy corbyn giving a speech about the brexit situation. we know people close to him, a kind ofy are piling

pressure on the president before the vote, but he may avoid a commitment to the single market. now, let's get back to richard turnill a black rock and charles myers of signal global advisors. the funny -- a funny thing happened over the weekend. alliance between the labour party in some of the conservatives that are anti-brexit, or want a smoother brexit transition. what does that mean for the markets? richard: this will put more pressure on the conservative party. in terms of the markets, i think it adds an issue affecting the markets, which is uncertainty over the endgame for brexit will persist. even though we have had some good news around phase one, and hopefully we will get good news around phase two, but phase three remains highly uncertain. francine: does that mean much more volatility because it is

completely unclear. you can argue it is less clear than it was three months ago. richard: let's talk about the currency. the clearest translation of brexit uncertainty to markets has been through the pound. we have seen the pound rally in recent weeks, probably because of the perception we are making good progress towards some deal, and the markets are starting to anticipate higher u.k. rate heights -- rate hikes. when we look at the stock market though, it will be about learning from the economy. the u.k. economy has been one of the laggards over the last year or so. that will continue to be the case. you launchedrles, a policy firm. if you look at the concerns in europe, you can argue brexit or the elections, witty focus most? on the: we are focused u.s. and europe, and i would

say, and i would agree with richard, i am very bullish on the short-term of the markets, especially equity market, but again, we have a brexit process in the u.k. that is very complicated, and there is a good chance that theresa may will not be prime minister a year from now, or may not even make it three or four months from now, and you have a president in the united states under investigation for three major crimes. if you are not keeping a close eye on the political process and put -- and events in the policy arena, you could be blinded by that in the markets. i would say that politics and , the risk is at the highest it has been in 20 years. there are many events upcoming that could really lead to elevated volatility, and i think elevated volatility will be the new normal. tom: charles myers, thank you so much. and richard turnill, thank you as well.

francine, you will be on your way to italy. what are you looking for two when you arrive thursday night? francine: i think what investors are looking for is basically if -- you have to look at the market scenarios. if you were to have a hung , it would not hold over the next couple of quarters. tom: we will have coverage for you beginning on thursday into friday. , stephen whiting. this is bloomberg.

♪ tom: this morning, with the dow

above 25,000, futures are higher. on the gel -- on the jerome powell front, good the chairman repeat a trillion dollar deficit? and the constitution of china. will president xi be more putin then putin? the communist party stunned china and the world. is president trump is -- and president trump simply alone in the white house? good morning. this is "bloomberg surveillance." i am in new york and francine lacqua is in london. francine: i am in london. the coventry is laying out a vision if he wants a relationship with the e.u. --wants -- tammy corbin says jeremy corbyn says he wants a stronger relationship. the u.k. has always had two

major parties, but it is the conservatives and labor. you can argue that this labor leader is more to the left than the previous labor leaders for the last 15 to 20 years, but now he is getting some kind of support from the conservative party that does not want a hard brexit. but it is a really strange political system and the u.k. what we are seeing is labor forming some kind of an alliance with those that want to stay really close to the e.u. tom: i like strange. i think strange weeks it were, francine. [laughter] strange is a technical term. let's get to taylor riggs. hasor: mexico's president definitely put off plans for a white house visit. that is according to officials familiar with the matter. the washington post says the trip was canceled because in a

phone call, president trump would not agree to publicly say that mexico won't pay the proposed border wall. -- kim jong-un indicated he will hold discussions with the u.s. a white house spokeswoman responded, we will see if that represents the first steps toward north korea ending its nuclear program. and china is taking steps to xiow president xi pain -- ping to stay in power indefinitely. orderly -- away with it would do away with the orderly regime. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg. tom: a quick data check.

big friday, bigger monday, futures up seven. now up 12. oil elevated as well. on to the next screen. a stunning number on the vix, 16 -- i have not even had a chance to look at the vix charts. francine? francine: something we are keeping an eye on as treasury yields are holding below 2.9% and the dollar weakening. with treasuries, not much going on, but investors are focusing back to what monetary policy will look like over the next six months, and we have two appearances from the new fed chairman, j. powell. very good. let me bring up a chart to bring in our next guest, who is

exquisitely wonderful. dow, 200 day moving average. we have shown this many times. a person change in 1929. a person change in 1987. and we have some stability as we have talked about in the last hour. i will put this out on bloomberg radio, on twitter, for all of you. steven wieting of city private bank and their global chief strategist. stephen, wonderful to have you this morning. your -- your underpinning is always corporate profits. a betterfits from revenue, profits from a well run corporate america? a stronger is revenue environment that we have seen for a long period of time. costs are rising and are getting a big piece recycled through the economy. we have seen a big rebound in the energy sector.

this is a stronger growth environment that we have seen since any time since 2010. tom: this weekend, mr. buffett, it is a big deal. he was asking questions of mr. buffett. it is just about a long-term investment for mr. buffett. is are going to say, that what we want to do long-term. anddo you avoid the shock the immediacy of the volatility? steve: a good idea is not to sell volatility when it is at a record low price. we have to remember that article stock market of 2017 was not usual. unfortunately, the story is different in 2018, where we are dealing with two things that once. one is tighter monetary policy,

that is competition for savings around the world, and the stronger earnings environment. i think this is a good environment for investors, but the returns will not be a strong as 2017. francine: ok. are we expecting more volatility? and does it hit other asset classes? steve: the important question is that what happened in early february where you had to a certain extent, a small amount of market failure in terms of volatility products and so-called the efficient markets, where the equity markets had tremendous volatility relative to every other asset class. that was an exaggeration. when you see the vix down at 16 from where it was on intraday at 50, that again, is a bit of a mistake in the marketplace, but to say we are not going to have any interest rate or credit , i think i would be a

mistake, too. this has been an exaggeration and the equity market, and we have a pretty decent environment, but we are not out of the woods from the things that should be impacting markets this year. francine: what would be the catalyst for that? steve: where we are, having known with the trenches and u.s. treasury yields and knowing what the top of the rangers, you can take a look at these markets and they are codependent. we have rebounded and u.s. and global equities. ultimately here, i do think that any period of fed tightening with the federal reserve is tightening while inflation is still quite low, that the traditional pattern of a willening u.s. yield curve continue, but it is important to see that what the u.s. has stomach that central bank, the balance sheet, what we are doing on the budget front, there is legitimate competition for savings around the world him and

that we are seeing the u.s. aken at a time when yields have risen. tom: let me show you that chart and the vix. we are going to go to break and come back with steve wieting from citigroup. all of the emotion of 2009. this is a term after whiting was talking about. we are right down here on the edge of quiet. stay with us. .teven wieting the citigroup from london, from new york, this is bloomberg. ♪

♪ francine: tom, we are still following the speech of jeremy corbyn, the opposition leader of the labour party, and he said a union. will seek this is important. he said exiting single market rights standards and protections would be accepted by labor, but it would negotiate protection and exemptions that could help workers in industries to allow governments to intervene to help struggling sectors. it puts theresa may and her proposition and a much tougher spot, tom. tom: francine, thank you so much. francine, why don't you pick it up with kevin cirilli. francine: we had a pretty engaging conversation with charles myers. saying that he does

not see the president staying in power for the next several months. joining us is kevin cirilli, our bloomberg chief correspondent. kevin, good morning to you. a lot of the focus is still on the probes and we have a memo being published relating to russia. what are you most looking for this week? kevin: well, i think in terms of the investigation, most people in washington are really keeping their eye on the robert mueller investigation. there has been no evidence of collusion and knows ingestion from robert mueller's probe that there has been any direct impact on president trump's and her circle. all of the focus so far has been on paul manafort and rick gates. i talked to folks inside the administration who point out consistently that the focus of pop mueller -- of robert mueller's probe into those two

men was a time before president trump was even running for office. the question becomes whether or not rick gates, who was very present on the campaign trail for a very significant portion of it, whether or not he provides additional information that would tie it directly to president trump. ,om: charles myers said look all of these guys are going to get paroled. do you and the washington journalistic mafia assume all we are doing is heading toward presidential paroled for all of these people? kevin: no. don't think right now there has been any evidence to suggest that president trump was directly involved. and i think a lot would have to happen in order for us to get to that point. most notably, midterm elections would have to flip the democrats most likely. you know, it is a competitive race.

you have to put both the house and the senate. is way,it of itself way, way ahead of us from where we are now. and again, there is no right now direct connection to president trump from any of the indictments that have come out. tom: maybe given the tone of the nation right now. let's go to the washington post. this on the economics of the president. they estimate the economy will go 3% annually for the next decade. 2%, theay about difference is huge. predictsudget project massive deficits for years and there are signs that inflation is inching up. we both also miss the effect of higher economic growth has on the nation's other conflicts and grievances. kevin, you were there at cpac. the president lined up his hard-core resentments and

grievances. was he playing just to cpac, or was he playing to a broader america and the sub 3% economy? kevin: i was -- i thought i was back on the campaign trail. that was vintage trump with that speech. [laughter] kevin: in terms of the economic growth model, the white house officials were giving a briefing to reporters, saying they believe .3% growth would complement tax plan and see additional points would calm -- would come from and infrastructure plan. whether that gets done before midterms, i don't know. to pick they are going up some type of gun reform by march, an additional policy item to get through. but the three-person economy has really perplexed lawmakers in both parties, and of course, whoever is in control of the white house will get the blame for it. last time it was president obama and this time it is president trump. francine: kevin cirilli, thank

you so much. still with us in new york, steve wieting. , how do look at all of the politics? does this help with gdp of the margins? steve: it would help it on the supply side of the economy, but what is a $200 billion federal financing for infrastructure in the economy do? that is just a drop in the bucket. that would come from a sharp rise in productivity growth. that would come from an unusual pickup in the labor force. but probably more so from productivity growth. now that we are down here for decade lows on productivity growth, getting some notion that that could pick up and close the cap somewhere between the 3% or 4% is not an unreasonable thing

to think about. you are taking off some of the constraints. this does not mean we have a recession within that can your period of time. march, whatl into are the citigroup economists saying about the investment spirit of american corporations, or in steve wieting's world? it has been a very sharp rise in business confidence. you are seeing some pickup in business investment. to say that those two things don't meet somewhere in the middle would be very, very unusual to have this big of a pickup and not see pass through to strengthen business investments. that does probably need productivity growth picks up. tom: we are hearing the complexity of productivity growth. steven wieting is sitting with us. coming up, an important conversation with the center

from cincinnati, robert portman. much to talk about. rob portman on the opioid crisis. rob portman on his national rifle association. this is bloomberg. ♪

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francine: a lovely picture of london. for our regular listeners, it is sunny. poland getting involved, holding talk today. none of brexit, but the future of the european union. china center repeal term limits in a move that would allow president xi to will beyond 2023. constitutional provision borrowing two executive terms, but the come in is party's committee says they want to change that. asia correspondent joins us. good evening and thank you for staying late. when you look at the timing of this and the market reaction, it was pretty muted. for the markets expecting this? -- were the markets expecting this? jinping,ms of xi

consolidating his power in china for some time now, we at the october, aess in meeting that ran for several hours, leaving little doubt that he was in control. to that extent, the markets took it in stride, but nonetheless, a significant move and raises longer-term questions about the direction china is heading in. and raises questions about policy direction and a lot of uncertainty. at the very least, it is unclear who will be leading china beyond 2023. and it rolls back some of the reforms over the last two years. longer-term, it is a significant question mark. francine: what does that mean for investors in the business community, and how should they read this? >> well, if you were to follow xi jinping's executive quality, he is doubling down.

the financial system is coming down on that in that will not change anytime soon. what that suggests is that they are willing to tolerate a slower pace of growth. if it means getting the economy into something of a more sustainable footing. the near-term picture should not change that much, but it does raise questions of where we are going longer-term? what does this mean for the broader direction of the country? and if china is willing to bend its own internal rules, what will china play on the global stage? of: the cultural revolution 2022, clearly it will be, this is a gentleman who wants to provide leadership and rule at least into 2022. he has to do that with a communist party. how is it different now than it was 10 years ago or in the time of ping? >> all indications, tom, he has the coming his party behind him,

and has been able to consolidate power and push through changes, forge through his own agenda, seemingly at his own well. we saw this direction that enshrined xi jinping as the most powerful leader. the indications are some of some would say, he made this move from a position of weakness. the broader indications are that he is very much of control and has the party behind him. all indications are that he is doubling down on his agenda. tom: quickly here, does the president own the cities? does he have the support of the powerbrokers of each and every china city? said, china is xi'sstable footing where administration is heading. we don't see signs of widespread

discontent at all. we see some discontent on social media, but the broader story and the narrative in china is behind xi jinping's policies. >> thank you, reporting from hong kong. coming up on bloomberg radio, one of the most talked about books of the season. written a tour de force. yes, it is on the marshall plan, the marshall project, yes on general marshall, but it was at a time when america got rings done. we will do that on bloomberg radio today. york, andn, from new from beautiful washington, this is bloomberg. ♪

♪ good morning, everyone. futures up 11. francine lacqua in london and tom keene in new york. the vix well under 17. in new york city, first word news with taylor riggs. taylor: china is on the verge of

tightening president xi jinping on power. the communist party is set to repeal the ban presidents serving more than two consecutive forms -- serving more than two consecutive terms. it would complete china's department from collective leadership. of the trumparns administration to obamacare would boost premiums by double digits. payments for obama care insurance plans will go up by eight and average of 18% and 43 states. those of the states where there are not limits on less comprehensive coverage. the u.s. supreme court hears arguments in a kasich at have a huge impact on labor unions and politics. the issue whether government employed unions can force to cover them. loss would cut into the money the unions donate to political campaigns.

to --patriates making looking to make big money. the indian financial capital -- foreigners moving to mumbai report average earnings of $217,000, more than twice the global ex-pat average. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. francine, tom? tom: taylor, thank you so much. twoa discussion on central-bank pericarp and breast now discussion-- on two central banks. carsten brzeski is with ing. cyclicalou look at the

indicators, there are issues keeping it at bay. tom: are we in a different season? >> food and energy are falling. this is a good thing. this is allowing us to have a flat phillips curve when we can push on. tom: is this important for europe as well? there was a spectacular chart. takeouter on inflation shelter. you and i know about inflation. san francisco, new york, washington, boston. do you have the same story as carsten? about this differently from a markets perspective. compensation in the united

states is having a convincing acceleration, but it is coming at her highest point of this cycle and is below the lowest point of the last cycle. forld you allow someone labor compensation to move up as a share of national income? you probably should, but you don't want to create financial imbalances. that is the tricky part. francine: all right. carsten, did you look at the ecb? behind in terms of inflation picking up with wage growth? least two years. look it is the most advancing economy, and we hardly have wage growth their. -- we hardly have wage growth there. francine: steve, if you were to

, but if youtric could wave a magic wand and be sure one data point, what would it the? the would look to see strength of employment. we have labor markets, which are growing faster than labor supply. fortunately, it has been at a better balance recently relative to where we were a few years ago, where we had no supply-side improvements. there were 200,000 jobs added per month, but wages were going nowhere. it still shows signs of late cycle strength, and i would agree that the eurozone has a few years to catch up to the united states, and that is a good reason to invest there. tom: chairman powell will wander into the dangers of the

testimony but the house financial services committee. dangers of the testimony what the house financial services committee. i believe he will get a free lunch for 30 seconds and then they will go right in. what should we listen into tomorrow? >> chairman powell has a lot of power to move financial markets right now. it is where financial markets have been. we are coming to grips. we have been busy in the markets in the last month or so, and a busy person is a little more easily pushed over paris of the potential to move markets if there. i don't think -- a little more easily pushed over by the potential to move markets. we had the monetary policy report to congress. they did not change the inflation outlook much. and now you get the nuances

beyond the tables. francine: carsten, do you worry about your levels? the currency, is that your number one concern? carsten: taking the trade weighted euro, which has hardly appreciated, it is not a concern yet. you look at the eurozone economy , domestic momentum is still pretty strong. to undermineugh the recovery. what could be a concern for the ecb is rather in combination with higher interest rates, with bond yields going up, the monetary conditions. about thedo you worry entire election being disruptive for the markets and the economy? carsten: honestly, i do not worry about the italian elections. they are too complex for the markets to derail.

the euro participation has not been issued at all during the election. what he will see here is another country -- what we will see here is more coalition within the next couple of months. thebigger issue is whether economy with high government that could still stand. that is similar to what we see in the u.s. right now. tom: carsten, if mr. draghi advantaged by the way his press conferences are set up. ? for those of you who don't keep powell, 99% of his speeches have been on regulation and structures like that. this will be a whole monetary beast we will see tomorrow. advantaged by the format of the press conference? it tohink they remolded really steer the market and the ecb is well aware of what happens and of code words.

that is what he is doing. tom: i love that. code words. remember, this is not a monetary policy post apple him -- this is not a monetary policy post conference. they can bring up any question known to man a put it on the federal reserve's doorstep. francine: carsten, going back to currencies. what does that mean for the dollar? dollar dynamics when it comes with the fed does next is something we need to remind ourselves of? issten: in the short run, it something that the fed will determine. i would not be surprised to see further dollar strengthening in the first week of the italian election, and what is going on in germany. and only when the ecb, around the summer, starts to introduce end to qe,e -- an

this will lead to the strengthening of europe. tom: we are going to come back with these two. general electric announces three and, boy,members, this speaks a lot about the new general elected. we have different names than in the old ge. stay with us. this is bloomberg. ♪

i'm taylor riggs.

qualcomm shareholders may let broadcom for their company for a cheaper price and shareholder votes next week. it will decide broadcom's hostile bid. one fund manager says investors are not happy with the price, but they are ready to throw in a towel. qualcomm says the higher prices wanted and ones broadcom to negotiate. i do parcel services suing the european union for wrongly the etm express. they threw out the v tell of the acquisition is still going on. is timetanley says it to get bullish on bonds. the firm says the selloff on treasuries that ramped up the last month is coming to end. -- coming to an end. and in china, alibaba is ramping up competition with tencent over food delivery. according to persons familiar

with the matter, alibaba has agreed to buy the shares that they don't own from investors like baidu. the giant has had a 23% stake. it was guided $6 billion last year. and that is your bloomberg business flash. taylor.: thank you, let's get back european politics. tilly heads to the polls on sunday. -- italy heads to the polls on sunday. they said contracts will be added to all parties. over in germany, chancellor angela merkel has nominated an outspoken critic to hurt cabinet. -- two her cabinet. let's get back to carsten chief economist and steve wieting. italy is too

complicated for the markets to worry about it. should we also ignore germany? but could the convictions of angela merkel significantly change depending on what she agrees on? carsten: we should worry about germany because there is a high probability that the members will say no to another grand coalition, which will lead to new elections in germany. that is something that has not been priced in by markets. in the longer run, germany is not an issue because there is only one populist party on the rise and has raked 15%. so there is no risk germany could be become anti-european. francine: what is your biggest concern for the markets? we talk about the repricing of treasuries. what about the repricing in german bunds? what does that mean for the rest of the markets? carsten: i don't see repricing of german bunds.

it could only mean that germany restinally arrived and the of europe that it does not have any stable politics anymore, but it simple he takes longer to find coalitions. but i think the overall stance of germany will be pro-european, so don't expect to see the selling of bunds. see thesel they exceptionally low interest rates? carsten: i don't think so. they will remain -- unitedis is like the states of europe. talk about asian investment and underweight and overweight emerging markets. where are you on the dramatic combine, whether it is the netherlands, or siemens of germany. steve: this is attractive. this is behind the united states . it has more room for recovery. you have nearly 4% dividend yields, corporate debt costs.

tom: do they need to make that more anglo-american? do they need to skew more towards dividend growth? or are they advantage by that high dividend? steve: you have to remember that the sector weightings and where the champions are in various industries are not going to match the united states kbr not want to match china for example. you are not going to find some social media empire being built from scratch in europe, but pharmaceutical companies, for examples, and industrial companies, many of them traded at lower valuations and had lower debt costs, and are really attractive options right now for the next several years. and that is a little bit different from the emerging markets story where you really have depressed valuations and depressed economies, and you find when you get savings inflows and strong currencies, these markets are going up anymore. in the case of these eurozone

markets, you will see that the correlation with the united states is high, and when the currency strengthens, you get into a bit of a headwind. but still an attractive market. francine: ray dalio has a big short on a lot of the big european companies. what does he get right or wrong? steve: i read a story that said, don't pay attention to this. you are going to miss understand this. and that was from ray dalio. i would not make my point of view on europe from those headlines. back.arsten, let's come carsten brzeski with ing and steve wieting with citigroup. stay with us. this is bloomberg. ♪

♪ tom: good morning, everyone. i'm tom keene in new york and london -- and francine lacqua in london. inflation.clinic on let's do that now. steve wieting, carsten brzeski,

here we are with real low rates. up we go and we are still not there on the fed funds inflation-adjusted rates. explain, steve wieting, what chairman powell cares about inflation and adjusted rates. steve: he wants to make sure that the u.s. does not have a boom/bust outlook. clearly, if we go on this trend we are in now, which is moderate increases in short-term rates while inflation is still low, the hope is, and i think a reasonable hope is, we can extend economic recovery, but you can never avoid recessions. the next downturn is not a severe one. that is critical here. that is the reason why, sometimes you take away the punch ball. it doesn't mean you push up real rates to induce a real downturn. tom: an equal opportunity with carsten brzeski. let's go over to german rates,

carsten. it shows that huge diversions, getting up to a real rates scenario. kind of like in the 10 year german. but it is still negative yields and most of your space. carsten: it is extremely negative. why is a german government not investing more? i hope we finally get a german government that could do more fiscal spending. tom: show that chart if you would, the yellow line. we will throw that out at some point on bloomberg radio for radio london. the yellow line is negative two-year german yields that were nowhere. friend challenged the fred and wrote a paper on this. what could j. powell learn from what you observed about negative rates? that it he can learn does work, and it can stimulate the economy. the question is, what can the german government learn from others?

an to understand there is effect of debt and that it could mean growth lauren gdp ratios without too much austerity. francine: carsten, you could say they could understand it? carsten: sorry. francine: sorry. go ahead. steve: the lessons of the austerity trap is quite meaningful. that is with its approach to macro management. francine: the germans have this idea of rapid inflation. i don't think it is hyperinflation. germany is an aging economy and an aging society, so there will be a big burden from their paid pensions and the next decade, so therefore, lowering the debt if there is not

a pragmatic discussion, you can increase your potential growth rate if you would invest more in the economy and infrastructure in -- and in digital. steve, we started the trump administration with stark comment on china, but also on germany. will that feud continue? steve: it has been less of a few to the germany than china. if we take a look at absolute sense, germany is a single national economy with the largest trade surplus, but within the eurozone, it has a slightly different context, but we have to think about it. if you have a single country that is going to try to save is some sort of macro economic risk. it might be less obvious and someone who spends themselves to oblivion, but trade policy with the eurozone and united states

is important, but we have to avoid disruptions across the border activity. we don't want to have a trade war. are we near that? getting a little more face time in the white house. -- and to mr. ross, with other announcements to come. steve: i am hopeful these are essentially skirmishes rather than trade wars. that this is something that does not fall apart when you get tit-for-tat, large disruptions with trade activity because of their is some feedback. tom: very good. steven wieting, carsten brzeski, thank you so much. we want to bring you 42 this week. francine lacqua skiing in the

italian, well ,alpa. s. out in front of the coliseum. it works. in the vatican. these are spectacular photos of a winter wonderland known as rome. just outstanding as well. we will be there with the election. and with francine lacqua, of course. stay with us across all of our platforms. this is bloomberg. ♪ mom, dad, can we talk?

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seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. oh hi sweetie, i just want to show you something. xfinity mobile: find my phone. [ phone rings ] look at you. this tech stuff is easy. [ whirring sound ] you want a cookie? it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. ♪ alix: fit they lose. speakers today serve as a

warm-up act. bond bear versus gold. morgan stanley says by bonds. xi forever. the chinese party could limit term limits. david: welcome to "bloomberg daybreak." i am david westin right here with alix steele. welcome to fed week. and little italian election -- and a little italian election. alix: the market feels like pretty much by everything. a euro-dollar a little bit stronger. it underperforms most of g10 currencies. market.y the bond 10-year yields moving down by 1.8%. a little softer. david: time for the morning brief. at 8:00 this morning st. louis fed