>> trade wars are good. president donald trump tweeds trade wars are good and easy to win. world waits for retaliation. president trump's bold move sends stocks into a tailspin. brace for impact. lyrically charged weekend with prime minister theresa may laying out her brexit plan, it italy is facing elections. david: a big storm outside in new york. >> we have a nor'easter, a harrisst storm -- eight alex: storm. the s&p had its worst first day of the month since february 2016 yesterday. the dollar, the weaker currency climbing0 euro-dollar higher. there was a reversal in the currency market after that tweet. yields go nowhere but there is a

strong safety can bid in europe and economies -- and commodities caught up. this is dollar-yen. so many different things going on. lowestyen is now at the sincethat we have seen the election of 2016. the boj governor says we will lay out a timeline. mr. kuroda and mr. trump duking it out over the yen. the three now for stories we are watching right now. trade war. backlash in the markets. and europe's big weekend. david: welcome marty schenker and lisa. let us start with the trump to. president trump tweeted -- when a country is losing billions of dollars on trade with virtually

every country it does business with, trade war's are good and easy to win. example, when we were down $400 billion to a certain country, and they get cute, don't trade anymore. trade wars are good. sounds like gordon gecko. throw 100 years of gop orthodoxy out the window. he is taking positions that are directly in opposition to it tradition of free trade that has led to world peace and basically , his language is having an impact on the markets this morning. as we can see. while steel and aluminum are important, there are other --ues that could affect including intellectual property. david: we have not heard yet what the other countries are going to do. we know they do not like it. here is a pie chart to show the countries that we import steel from.

canada. china is on that. it is the 3% number. a big purple canada. and a big pink mexico. the country's getting hurt by this is not china. lisa: the european union has said they are going to consider countermeasures. china is taking a more muted approach. economists estimate that the steel and aluminum tariffs will take away of gdp per year going forward. not a huge hit but it depends on what the retaliation is and what this says about president trump who seems to have gone somewhat rogue. and rob porter, a key advisor -- his exiting, was he a moderating force? make the we could

argument that president trump is not an idiot. what is the real goal behind this from yesterday? to donaldording trump, the real goal is to level the playing field. there are democrats that support the terrorists. -- these tariffs. canada, one ofte our closest allies, it is not a great ring at a time when the russian president is displaying in vulnerable missiles. that would never happen if the u.s. was in a position of strength. i think it is worth noting that it did happen just a day ago. alex: let us look at the market reaction. this is yesterday's trade. the red line is when the tariffs were announced. you had the s&p rolling over and closing at -- and closing lower at the end of the session. we are not seeing the safe haven

bid in the u.s. as much today. to not why u.s. today. that makes me wonder how much was the trade war priced out. lisa: our treasury is going to be a haven bid if there is some kind of trade war. onryone has been focused inflation. any kind of trade war will ultimately increase consumer prices. it will make the car more thensive and the beer in aluminum can more expensive. if you have these kinds of consumer prices increasing, higher inflation -- yields may need to go higher. it creates a strange conundrum. in new york, the markets are trying to sort this out. that the whitet house has this level of sophistication? marty: it is clear that the pro-trade globalists in the

white house have lost in this fight. gary cohn, who a lot say was there just to keep these things from happening. you kind of wonder how long he is going to stay there. i will say -- i look at it as you have four communications director's. looks like you will have three national security adviser's. people are leaving the administration. if this were a company, you would short it. alex: let us talk about companies. the steel industry was pushing for this but the other industries -- what is going to conversation with president trump and these companies? how will he convince them that this will not hurt them? conversation with president trump and these marty: he will not be able to. alex: when budweiser comes back and says there are 2 million americans that rely on jobs. marty: the one thing that is clear is that everything should have seen this coming.

this is exactly what donald trump has said he has wanted to do for years. there are white house reports that he would say every day, where are my tariffs? someone told him that he has the power to do it and he did it. i think you will see prompt increasingly isolated and doing more with his instincts tell him he wants to do. alex: that is the political drama in the u.s. theresa may in a few hours could be unveiling her brexit plam. and the vote underway in germany for the stp. those results will be released on sunday. will there be a coalition government? and the italian election. lisa, what is the most european -- what is the most important european event in the next 72 hours? lisa: it could be the italian elections. no one is expecting the far right party to win which is very much a eurosceptic party.

they have been watching all of the negotiations between theresa may and the european union. inve bannon right now is italy supporting the far right movement. if they were to win, the estimates are from a market perspective that italian bonds could sell off dramatically. and essentially double the extra spread that they pay over german bonds. if that were to happen, that could cause a huge disruption globally. that said, most people are not expecting that to happen. might beeve bannon able to get the prime minister elected in italy. we have germany and italy. historically, when we see those verywe look at them differently in terms of stability. wayhe vote went the other and we were surprised, what would be the reaction?

marty: as lisa said, that would be just as catastrophic as a farmer a victory in italy. the coalition that angela merkel has tried to put together for -- this is the culmination of that effort. if she is not able to pull that off, it becomes basically a free-for-all in europe and we could return to the kind of debt crisis we had just a few years ago. alex: is all of the drama coming out from washington -- do they hurt or help germany? marty: germans might say -- let us vote for stability. but immigration is a big issue in germany as it is here. it is divisive. she will have to overcome that. alex: thank you so much. marty with the quote of the morning -- if the u.s. was a company, i would be shorting it. and lisa, thank you as well.

china warns of retaliation if donald trump's tariffs move. we will speak to the head of china research. and let us look at the risk off feel in the market right now. the dow jones off by triple digits. worse of a seen this start in months to the s&p since 2016. the dax at the lowest level since 2016. and the asset classes, a weaker stronger -- a weaker dollar story and a stronger yen and a stronger euro. in little bit steady here in the u.s. traders not able to understand what they should do in a treasury market. do you buy or sell or hold? this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i have your bloomberg business flash. -- struggling film and studio will avoid bankruptcy after all. harvey weinstein has agreed to sell the assets. the buyer is a group headed by former small business administrator chief. the deal is set to be valued at $500 million. pressure is mounting for new oversight at wells fargo in the wake of the fake account scandal. watch her members of the board will leave after the annual shareholders meeting next month. some want all of the directors to be forced out. finland, shares of the

maker of the angry birds game are falling. the company also reported fourth-quarter earnings that disappointed investors. the ceo says management is not satisfied with the current performance of the company. and that is your bloomberg business flash. alex: countries around the world speaking out against the president's proposed tariffs. canada says should restrictions be imposed on canadian products, can a double take responsibility is to defend its trade interest. your came back with -- we will not sit idly by when our industry is put at risk. andeu will react firmly react commensurately to defend our interest. and other countries including china will take relevant, retaliatory measures. on top of that, we have chinese officials saying that the u.s. terrorists hurt the trade -- the

u.s. tariffs hurt the trade system. is with dries mertens us, head of china research. i want to start with you, walk me through what we can expect in the next 72 hours. >> we had quite a forceful reaction in asia. noticeably, it mostly came from u.s. allies. south korea was seeking clarity. japan was reminding the u.s. that it is not a threat to national security and australia expressed his appointment. the reaction from china was subdued. the loser listo in terms of tariffs against the steels, they are down on the list. our colleagues out of beijing have reported that chinese officials are asking for a list of demands on exactly what the

u.s. wants from china when it comes to trade. china is waiting to see what comes out of the meetings in washington. david: is this part of an ongoing negotiation? is this really just an opening bid? it is a curious opening bid. what we have picked up here in asia is there is a sense of frustration that started with the u.s. exiting tpp. onn, it became tariffs washing machines and that hurt u.s. allies including south korea. and now the tariffs on steel. some wonder if we are seeing a trend. it would be hard to see where this is going if this is an opening bid. the concerning thing would be if we get into a tit-for-tat situation. isare not there yet and that why it is so critical to see how china response going forward and whether america does ratchet up

tariffs. david: if china is the goal, ultimately, is it possible he is saying -- let me take a shot on china in a way that does not hurt china too much? we have a pie chart. the steel imports are relatively modest. it is electronics that are a big factor. is it possible that what the president is saying is -- i have thrown a fast ball at you to get your attention? >> that is entirely right. grounduld be the strategy. as you say, going after steel is not the way to hurt china. a chinese official in washington. i think china is concerned. they know that trade barriers would hurt their economy. if you really want to go after china, you have to go with a

broader list of merchandise including textiles and electronics. be there yetear to and that is why it is interesting to hear that china is asking for a list of demands from the u.s. insight on us some the chinese point of view. what do they make of this? senior economic adviser to the chinese president in washington right now negotiating about trade. ultimatelygoing to be rounding to china and that is why they have not reacted as of yet. they will continue to react in a small way. six percent of u.s. imports of steel come from china. -- 6% ofns 94% aluminum imports come from china and 94% do not. he is putting an up across the

board tariffs on these. there will be much more damage to south korea, china and japan. it is ill thought out. -- that is the lead of commotion. china is going to sit back and let washington be the centerpiece of this nightmare that i believe they are creating. time int at some other a more nuanced and minor way. alex: what would that look like? that nuanced and minor way? >> my favorite one is soybeans. we are a big exporter of soybeans. where are they grown? in the midwest corn belt all of which are so-called red states. theink china wants to get

attention of 1600 pennsylvania avenue. no better way than to cast some states of their agricultural lead. some: there has been deflation in china of those agricultural products. are notigher costs going to be important to them. want is for they this thing to play out and let the damage that i believe is going to be caused by it be suffered by washington and the conflict between washington and other major trading partners. and washington will learn and we will go on our way. alex: this comes on the eve of the national people's congress in china. there are a lot of things they have to accomplish their. how will this play into these

conversations over the next 12 days? quite a good is movement in china. there will be a rubberstamp parliament next week. it is coming at a time when there is a pretty stable economy. they will preach reform. and they will send a message to the world that china is a protector of the global order and a police in the existing system. i believe donald is right. there is a degree where china is happy to play for time here. damage toappy for the be inflicted on donald trump's trade policy. until they feel they have to fight back. we are not there yet but the risk has not gone away. for now, china remains in the drivers seat of the narrative. david: thank you for staying up late for us in hong kong. donald will stay with us. i will go. tariffnt trump's

announcement has rattled markets. alex: a check on the markets. it is a decidedly risk off field. the dow is off i nearly 200 points. in other asset classes, a safe haven bid anywhere but the dollar and strong buying in the european bond market. in perjury -- in particular, the peripherals. do withnows what to treasuries here in the u.s. and aluminum slightly higher on the day. prepare your portfolio for the weekend. this is bloomberg. ♪

♪ donald is still with us. to talk about what this means for companies in the units to -- in the united states that use steel and aluminum. toyota saying this is really

going to hurt as. that steelsuggests prices -- import prices will be up 25% and aluminum up 10%. these are cost increases. what are they going to do? they will be sort of stuck. david: and at a time when vehicle sales have flattened out in the u.s. they do not have a lot of pricing power at the moment. out whyi cannot figure this seems to be such an attractive policy to washington. alex: to piggyback, it is not just automakers. it is anything to do with candy, beer cans. budweiser came out and said -- 2 million jobs depend on the beer industry. erase whatng to help they got from the tax cut. donald: and china imports more aluminum scrap from the u.s.

then aluminum that they export to the u.s. china has a trade surplus on aluminum. and china could cut that scrap off and in flipped obvious and immediate damage. pleasure to, such a catch up with you. a lot of news to break down with you. forng up, a big weekend europe. angela merkel's coalition is on the line and you are looking at rome's colosseum. the italian elections this weekend. what does this mean for the future of the eu? you can see the reaction trickling into the market. euro working -- moving higher on the weaker dollar. this is bloomberg. ♪ mom you called?

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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: this is bloomberg daybreak. i am alix steel. it will be a bumpy ride today. operating on to not get long into anything into the weekend.

dow jones futures down by 181 points. s&p futures lower by .4. the worst first day of a month since 2016 for the s&p. european stocks also lower and the dax kit hard, -- hit hard, ahead of potential german coalition government talks over the weekend. another asset classes, a weaker dollar against all currencies, but dollar-yen is catching my eye, down by almost 1%. for a story at the boj. david: they do look at tapering, so they had two different dynamics, the tariff issue and the yen. donald trump said a trade is good that you have persuading to do in the markets. the markets do not agree. alix: the markets dropped. it is interesting to see where the bid is in the bond market

rate not in the u.s. traders do not know what to do with it. david: back to the day he was elected president, this was the concern. people were bullish on de-regulation, fiscal stimulus, but the one concern was trade. it looks like it may have come back to alix: if they price it out quickly, how much they price it and how much of a rating do we have to see? that is the question over the next few days. there is a lot of drama in europe, as well. some political issues. david: a couple. let's get an update on headlines outside the business world with kelly lines -- kelly lines -- kailey leinz. kailey: theresa may delivers a landmark speech on brexit today, when her cabinet haggled over for hours. she will tie herself to a promise that leaving the european union will not destroy jobs and she will want a yield that covers more trade sectors than any previous trade agreement in the world.

a day after saying he was not afraid of the nra, president a greateeted he had meeting in the oval office of the lobbying group. he had surprised the nra by coming up in favor of several gun control provisions. saidof england governor cryptocurrencies are failing. mark carney spoke at the bloomberg building in london. >> we are not worried about it displacing sterling with the u.s. dollar or conventional currencies, but it does throw a challenge, these cryptocurrencies, to central banks and those who receive payment systems and markets and how to reorganize them to better serve customers. kailey: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. david: thanks. it is super sunday in europe, with germany's social democrats deciding whether to join angela

merkel to form a government's and national elections on sunday in italy. we welcome francine lacqua from rome and matt miller in berlin. matt, it is fair to say the markets are priced in and it will be a coalition and angela merkel will have a government to run. what if it goes the other way? is that going to be a lot of downside to the markets? matt: a very good point. if you look, there is almost no hedging investors are doing with the euro as a provision for the possibility of failure. they are long calls if you look at one year risk reversals and barely short at the one week. slightly hedged. no one knows how this will go down. there is no polling. it is difficult to do that in a country of 80 million when only 400,000 registered spd members are voting. those lists are not public, so you cannot single them out and see how they vote.

we have opinion surveys of people who say they are spd voters that 66% would prefer a grand coalition and they think there is a 60% chance this will happen. if it doesn't, and we will get the result of a male-in a vote sunday morning, it will be a big shock to markets that have been fairly complacent about the possibility of government turmoil in berlin on monday morning. alix: fair points. thanks, matt miller. many saying germany will hold the most risk over the next few days but there is the election in italy. francine, what is the latest? well, first, if we go to fundamentals, germany has a strong economy and italy does not. gdp inimproved, 1.5% of 2017, but it remains fragile. unemployment down with three

percentage points above what we saw in the crisis. crunch time on sunday. it is unclear what governments from ancient or -- formation or grand coalition with smaller parties we will have. the market will look for some kind of promise to the market that reforms will go through. it has come a long way and it is unclear whether the person on on street, the taxi driver the road feels the country is getting better. the problem for now is the abandoned reforms don't go on the market ahead, and the market may turn and turn eurosceptic. for the moment, there is no talk of your skepticism and various platforms of many parties that confront each other sunday. this country takes a turn for the worse -- if this country takes a turn for the worse, it could be the worst politically for 2018.

david: that is a beautiful shot behind you. it looks great. that is francine lacqua. francine: it is windy. david: ok, as we look over to italian elections, let's look at what is on the voters' mind. they are divided. as you can see from this chart, the issue of wages could loom large. you see that italy is the white bar, germany the blue, and spain yellow. even spain, if you put the years together, we welcome someone from a with the italian economy, the man in charge of economic analysis for most a decade, and now at the london school of economics, lorenzo codogno. good to have you. what extent, as you look at the italian voter, are they going to be concerned about unemployment,

wages, or what we call pocket push issues? lorenzo: i think that is the most important factor. keep in mind, italy is growing now. actually, growing pretty fast why italian standards. is somethingowth like 5.7 percentage points below the peaks. that means there is no feel-good factor in the electorate. that is why they are still publish thego to targets and inclined to the outside the mainstream. david: if that is one of the major issues likely to be in the election, have any parties made a push on this issue? have they said, i can give you higher wages unemployment? the way donald trump did when he was running? well, promises will not

be maintained because there's no way italy can afford to start a spending spree. most parties have promised to reduce jet to ddp -- debt to gdp, but it is not in line. in other words, no one has said, we want to cut here and there to maintain fiscal sustainability and in order to review the debt p. reduce the debt to gd it is a surreal situation where they have informed done immigration and other issues not particularly relevant in today's italy. the key focus on how to enhance potential growth and reduce the debt to gdp is broadly absent. alix: what should markets reaction be? if you look at this chart, it is nonexistent. the white line is the italian 10 year yield.

you see it moving lower as there is safe haven buying today in europe. you look at the blue line, which is italian credit spread, and they are also widening a bit but not much. is that an appropriate assessment of the economy and risk? lorenzo: no, i think the market is very complacent now. people are looking at the global scenario, with trade wars, the decision in germany, 20 of events that could upset the national market, including the italian one. there is a lot of complacency. i would focus on sunday night on the outcome. my take is that there is a 30% probability we are going to have a central rise victory, meaning they centralized maturity parliament to form a government. 70% will be to the parliament. the key issue is what is the composition? suppose we have a center-right victory, it would be key to see whether the far right as the

upper end in terms of majority within the coalition. at the same time, if we have a hung parliament, we have to look at the situation and see whether there is a chance for the anti-establishment, and to your parties to form a government -- anti-europe parties to form a government. we have to look at the results on the evening to understand what the situation can be. alix: that is the situation in italy. many are looking at germany as the longer-term risk if they cannot form a coalition with the cdu. what is your base case and what does that say about european integration? lorenzo: it is a crucial moments. combination of the votes in germany and italy can be crucial. for at least one reason, because it is well understood that between now and december, they will be a big debate in europe about the future governments of

europe, and additional steps up integration. if we don't have a government in germany or one in italy, or we have an strange governments, we might run into a problem because probably all these decisions will be postponed. it means it would postponed by maybe 2.5 years because i knew enter into a time to close to the european elections in the spring of next year. there will not be the technical time to pass all this legislation. i think it is a crucial moment. events failed to provide a good outcome, again, europe will postpone any reform for at least a couple of years. david: thank you for joining us directoron, former general of the italian treasury, interesting to have his perspective. alix: i want to look at how we are looking at the markets in europe. you are looking at european

stocks down by over 1.5% in the dax off by two. the euro is stronger. that is a weaker dollar story. president trump tweeted trade wars are good, and that made it go lower than the euro. anywhere you look, except for greece, you see the 10 year italian yields moving lower by four basis points, bund by three, not what you would expect into a weekend where you could see political turmoil. we still have earnings trickling out in the u.s. jcpenney getting slammed premarket. they missed the average analyst estimate and adjusted earnings per share for the year on the high-end with 25 cents and on the low end, 5 cents. the midpoint missed. sales came in lights, as well. one of the retailers that living up to that solid holiday expectation. david: there is another chapter

in the ongoing saga of iheart communications with the heavenly indebted company. they now have a new term sheets, not agree to yet, but a new term sheet, basically ramping up the equity that would take away from the junior debtholders and shareholders. they have not agreed yet. this is john malone, saying he might like to help them. coming up, we will have more on beat. in our wall street you can tune into tom keene and jonathan ferro from 7:00 to 9:00 in pimm fox joins them from 9:00 to 10:00. bloomberg surveillance can be heard all across united states on sirius xm radio. light from new york, this is bloomberg. -- live from new york, this is bloomberg. ♪

♪ kailey: this is bloomberg

daybreak. i am kailey leinz. coming up, walter todd, greenwood capital associate managing director and cio. david: we will turn to wall street beat, where we cover three things it is buzzing about. first, wells fargo in the crosshairs with senator warren tooming chairman powell and boot, a new sec investigation. number two, schwartzman had a good 2017. number three, iheart radio on the verge of bankruptcy, but management might get nice rewards. alix: joining us is jason kelly, executive editor for global television. wall street will really be talking about the trade wars,

this a lot in the markets and what president trump is thinking. jason: we have this window into what people are talking and thinking about in the bloomberg. i was looking at the most read and it is trade, tarriff, tweet, trump, and it is amazing the market reaction. the reaction from that tweet from the president this morning. alix: a lot of the president's advisers or committees all come from wall street. like schwartzman and the likes of those guys. what is he doing on a day like this? jason: it is hard to know what they are doing other than putting their head in their hands. one of the people we have been hearing a lot about is gary cohn , who by all accounts was -- this is intentionally his last stand on the white house. david: it got delayed yesterday. they said they were going to think about it and it went back and forth. rumors are there was a big fight in the white house with gary cohn another saying, do not do this. jason: speaking of wall street

figures, one person who is a big proponent who comes off is wilbur ross, who has been the strongest voice candy administration, other than the president, from what we saw announced yesterday. we will see how it lays out next week. the markets globally are reacting strongly. david: that is the big story on wall street and other things going on like wells fargo. we were watching yesterday when elizabethell and warren went after him, saying, when are you going to get to wells fargo? they cannot get it out of the way. jason: they cannot, and we talked about gee on this program a lot in terms of the drip of bad news and you see it come back. another sec investigation uncovered yesterday into their wealth management unit this time. we were starting to see that four directors are going to step down, called for by a number of people. some have called for the entire board to step down, being

culpable for all that has happened. david: it is interesting because sooner or later, it does get to the board. we saw the ge board members leaving and out wells fargo. there are consequences sooner or later. it feels like we may be at a moment where directors are starting to get held more accountable. next week will be huge with qualcomm and broadcom and that will hinge a lot on the board. alix: let's backtrack to steve schwarzman. he did not have that big of a great year in 2017, only making $786.5 million. whatever. jason: it is amazing, i was talking to a producer who said, i saw that headline and thought, that is winning the lottery. it is more. ever,ggest lottery tab six hundred 50 six lane dollars, roughly $100 million less than steve schwarzman last year. alix: amazing, i don't know how

to respond. [laughter] david: the thing is, that is an amazing number and he is not alone. there is the competition that is substantial. jason: and i'll and private equity. alix: but does that tell you? jason: that it is a very lucrative business. alix: but all we find appearing as their eyes all this money -- is there is all this money, and they are becoming something more than what they started out to be. jason: that is true. $434 billion roughly under management at blackstone, more than double their nearest competitor and so much is not private equity. a lot is real estate, the biggest driver of all time. we saw that really notably over the last few weeks with john gray, with the president, chief operating officer, he came up through real estate and built a real estate franchise. this is more than private equity. it is real estate, hedge funds, credit, and it is firing on all cylinders.

obviously, it played out well. david: and one minute on iheart. a radio company and more now with a lot of digital and global business. they are rumored to be going into chapter 11 bankruptcy and today, they have a new term sheet. one thing that happened is the committee said we have to pay the leadership a fair amount to get us through, including the head, getting paid a decent amount of change. jason: 15.5 in bonuses. steve schwarzman recall that lunch money, but a lot of money, especially for a company that interestingly also ties back to private equities. ins is one of the big lco's the boom in 2006 and 2007 and that debt -- david: and that is what he would say if you were sitting here, if you look at our ongoing concern, we have been growing, taking a lot of money, but we started out way behind because it was so much debt and the company from private equity. alix: how would you convince

bondholders to take a loss when you read the headlines? david: because if you don't pay them that much, it would be worse. alix: it would? a guy who knows the company well. i making this up, but that is what they are saying. you have to pay back to make sure they get through it. jason: exactly, and the complicated negotiation. there was literally reporting as i walked onto the set with you guys, it will be a busy weekend for them negotiating back-and-forth but it looks like the executives will be well compensated. david: they will do all right in the end. thank you to jason kelly. coming up, we are talking about guns, but does it affect how many are being sold? we will have one report. that is what i'm watching. alix: trade war's are good, the tweet that tank the equity markets this morning. dax off byn and the

2%. in other asset classes, dollar treasuries not behaving as a safe haven asset. the dollar lower, yen stronger, the story in the currency market, the weakest levels since 2016. no one knows what to do with the treasury market in the u.s. and aluminum up by .4, not the bounce you would expect from tariffs, but will be trade war continue and explode? that is the focus of the market. this is bloomberg. ♪

♪ david: guns, that is what i'm watching today. we had been hearing a lot of different companies with dick's, walmart, cutting back on sales and now it looks like it might be hitting some of the stocks of the companies. outdoor american brands, formally smith & wesson, said we are going to miss the on earnings-per-share and revenue and it will keep going. we don't think we will sell that much. just yesterday, they are down

10%, on top of a pretty struggling year overall. if you look at where they are year to date, the are down. these gun manufacturers are getting hit and rumors are others are following suit that there are thus being sold. alix: that should not be the case because president trump is going to try to put some background check or age restriction, -- that should incentivize buyers. the other company we are watching jcpenney, cutting 230 job positions. they are getting clobbered after a weaker earnings report read much more coming up with markets the conduct red. this is bloomberg. ♪

♪ trade war's are good. president trump tweets they are

good and easy to win while the world waits retaliation. and president trump's bowl trade moves sends stocks into a tailspin and brace for impact. a politically charged weekend with theresa may laying out her brexit plan, italy facing elections, and germany's last ditch efforts to form a government. david: welcome to bloomberg daybreak. i am david westin with alix steel. alix: it is a risk off day and you can see the impact of what happened once president trump tweeted. pickingar is lower, and up steam to the downside, euro-dollar modestly higher, despite german elections and the dollar is dropping like a stone on that tweet. no one knows what to do about treasuries. if you want a safe haven bid in the bond market, you have to go to europe. sovereigns are well bid there

and crude oil softer on the day. but truly illustrates the trump tweet is dollar-yen, already with significant pressure because you had the boj laying out some kind of timeline for a taper further monetary policy program in april the 19th but continue to the downside to the drop, when the tweet hit. david: it was not just the markets reacting to all the news about tariffs, but a reaction from capitol hill and the fed. >> there are many approaches to dealing with the cost of globalization but protection is a dead-end. trade restrictions address the symptoms and not the underlying problems. >> as chairman bernanke he said, sort of the terrorists approach is not the -- tarriff approach is not the best, the best is to deal with people directly, rather than falling back on tariffs. >> we had a great industry at one time in steel, a tremendous

aluminum industry at one time, and china has run us out of is this, basically they stole the business and i support it. >> the steel industry has been in decline for over 30 years at this point. the reason it is imperative to take action now is because receding continues unabated. >> yes, we need to address unfair chinese trade practices but in a way that doesn't jeopardize the gains we have seen in america. david: from reactions from the markets and investors, we welcome walter todd, greenwood capital chief investor and cio. let's start with gross and inflation. what it could mean in a practical matter for the economy. walter: i think bill dudley made a reference to it, it has the implication of surprises. that is the intention. ahead, you want to agree on a quota, get the price up from u.s. reduction,

higher prices, more u.s. production, and even the chinese would be happy with that because with their quotas, they would be served under the tariff barrier rather than outside. alix: president trump just tweeted saying, we must protect a countries and workers. are steel industry is in bad shape. if you don't have steel, you don't have the country. if you don't have jobs in manufacturing, you may also not have the country. does this make you want to change how you invest in u.s. equity? walter: at this point, i don't this is another day in the life in the market of 2018, where we can find a reason to selloff, and now, the market looks at the shadow and sells off. i do not think it is the reason to change our strategy at this point. a lot of people say this is a negotiating tactic, and after front and trade policies, so

that could be the case, but i think it is a slippery slope to go down and something we need to watch and be aware of, but at this point, creating opportunities in the market. is the question about something broader than steel and aluminum? trades was the only action he took, what effect would it have as opposed to other things question mark -- other things? steven: the impact is so narrow, so the impact is probably modest. rder ofd be second o 10%. if you look at the list of aluminum plants people are discussing in reopening, they are all in spades that president trump would like to admit again. here,is a dominant story and i think the motif of president trump that he is

trying to show he is keeping all his pre-election promises, whether immigration, tax reform, and trade is one. alix: fair. we also saw this happen in the bush administration, and it looks like the identical market reaction and he stepped back after the wto said, no way, no how. this is a deja vu in the bloomberg, the white line is the s&p, the yellow is the dollar spot index, the blue is dollar yields, and the ride is the tariffs we saw -- red is the tariffs. where are the opportunities? walter: we think it is in the cyclical sector. if you look at the backdrop for earnings and economic growth despite headlines, it leads you into areas like industrials, materials, financials that would benefit from a stronger growing economy and we think that is still the case. alix: even if some industries have to pay more? walter: that is a risk and it is reflected.

look at what happened to the winnebago industries, they went down yesterday because they use a lot of steel and aluminum, a risk on the margin front. the reactions would think that overdone relevant to the reality. they're in mind that we have a president -- bear in mind we have a president who has defined himself by the stock market and how it has them. if it continues to go down, you could imagine he will try to backtrack on some actions or at least on twitter. alix: you would buy the dip? walter: we would at this point. alix: this is the s&p operating margin of 13%. you will not by the s&p for operating margin, but if you look at the story, it has been earnings, growth, global synchronized growth. if you take us off the table because of a potential trade war, what are you left with? it depends how much you take off the table. if it is across the board, that is major and serious. these are areas that may have

fought over before in the past and we know the outcome. we went china to take chinese capacity and put it into the midwest. we want them to limit exports. they could have a nice margin and u.s. producers could stay online. we know how it ends up. the most likely path is not disaster. david: that this all feels vaguely early 20th the late 19th century, all about products, not digital, not the new economy at all. the economy is different. in fairness to the president, there is a segment of the u.s. left out in the beginning from trade. everyone wants to help them but nobody has done it. there are problems in many areas. economics does not work. the politics works, and he is trying to keep this promise to

the segment left out. alix: the concern is regardless of how broad-based it is, on the margin, you mention cyclicals. how are you positioning your portfolio for inflation and does it change it for you? walter: terrorists by fs byelves -- tarrif themselves would be more inflation are in the u.s. and energy would benefit, materials, and you have to watch the margin trade up with the increase in your input prices, but we think you want to be pro inflationary and not disinflationary in sectors like consumer staples. alix: what does it mean for the consumer market? everyone seems like they don't want to touch them now. toven: there is a tendency save haven, and part of the reason they are so low, and the market is fighting against the tendency because they see inflationary pressures. they just had the fed reasonably

hawkish with respected not talking too much in bending the 2% target. so they say, what is the second-best safe haven? japan? europe? those guys are bystanders on this. that is the bond market they are going to. i think there is ambiguity about the u.s. treasury market here and it isn't a clear buy or so. on thelso joining us phone is j.p. morgan analyst who covers basic materials, which steel producers are going to benefit the most? help us break it down. >> u.s. steel would probably be the top with the highest agree of leverage to pricing in the u.s. market, and second-biggest steel producer behind new courts, so u.s. steel. alix: do they have the capacity to ramp up capacity to 80% in the u.s. to make up for the lack of steel and aluminum we will not import?

michael: yes, and their products have enough capacity to ramp up. there might be some products there will be gaps for sure. david: this is why the president just tweeted, he is worried about the national security aspect is this move enough to build up capacity? forget 80% or 85%. that is not going to make us independent on steel if there is a war. is it expected to lead to a huge investment in you steel plants? nohael: that seems unlikely, . it takes years to build steel plants, at a minimum, three years. that: is the net effect they may pay more money to employees but it will not address the national security issue, if there is that issue. michael: that is correct. the security issue you could say has been undermined for years in terms of unfair trade and steel. to be honest, fair trade in

steel has been unfair and i'm sure in other products, as well. the big problem that the industry has, and in trade is circumvention, so a great example of that last year was when the chinese were brought to case of anti-dumping of coated steel sheet products and they were found guilty and they tariffs,300% to 500% which would knock them out of the u.s. market. their share in the u.s. market in these products were anywhere from 6% to 8% of the u.s. market at the time, and once they went into effect, their share, chinese share in the u.s. markets and in products went to zero. at the same time, vietnam share of those products went from near zero to 4% to 6%, so what

typically happens is a country or foreign producer gets a high tariff that knocks them out of the u.s. steel or aluminum market, and they just move that production through another country, like vietnam, that does not have or has low tariffs in the u.s., and that is a form of circumvention or a way to avoid our trade laws. i think what trump is doing, besides trying to meet some political promises he made, is to address this circumvention issue whenever secretary of ,ommerce ross talks about nafta he is usually referring to a country of origin issues as the main problem with people circumventing nafta laws, moving products from outside nafta through mexico or canada into the u.s. it is tough to stop it. you really have to address it on an individual basis. this is more of a shotgun approach, which also hurts trading partners who are trading fair with us. it is a way to address this

circumvention issue. david: i appreciate that, really helpful, michael gambardella of jpmorgan. steven englander and walter todd bowles stay with us. alix: risk off day in the market, trump tweets, trade wars are good. much goasuries and you nowhere, stocks lower, dollar weaker, dollar-yen at the lowest since 2016. what do you do on a day like today, when you have a lot of european risk over the weekend, as well? he will help break it down. this is bloomberg. ♪

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today, alar-yen down risk off in the u.s. and donald trump tweeting about trade in the bank of japan the latest central bank to join the qe unwind conversation. speaking about it, he said right now, the members of the policy board, and i think prices will reach 2% around fiscal 2019. it is logical we would eat debating an exit at that time, too. -- we would be debating about an exit at that time, too. still with us, walter todd and steven englander. how much more downside can we see in dollar-yen before gets crazy? steven: i think the boj is getting close to a point where they worry about this. 100,ple of years ago was the real breaking points, and i think now, it is more stressful for them because if you think of their policy, they have told the japanese people, we will take

away your escape bonds even though they did not yield much and force you to go into equities. right now, the equity market is tanking in japan. theirk they are facing own political issue here. i do not think they can carried this through newly as sars the market is worried about. alix: which is so weird the timing, today, of all days on the yen had seen a safe haven surge with potential hedges unwinding and flows back into japan, and he picks today to make that statement, i was puzzled about it. i am, as well. it is possible he is looking ahead to the japanese olympics, a lot of fiscal stimulus and activity that comes with that, do we really need to be maximum fiscal and monetary at the same time? but the timing is public. had it been 115, i could understand it. david: walter, it is also possible he was not paying attention.

too often, you describe all these thinkings in the government and they just miss it. to what extent does fx plate the significant role? walter: we are primarily domestic. david: still, u.s. companies have to worry about fx as they export to get income them outside. walter: absolutely and it speaks to finance and the markets. it creates financial stress, particularly when they move rapidly in one direction than the other. it is more big financial stress indicator to us then looking at the fx specifically. i went to make the point about central banks and the collective central bank balance sheet globally because to us, that is what you want to watch. that is the game changer into 2019, when the global central bank balance sheet peaks and starts to fall, that is a significant drain of liquidity out of the system and that would be a significant change for us. david: let's talk central banks because mr. kuroda was not the only one. jerome powell gave testimony

yesterday, second day, and it came back on the question of inflation in the labor markets. jerome powell: we see wages trending up a little but most continue to grow at 2.5%. nothing in that suggests to me that wage inflation is at a point of acceleration, so i would expect that some continued strengthening in the labor market can take place without causing inflation. david: of course, this is the second day of testimony in front of the senate. the markets reacted quite a bit because they took what he had to say meaning raising rates higher. where are we now? ssteven: that is my interpretation.on tuesday, he did not take an opportunity to be balanced. the emphasis was on the hospital -- on the hawkish and fiscal. i think he was trying to convey it is good news if we do

four because we will only do it if the u.s. economy is strong enough. we are not trying to tank the economy but we see a wave of demand and data sort of appropriate to move faster. i do not think the market took that message but that is what i took. alix: does this make you change anything in your portfolio when it is being removed and the yellen we knew is trying to get thrown out the door? walter: not really. we are watching the fed for the extent that the yield -- the shape of the yield curve, i think the fine line the fed is trying to walk is reacting to the stronger growth but having big yield curve not inverted because that means likely a recession in the next 12 months to 18 months. that is what we are focused on as it relates to the fed and their actions. we think they will go three and not four this year because i don't think the market will give them room to go four, but we

think the balance sheet runoff could keep upward pressure on the back end of the curve and all the spending we do in the government. alix: i went to pivot thatalix: into what it means for global yields. bloomberg.this is a conversation in the bond market now. the white line is the 10 year treasury and hedge in euros and the blue line is the generic tenure bund yield. the yellow line is the japanese jgb 10 year yield. because hedging costs are so fx is so high, you are losing the pickup you would expect from 10 year yield. what does that do to fx and the global bond market? steven: i think it forces investors to make a decision. they cannot buy hedge funds because there's no point. they are not getting anything out of it, so they have to decide whether they're confident enough about the dollar, u.s. economy, and everything together and they can go in un-hedged. right now, the lack of

confidence -- and there is also some central bank selling. it is hard to detect, but you have this read from the way custody accounts are moving, other partial data we get, that central banks have decided to have enough dollars and they are trying to get rid of them on top of the everything happening in the bond market. alix: and on top of what we see in europe over the weekend, so a big weekend ahead with the u.k. prime minister theresa may speaking at 8:30 a.m. this italianand you have the elections sunday, when polls open at 1:00 a.m. eastern, and germany results will come out, and they're currently voting now. joining us with maurice stephanie flanders -- joining us with more is stephanie flanders. what is the biggest risk? stephanie: i think the biggest is you wake up monday morning and the three political question marks that investors have been trying to not think about asked a look at this lovely economic

recovery in the eurozone have all somehow turned out in a way we were not expecting, so we still don't have a german government because social democrats have rejected the grand coalition.we perhaps the tail risk is a get a strong results for the really outside parties who might be able to find a government by themselves. we don't think that is likely but if we end up with that monday morning and we had a real stalemate on brexit, those three political risks suddenly leaned larger. i do not think that is a scenario investors are banking on but i think they are waking up thinking, wow, there's a lot and play the next days. david: the markets have shown amazing resilience to deal with uncertainty, particularly with europe and washington, but there are a lot of us under assault. two years ago, -- not result. -- not result. how much are the markets counting on answers to the

questions you pose? stephanie: if we think back to a year ago, you were looking at major uncertainties on elections and friends and an outlier result in germany. none of the big risks manifested themselves and that puts europe been stronger place. they were these remaining question marks that we decided to not matter and we could just go on and look at what was happening economically. they are still there and italy has that capacity to bite you eventually but i expect not in the next months but something people should keep an eye on. ministerur prime theresa may is scheduled to start speaking a few minutes from now. what do we expect to hear? will the markets get more certainty from that? stephanie: i was talking to the governor of the bank of england and he was trying to be polite the waiting to see what she said but i think there are low expectations among businesses

from the speech because there have been a lot of big speeches from theresa may and colleagues and they were billed as being speeches that would give us clarity. thatill only have clarity europeans think are practical. what the british are asking for from the europeans is something which the europeans have said in terms they are not willing to give, and we can get past that. alix: steve, do you like the euro-dollar into the weekend? teven: dollar-yen down on my pick. alix: walter, do you hedge risk into the weekend? walter: no, i don't think you do. i think you take the opportunity to buy the dip the way for strong economic growth. englander and stephanie flanders will be sticking with us. in a few minutes, theresa may

will be giving landmark brexit speech, looking at what is happening in the sterling market with the pound dropping but back up a little in part is also the weaker dollar. and broader europe, euro-dollar stronger despite issues into the election in italy and the german coalition. european stocks will over and a bid anywhere you look in the bond market. italian 10 year yield down for basis points and boomed down to basis points -- two basis points. this is bloomberg. ♪

alix: this is bloomberg daybreak. here was the tone set, donald trump tweeting trade wars are good. .utures are off 273 points

it's the worst first day of a month for the s&p since 2016. we building on those losses today. european stocks were hit hard. the dax is rolling over 2%. we will hear more about the coalition government over the next 72 hours. the dollar is getting hit. the dollar-yen is where you see a safe haven bid. some of this is coming from the boj, we could see the end of qe starting in april 2019. ?here do you go for safety the market tells you to go to the european bond market did german bund yields are down. u.s., we just started to see some margins in the back end of the curve, a little bit of selling on the margin. it's nothing to write home about. the vix is picking up speed. there is a lot of uncertainty in

the next 72 hours. david: we are moments away from the address from theresa may on the question of brexit. still with us a stephanie flanders and stephen it. mayors residence. what is she trying to accomplish? who is her audience and what do she need to tell them? stephanie: there are two audiences, three even because she's talking to the british people in theory as far as anyone once to hear another word about brexit at this point. she is speaking to her party and she is speaking to brussels. i think a little bit less to brussels over the last year, a lot of talking about brexit has been a mastic late oriented. she is trying to square various -- terms ofurn owns supporting her own party. her colleagues of said this is

the first time she admits she can't have her cake and eat it too. she recognizes there will be changes that come out of rights it. -- brexit. the test she is going to require , it's still like she is asking for something quite general, but not collectively possible. not having any friction on the border in northern ireland, having a free border there and having control over trade policies, those two things are not things the europeans think you can have while still having a consistent agreement. david: this is not the first speech we've heard from her on this subject. the market has deeply discounted any clarity? steven: i think she's making a mistake. this is a speech he could have given it two years ago. right now, the market wants to hear this is the nature of the deal and we are getting closer, andout general principles

aspirational stuff. the market says you are telling us you are nowhere close with brussels and it's a negative not a positive. alix: in terms of the markets, sterling is trading higher. has a 150 call for cable by the end of the year, saying the risk premium will play out more. how you view that dynamic? steven: i don't see it. i think there is damage to the economy coming down the road. nothing has happened. once it becomes more concrete, when you see jobs moving out and firms positioning themselves for brexit, you will see weaker sterling. it's not necessarily against the dollar as the euro keeps going up. it's against the euro on a trading basis. david: looking at it from over here, it may be different from where you are, i'm struck by the

prime minister fighting a two front war. jeremy corbyn is behind her and she's got others in front of her. how did she manage that? if she moves in one direction, the other side comes out her. stephanie: it's a decent perception. she has members of her own party, not just the labour party, which has a clearer alternative. she comes off as a bit more realistic. going back to stephens point, what the problem for her and for the markets is she's getting to a point where her inability to give clarity and to make leadste basel's herself the europeans to say if you are not going to come up with anything, we will fill in the gaps. we've seen them come up with the lowest common denominator solution because we don't have anything else from the british. that lowest common denominator

could end up being a slightly different version of brexit than we might be expecting. entirely of her making. it's where she's been forced to go because she's left nowhere else. she is not made her own speeches. david: it strikes me, it seems like there was going to be a transition. the last time we heard from michelle barnier, he read questions about that. is that in jeopardy? stephanie: once you have language in europe and you have all of the countries agreeing to it, it's hard to change. once we have this language coming out of europe saying this is what we understand the agreement to be, it's hard to change that. i think we will get the transition agreement, but not if she starts rejecting what he believes they signed on to at the end of the year and that last-minute compromise around ireland. alix: when we listened to her

speaking, will you measure it as a successful speech? what would you have to see? steven: i would look for something that suggests they are moving it to an agreement, that she and the europeans see eye to eye and there will be common language. alix: like what? steven: even if she says specifically we think we can ireland, compromise on we can do this and we are moving in that direction, to put it out there like a child's birthday party when you say this is what we want to this is what we're going to get, markets will react badly to that. alix: what volatility do you expect? they could slip and you have a hard time getting past that 1.5 level on the 10 year. steven: it's like the treasury right now. often, there is a safe haven. the worst prospects for the u.k.

economy, they are going to hike and support yields. it's not really the trade you want to be in right now. i've: one of the things been curious about going back to the ireland issue, looking from over here, if there can't be a border between northern ireland and the republic of ireland, doesn't that mean there can't be a border between the u.k. and europe? where is the border going to exist? stephanie: this is what the optimists would say there is going to be minimal economic damage. that is what people believed on the basis of the agreement she raced at the end of last year. it's not where members of her party want to go. you could end up being forced to be in a customs union type situation where you can't have that hard border between the north and south of ireland or as the irish see. you just treat the island

differently. that's not acceptable to her party either. that was the voice of optimism. we talk about where sterling might go, the reality on the ground will push stocks in place even though she's not doing any of the running right now. alix: we want to reset for you. we are at the mansion house in london. we are waiting for theresa may to come in and make her case for brexit, lay out her specifics. what will they be? will that be successful? the warriors you have custom unions. -- worry is you have custom unions. when you have the party building to want a custom union, it won't be the one they are currently in, how does that change the conversation? stephanie: they are not going to be in the customs union because

the customs union is the european union. has a customs union with the eu, that's what we would be looking to develop, a good customs union. i think the important thing which people are not understanding here is you limit your ability to negotiate trade it doests and goods, not affect services. it does not include services. that's an important and of freedom. i'm surprised the prime minister has not done more to that. we thought we would have some freedom. david: as we continue to wait for theresa may to give her youess, we will play for what she is up against, what people have suggested to her. newabor would negotiate a comprehensive u.k. eu customs

union to ensure there are no tariffs would europe and avoid any need whatsoever for a hard border in northern ireland. >> brexit will mean a change in the way british and other unions do business. it has to. if we are going to make good on the referendum results. we could strike our own trade deal and our own immigration policy and make our courts sovereign. >> this is not a given. david: there you have a taste of three constituencies. you have the opposition, her own party, then michelle barnier and eu. we are waiting for her to give her a dress. countrymenre some who cringe at this, tony blair once a vote of the whole thing.

support in great britain at this point for another vote? stephanie: there's not much support for any kind of vote, let alone a referendum. the prime minister does not have a majority government today. there is a risk that you might have to go back to the people for a general election. no one wants another vote. most people don't want to hear anymore about brexit, even though there are some the questions to be resolved. sidelines, people are talking more about it. it's salable, a second referendum. stephanie, hang on one second. theresa may is taking the helm for her brexit plan. theresa may: thank you for hosting us this afternoon.

in the midst of the bad weather, i would like to take a moment to thank everyone who is going the extra mile to help people at this time. i think of our armed forces and emergency services keeping people safe. all of those keeping services going and the many volunteers who are helping those in need, your contribution is a special part of who we are as a country and it is all the more appreciated in a moment like this. i am here today to set out my vision for the future partnership between the united kingdom and the european union. there have been many different voices and views in the debate on what the new relationship should look like. i have listened carefully to the mall. as we chart our way forward with the eu, i want to take a moment to look back. ago, i stood in

downing street and addressed the nation for my first time as prime minister. i made this pledge then to the people i serve, i know you are working around the clock and doing your best. i know life can be a struggle. the government i lead will be driven not by the interests of the privileged few, but by yours. we will do what we can to give you more control of your life. we will think not of the powerful, but you. when we pass laws, we will listen not to the mighty, but you. not theprioritize wealthy, but you. when it comes to opportunities, we won't entrench the advantages of the fortunate few. we will help you, whatever your background, to go as far as your talent will take you. we are living through an important moment in our history. union,eave the european

we will forge a new role for ourselves and the world and we will make britain the country that works not for a privileged few, but for every one of us. that pledge to the people of our united kingdom is what guides me in our negotiations with the eu. for me, that means five things. first, the agreement we reach with the eu must respect the referendum. control oft to take our borders, laws, and money. in england will never be left behind again. vote for a distant relationship with our neighbors. the new agreement we reach with the eu must endure. after brexit, the u.k. and the eu want to forge ahead with building a better future for our stay at the

negotiating table because things of broken down. third, it must protect jobs and security. people voted for a new and different relationship with europe. while the means may change, our goals do not. to work together, to grow our economy, to keep our people safe. fourth, it must be consistent with that kind of country we want to be, a modern outward looking tolerant european democracy. a nation of pioneers, innovators, creators. a country that celebrates our history and diverse city, confident of our place in the world, that meets its obligations to our neighbors and for itsand stands up values. fifth, it must strengthen our union of people. we must bring our country back

together, taking into account the views of everyone who cares about this issue, from both sides of the debate. it's my duty to represent all of the united kingdom, england, scotland, wales, northern ireland. from coastal clowns -- towns to the great cities. we will implement the decision , reachingtish people an enduring solution, or texting our prosperity, the liver in an outcome consistent with the kind of country we want to be, bringing our country together, strengthening the union of our people. we are now approaching a crucial moment. there is no escaping the complexity of the task ahead of us. we must negotiate our exit from the obligations the touches so many important parts of our national life, we must build a new relationship well given the

uncertainty and challenge of the negotiation. we are making real progress. at the end of last year, we agreed to keep our withdrawal. we are in the process of turning that agreement into legal text. we've made it clear our concerns about the first draft published on wednesday. no one should be in any doubt of our commitment to the joint report we agreed in december. we are close to agreement on the terms of the implementation, the key element of the deal in december. there are some points of difference. i'm confident these can be resolved in the days ahead. the u.k. and the eu are clear, cannotplementation time become a permanent solution. it is vital to give governments,

businesses, citizens on both sides the time they need to prepare for our new relationship. i want both sides to turn all of our attention to that new relationship. before we can do that, we need to set out in more detail what relationship we want, building on my foreign speeches. last month, i spoke in munich about the security partnership we seek. i want to talk about the other pillars, how we build up equal -- economic partnership. in florence, i set out why the existing models do not deliver the ambition we need or impose unsustainable constraints. wouldrway model, where we stay in the single market, means of lamenting new legislation automatically and in its entirety and will mean movement.

we could negotiate a free trade agreement like canada has negotiated with the eu. these options would mean a significant reduction in our access to each other's markets. this would mean customs and regulation checks at the board that would damage the supply chain are industries depend on. it would be inconsistent with the commitment we have made in respect to northern ireland. this is a wider issue in our negotiation. successive british governments have worked tirelessly together with the parties in northern ireland and the irish government to think about a historic achievement. we should all be proud of it and protect it. why i have consistently

pushed up holding the belfast agreement at the uk's approach. as departure from eu causes particular challenges for northern ireland and ireland, we joined the eu together 45 years ago. it's not a surprise that this is caused anxiety for solutions. we've been clear all along, we don't want to go back to a hard order in ireland. we have ruled out infrastructure at the border or checks and controls. it's not good enough to say we won't introduce a hard border if the eu forces ireland to do it. a responsibility to help find the solution. we can't do it on her own. all of us must work together. we agreed when we met recently that the commission should do that. final point.e one

it would be unacceptable to go back to a hard border between northern ireland and ireland, it will be unacceptable to break up the united kingdom's own common market by creating a customs and regulatory order on the i received. my commitment to this is clear. as prime minister of the united kingdom, i'm not going to let our departure from the eu to anything to set back the historic progress we have made in northern ireland, nor will i allow anything. david: we been listening to theresa may in london. i think what i learned this she has five principles she wants to follow. i learned that it's very complicated. they are trying to reduce the legal language. alix: it made my skin crawl. what to do we learn that was new?

what did you learn? steven: it was very much as expected. the disappointment as she has nothing more to say. it's pretty clear. the problems in northern ireland are solved. the irish parliamentarians have a veto on what they are going to do. i did not see any glimmer of the solution there right now. this will rank as a disappointment in market terms, even though the market wasn't expecting much. alix: we have a risk off tone this morning. it was weaker heading into the trading day. then you had president trump tweeting that a trade war is good. you saw equities take a tumble. the dax is off 2%. openutures are looking to .6%. -- down .6%. now we see that fall through selling. the dollar is weaker.

you have the dollar yen down but i -- 5.7%. where'd you go for safety? many traders are going into the bond market. these are off the highs of the session, yields are lower by two basis points. we were down by five earlier in the session. we have selling pressure coming under way. traders were undecided in the treasury market, now it seems like it's the theme of the day. the vix is up to 24. joining us is michael purvis. what do you do today? i think you have to step back and put the news flow out of the discussion for one second. every vix spikes above 40 by queen had a couple of weeks ago, the price action on equities in the aftermath was you have a

strong relief rally and a second leg down to the first dip level. pointsg another 100 would be right in keeping with historic precedent. the news flow we have seen here overnight and more generally, it's raising new questions for the markets that we have not had to contend with. alix: do you want to wait? michael: you want to wait. i am tactically bearish right now. about halfway through the second leg back down. when you start seeing that happen and maybe some sort of bottoming, you can go by the depth. -- dip. it has not escalated into unpleasantecidedly

from what we've seen with the trump narrative. david: how much of this is because the fact of the trade action? we don't know where it's going as opposed to policy direction and fear of trade wars? michael: it's more about the unknown. we don't know if this will escalate into a global trade war. out?ry cohn i think the market likes having a goldman guy in the white house. there's been a lot of turnover in the white house. a political risk component creeping in that we didn't have quite so much earlier? i think that's very important. $40,000rice of a car is , i don't think that's going to derail the market. the real risk is the unknown about can the trade war escalate

into the new one. alix: i know you like more downside for dollar-yen. the vix is up. i think the market will be very nervous. the vix goes up when they see between powell's testimony and the other issues we are discussing. alix: thank you so much for joining us for the hour. thank you for your perspective. that is how we trade. it's a big weekend over in europe as well. bloomberg markets, the open is up next. this is bloomberg. ♪

jonathan: from new york city and our viewers worldwide, this is the countdown to the open. ♪

jonathan: coming up, global markets wrestle with president trump passes tariffs, worried the trade war might be next. countries from china to europe threatened to retaliate attention tension with the chairman begins already. the federal reserve says the tariff approach is not the best one. the cash open 30 minutes away. story.-- the down .2%. 1%, treasuries yesterday on offer right now at two basis points on the u.s. 10 year. plunging a dollar is -- donald trump wraps up his trade reference -- rhetoric. 10%.dent trump: