it was the inflation scare that some volatility shooting up. littlebe the market is a -- it is right to be a little bit cautious. generally, the narrative i am reading, it is a little cautious ahead of that data. the market is expected to open up around 0.1% to 0.2%. the ftse 100 7214. as anticipated, trading around the flat line. we saw that on the fair value and i suspect you will see that data coming out at 12:30 london time. that is maybe when the action starts in europe. the ftse 100, you will see the markets opening up in similar form this morning. we have a couple of others coming through. everybody else is taking a more literally attitude. up 0.1%.is financials are up this morning. health care is up this morning

as well. some weakness coming through there. energy is a little bid, which is interesting considering oil is trading a little lower. this is the market in aggregate, in totality. it is trading very flat. financials, and energy looks very good. matt, what do you see with the individual names? matt: if you look at the stoxx 600 move screen, we see a pretty eadth right now. but at the top, as far as the companies that are adding index points on the stoxx 600, you see them all lined up, total, royal dutch shell. you do see airbus there, that is what they call an dead cat bounce, because they were down yesterday over concerns on

tariffs. you see bank of sent and their sidelliance on beginning this morning and you do not see any of the big banks on the losing side. take a look at the losers. bhp billiton, rio tinto -- the miners and the material stocks down. you see the consumer staples, so the things you cannot quit like british american tobacco is a loser today. unilever is a loser today. anheuser-busch is a loser today. those things that you need or by no matter what happens are down. the defensive stocks are down, maybe that is a positive sign when you have financials up and defensive stocks down, that is not necessarily a bad sign for the markets. guy: absolutely and that is the point you can make about the u.s. as well. --alking about the u.s. maybe you have forgotten, or you had a meltdown, or a melt up depending on your point of view.

asian equities, a little mixed today as markets await inflation data at 8:30 this morning out of washington. mixed has opened in form as well. joining us now from singapore is mark cudmore. and joining us from nomura. mark, what is the setup into this number? will we see a repeat of february? mark: i think that will be difficult. that number was very shocking because wages where the missing puzzle piece for inflation. that was the game changer. whether we get that overreaction again is unlikely. we've cleaned out some of the traders. up, with volatility spiking

there is less of a risk. and the market is trading quite negatively. it was weird yesterday, there was no particular read into equities. it looked like the market was ignoring trade tensions and yet, we did see the latest concern yesterday in the u.s. the market is a little bit nervous, but i do not expect as big a reaction in february. guy: are you expecting an upside surprise with u.s. inflation? >> friday we have the payrolls number, it showed that wages dipped in the margin. the previous report showed wages at inflation picking up at the same time. the number today we do not think will be a big surprise. you expect as far as the currency relationship here? we have seen that driving asian stocks overnight. people continue going to the yen if there is the threat of the trade war.

>> absolutely. the yen is the big winner if there is the threat of a trade war. to some extent, people are aware on aluminum are the first round. the big one is the action against china around the intellectual property and people are expecting over the next few weeks or so some announcement from the trump administration around anything on that front. that is something that is weighing on markets and ultimately that was to manifest itself in the yen. equitiesk, we not see suffering this morning. they are not moving much in any direction. if you look at the broader indexes. does the trade war top really hurt equities from here? is it all priced in? does the market think it will blow over? well, several questions

there. i do not think it is priced in. equities and stocks rallied as the news broke. this is a long-term economic issue and the specific riffs we have seen are not specifically relevant and where they are, they are a few exceptions. the reaason i'm worried is that there is still no definitive that this will not really to a retaliation, that this will escalate, that we will not see the intellectual property situation with china escalate. i am worried where this leads. there is more nervousness amongst politicians about the plan that trump is taking, that he has continued on these trade punishments, despite the fact that gary cohn was pushing against them. there should be more nervousness there, but most investors disagree. it is not priced into the market at all. guy: mark, can we come back to

the issue of positioning? how is the market set up right now? when we had the february spike in the vix, we had a january that preceded that -- it seemed full risk on -- we message that came out of davos was, you do not want to be in cash right now. there is no point being in cash. are we in a different place now from the market set up point of view? mark: structurally the money is still very long equities. moverade is for a bigger on the equities and that is the fact that there was not much de leveraging in the dip. short-term, the rally last week, means that money has not caught this bounce back up as much as they would like and that means the short-term trade is higher. a 1%means that if we see move higher, that causes a much

faster reaction. the greater trade will be the 3% move, which is the downside. more so than that, rather than equities, the real factor the market is following is rates. the equity markets start getting nervous around 3% and that is what is holding people back from taking risks. if they get a high inflation print, they want to see how the inflation market will react. matt: what do you expect from the inflation market? >> in general, we expect yields to go up? expect yields to move up, but we are in a new trend for high yields now. central banks are hiking rates. in the u.s. we have a larger budget deficit. and all of that should see higher yields. so, that will pressure various risk markets. equities, but more so credit more than anything else.

guy: thank you very much, bilal will stick around. mark cudmore sticking around longer than normal to join us from the mliv team. you can follow the insights of the entire team on your bloomberg. i want to take you to the joint press conference this morning. we will be talking to the rba cfo later on. i am looking forward to that conversation, this as the two companies go through this complicated asset swap, which will he them in different directions. we will come back to that later and if you want to continue to follow that, it is live on your bloomberg. we are nine minutes, nearly 10 minutes into trade. let's show you with the stocks we're watching this morning. you look at more details when we come back this is bloomberg. ♪

guy: we are 12 minutes into the market session. nejra: we are still talking about that deal in the german power market. we are looking at eon, but we had numbers fromt the rwe, and we are focusing on eon. the savings might read as much .s 800 million euros by 2022

so, a number of things pushing the stock higher, as i say one of the best performers on the stoxx 600. i am also looking at antofa gasta. yearng at the full revenue dividend. a number of factors to push that stock higher. only downside, the worst performer on the stoxx 600 is iliad, pushing that stop down the most since june of 2016. guy: thank you very much. the benchmark containing some of europe's biggest manufacturers has been trailing for most of this year with a stronger euro slowing growth and a potential trade war threatening investors with a little more pain. they are waking up to how vulnerable stocks in europe might be.

joining us out of berlin with matt, richard jones. and heather jones, still with us on set. and bilal hafeez, here from nomura. heather, let me start with you. germany in many ways has been at the forefront of what has been an incredible recovery. we have a cheap recovery. but some of that is just beginning to turn around a little bit. the euro. what does that mean for german equities? heather: first of all, the german economy is still be powerhouse of the european union . german stocks, if you consider a bellwether, have lacked this year and you have three things going on. one, you see a cooling off during the european equity story. you have a potential for a

stronger euro, hurting the manufacturing powerhouse. they have autos. also, if we have more trade tension develop, that could hit biggest tradey's industries, such as bmw and daimler. also, we have the feeling we have peaked in germany's economic momentum. stockholders are saying, ok, maybe it is time to take the foot off the pedal. guy: i am looking at the u.s. economic surprise index. it is not the stock chart -- sorry, matt. matt: i have a chart, too, guy. guy: ok, matt. matt: i put the surplus in the drop-down box, so you can see. germany has a big trade surplus, obviously, as heather is just mentioning. united states, 60 $6

billion, though a ton of bmws are produced in south carolina, they sent a ton of cars from here to there and the eu put a 10% tariff on cars, the u.s. only puts a 2.5% tariff on the cars. richard, what does the current account surplus mean -- and you are an fx strategist -- in light where the euro is priced in relation to the dollar? richard: germany is one of the biggest beneficiaries of globalization. the current account surplus has climbed higher. in the current environment, it has been euro positive. and with the current account surplus, they have depreciating currencies. the they problem here, or the wholeildcard is the u idea of friction between the u.s. and european union. further traction,

for momentum, i think that is the big headwind for the european economy and as heather said, for german stocks. matt: is the euro undervalued right now? >> it is around fair value right now, which is between 1.15 and 1.20. that said, the german account surplus is incredibly large. it is the largest in the world, larger even then china's current account surplus. that tells you that germany could handle a much stronger euro. guy: just coming back to the ey look forwardh and what we are seeing -- and we will come back to this chart are in a position where expectations are so high for the european data, so in many ways, there is only one way down and we are beginning to see that in the evidence. this is the data. we are seeing the white line

come down pretty sharply, which is europe and the blue line, which is the united states. i struggled to see how the data gets better from this point in time. from an equity point of view, presumably that makes it rougher from here on in. bilal: i agree. to some extent last year we had great political news and macron winning, and european growth surprising. the one thing i would say on the data surprises they follow the cycles and when they collapse, they do pick back up. but right now there are many headwinds for the are being growth cycle. is slowly but surely tightening policy as well and that will not help either. guy: what does positioning look like? what is the market set up look like right now? we have seen a lot of u.s. investors start to turn tail when it comes to the view on europe. last year they had a great view on europe because it insulated them from a lot of things going

on. what is the set up right now? are we fully invested, are we starting to pull back? u.s. investors have never been as keen on european invest stocks as they have with the u.s.. the data from the last month, the inflows into european stocks have a slowed and last week they were just up a fraction. continues, pattern perhaps you could start to see some outflows from european stocks, but a lot of it is tied to, are we going into another period of more volatility and what happens with u.s. stocks? european stocks have been buffeted by the ups and downs in the u.s. market this year. matt: richard, let me come to you for the last question. what do you think about the investor positioning in the dax? are there many investors here and they are not as historically into stocks as americans are brits?

richard: i think that dynamic is in play. and if these headwinds do emerge, that problem will become exacerbated in the future. matt: richard, thank you for joining us. richard jones, here in berlin. you can get more of his take on the mliv blog. guy and i look at this every morning to get prepped for the market. heather burke also joining us from bloomberg. heather, thanks for your input. remember, by the way, guy, customers, or viewers who are customers can also watch us using the terminal. guy: and i just pulled it up. so, there is the function. it is pretty obvious, but on the right-hand side you have the sidebar which provides you with the functionality we are using. you can also get in touch with matt and i and the team with the little blue button on the left-hand side. us can also just message

individually. what are we doing and what are we not doing quite so well. the market is 20 minutes old this morning. we will come back and talk about the stocks on the move. that is next and this is bloomberg. ♪

guy: you can see this on the map, wum on your bloomberg. london going nowhere in a hurry. we've got the paris market up by 0.3% and germany's trading up 0.1%. we are waiting for the u.s. cpi later on in the day. ,ill with us, bilal hafeez fx global head of thee g10 strategy. the u.s. treasury seem to have gotten themselves into another range, sub 3%. what is it going to take to get us out of that and will it be such a big deal if we do break out of that? bilal: i think what will take us out of that range is if we see higher inflation, or if the fed a balance sheet reduction, which

the stocks start to pick up during q2. now, whether that will impact markets are not depends on what the motivation factor is. if it is good growth data, context,flation, that markets will be fine. but if it is core inflation with ish growth, that will be problematic for the markets. guy: my sense is that the fed wants to raise rates. we have been talking about the data, but is that the reality? bilal: i would agree. the rhetoric from the fed is they want to have three to four rate hikes. guy: do they care about the market reaction? powell is different to yellen. the story -- they certainly sounded a lot less sensitive to the market moves. they have talked about the equity valuations, being elevated in the u.s. we were think that if

more significant equity corrections, 20% to 30%, they would take notice. matt: what about the ecb? last week they removed the easing bias and also lowered the inflation forecast. are they on autopilot as well? bilal: i think they are on autopilot when it comes to winding down the qe. it seems like the taper is going to happen. we are also looking at the cycle they are after, the rhetoric during the press conference last week was quite dovish. they said they were reactive to data, which was in contrast to the fed, which said they were going to hike three or four more times. they were concerned about inflation and european inflation is much lower than u.s. inflation. in the u.s., core inflation is 2%. matt: bilal, you will stick with

us, the global head of g10 fx strategy at nomura. when we come back, we talk about the was government borrowing $62 auctions thisbt uactio week. ♪

matt: welcome back to bloomberg markets, 30 minutes into the market session. ins. cpi drops at 8:30 a.m. washington and investors seem pretty relaxed ahead of the data but could a strong delivered chilled to volatility? --i will be toks the volkswagen ceo in berlin, maybe ask him about diesels as well. ome president blocks broadc talks were qualcomm with foreign bidders seemingly barred from u.s. acquisitions that affect national security.

good morning and welcome to bloomberg markets. the european open. imf miller in berlin, alongside guy johnson at the european headquarters in london. guy: 30 minutes into the trading day, how are things shaping up and down? --.he moment, we have got well, you can see it. eon is trading down. arubus, i and initially thought that was airbus, but i have to put my glasses on. eon is showing a little bit of upside potential this morning. this is as the press conference continues. let's show you the downside at the headlinend at level, these markets are going nowhere with the cpi data coming up later on. iliad is the biggest loser out of paris. got hanover,

interesting, the viola story, down by 2.75%. u.s.tian: in the republicans have ended the investigation into the 2016 election. they found no evidence of collusion and is comes as but objections from the democrats. but the council with robert mueller continues with at least four people connected to the presidential campaign facing charges. is according to somebody familiar with the matter. the cnbc personality has emerged thegside gary cohn, outgoing director of the white house national council. w.ump has spoken with kudlo0 china gave the central bank the power to write the rules for the

financial sector. the china insurance commission will be merged. some of the functions, including drafting he regulations will move to the pboc. this is start of a sweeping overhaul aimed at closing regulatory overhauls. east coast is battered by anothe storm today,. by the time it is over, the nor'easter will dump to 10 to 1 8 inches in massachusetts, causing a blizzard along the coast. this is the first storm to hit the northeast since march 2. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. much indeed.u very to add one more thing to the list of worries, weakening demand and the bond options.

the government plans to borrow $62 billion at debt auctions this week. there is doubt as to whether this will cause supply indigestion. dani burger joins us now. and it still with us, bilal hafeez. the market has a lot to take down, why do we think there will be a weakening in demand and an expectation of higher yields that will be necessary to make it work? dani: we saw that to a smaller degree. there was no risk this would be a failed auction. we hear again and again this lack of safe haven assets. of course, people are going to buy this, but the question is not, are people going to step into the auction, but how much are they going to demand? we did see yields at the highest level since 2007. and the bid to cover ratio is

the highest since november. there is a concern about the yields. but when you have hedging costs so high, especially for european investors, you need that yield to look attractive to want to come in and buy it. matt: didn't we see just a couple of days ago at an auction, the worst bid to cover ratio since 2009? isn't there some evidence out there that all this issuance is going to be a little bit much for the current demand? dani: yeah, i mean, the thing you have to think about is the long-term trend here. of bond issuance -- there are so many other factors, maybe around the auction yields move, but when you have a day with cpi data, that will affect that. that we have seen this longer

trend of bid to cover ratio trending downwards with demand looking a bit auspicious. and in terms of the health of debt markets overall, it is a bit of a strange time, especially when you look at the yields on short-term bills coming up. i brought this chart with me. when you think of short-term risk assets moving upwards, one of the arguments for investment grade, especially has been negative yields around the globe. low rates in general. the spread is starting to change in investment grade investors might move back into risk-free assets, if they can get the yields they want. we have been looking at investment grade spreads w idening. an auspicious time for a little bit of unease about where yields are going on treasuries and bills. matt: dani, one of the things i love about your reporting is you dig through the data and look

for historical anomalies. how often have we seen the fed in this kind of raising stance at the same time as the u.s. needs to increase its borrowing? dani: if you think about it from a big macro point of view, it's odd because usually when the government deficit is ball ooning, and they need to borrow more, the economy needs that boost. it will not be during that cycle when the fed is raising rates, but here we have the fed raising rates and this ballooning deficit. and when you talk to bond bearers one of the biggest arguments for why yields are going to move higher is this market dynamic, where we have the fed unwinding the balance sheet. that part of the demand equation is not there. and meanwhile, supply is getting larger. small part ofre a the overall picture, but it does help to back up this idea that a bond bear market is approaching, or in the eyes of some investors

is already here. guy: is it already here, bilal? bilal: i think it is. it is trending up. it is choppy at the moment, but we are reaching the higher highs and the lower lows. and i think the dynamics overall will continue to hike rates and that will push the entire yield curve higher. we have this shift in the supply and demand dynamics. all of the things holding yields lower are turning around now. guy: army underestimating the affect the balance sheet will have? it is beginning -- it becomes a little bit more of a more obvious story over the next few weeks, but we have never done this before. it is huge and in some ways, it is very hard to get your arms around and understand. bilal: i agree. they said they would increase the balance sheet last year. the market could kind of ignore the balance sheet and focus on inflation. now, inflation stocks are picking up.

now the market will be forced to wake up and realize the implications of the fed balance sheet reduction. guy: do i just drop duration and is at the most obvious thing to do right now? yeah. i think so, and depending on your view of risk appetites, one could focus you wanted tof use the market in a more favorable way. otherwise, the front and long cash makes sense. guy: thank you, bilal hafeez joining us from nomura, and dani burger joining us on set. up next, we talk about the stocks we are watching this morning. green core is the world's biggest maker of sandwiches. irish based company.

it is a structural story in the united states, but turns out to be a little tougher than anticipated and the stock is getting tougher on the back of that down by 20%. this is bloomberg. ♪

guy: it is time to take a sandwich break. let's find out what the movers are. nejra: we are looking at the irish food company, dropping 22%, the most since june of 2016, hitting the lowest since

october of 2013, seeing full year adjusted eps. the challenge for this company has been the u.s. business, taking a 3 million pound charge for the u.s. restructuring with those shares taking a battering. tp icap taking a move lower. earlier it dropped as much as 8.9%. the full year revenue came in, meeting estimates. morgan stanley saying the second have pretax profit missed the consensus on weaker sales, though they did say the outlook is encouraging, but investors encouraged, at least for today as we see this stock underperforming. on the upside, i am looking at metso. upgraded to is overweight and morgan stanley and trading higher by 4.3%. matt: thanks, nejra. let's talk more about the auto industry and global trade.

later today we will bring you the interview with the volkswagen ceo, matthias mueller. how will be carmaker respond to a new threat, increasing protectionism and maybe even a trade war? we bring in the bloomberg managing editor. thank you for joining us. what do you think the german ceo's to gather will do? alreadythem, like bmw, manufacture a ton of cars in the u.s. and have a footprint there. >> that is the big trump card. we have a lot of manufacturing in the u.s. we, bmw, have a massive footprint there and we are pushing into the market, as is daimler. but they will have to work together on this legally to figure out how they can overcome the tariffs. it is a risk to them because the u.s. is such a huge market and

they do export some cars into the u.s. market and they cannot manufacture everything over there. so, that question will come up and they have just come out of the mess with diesel. they do not want to fall into a new mess. matt: there already are some uneven tariffs. when the u.s. wants to sell cars over here, they get a 10% tariff slapped on them by the eu. going the other direction, it is only 2.5%. as a result, you see very few american cars -- there are no f-150's driving around the streets of berlin. how will that be resolved? >> well, i do not know if people ut themore f-150's withotu tariffs. ofhink it is more the kind cars people drive over here. that is something that they will have to resolve. people might argue, has donald

trump got it all figured out over here. there are some uneven trade balances they have got to figure out. set up toe government deal with this? benedikt: they are very fresh and will be inaugurated this week. they sort of muddled through the diesel crisis over the last couple years and what they have done, they have backed up the carmakers as far as they can. but, are they up to this, probably not. and they do not have a robust voice here, but the germans would also say, trade is something we cannot deal with unilaterally as a country. it must come from europe and that is where they speak with one voice. that would be the answer from angela merkel, who has discussed unilateral deals. there has always got to be a european voice. but i am just curious as to

whether or not germany will provide -- germany is the most exposed to this. therefore, does the new german government provide leadership on this? or will we have a new voice in europe? edikt: that i do not know. what the germans can do and it is no coincidence that the lehman ceo, they were with angela merkel on her visit to the white house. that is the signal, look at these guys, putting a lot of money into the economy. that is what insulates them best from any trade. matt: we certainly did not see any leadership out of germany ieselg the first d summit. merkel stayed on vacation and barbara hendricks business no longer here with us. you saw it from mueller and from kruger. though they did not do that much either. now that there is more at stake,

diesels could be banned from german cities, do you expect placards, morelue talk of actual harbor upgrades? what is the answer? benedikt: they do have to push the carmakers into a more robust response. what we have seen over the last couple years is not enough. we have got to see more of these cars entering the market. what we saw in geneva is interesting and that will start next year. but you are right. the german government has not responded properly and has not really been sort of strong on that point. we will see the move goes strongly towards renewable energy, towards renewable cars, and that is something that will come out of the mix. mue: what do you think that ller will say -- if you look at the chart, volkswagen has been

doing well. but what do you think he will say that is most interesting to bloomberg news? will it be the possibility of a truck ipo? can he modernize porsche and lamborghini? >> it is, will the monetize some assets. porsche is argued we worth more than the entire bmw group. there might be talk of the truck business being spun off and we see similar movements with daimler. if you look at the charts, you think, diesel crisis, what diesel crisis? they have recovered, but how can they give the different units aautonomy. the company as we see it now is still pretty much the company at the height of the diesel crisis. matt: thank you, benedikt kammel

.we will bring you our interview with matthias mueller at 12:30 u.k. time. guy: and vw's press conference will also be on live . if you want to watch live pressou have the eon conference, the joint press conference taking place right now. we will be speaking to the rwe u.k. time and eon's ceo will be joining us at 10:00 a.m. u.k. time. then, you are able to get the vw press conference on live go. it is all the main ceo's and cfo's from those companies. we will come back and are watching the stocks we need to

pay attention to. we're looking at the mid-cap movers. is talk of the hour is next. this is bloomberg. ♪

guy: 8:53 in london. reporter: donald trump has issued an order blocking broadcom's bid for qualcomm on the grounds of national security. the broadcom's ceo met officials to address the concerns. the statement says there is

credible evidence that the move would undermine the u.s. interests. offering could accords to small u.s. businesses. cis includes jpmorgan on a o-brand. amazon is hoping the new credit card will also eventually add offerings for business security. d $8ral electric pai million in his final months of the company. as chiefd down executive in august and quit the board two months later. ge said the ceo will not receive any bonus for 2017 because of the overall fopoor performance. guy: matt miller has been waiting for the moment in this p

rogram. we will be talking about sandwiches. this is the biggest freezer of sandwiches, greencore is trading on a massive volume this morning. they are having problems restructuring the business, as a result of which the outlook is far from favorable. the stock is trading down. matt, look at the volume it is trading on on the right hand side. matt, sarnis. i actually did not know what you are talking about in the months passed. this is the first day i understand what you're talking about. today, the u.k. chancellor philip hammond delivers his spring statement at lunchtime, maybe he will have a sandwich there. the european council and commission give brexit statements to the parliament in strasburg, formerly of germany

now of france. and donald trump makes his first trip to california as president. we will see how that state welcomes him. , as we haveup today been teasing all day, my interview with the volkswagen executive ceo matthias mueller, as well as the cfo. we will talk to them about diesel, we will talk to them about trump and tariffs. and we will talk to them about trucks as well because they will reporteranalysts and say, need to monetize some of that business. we will bring you that interview with matthias mueller at 12:320 u.k. time. guy: matt, it does seem that his biggest concern at the moment i know is that there are not enough to get trucks in germany. matt: it does worry me. i have to say, every truck i see here is a ram.

i was looking at the possibility of purchasing a ford rafter for germany and it was over $125,000 on the road, so there is something going on there. surveillance is up next. ♪

>> demanding answers, theresa may accuses russia of attacks on british soil. should the fed act more aggressively? good morning everyone. this is "bloomberg surveillance." and seeing a little bit of market movement. in: you have big politics pennsylvania. this is a different election for our global audience. election thet an southwest of pittsburgh. it is something everyone will be focused on, including the president of the u.s. francine: a lot rides on the selection because it may be a bellwether for things to come. the deadline is

approaching for russia's president vladimir. -- vladimir putin. told parliament it was either a direct act by russia against the u.k. or else russia has lost control of a deadly nerve agent. russia's foreign ministry called it a circus act. president trump is sending a message to investors with his rejection of broadcom's takeover. e says it threatens to hurt national security. television commentator larry kudlow is the favorite to replace gary cohn as president trump's next economic advisor. name the cnbcmay personality to head the white house economic council within a day or so. kudlow was an economist and served in the reagan administration.

aina has unveiled restructuring plan that consolidates the communist party's authority. it would give the president more direct control over money and power. the plan calls for merging several ministries and asian agencies. global news 24 hours a day, powered by more than 2700 journalists and anaylsts in more than 120 countries. this is bloomberg. tom: thank you so much. a quiet market. i just have one screen today. futures up for. -- four. i would notice a little bit of curve flattening arm the last 24 hour. -- ours. -- hours. francine: european stocks are drifting somewhat.

i'm also looking at yen weakening a touch. tom: it is early in the morning across the east. we have our daylight savings time going on right now making it ever darker. like a groundhog, he is southwest of pittsburgh, pennsylvania joining us now. let me just cut to the chase, everyone wants to know, is there any indication of the turnout through the day? kevin: i can tell you that the democrats i speak with at the net -- democratic national committee tommy they are in full thee mode to mobilize grassroots effort inside this -- democratic national

committee tell me they are in full force mode to mobilize the grassroots effort inside this district. donald trump, jr. was the republican trying to get out and mobilize the votes. lynn and think he is a nice guy, but ultimately, they feel they need to vote for president trump's agenda. tom: within the turnout, is geography a constraint in the final days of campaigning, is the 18th geography of congressional district important or is that a nonevent given modern media? inin: that is a great point the sense that both sides of the outcry of money that is flooded in here, more than $10 million on the republican side, and very close on the democratic side. this is a district that has several businesses headquartered

deal, dick'sg u.s. sporting goods, american eagle heavy retailing folks are here as well as the steel industry. a lot of interesting business developments here, but social media is a huge points -- push for how both sides have been trying to get out the vote effort. tom: it is very interesting. within this modern politics, the key distinction to me are democrats that for generations going back to reagan have voted republican, for the idea of getting traditional barack obama democrats out. which is it for the democratic candidate? connor is a democrat : connor is someone who was running away from the current democratic structure of

leadership in congress. who hasalso someone embraced former vice president joe biden who is campaigning here as well. this is a new type of democrat. in a state that went for donald of the 2016 cycle, the had not gone for republican president the candidate since 1988. francine: donald trump's message seems to be that the u.s. tank is not for sale. how does that play out in pennsylvania? kevin: the qualcomm issue was not on the minds of many voters i spoke with yesterday. this is very much in line from the administration's perspective with keeping with an america first agenda. something inhis is the best national security interests of the u.s. and will put china on the defensive, and that china was just too late trying to take advantage of the

american telecom industry. that is ultimately why they had let this deal go. chairman, this is something he was going to be taking very seriously as the expedia did the process -- thedia needed -- expediated process. francine: that was a great interview with secretary mnuchin. if pennsylvania does not go tom doeshow will he change -- not go trump's way, how will he change? kevin: donald trump, jr. joked about it yesterday. he said if we don't win, people are going to write all of these political criticisms. i don't think the ministry should will back off of their priorities. even after member this district is sending millions of dollars

to both sides that will tend to the disappear in just a few short months because of redistricting. is that a loting of republicans could actually end up retiring because they are watching this and feel that a conservative district moves for the democrats, that could be a bellwether and a signal about the midterms that are just around the corner, particularly in a heavily conservative district like the one we are in now. francine: thank you so much. kevin, our chief washington correspondent. everyone 12:30 london time, do not go out and get lunch before you get the data out of the u.s. 12:30m to remind everyone

london time, do not go out and get lunch he for you get the data out of the u.s. talking about the dollar, how low can ago before it starts hurting? david: things are quiet at the moment. we have a dollar that is drifting at the moment. it is grizzly, but not a bit. if it was a bear market, how low at the dollar actually fall? we think we can easily fall another 7% and nobody says anything. by the end of the year, euro-dollar is 132, which is not the end of the world. the problem with the dollar is that it keeps falling and if it falls too much, and rates are pushing upward, then it really squeezes. where's that tipping point?

that desert we would say it is about 50% or 20% away from here. if that were to happen, that would be terrible for the global economy and very problematic. francine: how much would it actually hurt the world economy? upid: if the dollar to trade 7% by the end of the year, fine. when you start going for the 50% or 70%, it starts squeezing the world economy and suddenly the dollar goes up because you find safe haven. the end stops falling over. there is a bit to go if you are everything in this global growth y and all tree hugg beautiful world. what brings it from 7% to 8%?

vid: 7% and the dollar is looking ok. francine: what would have to happen? : i think people are starting to worry about it. we are in the credible threat phase, the wagging the finger phase restart taking things rather seriously. we are not going into the next phase which can really tip things over. the problem with that is that the weaker dollar is very helpful with the u.s. if it starts going more than 7%, watch out. tom: here's the chart. certainly, you migrate down and the bloomberg dollar index, which is a very good set of chart into, off the

the end of the year. this is not a brutal move. which currency would be most effective by the bloom weak dollar? : the currency that goes up the most are the big closed economies. that would be the euro and the yen, the swiss franc is a tiny little open economy. everyone is having argument with each other. great for the euro as a currency, but terrible for the european economy. us. david bloom with coming up, we are looking at inflation with david bloom.

we speak with the former governor of pennsylvania, i believe from a city east of pittsburgh. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance." according to people familiar with the matter, the world largest online retailer will offer a credit card for shoppers. it is apparently in talks with banks like j.p. morgan chase for a branded credit card. id of must look at r

as many as 5000 jobs to get elon muskenergy -- will get rid of as many as 5000 jobs to get ready for energy. tom: one of the biggest conundrums is if you take sheltered inflation out of inflation, there is not much inflation. every single person watching this is hammered by sheltered inflation, particularly in the big major cities. what does jerome powell look at? all of inflation or inflation that is sheltered where there is not much there? if you have nowhere to look, fine, but people have to look somewhere. work with noo close on or she is, there is no inflation. it just does not work like that.

you have to look at the whole picture. 10 year bonds are going up. they haven't even broken 3% and here we are. there is no inflation. if you don't believe me, go demand a pay rise from our job -- boss this afternoon and see how you with. i think that is a great idea. does hsbc we affirm the linkage of david bloom's work with steven major's work, which is for a generally lower rate environment? david: yes, that is a we have been arguing. we're looking at the structural

ability components. talking 3% or 4% -- three or four rate hikes. interest rate expectations rather than the currency goes up. that was my how it is working. rates are at the margin at the moment. what we are looking at a structural issues in the economy and political issues in the economy. and we're looking at rates. we sit next to each other and he buys me a cup of tea every morning. francine: do you worry about inflation missing across the world? we had norway's decision to lower its price target, and similar concerns from sweden and argentina. what is going on worldwide? keep saying that maybe inflation has peaked and the economies are doing quite nicely

and there is no global inflation. you get people coming on a telling you and frightening people that inflation is just around the corner, looking under the table everywhere. where is this inflation? it has picked up a little bit, but look at what the ecb has spent. francine: is this a new normal or will it ever go back to the kind of inflation's the we are used to? david: something new and different in this route can always happen. no weights pressure. pressures. you could get an investments offer picking up and suddenly cash-rich companies are going to machines. be very careful what you ask for. this is a low inflation meant environment where unemployment rates are at an all-time lows and yet we are all sitting at our jobs full of fear. francine: this one is for you

david. if you look at the graph of dxy 2018,cy between 2015 and existse now -- there now a large disconnect between the two since late 2017. why? the 10 yearu talked bond against the dollar yen, you see it works nicely because there has been a breakdown between interest rate differentials and the currency. but we are facing at the moment is higher rates in the u.s. being associated with the weaker dollar and that is very unusual and causing all sorts of breakdowns to happen. i think that is because of the agenda both politically and structurally in the u.s. to push the dollar down they does not fully responding to interest rates and we have this breakdown. you can see it in cable and the dollar-yen chart. that is what is going down.

there is a breakdown between u.s. rates going up and people think this is good for the rest of the world. happens is higher rates in the u.s. is associated with a weaker dollar. that is quite unusual and sometimes lead to trouble. tom: thank you so much. he is with hsbc. an important conversation for emerging markets for the greater equity markets worldwide. mark is in the 8:00 our. -- hour. stay with us. this is bloomberg. ♪

♪ francine: good morning everyone this is "bloomberg surveillance." president trump has issued an executive order stopping broadcom from acquiring telecom. joining us now is bloomberg executive editor for global deals. as always, thank you. are we going to see many more of these kind of deals stopped? with good reason, was a unusual? aaron: i think the clear message was that you cannot buy u.s. tech if there is any co nnection to china whatsoever. he was trying to circumvent any of that concern. because of the competitive

tension between the chinese and u.s., trump has stepped in. isncine: this is a new thing there are industries of the u.s. -- is tech a new frontier? aaron: i would say it is one of the most sensitive industries, but we have seen this trend over the last few months, if not years. i think there have been five deals blocked by u.s. presidents including trump and obama. trump has already blocked to in the first -- two in the first few months. if there is a sense it will impact u.s. industries and businesses, he will step in. informs it just how a singaporean it take over of the u.s. would happen.

navyare to a major u.s. logistics center. the u.s. and singapore is about as close as you can get without an alliance. i think the concern here is if qualcomm gets taken out by broadcom, that might slow down rmb and investments and that china to window for win a technological battle. tom: there recently, do we have transparency in accounting? do we know how much revenue or profit they make from china? we have a major auditing firm in their doing the work or is there a mystery to broadcom? way, thereink in a is a mr. because a deal has not even been agreed. due diligence and looking through the books, we did not even get that far. broadcom was fighting this battle for many months and were planning to try to replace most

of the board at qualcomm. they do not even get that far, because trump blocked it. on the one hand, broadcom is a public company, you can take a close look at their books, but i think the real due diligence between the two companies did not even start. tom: wonderful work out of taiwan running for bloomberg. this is over and news events. the word china does not appear once in present tense executive order prohibiting broadcom takeover of qualcomm. china's technological ascent will probably not be sent -- --p by one quarter. executive order. china's commitment to taking grant from the u.s. is well patently obvious. we have been here and we will continue to be here. the executive order the only weapon we have?

aaron: no. i think there is discussions in d.c. about strengthening the rules where the u.s. government can intervene. i think it is also worth pointing out that this comes amid the backdrop of china cracking down on outbound mma. these situations or rehab is giant chinese conglomerates buying assets all over the world . have a it is going to huge slowdown with the u.s. resistance and chinese resistance to chinese deals in the u.s.. tom: general mattis does not care if somebody buys the waldorf-astoria. was this simply box by the pentagon? -- blocked by the pentagon? aaron: i think there is no doubt that the u.s. government would

probably suggest or hinting that trump should step in and block this. the ceo of broad, was at the white house to make his pitch. i want to invest and have a headquarters here, obvious is that was not enough. i think there were concerns across the board and that is why this deal was dead as soon as the u.s. government got involved. francine: looking at some of the deals last 12 months that have been blocked by the u.s., i am seeing about seven deals blocked. does it mean that the chinese buyers will start looking at europe with more interest? .ith this america first agenda aaron: i think that is a big thing that started a year ago. , the bankersuyers were saying of the u.s. is going to be so resistant, let's go to europe where they might be more friendly. over asresa may took

primus to her, she can onset we will start protecting our strategic industries as well. i think it is a general trend across the world being led by the u.s. about more protectionism. francine: this is translate into the world, did you see more money flowing from china into euros? possible, but as you said, this whole idea is the big thing coming up. the u.s. once a credible threat and a negotiating ploy in order to get what you want to renegotiate contracts and say hey, you have a surplus against the u.s. why are you building up your reserves the way you have been building. you are cheating, now stop. this is really what it is about. we are very fortunate is happening while the world is growing quite nicely, because if it was the opposite, i think it would be a little more worried. francine: thank you both for

joining us. the two prime minister theresa may has publicly accused of russia chemical attack on british soil in a statement made to parliament that it was have the likely that russia was responsible for the poisoning of and warned of retaliatory measures. a couplevladimir putin of nights. when theresa may talks about retaliation, what are we thinking? >> so far, the russian response has been to dismiss the rest -- british allegations. the foreign ministry called the speech last night a circus act. suggesting that the whole thing is a british set up to discredit russia. this is a line we have seen from

the russians a decade ago with the poisoning in london. this has been a traditional line. we are expecting a little bit more reaction from other officials today. she was hoping to hear by the midnight deadline tonight that she set. that turns into the actions to the u.k. and what they choose for reaction. questions there are ranging from expelling diplomats and cutting back diplomatic relations, perhaps taking out rt and other media, or to further more like a steps coordinating economic sanctions that would have the eu and u.s. to be maximally effective. asn something as strong

disconnecting russia from the financial system, the interbank payments network. is theat we notice here silence of the president of the u.s. he is a little distracted filling out his basketball brackets, but president trump has been silent. how has that played in moscow and from our you stand, how is it played in london? certainlye is that there watching washington closely to see how broad the reaction is. the fact that trump and the white house have not said andhing is nearly as strong something they have noticed about -- noticed. there watching for the strength of the unified response.

the white house pointed reporters to the statement from secretary of state tillerson overnight, which was quite tough. directly when the finger of russia and suggesting we have been trying to work with russia for the last year and has not worked out. his comments were quite ominous. all of the questions go back to the extent in which he is in the same wavelength as the president, particularly on russia related issues. much.ne: thanks so joining us now from milbank, is in -- ian blackford. he will talk below that about brexit, but first a question on russia. we heard from our team leader in moscow but this may be an opportunity for vladimir putin and russia to take advantage because they think the prime minister is weak. how would you advise the prime research react to the

allegations so far? : the first thing we need to do is ascertain whether or not this was rogue elements from the russian security service, or if it is state-sponsored terrorism. we cannot tolerate the situation where individuals going about their daily life are targeted. it is an attempt to murder case that we are facing. if it is the case, there is russian involvement, the me to take action. i think her previous peace demonstrated the range of options that are there across economic, financial and diplomatic measures. we need to do that in conjunction with our allies in the european union and of course the u.s. as well. we need to send a very strong message that this kind of activity, the attended assassination of individuals on the streets of the united

kingdom simply will not be tolerated in there has to be an appropriate response to that. this is one way we need to come together and there needs to be a nine at front in this issue. francine: would you worry about escalation? ian: any actions we take need to be proportionate. we civilly cannot tolerate a situation where i attended murder is taking place in the streets of our country. it is not acceptable and it is a message that the kremlin and russia have to understand. we have a duty and responsibility to protect those that live in the united kingdom. i'm absolutely fascinated and speaking from new york where there is a little different view on our legacy of british intelligence is formed out of hollywood. i apologize for the of from. -- iere a particular since

apologize for that up front. do you feel they are doing the best they can, given the information that they have? an: as a member of the intelligence and security community, i do interact with the intelligence community. i have the utmost regards for them and of professionalism and the way they go about their work. they have my full support and i'm sure the full support of the government as well. when you look at brexit, does brexit actually weaken the position of the u.k. in cases like this if the u.k. were staying in the eu, would you be able to be stronger and fighting united against russia? ian: my view on brexit in my parties view is very clear, that we regret the united kingdom is leaving the european union. the things we have to determine

is that there will be no division in our security matters across the country. leading -- leaving europe does not help in terms of our ability to work with our european friends. we will have to redouble efforts to make sure security and cooperation does work to its fullest extent. francine: what makes you worry right now about brexit? are we closer to finding a cabinet that is actually strong enough and it will we get the transition agreement that the u.k. wants? ian: it is a very good question because the clock is ticking. the european union has made it very clear that any transition court of justice will still run. we need to do is take it away

from the table. the european union has made it clear that cherry picking will not occur. we know that in my country of scotland, there is a threat that 80,000 jobs in the living standard will fall. we must deposit recognize the challenges that we face, and we must stay in the single markets. francine: thank you so much. that is the leader of the scottish national party. the following, red lines, whatever lines between the ek and eu, what does it mean for pounds?

david: people get excited. actually, from april until about mid-august, people got very bearish. since then, five a pancake. people are saying look at cable in the dollar earnings of this and that. no, it means the dollars weekend. this takes the weekend dollar and looks at the current currency in matches. how can the dollar matter? when you look at eurosterling, it basically says we think there will be a transition deall -- deal.

eurosterling has done nothing. we can talk so you're blue in the face, but the only line that matters is that eurosterling is fact -- flat. bit is his little bonus from 2018. because the gdp a small island for a mattress. this and i have to the back to the headlines that came out of the bloomberg the other day. the ecb press conference. it wasust stunned at how waited for inflation. ighed for inflation. we are just waiting to see a army? -- aren't we?

david: if you know the play, he never appears. i think for eurosterling, what really matters is politics. the three things that matter are cyclical, structural, and political. this is a political play going on at the moment. we are still quite bearish on sterling with eurosterling edging up. is going to get quite testy up there. kim of them pull off the new british empire of global trade? s&p,ve this minister from and there's that he unique domestic politics. are you a global optimist on the new british trade system? avid: the problem is, we have

heard from previous speakers about some deals being blocked. we have heard about a time expansion in a corporate census. then, there's the terrace coming fs coming about. this is not a good time to got be looking for deals. that is the problem. what you want is a love fest and then you can go out and do these global deals. the timing could not be worse. francine: you can actually see what we heard from insiders is that the ecb has so much trade with the u.k.. there are some countries that want some sort of deal, because otherwise they lose most. david: i'm sure it is possible. i'm sure we can get those done in no time.

eventually, everything could get done, but there is a time problem. it took seven years for canada to bring together a deal. it takes a long time. these trade deals take a very long time. they get 700 done in rapid time might be a little bit difficult. howcine: talk to me about difficult it is for mark carney right now. i think central banks are more determined than predetermined. i think it is predetermined for a rate hiking -- hike. interest rates are not the only driver. we think the political and structural elements of the u.k. mean that one more rate hike in may or something is not going to cause a bull market for the pound. quite reverse. talked aboutnot

capital flows into the united kingdom. i know it is a very interesting and confusing story. critically, since the gloom of early brexit, all hell was going to break loose and money was going to stop flowing in. the last trip to london, i don't buy it for a minute. moneyflows of investment into london and into the u.k. david: you can see the deficits keep getting worse. you're attacking capital and that the u.k. should attract capital since london has an ability, like the u.s. to be very efficient within capital. people want money to come to london. the problem is, what does it mean? nothing is happening. you came to london with exactly

the same as it has always been. two things rapidly start -- start changing. what happens then? you are absolutely right, london attacks beautiful capital. for the moment, everything is fine. we have not actually gotten this transition. our gotten any deals. nothing has really actually happened. francine: coming next, we speak with markus. niche or random bring up tv and message of tom and i and we will get to those questions. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. join byelighted to be markus who joins us from germany. thank you for joining us. are the pressure points of antitrust? how much do you worry about regulators at this point? markus: good morning. we are creating two are the pref antitrust? new leading european companies. eon on the networks and distribution business and the other on power generation trading and security of supply. coming to your point, so far, all statements we have seen experts are really positive that we don't expect any significant hurdle from competition authorities for this transaction. francine: what exactly is the

rationale for rv going forward -- rve going forward? s: our operating business so far has focused on conventional power generation. with this transaction, we can find too large renewable platforms. the number two in wind in europe and renewables and europe. how do you make this profitable to reverse share price performance? markus: what we will see from --s transaction compared

this transaction will more than double. willture, more than 60% come from the renewable business, which compares today's business from only 30%. it will entirely transform the company which is currently focused on conventional generation. most of our activities are on the renewal side. tom: can you get a greater margin down the income statement ?r a better balance sheet markus: we definitely strengthened our risk profile and financial profile. this transaction will bring it down to 2.5% to below 3%. compared to the

additional income we get very low figures. we expect a very stable investment rating. francine: how many jobs will be lost? markus: we announced today, together that about 5000 jobs will be affected by this transition. this is entirely on the eon energy side. we will not see any significant reduction in jobs on our side. francine: will completely dissolve the energy brand? markus: that is a decision that .on will take francine: when will you make a

decision on it? eon decision,an so it is not our decision. expectations that maybe they do it in the second half of 2019. tom: thank you so much. greatly appreciated this morning. so much to talk about here and really just one of the final thoughts we want to do with is a david lim. we see the challenges of europe and so much of this i really wanted to get out front of this, what happens? with a postme up dragging ecb? david: we have look at who the possible candidates are.

day, they havehe them they had to do. it does not seen the anybody was more hawkish than 15. let's see what -- then one thought. let's see what they say. likely to go up then down. that is not going to change. tom: thank you so much. coming up next hour, we will look at pennsylvania and kevin is in southwest pennsylvania. stay with us. 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. ♪ tom: this morning, the president says no to asia, the secretary of treasury says it will take

all necessary action. there is quote, shredded will evidence that china could gain american technology. a singapore company cannot acquire qualcomm. this morning, unimportant and timely inflation report. southwest of pittsburgh, turnout is all that matters, as a democrat competes against a republican, and the president. "bloomberg surveillance." this is"bloomberg surveillance." -- this is "bloomberg surveillance." francine, give us the london update on the spy issue. prime minister theresa may has really read the riot act to mr. putin. francine: she has, but she did not say how far she could go. there were two people, as we all know, slumped on a park bench.

the prime minister yesterday for the first time saying that they are very close links to the russian government. she did not go as far as saying that vladimir putin was involved, but she talked about retaliation. until we know if this is state-sponsored or not, it will be very difficult for the u.k. to do anymore. tom: we will have reports on that from our moscow bureau through the morning. here is your first word news. >> the deadline is approaching for vladimir putin. theresa may has given him until --night to rebut obligations allegations that russia poisoned an ex spy. ministry called her statement a circus act. president trump travel today to opposition territory. he is making his first trip to

california since he took office. he is trying to fire up support for a wall along the border with mexico. he will look at a number of prototypes near san diego. he is having trouble getting congress to pay for the barrier. gary ludlow is the favorite to replace gary cohn as economic advisor. the president may name him to head the economic council with an a day or so. kudlow was an economist and served in the reagan administration. china has unveiled a restructuring plan that -- the chinese authority. it will give jinping more power. it will give china's central banks the power to write rules for the financial sector. 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. tom: thank you so much. even markets out there,

though we are going to focus on equities. futures up five points. a little bit of curve flattening and the vix is very stable. francine: this is what i'm looking at. we are getting some breaking -- raising there -- do .9%. they said that the world economy will grow by 3.6%. 3.9%, socast is also that is higher than the 3.7% and november. these are my markets. overall, european stocks are pretty much unchanged. investors are all looking out for that u.s. inflation report. nn important reminder --a important -- an important

reminder, for central europeans the data hits at 1:30 p.m. tom: the good calls out in the northeast of a bite scranton -- up by scranton. we are in pennsylvania for this important and nuanced election in the south was quarter of pennsylvania -- southwest quarter of pennsylvania. 18th of --ut the congressional district. how much is this still country -- steel country? >> they are hoping that that will come back. that is why that president steel with the still -- tariffs, this is a portion of the country that will plate very well -- play very well.

this is a heavily conservative district, one that candidate trump carried by more than 20 percentage points. -- millions of dollars republicans have spent flooding this district with advertisements. i spoke with a source over at the dnc who told me that they to mobilize the grassroots to seize upon the momentum that they have. donald trump junior was campaigning yesterday. joe biden trying to get out the vote for the democrats, as well as governor wolf. tom: edward rundell would join edward rendell will join us in a minute. did secretary clinton lose the district? >> that is a great point.

secretary clinton did not perform as well as the metrics as she needed to -- at the metrics that she needed to. she did not perform as well as barack obama. president trump outperforming in the constituencies that he needed to, including amongst white working-class women. this is also a district that is heavily influenced by the retail industry. big, prominent retail groups, including dick's sporting goods and american eagle up arrow headquartered here or -- american eagle apparel headquartered here or nearby. i would argue that the democrat is running away a bit from the current makeup of the democratic party, criticizing nancy pelosi. he is viewed as a young newcomer with new energy. should he lose, it is very likely that he will run again in the gerrymandering redistrict

race. kevin, why has it been a struggle for president trump, for the republicans to do so well in pennsylvania? kevin: i couple of reasons. -- a couple of reasons. a lot of republican strategists say that quite simply conservatives are motivated to get to the polls. obviously there working differences between that race in alabama and where we are today. president trump going all in. he was here over the weekend giving a bombastic campaign speech. prima trump, so to speak -- prime trump, so to speak. tom: let's look at this quickly. someis ella nielsen, with nice numbers.

republican plus 11, that is a big number. there are technically 70,000 more registered democrats than republicans, but many of these voters have been casting ballots for the gop candidate for years. republican allied groups were outspending democrats 17 to one. where are the democrats going to come from in the hills in the valleys? democrats, thean union workers, and in particular you have seen top unions trying medicare,ssues of medicaid, and health insurance, really trying to get out the vote in that regard. when you look at it from a broader perspective, should someone like conor lamb be able to win here, you can bet that joe biden is going to seize upon

that message, and potentially launches own presidential campaign. a lot of republicans in washington, d.c. are really going to consider retiring should lamb pull this out. tom: interesting. francine: kevin, think is so much -- thank you so much. the russian foreign minister has been speaking in moscow. this is as the prime minister's cabinet in the u.k. is meeting this morning to discuss how to strike back at russia in the wake of the poisoning of eight former spy -- a former spy. the kremlin have a midnight deadline to explain the attack. we will keep on monitoring what mr. lavrov says to see whether they will respond or not. this is bloomberg. ♪

♪ tom: this is "bloomberg surveillance." lavrov the speaking in moscow on this important issue of two very ill people suck the london. and of course prime -- south of london. and of course, prime minister may's statements. we have joseph quinlan of bank of america, merrill lynch. bmolso have brian belski of capital markets. how much are you in cash right now? this cash good or bad? -- is cash good or bad?

you guys have been encouraged to stay in this bowl market -- bull market. pricednlan, are we fully now? 11% by the end of the year. joseph: i think he is right. we just saw the oecd wrap up their numbers, so there is more upside. tom: it can't get better than this. why are the bears wrong right now? you have been so good at sign saying that they are just wrong, wrong, wrong. what are they wrong -- why are they wrong? >> so much of investing the last 15 years has been about macro -- quantumive investing. joe and i have known each other

for a long time. we have been through the wars. hads not just that we have the opportunity to work in our business for so long, it is just that we have seen things and lived through things. there is nothing academic about what is happening with the market. if you're trying to diagnose early cycle,cycle, whatever cycle, you should not be doing that right now. you should be picking companies and holding companies. and when the market rolls over and gives you the opportunity to buy more there's companies, -- more of those companies, that is what you should do. francine: some of the difference is that we see in the market now compared to it was five years ago, is that at this point in the cycle when the fed is raising interest rates, it makes little sense that the dollar is weak. does that create schisms for the market? >> we have not seen these types of levels ever. we are still acting like it is

2008. that was once in an every other generation event. i don't think you should be talking about the interest rate cycle in the last five years. you have to check about the 1960's, -- you have to look at the 1960's, 1980's. -- ou look at even 2016 francine: how do you explain a weak dollar given where we are with the fed trying to raise rates? >> f the fed is raising rates from crisis levels and lower levels, if industries are to go up from these types of lower levels, that is actually a good thing, because it means that the economy is improving. what are heading into a period of cyclically higher rates, not structurally higher rates. 4.: this is cfa level

the risk-free rate. that rates are going up is a good thing, there is the nominal rate, the inflation-adjusted rate, and they fall into error inker -- into our anchor. do you have a clue of where the risk-free rate is? >> it's not that the dollar is weak, i think it is that the other currencies are looking stronger. the key is that there is so much liquidity out there. every client that i speak to, they have so much money, they don't want to pay up, but they don't want to miss a day where there is great on the screen. absorbing all of this cash, it is another 12-18 months. tom: when you look at the wall of money out there, it comes down to internal rates on return.

if we have a president who says make america great again, do just assume that irr's go up? brian: the dollar typically and historically rallies before interest rates go up. that is exactly what has happened. now that fiscal policy and interest rates have begun to hit, the dollar is weakening. the biggest thing that people are missing is that we are so focused on inflation. we should be worried about growth. these companies are going to be going up. we started this whole conversation about cash. cash is awesome. you want to find those companies that are deploying cash in a very meaningful way. that is the next part of the cycle that many investors are missing. tom: brian belski and joe quinlan with us. we wrap around the equity markets with all that is going on. i wanted to show hr on broad, --

charts on broadcom, qualcomm, and intel. the point is that they are all very different. president considering a clear and present danger on technological, intellectual content. what it means for singapore and china. we will have much more on this. london,tay with us from from a daylight savings time. ed is dark out there, folks -- it is dark out there, folks. this is bloomberg. ♪ >> bloomberg television is brought to you by wells fargo.

♪ york,rom london and new francine lacqua and tom keene. a headline out from qualcomm. their language is really quite strong on what they want from broadcom. i am not sure of the context on this. we will talk about broad come in a moment. broadcom must permanently abandon an attempt to buy qualcomm. i don't know if that was pre-imposed. is joeow with this quinlan of bank of america-merrill lynch. joe quinlan, are the financials a proxy for america? degree, yes.

obviously consumer credit cards are pretty healthy. we are using them, so i think it is emblematic of the bank's profits. everything aggregated, yes. tom: which banks, brian? buy? banks do you brian: his employer and my former employer, bank of america. it is one of the most hated stocks in the buy? world, because quinlan is there. [laughter] it is a mix of both. from a basis, for the next 10 years, he is the head of emetic investing.- thematic i believe wealth management and -- are the two most important themes. from a regional bank perspective, we are going to see ex come back.cap-

it is not just about interest rates going up, it is about the economy improving. from an institutional perspective, a lot of institutions that i speak with are still exposed financially. there are still some stocks to be but there. francine: talk to me about the leadership at goldman sachs. , inthat -- does that change any way, shape, or form wall street? goldman has done a great job positioning itself. havehing that they do not that bank of america has, or even wells fargo is the what management part of it. -- wealth management part of it. goldman has done a good job.

when you look at goldman -- we can still look at goldman and respect to its financial banking business. brianna, will we see a , willre m&a from -- brian we see a lot more m&a from --? brian: during the post crisis, banks cannot do anything. if you take a look at forward rates come in terms of dividend growth, financials are by far the strongest. i think that we will see some m&a, especially as we understand that these banks are going to bankscale to compete with of america, to compete with jpmorgan, to compete with the canadian banks. tom: what do the banks want from the fed? the answer is that will -- if we get more normative, it is good for the banks?

brian: it is good for the banks up to the point where we take away the punch bowl and rollover. what are nowhere near that, so we are still in that sweet spot. i think the banks want clarity. i think wall street is very comfortable with this fed chairman. francine: thank you. joe quinlan of bank of america and brian belski of bmo capital markets. coming up, a conversation with mark mobius. look for that interview at a clock a.m. in new york -- 8:00 a.m. in new york. this is bloomberg. ♪

♪ francine: good morning, everyone. this is "bloomberg surveillance." the russian foreign minister has responded after u.k. prime minister theresa may publicly

accused the kremlin of the chemical weapons attack on british soil. he said russia is not guilty of the poisoning, but is ready to cooperate. to comply the u.k. with a request for a sample of the poison. do you believe that the foreign minister and the kremlin are trying to deescalate this by the cooperative -- by being cooperative? >> i don't think they really are. they rejected the deadline, which the u.k. set for midnight tonight. he was quite competitive, the russian -- competitive, -- , the russian foreign minister. russia is breaking

itself -- bracing itself for u.k. reprisals. francine: what does that mean for possible escalation? does it get worse? does the u.k. think of retaliating? and how can they retaliate? henry: russia is not expecting that sort of nuclear option. there was the mention of a possible ban of swift transactions. the u.k. would need the support of its allies in europe and the united states. i think what they are expecting is diplomatic expulsions, and perhaps other forms of retaliation. i think they can't expect that they can do with it. tom: what is the linkage of moscow to london? what is the emotional linkage of moscow to london? henry: london is a place of refuge for russian exiles,

political exiles, former spies. they regard it as a place which is essentially giving refuge to critics of the regime, and traitors. it is a great place to do business and a lot of russians have their money there. tom: what will we look for in the next few days? what will you watch out for from mr. putin, mr. lavrov, and the russian government? looking to see whether this up there is going to become another major confrontation between the west and russia. whether or not these measures will provoke some kind of response from russia, how far this is going to go. tom: henry, thank you so much. henry in the moscow for bloomberg news. >> more on russia. new poll finds that president

trump's steel and aluminum tariffs will not have much impact on the u.s. economy. here we go. republican lawmakers say they have received complaints of corruption and mismanagement in restoring power to puerto rico. in some cases they may have prioritized their own homes over a hospital and the airport. much of puerto rico lost power when hurricane mario in september. the northeastern u.s. is getting slammed by a major storm once again. there is a winter storm warning for the rest of new england. more than 1300 flights have been canceled so far. 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. tom: there is an election today in pennsylvania.

it is in the southwest corner, just beneath pittsburgh. joining us now is edward rendell, the former mayor of philadelphia, and if the governor of philadelphia -- and yes, the governor of philadelphia. what is it going to take to get democrats out? what do they need to do to get the reagan democrats to vote democrat this time in that district? what do they need to do to get the barack obama democrats to mb?e for mr. la >> first and foremost, the anti-trump sentiment of most democrats is enough to inspire turnout. democrat turnout has far exceeded republican turnout this year. we have improved our boat total just vote total -- vote total.

what can conor lamb do to get the reagan democrats? he has done a great job. he is pro-life, pro-gun rights, a conservative democrat. he fits in well. he is an afghan wars hero. he is an excellent candidate and an easy guide to vote for. the steelworkers and the coal miners, interestingly, the unions are supporting conor lamb. conor lamb has done a good job talking to union households. he has also done a good job not letting the election get nationalized. let the election become democrat-republican. is an elections for a district that will go out of existence in about eight months. tom: you made national headlines when you stood up and said that the philadelphia eagles were not

manly, philadelphia was not manly, and minnesota would have play football -- played football. you went nuts. that is an idea of this election and that conor lamb is running away from that modern, progressive, liberal democratic party. is that going to be the theme for 2018? to run away from speaker pelosi and secretary clinton? >> it depends on the district. forave got to have room conservative democrats, because conor lamb fits the mold in that district. if you moved him to philadelphia suburbs, he would not fit the mold. in the philadelphia suburbs, most people are pro-choice, and most people are strongly anti-second amendment rights. he rights themselves,

but they want sensible gun safety laws. i consider myself a progressive, i'm not sure that they would. if we are going to take back control of the senate and the house, and eventually the presidency, we have got to do it with conservative democrats as well as progressive democrats. it has got to be everybody. francine: is this pennsylvania dinghies allusions with the -- being disillusioned with the republicans? >> president trump is still fairly popular in that district. his favorability in the polls is about 51%, far ahead of his national track. the democrats themselves are more enthusiastic than the republicans. that is because a lot of democrats are angry at a lot of the things that president trump has done. the district as a whole is not anti-trump, it is pro-conor lamb. he has done a great job campaigning.

if conor lamb wins this, considering donald trump just 1.5 years ago when the district the0 points -- won district by 20 points, it is a huge wake up call for the republicans. tom: philadelphia is about a lot of violence, like every other major city in the country. want to know your thoughts and what the democratic party needs to do to move forward on some form of gun legislation. what is a new approach to get something done for republicans, democrats, and independence across america? have to control the house and senate so that they can bring these bills up for a vote. with call -- paul ryan controlling the agenda in the house and mitch mcconnell in the senate, gun safety laws like thoseg assault rifles and

magazines that have 350 bullets and a clip, those things will only be brought to a folk -- vote if democrats controlled the senate. i believe it there will be enough republicans to join with democrats to reenact some sensible gun legislation. francine: governor, if the democrats win this one, how would it change the republican agenda at a national level? edward: the republicans have one trump card. that is the tax reform bill. they have done a very good job of putting advertisements on, which i don't believe tell the true story of the tax reform bill, but it is becoming more popular. that is their trump card, and they have got to play it hard. even people who say the economy

is in good shape are still -- many of them are still voting democrat in the congressional elections. i think is -- that is because of the antipathy that president trump has engendered among many voters. tom: governor rendell, thank you so much. we have continuing coverage of the 18th district elections through the day. kevin cirilli is there. markets" later today. look for that in the 8:00 hour. from london and new york, this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance."

president trump has issued an executive order stopping broad, dcom fromiring -- broa acquiring qualcomm. he cited national security concerns for the order. when you look at the reasoning behind this, can you say without a doubt that the trump administration is much more america first that it now extends to the technology sector? francine.right, isn't from china or even really from singapore. this company in transition coming back to the u.s. in november they joined mr. trump in the white house. at the time trump seemed pro-broadcom, so this

is a very unexpected move. the technology sector has always the u.s. hasg that always been strong on blocking deals. these companies have not even agree to do a deal yet. all we were looking at was broadcom trying to get -- on its board. francine: what is the president concerned about? 5g?t five g -- >> that is an interesting question. there is nothing a parent about broadcom that would give away some entrance into the u.s. they are extremely positive. the chief technology officer at

broadcom were in those discussions. they feel it went well. they genuinely do not understand what the national security concerns are. it is very unclear why president trump made this executive order. tom: this as mystery as to the why. is a fairlydcom transparent company. is about the new -- it is about the new globalization? >> it could be deglobalization. this path of investment protectionism where the president is involved in deciding deals, some governments are getting involved in investment. that hits closer to home on wall street a lot sooner, and faster. tom: is this going to be multinationals, x china? >> we hope not, especially given the fact of fair and free trade.

i think 10 years ago we were still focused on what was happening everywhere else, but in the u.s. now the diversification of these multinationals is very important. tom: i really don't know the auditing, the visibility, the transparency of broadcom. do you have that same mystery when you look at documents or general accounting documents and singapore and the u.s.? >> yes, but you have the same issue with qualcomm. we don't know if the issue is with what qualcomm has going on in regard to china, or what adcom has going on in regards to china. obviously they have taken a view that somehow putting these two together creates risk that you don't currently have. they are both fairly opaque, in terms of what they are doing.

broadcom is for all intents and purposes a u.s. company. tom: how can you say that? i don't agree with that. brocan you say that adcom is a u.s. company? >> they are largely a u.s. company. they have a u.s. citizen as their chief executive. almost all of their board members are u.s. citizens, with the exception of one canadian. francine: what does this mean for the future? will we see less deals in the u.s. as a whole? >> i think in the u.s. we would definitely see less megadeals. at&t and time warner and now this deal have been blocked by the president. they are both worth over $200 million, the largest deals to come in front of him. i think it will halt a lot of

these transactions for a while. china,pany connected to it will be very difficult to see them coming to the u.s. tom: we will continue with mr. quinlan and mr. belski. we have a chart showing the many inflations of america. this is bloomberg. ♪

♪ "om: "bloomberg surveillance. from london and new york. the number one mail that i am getting from our viewers and listeners is about it fully employed america. nobody agrees with that statement. number two item is that there is no inflation out there. bring up the single best chart, if you would. it is really simple. the inflation the everybody feels as up here at 3%, service inflation.

which inflation matters? >> both inflation matters, but the difference is in it goods inflation in the next few infla. months. it is a broadly defined goods inflation. we are starting to see some additional pressures. the president adding tariffs on steel will add to the pressure. january changed the narrative with average hourly earnings rising. february they were steady, but as the labor market gets tighter, labor is the biggest input cost to service businesses. tom: is this margin compression? is that where we are headed? brian: so far. we are talking about 36 years of no inflation. we need to see a longer-term turn in inflation. let's focus more on growth. next couple months, yes. many people are missing that there are so many companies and areas that are exempt from the

tariffs. there are a lot of still companies that are exempt from these tariffs. >> we don't know who is exempt yet, other than canada or mexico. brian: which are two very important trade partners to the united states. francine: joe, what is your take on inflation? joseph: every company that i talked to are talking about the lack of labor, and how they are paying up to keep the good people insider company. they are paying more for training. they are even skipping drug --ts, just showed to work show up to work. i think in inflation is coming, but we can manage our way through it. francine: we were hearing from .avid bloom of hsbc how do you get wage growth? that that employer saying

i am concerned that you will leave, so i am going to give you a wage increase? or is it because we ask for it? >> your best and brightest who walked out of the door will be enticed back to china. it will be a combination. there is a focus on wealth, talent, keeping the talent in the door in the united states. that will come through with more wage increases. tom: i want to bring uptom: another chart. bonus round chart. this chart matters. the dollar index. david bloom at hsbc calling for a weaker dollar. this is the compensating factor among all of these stresses. the answer is that the dollar adjust, and life goes on. >> it has been adjusting in some interesting ways. if it continues to turn around,

that will help keep inflation down, but we should see some of the lagged affect coming through. belski, are multinationals going to currency adjust? >> i think it is overweighted. people forget that in the 1990's you actually have many companies that made monthly -- money off of hedging the currency. the dollar was strong and they hedged appropriately. i think multinationals are very well-positioned, especially given the strength of the north american economy. it is going to drive cash going forward. >> april is when cpi is going to rise. all of the things that janet yellen talked about, they fallout in march. tom: this is important. you have been in the press conference. there is a lot of people on

the fed who believe that. i think it would be useful. the argument that the europeans don't --, then we have too many meetings. it would be useful, because every meeting there is no press coverage, we know that nothing is going to happen. tom: this has been so valuable. gentlemen, thank you so much. brian belski and joseph quinlan have been with us. let's look at foreign-exchange. right now the yen it is back up. stay with us throughout the day. this is bloomberg. ♪ mom, dad, can we talk?

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shuts down the broadcom qualcomm deal. hits a record high. inflation tightrope, core inflation jumps in january. the u.s. breakeven sits at 6%. david: welcome to "bloomberg daybreak." i am david westin alongside alix steel, waiting for inflation. alix: women's apparel prices jumped the most on record, a huge mover in january. thank you to my mother. does that mean we will see a huge give back? that is what markets have been waiting for. here is how the markets stack up in the u.s. it feels like it is a little bit of a risk supported world. s&p futures up 6 points. it is a