$60 billion this week. the chinese premier says there's no win near trade war, but he will protect the property of foreigners. vestors focus on the fed and g-20. questions remain on the facebook scandal. and the most famous prince speaks to bloomberg exclusively on his 83 days in detention. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua. tom keene has the week off. this is guy johnson. we're looking at treasuries, a lot of market moves. guy: yesterday was about tech. today we're migrating to what's happening with the fed story. i suspect that will be how markets will shift. it was interesting, the tech story yesterday, kind of such concentrated risk. you have a couple of big names suffering, and as a result of which, the markets really feeling the pressurement across the u.s. and the asian session as well. zproip we also have our michael mckee in buenos aires where we

talk china and tariffs. let's get straight to news. here's taylor. taylor: you mentioned the trump administration plans to impose heavy tariffs on chinese products as early as this week. according to people familiar with the matter, the u.s. wants to crack down on what it sees as intellectual property theft from american businesses. companies from amazon to wal-mart warn the ad many that a crackdown on chinese products could hurt the economy. in china, the president has begun his second term with a warning to taiwan. in a speech to the national parliament, ji says china has the capability to stop any attempt to formal isles the island independence. ji xi comes a few days after high-level official visits to taiwan. economists surveyed by bloomberg say fed chairman jerome powell and his colleagues will end up raising interest rates four times this year, but they say policy makers are unlikely to signal

at this week's meeting. the fed's open market committee begins its two-day meeting today and will issue a statement tomorrow. saudi prince says he's not like the other royals and business leaders rounded up in an anti-corruption drive. in an exclusive interview with bloomberg's eric schatzker, the prince says he was never accused of wrongdoing. >> we have signed something, yes, an understanding. some others may cause acceptabilityment. settlement to me is you may the wrong, you made something wrong. in my case, no, it's a understanding with the government. taylor: we'll have more of that interview with prince talal in a few minutes. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. guy, francine? francine: thank you so much, taylor. this is what i'm looking at. guy was saying there's a little bit of a shift off what we're

seeing in stocks, to a lot of investors focusing on what will happen with the fed and, of course, the potential new trade tariffs from president donald trump targeting china, how that will be taken from china. dollar steady. government bonds falling. european stocks actually rising a touch. d then for good measure, 6.3282. guy: let's focus on the stocks here in europe this morning. the u.k. drive train and conveyer belt company doesn't sound exciting, but the french company is buying it. the reason this is interesting, it tells you something about brexit, though the company continues this deal has anything to do with brexit, and the fact we may see inflation in the supply chain for the mining sector. nice revenue target pushing forward. and de la rue, they make bank notes s. money going out of fashion? this company makes money, and

you've got to wonder whether or not as a result of it, stocks trading down by nearly 12%. there's a lesson in there for all of us. the other thing is oracle. oracle trading down after hours. this could be something that adds to the down side move in u.s. tech a little bit later on. oracle talking about maybe cloud not delivering in the way it once did. keep an eye on this tech heavyweight as the u.s. session gets a little bit closer. after hours down by 8%, fran. francine: cash? did you say cash? what's cash? i think our children will not even know what cash is. guy: that's the point. francine: that's a whole other show we need to do. this is without a doubt my chart of the day. and these are pound movements. this is on the back behalf we heard yesterday, of course, from the e.u. and from the u.k. about these transition deals. the european union agreed on monday on these broad terms of this two-year transition, the chart shows that g.d.p. u.s.d. cable, but also we charted the pound index is different from

the pre-brexit vote range, which is highlighted in white. you see the white at the top, then breaking away from the range. push it out for social ocial media, of course, for all of our radio listeners and good morning to you. guy: good morning to you as well. let's talk about what's wrong with this chart. what is wrong with this chart? you tell me. we've got a situation where oil is going up and the commodities complex is going down. i've got the wrong chart here, which i did not pull up. that's the fenr. francine: a good one. guy: i pulled up the wrong chart. francine: we don't show this chart very often. guy: this is a great piece of functionality. a apologize for bringing up the wrong chart. francine: it's a dashboard. dashboard. graphics tech selloff. francine: i really like that. we don't do enough of that on "bloomberg surveillance." concerns of increased increased

regulation and supply chain disruptions continue to weigh on sentiment. facebook shares posted their steepest drop since 2014 on firm that the research alita. e an and then, of course, we have everything surrounding driverless cars. joining us from dubai is richard windsor, founder of radio-free mobile. also with us for the hour, chief economist. eric, thank you so much. stay there, because we'll get to you in a second. richard, when it comes to the tech selloff, what exactly freaked the markets? is it that we had a trajectory on where a lot of these stocks were going when you were driverless cars could go now and now it's all hanging up in the air? >> i think you have a number of fabtors. you had the really large tech companies that have had, you know, one of the greatest runs they've ever had. you've had the prospect of increasing interest rates. and then also, if you look at

the stocks that are dependent on moanization of user data like google, these are the ones that have most impacted. i suspect it's more about these factors, combined with increasing fear of regulation in terms behalf people and cannot do with data that has been given to them by users that are causing the problems. francine: we also heard that the e.u. was probably considering a digital tax as trade rages on. what would that look like? >> great question. very difficult to tell. i guess they would look to impose a tax on revenues that have been derived in the region. that would be the simplest way f doing, it i presume. i think this will blow over. the reason why i think that is because there's a fundamental misunderstanding in my opinion in terms of how the internetworks. users seem to have the opinion

that the internet is free. it isn't and never has been. what you're actually doing is just paying for service with personal data. once users get more accustomed to that, then i think that there will be an easier situation where you can choose. you pay the cash or you pay with personal data, and that's how i think it's going to evolve going forward. guy: do you value these companies at the same level if that is the case? as you say, at the moment, there is this misapprehension that the service is free. but basically these are data mountization companies. > actually, i think it is. you can go to google and say yes, i will use your cat a. or i don't want you to do that, and i'll pay you $5 a month for the service. obviously these companies would set the pricing of that service

at the level at which there should be no real impact on revenue overall. guy: do you think there's a breakup risk here? are these companies too big, too power scientifically somebody pointed out they spend a huge amount of money in terms of lobby in washington. they control huge sways of the technology sector across the united states and across the world. we've seen it in history, when companies and sectors become too big, there is a regulatory impetus that starts that ultimately ends up leading to breakup. richard: i think it's a possibility, but it's a very distinct possibility. if you look at google, your first question is, well, what am i going to break it up into? and there is a reasonable argument that the level of google is a one-trick pony, i.e., it does search and everything else is fairly minor. as a result of that, you would have great difficulty breaking that up into its constituent

parts. in the same, you could level the same accusation at facebook. facebook generates almost all of its revenue off its social network, so the question is, what would you break it up into? francine: let's bring eric nielson into the conversation. i don't know you don't look at this, but you must have a view on driverless cars, the end of cash, and the impact it has on the economy 5, 10, 15 years. does anything happen change that deal? eric: i'm more and more nervous. i think we had maybe an overshot in terms of globalization after the crisis and through the crisis. and i see a lot of winding back of this. i think what you're referring to, what we just talked about on the i.t. industry, the tech industry, i share skepticism here. to some extent, these companies have been broken up in the sense that they're not free to operate in china and russia, for example. we don't want this, and all the

europeans are saying, i don't think you pay enough taxes because you shovel through an island, so maybe, as richard said, maybe we should tax where the revenues come in. but this whole thing is not a smooth process. you have to worry about how this impacts the economy in a negative way. guy: we find ourselves in a situation where the chinese, you've got two buckets of tech stocks at the moment, the u.s. bucket and the asian bucket, because europe doesn't have much, so it falls into one of those two. the chinese bucket is going to be made up of companies that are going to get bigger and, therefore, potentially stronger, whereas there is increasingly this taxation burden that is likely to be put on the u.s. once. so are we putting ourselves at a disadvantage? are we heading down the road of a trade war? are we putting ourselves at a disadvantage?

erik: i don't know, yeah, from a very sort of liberal kind of world view we are, in a sense, but i think what we have seen some of the backlash to what's where these companies, seems to be the reporting is correct, meddling with the political process so. then i think most people will think, well, then there has to be some measures to take this and that's what i meant before. politically it's nottable and probably desirable, but it's not smooth for the economy as this happens. francine: what are you watching out for in the next 74 hours? will it be testimony to kind of exactly understand where a lot of these big companies go from here? richard: my personal suspicion is things are -- people start to get worried about the use of data. obviously if you look at the

ata leak, where i think it was 50 million accounts or some football accounts made it into a analysis firm, facebook has changed its policy so you can no longer do that. so what i suspect will actually shop there's going to be talk and softness, but i think at the end of the day, we're coming into earnings season, and quite possibly another good season from the tech companies. as a result of that, i suspect a small correction, but then a continuation of business as normal, at least another quarter or so. francine: richard, thanks so much. richard windsor, founder of radio free mobile, and erik nielsen stays with us. come up tomorrow, fed chair jerome powell's first rate decision, a news conference. of course, that's at 1:00 p.m. in new york, 5:00 p.m. in london. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. uber has suspended self-driving cars after a fatal accident in arizona. according to police, a woman was crossing the street outside of a cross walk when she was hit by an uber car near phoenix. there was a driver behind the wheel, but the car was in self-driving mode. there's speculation the accident will lead to a push for more regulation. there's a report that saudi arabia scaling back plans for a ublic offering for aramco.

the oil giant would be listed next year only on the saudi stock exchange, according to the "wall street journal." they're reportedly taking more time to decide if an international listing is worthwhile. the movie studio weinstein company has filed for bankruptcy. weinstein failed in the wake of sexual harassment claims against co-founder harvey weinstein. the company plans to sell its assets to an affiliate of lantern capital partners. weinstein agreed to release any women who settled sexual harassment claims from nondisclosure agreements. and that's your bloomberg business flash. francine, guy? guy: taylor, thank you very much indeed. washington is set to rad to slap tariffs on china by the end of the week. anwhile, in beijing, premier says a trade war is in nobody's interest. >> indeed we have heard much talk about a possible trade war between china and the united

states recently. we believe that a trade war does no good, no one will emerge a winner from a trade war. what we hope is for us to act rationally instead of being led by emotions. we do not want to see a trade war. guy: erik nielsen still with us from unicredit. where's the tipping point in this story? the chinese, and we saw this sort of 18 months ago with the davos speech that was supplied by the chinese premier, have tried to play sort of the calm, rational actor in this story, but you just wonder where they are being pushed to and at what point they start to retaliate. that's when the game really starts. where do you think that point is? erik: i don't know, but i think there are a couple of things going on. the one part is i think it's an irony that china is now the defender of free trade, right? at the end of the day, they have a lot of subsidized

industries and all the rest of it, and so the real tragedy for me here is that they're the protector of the world have decided that they don't want to be, the u.s., they don't want to be the free trade champion anymore so. now we are in this back room, fill in in y they a peculiar way. where do they draw the lines? it's impossible to say, because it's a big decision at the end of the day. they have to do something, but i suspect they will retaliate very modestly, because they the trade war. guy: in some ways, this feels very much like how we used to think about the cold war, escalation theory, that kind of language. is that the direction we're going in, and is that a useful sort of way of thinking about this? >> let me start by saying, i think we haven't named it yet, but i think we already are in

cold war ii, but more with russia in a sense. politically, this is completely cold war stuff we're going through now, and i don't see the breaking point there to where we stop this sort of escalation on the political side. but this time around, compared to the original cold war, we have now china being a major player and the leading power. so this is confusing. francine: but erik, you have american businessmen who basically yesterday said, look, $60 billion will hurt the u.s. economy. how can you quantify that? do we know by how much? erik: it's very, very little f. you're doing the trade tariffs and the steel and you do a $60 illion on top of that, it is a point on g.d.p. at most. but the question is, if the chinese retaliate and it comes back and forth a couple of times, then suddenly it could -- there was a study by the

i.m.f. chief economist some years ago that estimates that if you gone to 20% tax, import tax in america i think it was, on all chinese imports, you could have something like half a percent cut to u.s. g.d.p. by the exchange rate. francine: how would china retaliate? even if they don't throw the fire on the other side, can they retaliate in measures that we don't really notice, but put investment in europe? can europe benefit from this? arizona i think: i was going to say, how can they retaliate? i hope they do just like they try to smooth trump, revoking some of the licenses for his daughters back in tchine a, very symbolic, very sort of tell him you don't like what we do. but the most serious question you ask, yes, i'm sure europe can benefit, and i think already, as i understand the conversations between berlin and beijing, how can we at

least prevent that we get down on the slippery slope? guy: does the trump camp see that as being europe endeding -- ending up in china's camp? europe is trying to get around the aluminum and steel tariffs, if the white house perceives that the negotiations are in full flow and the chinese and the europeans are negotiating, does that isolate washington even further? erik: it does. i forget who coined it, is america alone, the idea that -- the problem is i don't know, but i suspect that trump and ross and these people don't really see things the same way we see them. they say, well, people are just being confused. they're saying that calling some europeans, it's very difficult, because he's so unpredictable, trump. i suspect if trump reads the f.t., which he probably doesn't, he would say, that's good, i'm messing around with them. but this is strange.

it's not good for the economy. francine: i mean, it could be seen as a win. i know he's watching, so i'm sure he's listening right now. we'll get back to erik shortly. prince talal has taken a few knocks en route to becoming the richest investor in the middle east and one of saudi arabia's most recognizable faces. none, however, have been greater than 83-day detention at the request of his cousin, the crown prince. erik schatzker secured the first interview with the billionaire since his release. erik: why were nut ritz carlton for so long? >> i don't believe i belonged there at all. i am in agreement with my government, but not all the time. for example, i give advice to certain incidents, and sometimes they listen to me and sometimes they don't. it's like they give me advice, and sometimes i listen and sometimes i don't. there's an interaction between me and the government. on that particular subject, i

don't believe i should number there, yet i am there. i swheap they said, and i'm under the king and conference. erik: what did the government want from you? did they ever make that clear? prince: i will not dwell in the scussion through the representative. erik: they must have wanted something, though. prince: no. i read what was written that they wanted a or b or c or what they have. erik: according to one report, it was $6 billion. prince: oh, yes, frankly speaking, you know, all these are rumors. i will not dwell in the arrangement. erik: did it cost you anything to leave? prince: i will not comment.

erik: did you to pay the government any money, hand over any land, surrender any shares? prince: when i say it's confidential and secret arrangement, that this is based on confirmed understanding between me and the government, i have to respect that. remember the family. the king is my uncle. and this is the rule of saudi arabia. correct? i have my kingdom also, and to maintain the relationship etween and he them and have it erik: you understand why i'm asking the question. there are people, fellow detainees, who sign settlements and pay large fines. i want to know whether you're in the same boat or whether ou're in a different camp. prince: some of the people are

there. i'm not going to name names, but i know them. i know that they did commit crimes, did commit crimes of benefit, and they were involved in bribes and in stealing funds from the government. we all know them very well. i know them. and i'm for having the people there. i am for the anti-corruption. now, unfortunately, i had ahead of that group, but fortunately, i'm out of it right now. so i'm i'm not the person who say i'm going -- i forgive, but don't forget. i say i forgive and i forget at the same time also. erik: i also want to know if you retain control of your company, whether you're still a 95% shareholder in kingdom holding, whether you still own your media company, whether you're still in full control of your personal investment portfolio.

prince: i am the chairman. obviously i did give the power to our new c.e.o. more than a year ago. the leader mpowered to manage the process. so all sflb power long time before i went to the ritz. i'm really chairman, and they all functioning as usual, even when i was in tension, they were still functioning. it was the conclusion of proof that all these operations were kingdom holding or my private office, they were functioning as possible, even in my absence. erik: are you still the share holder? alk very simple. kingdom holding is saudi arabia, and saudi arabia is part of g-20, and our stock market is very transparent. actually as the united states.

so you can go to the list of holdings, and you look there at how much is my holding there. you can see it's 95%. you go there, you see what is right now, and you can verify that independently. erik: your royal highness, you maintain your innocence. you say that you didn't sign a settlement acknowledging guilt. and that you are different, if you will, from many of the other people. prince: no a confirmed understanding. i say we have signed something, yes, a confirmed understanding. i don't call settlement. some others cause settlement. settlement to me is an acknowledgment that you make wrong, you made something wrong. in my case, it's a confirmed understanding with the government. erik: you realize how important it is to be candid and honest. the circle of knowledge is too wide. too many people know too many things. and if all of a sudden a different story emerges, your

credibility will suffer. prince: sure, sure. erik: so everything you've told me is 100% true? prince: i have a confirmed understanding with the government, and it's ongoing. now, elaborate on that, it's an ongoing process with the government. erik: what was it like being held captive by your own cousin? prince: frankly speaking, it was not easy. i have to confess that. held t easy to be against your will. but i used to say, look, this is your uncle, this is your country. and this is your cousin. and really, when i left, very strange feeling i had, and i met -- i got it all my sandps i have and i told them,

complete comfort and no feelings at all. sure enough, we're back in communication with the king's office, with the crown sandrins his people. and that's very strange situation, not easy. but it's a fact. erik: and that's because what, today move forward? prince: i believe in my country. look, this country has been established by the my great-grandfathers. this country was established with our blood, with our grandfathers' blood. i'm want going to have what appened to me against my uncle, my cousin, and my nation and my people in this country. erik: did you see prince mohammed or the king at any point while you were in the ritz carlton? prince: no, during ritz carlton detention, no, i did not see

them. but i was in that contact through the people, yes. so i had a few representatives. erik: how would you describe your relationship? prince: you will not believe it. after i left, it is not only as strong, it's stronger. and this is shocking to many people, even to my people, not only to you. i told them, my relationship right now with this guy is not only as strong as before, stronger. and this is shocking to many people. erik: you've forgive him? prince: i forgot, forgiven, the whole process is behind me. completely. completely. erik: how often are you and he in contact? prince: barely three days come without me texting or calling him or talking to him, barely three days. erik: you tack almost every three days? prince: we text a lot. we text a lot, but we talk less

frequently. but barely a week goes without us communicating and without us communicating. erik: what about your profile domestically or internationally? will that have to change? prince: no, but thank god, many of the companies i deal with, many of the banks i deal with, i really take this opportunity to thank many heads of state in europe and other world, many heads of state in the far east, and many ex-head of states in the united states, really for caring about me and being in touch with my office and with me after i left and during my detention. warren buffett, bill gates, you know, roy frank f.b.i. of goldman sachs, and president carter. erik: they checked in on you? prince: oh, yes. and actually, bill gates issued a press release about me. i missed a lot of my friends. i have no time to just mention

all the names. i really appreciate what they did, all those in the political arena, nationally, internationally, and then the community also. i thank them for the care about me and say i will never let you down. francine: that was eric schatzker speaking exclusively with kingdom holding chairman's prince talal. erik, how does this translate into your world? you have the currency angle. do you worry a little bit less about saudi arabia in terms of finances than you maybe did six, eight months ago? erik: yeah, for sure. i worry less about them for two reasons. the oil price is set, and the fact that it feels like they're becoming closer to the west and reform the economy, which hasn't been done. whether they would be successful, i don't know. one has to be skipped, but certainly a high oil price is good. francine: what does that mean? the oil price, what is the

metric when you look at the oil price? does it feed through inflation in the u.s.? erik: yeah, it does, and that's best. it's very clear. we've been asking for more inflation in america and europe for a long time. we don't want inflation as cost push, because oil prices go up. that's bad inflation. we want inflation because it closes and demand pushes it higher. that's what we really want. but what i meant by good news is that also in it for the west, you need a stable middle ast, and you need oil prices at least north of 50. guy: talking inflation, we just had c.p.e. drop, and maybe the wrong kind of inflation, because it's been driven by what happened with the pound. the pound popping around on it. i'm just going to my screen. the number going through at 2.7. previously it was 3.0. it was surveyed to come through at 2.8. it's now come down to 2.7.

we do have a bank of england decision coming up in a few days' time. it's going to be interesting to see ultimately whether or not actually the markets price in the bank right in terms of the inflation expectations and whether or not that is likely to lead to an ongoing rate hiking cycle. we'll see. we'll find out later on this week. mark is going to tell us. francine: this is basically, we're looking at the function, we're also looking at traders and how much they feel the d.o.e. can act. do you feel like they can? this is showing at least one of the elite rate hikes this year. can they afford to even hike once? erik: i wouldn't if i were them, but i think they will. i think the u.k. economy is too weak, and they should look through the inflation at this stage. that would be my view. but i think they have set themselves in motion that they numbers. guy: the u.k. economy is running at -- it was running at

17 miles an hour without shaking, kind of the -- it's now running at 60 miles an hour without shaking. if we run it at 60 miles an hour, it starts to shake. we don't have the same potential growth rate we used to have, so the inflation story is a bigger risk, therefore the banks should act earlier, shouldn't it? erik: if you're running at 60 miles an hour without shaking, maybe so. i'm looking more at maybe 30 and a lot of shaking. point. 're making the erik: so, yeah, i don't see why you hurry. the risk that faces our control here is not that high. point. erik: so look, let's also step back. whether they hike once or not in a year makes no difference to the economy. i mean, the market gets very excited about these things n. real life, 25 basis points is not important. francine: you're breaking our heart, erik nielsen, stay with us. we'll talk more about what the market cares and doesn't care about. coming up tomorrow, an exclusive interview with

barclays' chief executive officer. that interview at 6:00 a.m. in new york. we'll be talking about the banking industry. this is bloomberg. ♪

francine: good morning, everyone. this is "bloomberg surveillance." guy and francine from london. britain and the e.u. have reached a draft agreement. according to the blocs, the e.u. may offer the u.k. improved equivalence for financial services after brexit. it's a system the u.k. has previously rejected. jing me now is our editor.

still with us is erik nielsen. emma, i'm so glad you're showing up to give us clarity on what's going on. is this unilateral, and does it mean that the u.k., that this is a bad deal for the u.k. yet again and they'll have to reject it? emma: the u.k. has already rejected equivalence. bathesly it's something that's unilateral. the commission says your rules are the same as yours, therefore, you can trade in the e.u. the problem is if the commission decides that they are no longer equivalent, then they can withdraw that. that almost of short notice is why the banks hate it, because you can't run a business, they say, on something that can be withdrawn on short notice. so the wording now, this is before in the draft negotiating guidelines, because this is what we're talking about, the post-brexit trade deal, and these are the guidelines that the e.u. is going to use to negotiate that trade deal. so before there wasn't a

mention of financial services. they mentioned services broadly. and now there's this annex, which they're going to discuss later on today, and it says hat what's on offer could be improved. we're not sure what it means, but what is absolutely clear is that the commission would be making the rules. there's no space at all for the mutual recognition, which is what the u.k. is pushing for. francine: what happens next? do they come back from a proposal and we wait to hear from the commission? emma: the u.k. hasn't actually produced a document that sets out trade. theresa may has again a speech on the second of march, and that's one of the things that the e.u. says. it's all very well to make speeches, but let's see, let's see it on paper. that's why we had merkel earlier on this week saying she still wants to hear more about what may actually wants, because they don't really -- the e.u. doesn't seem to think that making a speech is in the negotiating process. it's clear the u.k. banks don't want it.

they don't want to be rule takers. i think i'm right in saying it was the banking lobby who sort of came up with this idea of mutual recognition, and the u.k. adopted that. guy: erik, what are the impact of a cliff edge on the european e.u. economy after the u.k. leaves if we don't have the same ago recongratulation of financial services in london, the access to those markets, those capital markets, ceases to be there for european countries. what is the downsize for europe? i'm trying to understand how strong a card the u.k. ultimately has to play here. erik: it's very weak, because the u.k. is small in this context. i think from day one, it believes you cannot have most of the settlements and the financial outside the e.u., so there will somebody pushback on this one, and there is, on this specific issue, a degree of also a benefit for us if you

will. i mean, you can see how frankfurt and paris and other countries, other cities are sort of competing to get the financial industries in there. if brexit is anything but a very soft one, it's a negative for all of us. but more so for the u.k. guy: if i'm trying to sell a bond, whatever it is i need to do, one of the things that happened since the financial crisis is that the u.s. capital markets have become bigger. one of the things that happened is the european capital markets have become smaller. now one of the things that happened after the financial crisis was europe said what we need to do is get deeper capital markets here, one of the critical factors for our economy in we're going to take it forward from here. the most obvious thing to do is to use one of the global financial centers within the time zone to generate that process.

yet we're about to see the cliff edge. erik: but you have the banking union under construction, if you will. i mean, the banking union, from their point of view, it's not been slow, but the union is nderway. francine: we also have this agreement coming on wednesday, is the u.k. going to be better off on wednesday or thursday than it was two weeks ago, or is it broadly the same? emma: the transition deal is an achievement. it was signed off by the leaders, but it is certainly an achievement. what's been interesting over the last few months is how businesses have gone from saying, you know, we must have a transition, sort of policy, it's what we need, to sort of looking a bit and saying, actually, because the trance i guess isn't legally binding until the final withdrawal deal is sealed, that somebody some

businesses are sort of thinking that it's not terribly useful. and so we've had the bank, the u.k. banking lobby has reached out to regulators and say can you provide us a bit of clarity? can you say the transition is sort of almost legally binding and for a lot of businesses, they're going to continue working on their contingency plans because the transition nice to have. but it rather postpones the cliff edge rather than -- guy: just delays the pain. emma: also, in the next 12 months, they almost need to work on what would happen on arch 20 -- sorry, next year, march 2019, because it could become unraveled. guy: still exists in exactly the same way. emma: just a suspended cliff edge until with the draul deal is sealed, and that won't happen till early next year. francine: thank you so much. emma and erik.

coming up tomorrow, we also speak with the chairman of the yumpian banking authority. we'll talk about brexit andee quive a or not. look for that interview in new york, 5:30. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get the bloomberg business flash. oracle has hit a speed bump in efforts to become the power house in cloud computing. they forecast slowing sales in programs delivered over the internet. meanwhile, demand for new oracle software licenses fell almost 2% in the last year. amazon is considering expanding its bricks and mortar footprint by acquiring locations from bankrupt toys r us. according to people familiar with the matter, amazon is not interested in maintaining the toy retailer's brand. instead, a potential deal could lead to amazon-branded stores. and market zuckerberg was the biggest loser. his fortune fell almost $5 billion yesterday after reports say the political advertising firm retained data on millions

of facebook users without their consent. facebook shares fell almost 7%. he's now worth about $70.4 billion, making him the world's fifth richest person. that's your bloomberg business flash. francine, guy? guy: thank you very much indeed. jerome powell will hold his first policy meeting later today as fed chairman before issuing a statement tomorrow. economists expect the fomc to raise rates at this meeting. and there's a further three rate hikes this year, thereabouts, market still making up its mind. suspect the fed still is erik nielsen sit ago longside us at the desk. we were having a chat in the break, and we were talking about whether or not the fed is going to raise three or four am you went, i'm a bit worried about next year. should the fed be cutting rates at this point? erik: probably not. i wouldn't cut rates, but if i were a betting man, i think i would bet on a rate cut towards the end of next year. people are thinking, how far do

they keep going, and nobody is talking about the consult. i think there's a measure of probability that next year sees a significant slowdown. guy: recession? erik: you won't get probably a recession like two quarters of negative growth within 2019 i think, but when we come into early 2020, very likely probability, a very high probability, and that means growth will slow almost a year before. that's sort of a greer now certainly. and that's when the fed typically stop hiking and then at one stage down the line, so the end of next year, i could easily see them cut. guy: the fed is going to be cutting as the e.c.b. is exiting. going to be an interesting middle, isn't it? erik: yes, yes, exactly. that's why you have to think euro dollar moves higher. francine: why would you just not hike as much instead of then -- you use credibility. we've seen it here in europe about 15 years ago. if you hike, then cut, the markets freak out.

erik: yeah, well, you hike until you don't hike anymore, and then you wait for six, nine months, and then you cut in the normal scenario. but i think the probability -- this is my view of next year, at least the high probability, but if i were the fed, i would also hike now, but i would not say four thikes year. i mean, what's in it for them? francine: growth is good. what would happen in 18 months from now? erik: there are two issues. pure macro, half of the increase in private consumption in america has been funded for two years now by a drawdown in household savings, and it's down 2.5%. so this is vulnerable. this is 70% of g.d.p. in america. then you have the risks of policies, the trade stuff, and the fiscal expansion, and what does the fiscal expansion do to the 10-year? my view would be that there's certainly a risk that sudden this will thing falls off quite measurable sometime down the

line. francine: who would be hit? regardless of tariffs and trade, or is it? erik: so the underlying fundamentals would suggest to me that sometime next year you have a slowdown. tariffs and trade raises the risk it happens more properly and earlier. guy: you think the euro goes up? i'm going to throw the other argument out. francine: i'm shocked. guy: as the fed is -- yeah. the fed has been hiking rates and the interest rate differential on the 10-year go wider and wider and wider, the dollar has gone down. i'm going to throw it out there. does the dollar go up when the fed starts? erik: no -- guy: no,, no euro dollar has gone up when the fed is hiking. erik: i don't think that's as powerful as the fiscal expansion. we have a nice -- my colleague has a great chart on the u.s. budget deficit adjusted to the

cyclicals. guy: the euro has gone up because of the u.s. deficit? erik: no, the dollar has gone down. the dollar weakness more than a story. that's important. francine: that's not how draghi is feeling it. erik: and rightly so. it's gone up by ruffly half of what your dollar has. so we start as dramatic. guy: it's down because it hasn't moved. erik: right. and we have the sterling, we have the central europeans and all the rest of it, so yeah, but the renminbi is a very big part of the story, right. francine: i caught it up in time. i'm so happy. there it is. there on the left. erik: right. what's the problem, right? francine: what do we do from here? erik: what's the problem, right? guy: it's gone sideways. erik: where does it go from here? we will go higher.

over this year, if i were a betting man, i would say maybe 5% or thereabouts. nothing too dramatic. guy: companies are already complaining about it now. francine: spain is. erik: they are, and yet their exports are still growing faster than global trade and g.d.p., so they're still getting market shares around the world. of course, if you're an exporter, it's nice to have a weaker currency. i prefer they didn't have it. guy: one of the e.c.b. guys was talking about this is as good as it gets for the e.c.b.i.e., the growth momentum story has been there, it's been fantastic. it gets harder from here. do you buy that, or do you think the e.c.b. can costa long for longer? rik: i think we are close to the peak of growth. some indicators suggest above

2.5 to 3. i don't think it's going get up there. i think we are maybe cruising, hitting off a little bit. the e.c.b., and then if you look a year out, if i'm broadly right on the u.s., europe will also have a hit. so then you see eurozone growth drop back to 1.5, 1.7 or there be. to the e.c.b. point of view, you can sort of remove the que, but you won't get inflation up to 2% for a while. francine: we could go on. erik nielsen back on. coming up next, we speak with the head of strategy and bank of maryland global head of economics. this is bloomberg. ♪ ♪

the u.s. is set to impose tariffs on china this

week. the chinese premier says there's no winner in a trade war, but he will protect the interactional -- intellectual property of foreigners. investors focus on the fed and the g20. questions remain on the facebook data scandal and driverless cars. the most famous prints from the saudi purge speaks to bloomberg exclusively on his 82 days in detention. i am francine lacqua in london. guy johnson is my coanchor for the week. it is fun. tom keene on a very well-deserved break. we look at the markets and the fed and a little bit of possible equivalency in the brexit debate and -- debate. s&p fair values on the according to a .3 percent rise. maybe we are putting what happened yesterday behind us. we down stuff 2700 -- bounced off 2700 yesterday.

i feel like today is the day of market time. a lot of sound off your yesterday. tomorrow is when the action is. francine: a lot of focus on the fed and the g20. tariffs in china is our next topic. let's get to the bloomberg first word news. are we getting headlines? guy: i want to go to germany, my ego screen and figure out what's going on. i am more a fan of the efo, but we will do the zew. current survey, 90.7 and the fits aas 92.3, so this narrative that tells us a little bit about what is going on within the slowdown in germany. pmi is relatively elevated levels, but we are seeing a bit of a slowdown. let's get a bloomberg first word news update. taylor: the trump administration plans to impose heavy tariffs on chinese products as early as this week. the u.s. wants to crack down on

what it sees as intellectual property theft from american businesses. amazon from walmart -- copies like amazon from walmart warned the government that a crackdown on china could hurt the economy. in a speech to the national parliament, xi said china has the capability to stop any attack to formalize the island's independence. president trump signed an order allowing high-level official visits to taiwan. economists surveyed by bloomberg say jerome powell and his colleagues will end up raising interest rates 4 times this year, but it's a policy makers are unlikely to signal that at the meeting this week. the market committee begins a meeting today and will issue a statement tomorrow. saudi prince -- says he is not like the other royals and business leaders rounded up in an anticorruption drive.

in an exclusive interview with erik schatzker, he says he was never accused of wrongdoing. something -- aed current understanding. me is an to acknowledgment that you made something wrong. in my case, it's a confirmed understanding with the government. taylor: we will have more of that interview with alwaleed bin talal in a few minutes. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: i just want to get back to the zed figures. the survey is pretty much as expected. the expectations basically have fallen really quite significantly. the figure we are left with is 5.1 instead of the 13 we were expecting. that is for the month of march,

so it seems for people in chiefy -- this is -- executives are worried about what comes next. another is i guess being felt in certain parts of the market. .sian equities nudging lower investors trying to figure out exactly what it means -- what the latest headwinds from technology companies mean for market moving events this week. we are looking at the fed and the trade and tariffs and maybe even the e.u. summit in brussels. dollar treasuries edging lower. guy: it's an interesting an eclectic mix today. fenner is a company that has been acquired by michelin and makes conveyor belts, which doesn't sound exciting. if you think about the fact that it's exposed to the mining sector, perhaps this is a bet that we will see inflation in the dining sector. it's putting out nice numbers early on, but doesn't seem to be getting much of a market reaction.

rue is a company that makes banknotes notes. it's interesting they are putting out a little bit of a negative spin on what happens next. perhaps this is a story about the death of money. i just want to show you, we mentioned it earlier on, oracle trading sharply to the downside. this is a cloud computing story and the stock down 8.55 cent. beckett impact -- 8.55% and i could impact the tech market. francine: -- concerns of regulation -- amazon shares reported their steepest -- apple also4 spooked the markets in reports it is designing and producing its own device displays for the first time. it us is our bloomberg markets reporter.

great to have you on the program. what can you tell us about what happens next? >> a lot of this is looking at facebook's reaction, especially for mega cap tech stocks that have a stranglehold on data and data lot of individual's as well. facebook has had a difficult time communicating to investors of how they proceed, whether this is a data breach or misuse of data. the reason this is important for market as a whole is these are such large stocks. facebook and apple accounted for 1/10 of the losses in the market yesterday. thesecompanies -- companies are having issues and we have the entire global backdrop changing between central banks and the global growth story up. it definitely looks like we are on shaky ground. francine: does it help with advertisers? if there is -- is there a playoff of tech stocks and advertising? dani: generally when you look at

these companies, google and facebook, when you think about online advertising, it is these companies. there is not really any other room to go to anyone else. if we get more policy scrutiny in terms of how advertising -- advertisers are using data, that will spook those areas as well. facebook and google and the likes need to get their message straight on how they are going to communicate because the nerves are on every aspect in our lives. it's difficult to attach one policy to say this is how we solve the issue. guy: the market is getting narrower and narrower. what now appears clear is we are going to see more volatility from a political point of view and a business model point of view around some of these companies. how to the models -- how do the models stand up in the market? how does the market traded this story?

it has been a one-way bet, how does that change and how does the market take it? dani: you know i love looking at things through a -- lens. this is a trade where you bet on things that work to the best over the past 12 months. notybody intentionally or really love this kind of trade. when you look at hedge funds, they own a lot of tech and it makes them very much in the trade. the way that has been described before that i think is apt is momentum tends to be an escalator up and an elevator shaft down. when this breaks, it breaks hard. we see the violent -- market have violent rotations. it gets very difficult to position and that feeds into this volatility and at the same time, you have credit spreads widening. there is a sense out there that the market is not able to absorb some of this headline risk like it could in the past. guy: the vix went up to 22

yesterday and came down sharply? what is that telling us about positioning right now? dani: the one i think is pretty applicable to the action yesterday is the vix for technology stocks. generally we see that one -- it's the nasdaq that is much higher than the -- vix. february's market action was widespread so that one surged beyond the vix yesterday. we are seeing a bit of a normalization in terms of that, the market volatility going higher and tech volatility higher. this was almost a reversion back to average yesterday. francine: thank you so much, dani berger -- dani burger. eileen, what will happen to facebook? eileen: i don't a what happens after you lose $30 billion in market value, but i think there will be a reckoning.

i think they are going to have to come forward and disclose sort of the timeline event and what action they have taken in order to audit what happened and whether or not they are going to put in changes to prevent this happening before. all of this is to say that the data that was collected was athin their terms of service the time, which they have changed and they change that in 2014. a lot of this is just about getting trust back and making sure when they have issues, whether they are technical breaches or misuse of data, that they are upfront with customers about having that happened. francine: who will regulate facebook? is it u.s. regulators or just the european one? eileen: i think it will be all of the above, given that facebook has such a great population of users, those that are all the around the world, i think every regulate or will have a right to look at whether its userss users --

had their privacy violated in some way, shape, or form. guy: have we reached peak facebook? eileen: i have talked to you guys for years and years about that. far be it for me to predict that we are there now. i think there is a reckoning the company has never faced before, so it's going to be probably one of its biggest hurdles. i am actually still thinking it is resilient enough to see this through. i think a couple of heads will roll and a have been rumors about the head of security may be taking a different role. i think you will see them come out with a pretty impressive mia kulpa. i don't think they will necessarily be on the decline. guy: should suck her berg the --zuckerberg take what role does he play in the process? eileen: that is something a lot

of people have been asking over the past 1, 2, three days. i would have thought he should take a front seat, but i would've thought sheryl sandberg would be next to him and the two of them have been really uncharacteristically silent. change that is going to seeing that they are meeting with in-house counsel, figure out the best position and get the facts straight. both of them need to be out front in order to recover from this. guy: thank you very much, eileen burbidge joining us on the tech story. trade tensions between the world's superpowers continue to escalate and washington is said to be ready to slap $60 billion in tariffs by the end of the week. -- on china by the end of the week. bloomberg's economics and policy correspondent mike mckee spoke with the european commissioner

of economic affairs. >> nobody wants to enter into a trade war. everybody is looking at the way to bridge the gap and find terms, we are in a very delicate moment, we need to prepare a possible response to american measures and the e.u. is preparing for that, obviously . we think the best is to avoid any kind of scale up. guy: mike mckee joins us now from when osiris -- buenos air es. how much pressure is the u.s. feeling at the meeting you are at? enormous in normal -- amount of pressure. ministers basically agreed ici said that china

does cheat, but protectionism is not the answer. if the u.s. hopes to come out of this with an international agreement, they are not getting anywhere. guy: the talk now is that we could see escalation and that we could see the trump administration imposing i.t. related sanctions on china. what kind of tone will we be leading the meeting with? could it get worse by the end of the week? like theyt does look will not come to any particular agreement in language on their communique. it leaves the world somewhat divided on how to handle the chinese -- if the u.s. moves forward with sanctions and china does retaliate. a china only adds about 4% or 5% value to products it ships to the united states.

most of what it assembles and ships is with components around the world. if the u.s. imposes tariffs, it could have an impact on the rest of the world. even if these countries are telling the u.s. know on china, many -- u.s. no on china, many are trying to get exemptions from steel and aluminum tariffs. argentina apply to come australia got theirs. and the commissioner for trade for the european union is in washington tomorrow to try to present a unified case for the e.u. to be exempted. they are working both sides of the street. francine: does the u.s. have allies in this? i was always surprised when you speak to chief executives and they say tariffs are not a good idea, but the u.s. administration has a point, china has not been playing by the rules. michael: no allies so far. that may be in part due to the administration's attitude and

the way they are talking about going it alone. the ideal from asians and europeans would have been to put together a global effort to pressure the chinese, but the trump administration feels global pressure hasn't done the job so far and it is time to take action and nobody else is committed to doing that yet. guy: great stuff, great reporting. thank you very much indeed. michael mckee joining us from the g20 meeting. joining us on set, jeremy stretch. let me start with you. if we get further sanctions, if we get the trade war escalating, dollar positive or negative? an interesting dilemma in terms of how does the market trade this dynamic because it's being triggered by the u.s. in the sense that you would argue that would be a draining factor in terms of dollar sentiment. when you do see periods of

uncertainty, the liquidity of the dollar usually plays positively. i suspect ultimately the u.s. dollar would be under a little bit of pressure and i think you will prefer to be looking at , ase euro, yen, swiss franc opposed to holding dollars. guy: how does your play this? europe is probably -- in the worst position right now because if there is a trade war, europe is going to be life are the biggest victim along the biggest regions simply because 30% of our gdp comes from exports. reason, --, for any down in global trade, europe will suffer. to send.s. continues protectionist noise, europe will be seen as the one big region that will resist this temptation until the last moment. if you think strategically for

any emerging market producer right now, it may make sense to lock in strong market shares on european markets right now to protect yourself against possibly an escalation of terrorist -- tariff hikes in the u.s. if that happens, you've got more inflationary pressure to europe. if this continues, you could get more inflationary pressure in the u.s. and more deflationary pressure in europe, which would not help the european central bank. francine: what did you make of the latest zed figures? german investor confidence slid to the lowest since 2015 and we understand this as a thing or two to do about the expectations of a possible global trade war. are we underestimating the fact that germany is vulnerable? zed tends to be very volatile and tends to reflect market opinion. we have to be careful because it

predicted two of the last 10 recessions, so we have to be careful. it is true that germany has fragility and in the commentary that you read in europe, what comes out very often is that if you base your entire growth model on extracting from the rest of the world massive trade surpluses, then you may fall thick of any kind of retaliation -- victim of any kind of retaliation from the rest of the world. europe would it -- would be the biggest victim. within europe, which has the highest sensitivity to non- european trade, that is germany. --ncine: strong german girls growth should not be taken for granted. jeremy: i would not read too much into the zed because it is very much a proxy for what's happening in the equity space. i think clearly, there are going to be potential headwinds for

germany. if we think back to why the u.s. are considering tariffs against china, it's a case of leveraging penalties against those that run trade surpluses brady germany falls and that bucket as well -- and i think that underlines the influence of the trade model on the german economy and if there were to be headwinds or barriers to the trade cycle going forward, inevitably, that would have a burden of pressure on the german growth outlook. and we will wrap it up will be back in just a few minutes time. ,eremy stretch and gilles moec they will both stay with us. we bring you our exclusive interview with alwaleed bin talal, the founder and chairman of kingdom holding company this is bloomberg. ♪

♪ good morning, everyone. guy and francine from london. this is "bloomberg surveillance ." let's get to bloomberg first word news. here is taylor riggs. taylor: there has been another bomb explosion in texas. authorities say a package bomb blew up at a fedex distribution center. according to a report, the package was headed to austin where 4 bombs have exploded since march 2. in france, former president nicolas sarkozy has been detained by police for questioning over suspected legal campaign finances according to a person familiar with the matter.

if the first time he has been questioned whether his 2007 campaign received millions in donations from libya. the investigation began in 2013. china is promising to protect the intellectual property of foreigners investing in its economy, but not certain if that promise is enough to keep president trump from imposing new tariffs on chinese products. according to people briefed on the matter, they would be part of a crackdown -- tariffs would be part of a crackdown aimed at the theft of intellectual property. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thanks so much. hasce alwaleed bin talal taken -- is on route to become one of the richest investors in the middle east. schatzker secured the first interview with the billionaire since his release.

clear my name, number one, and clear a lot of the lies. when you said i was tortured, i was sent to a prison during and all of these were lies. i stayed all the time there and i was never tortured. i was given the best service by the saudi government. we had the best food, best everything. really, it hurts me to hear all of these rumors and innuendos, and heresies. erik: this whole ordeal has affected your reputation. people will still believe the matter what you tell me today that because you were in the ritz carlton, you must be guilty of something or crooked, perhaps. surely you must realize that? >> sure. when you are detained, for sure,

some of the business community and the banking community will doubt for sure. it is my job right now to interact, meet with all of them individually or jointly or go through a good reporter like you and say my story. it's not going to be easy at all banks and some in the business community will be doubtful and say what is going on? however, i assure them that everything is back to banks andn the normal and that we are functioning as we would before and we welcome them to come here and see what you are doing in saudi arabia and life is back to normal. -- ifhow will you know or it is or isn't affecting your business opportunities? >> i know because i met a lot of businessmen in touch with us

and the community is a important barometer. theirll reiterated position of trust and confidence in us and said they are ready to continue with you, as was the case before. erik: it would certainly help if leed didrnment said alwa nothing wrong, it was a misunderstanding. he paid nothing to leave and remains a saudi citizen in good standing. this hasn't happened. >> all of these points were covered in the confirmed understanding agreement with me and the government. i cannot dwell into that and the government will not dwell into that. but you havestand, to agree, shortly, that if the government, prince mohammed or other government official were to affirm everything that we have discussed today, that would

help. >> the fact that i am speaking to you right now and saying everything truthfully and honestly and the fact the is not saying it's wrong is an improvement of what i am saying. erik: the crown prince is touring the west, meeting president trump at the white house and trying to attract capital to saudi arabia. given your experience in the ritz-carlton, how good can you feel about presenting a common front with the government -- the very same government that put you in the hotel? >> look, i am a supporter of saudi arabia. a supporter of my government, a supporter of the king and the prince all the way. before, during, and after detention. i support saudi arabia because this is my country. erik: people will find that hard

to understand. >> i understand, they don't understand the type of person. it is family. i have daughters here. i am part of the saudi community, i am part of it. it's like in the united states, you think of paul ryan always agrees with trump? they are the same party, they disagree sometimes. even nancy pelosi and schumer of the senate disagree. here. one party the ruling family of saudi arabia. this country was established about to moveot from that front. i understand this sounds weird to people. you are being detained by the king and the proud prince and yet you are still supporting them? you bet so.

i am supporting them wholeheartedly with complete freedom of liberty. erik: you have spoken to investors and other ceos, what do they say? -- someof them really of them called me and some, i called them. i didn't talk to maybe a few. erik: you have to wonder how comfortable they will be putting capital in saudi arabia after seeing what we might call the ritz-carlton method of dealing with disputes? >> they have to decide if that. i can talk on my behalf and a sure you and tell you business as usual. we will invest in saudi arabia. i was born in saudi arabia and i will die in saudi arabia and that is my nation forever. francine: that was bloomberg's era chapter -- erik schatzker speaking with prince alwaleed bin talal. joining us is kevin cirilli.

we have a million questions about president trump and we want to talk about facebook. first, alwaleed bin talal has also -- first, the prince of saudi arabia is received by the white house today. kevin: they want no draw my in terms of political optic and second, they need to have some type of arrangement that would double down on what we saw in president trump's first year in office, particularly a -- we should note the saudi's role with financial ties to folks like russia and the chinese. the united states has really tried to bridge this gap at the end of the obama administration and the trump administration to bring them to the negotiating table and even plant some seeds to get them to put pressure more on iran as well. the third point is to really continue to allow u.s. companies

and u.s. multinationals to continue to make an imprint in the u.s., we remember the investment gilts announced in riyadh during the president's foreign trip over there. that is something that will also be on the table. this is part of a broader effort. we should note that the saudi government officials are going to be touring other u.s. cities, including silicon valley leaders. they really are using this as an opportunity to meet with the private sector as well as the trump administration. francine: is there a realization or concern within the trump administration -- when you look at the deals, saudi arabia i think brought some defense missile systems from russia. is there concern the u.s. is losing ground in the middle east from china and the russia? kevin: there absolutely is that concern and i think that will be something that privately, behind the scenes, they will have to deal with.

congress is rolling this in terms of crafting pressure on the administration to be able to pressure the u.s. the question you raise come i can tell you there are lawmakers in both parties who have privately risen those concerns and somewhat publicly -- about how the saudi's, despite all of this u.s. investment from u.s. companies, has still taken a look with russia, for example. several irked many -- lawmakers the wrong way. the bottom line is that there is this appetite to have a positive relationship, this wanting to have a positive relationship with saudi's because of the historic relationship we share, but also because of the important pivotal role they play in the negotiation table geographically and economically with regards to iran. guy: good morning, it's guy. are we going to get sanctions against china on the ip story by

the end of the week? kevin: good morning, i am not sure if we will get them by the end of the week. in terms of i.t., that's one of the back stories we have been following in terms of nafta because the -- how the chinese have utilized backdoor nafta deals with regards to i.t. i speak with sources at the treasury department who tell me they are very much aware of the i.t. development and it is something that is on the table. i don't want to hold myself to a timeline. what does -- hiring tell us about the way the mueller probe is going? kevin: it suggests that the issident's legal team looking to bolster up. the second thing is they are taking this seriously. i always point to the facts, as you know and as we reported here, that the trump

administration actually has sanctioned some of the same folks named in the mother probe, but they have a political redline in sense that they do not want to see the mueller probe go beyond anything other than collusion, which they feel there is no evidence of. the investigation has expanded. we followed all of it. i think the hiring of an additional attorney example five francine: that. francine:great work. kevin cirilli there, bloomberg chief washington correspondent joining us. let's move on to the other big story in washington, that is jay powell's debut. he will hold his first fed policy meeting today before issuing a statement tomorrow. three hikes have been forecast for this year. still with us is jeremy stretch and gilles moec. jeremy, you just came back from the middle east. are the markets really overly focused on what the fed does and

tariffs or do they care about political meandering between the trump administration in the middle east? jeremy: there's a great deal of interest in terms of the political dynamics in relation to the middle east and in the context of the white house, it has come down very firmly in terms of the saudi position. that has provided a little bit of support for the region as a whole and i think there is a lot of debate beyond just the political dynamics, but also into the fed position as well because that is the other variable that is most relevant to the region. has to sayt powell in the course of the upcoming statement will be fascinating to the markets. francine: what are you expecting him to guide us to? is it a rate hike or is it three or four this year? gilles: if it's not a rate hike, it will be a big surprise. we think three for this year. we still think there's going to be a sort of hawkish tone to it because we expect them to raise

the number of dots for 2019 and it's really 2019 which is the battlefield. the market still doesn't want to buy the fed story about next year. i am impressed every time in the u.s. the time we spend on is that the end of the u.s. cycle, the fed will be stopped in its tracks, etc., etc. we can expect from jay powell to generate confidence. the cycle is strong, the bushel -- fiscal push will help and when -- in this context, it would make sense to add another dot to next year. another issue and something we will check is what the fed has in mind for potential growth. there has been a lot of discussion about this, secular stagnation was the big story in town. if the fed starts raising the estimated potential growth, that means the terminal rate would be higher. that would be a nice gesture to

try to re-steepen the curve in the u.s.. guy: how does this work from draghi's point of view? gilles: he could find himself in an interesting cul-de-sac where the fed is beginning to turn and the market is talking about this 2019, 2020 as the ecb is starting to exit. guy: he's got a big problem coming down the road. gilles: he clearly wants to engineer as big a gap as he can between the fed and ecb. it's probably not so much what the fed says, but what the market thinks the fed will be able to do. if the fed is stopped in its tracks next year, the ecb will have trouble normalizing military -- monetary policy and in the latest communication from draghi, i think he is trying to move the goalposts of italy. the risk until two or three weeks ago was they would probably strike a bit faster than what the market was pricing and i now think there's a risk they strike later in the second half of the year.

it seems to me is laying the ground for something even softer next year because the potential trade war is an issue and the currency definitely is a big issue and if the market again does not accept that the fed can continue into next year, they will have to wait. guy: jeremy, can you buy that? draghi is either going to slow it down or accelerate because the fed could be finding its self-dealing with a slowdown in two 2019 and 2020. he either speeds up and does it before or does it later. that makes trading the euro difficult and there is upward pressure on the euro. does that accelerate upward pressure or does it take some of the pressure away? problemi think draghi's emanates from the fact that ecb was later into the inflation -- expansionary cycle in the u.s. we very much agree on the dot

changes for next year, but i think it leaves draghi with this conundrum. i don't think it's the level of the euro that is the source of concern, it's the rate of change. i think that is the reason why back in september last year when the euro appreciated, draghi made reference to it. i think there is room for the euro to appreciate before it -- without it getting into an environment where it's committing -- but it will be disinflationary as we head to a 130 print. that will cause a degree of consternation for the ecb into next year. francine: jeremy stretch, thank you so much. -- join us for jay andll's first rate decision news conference, that is tomorrow 1:00 p.m. in new york and 5:00 p.m. in london. do not miss it because of the time change.

5:00 p.m. in london. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. oracle has hit a speed bump in its effort to become the powerhouse in cloud computing. --y forecast slowing spit slowing sales. fell by 2% in the last year. amazon is -- is considering expanding its brick-and-mortar fromrint by acquiring -- toys "r" us. they are not interested in the

toy retailer brand, instead, the deal could lead to amazon-branded stores. mark zuckerberg was the biggest loser. the cofounder's fortune fell by almost $5 billion yesterday after reports the political advertising firm retained data of millions of facebook users without consent and shares fell almost 7%. he's now worth 70.4 billion dollars, making him the world's 5th richest person. that is your bloomberg business flash. guy: president xi jinping started his second term with a warning to taiwan a few days after president trump allowed in order -- signed an order allowing high-level officials to visit the island. in speech to the national parliament, she said china is capable of stopping attempts to formalize taiwanese independence. , the chief now

economist. and still with us, gilles moec. let's talk a little bit about are goinge relations to develop this week. we have the potential for trade sanctions to be applied as a result of ip infringement from point of view. how will the chinese react if that becomes a reality? >> we are at the beginning of much more fraught china-u.s. relations going forward. i would say further down the line, this is most likely going to turn into a full-blown trade war. still hasear, china all the incentive to try and -- we are unlikely certainly before the november election in the u.s. to see china reacting very aggressively to what certainly is a very

different stance of president trump with respect to what he did last year. guy: how do i think about this? how do i see arise around what is going to happen next? i am trying to understand -- you can go back to game theory and go back to the cold war and try theoryrstand deterrence and how that relates to the story. how do i think about how a trade war would involve? --what am i looking at? diana: i think you are starting in the right place. maybe a different type of cold war. if we look at what happened to the global economy since china joined the world trade organization in 2001, localization has been all about incorporating china. this is a very different .conomic and political system it hasn't worked. the globalized order we created hasn't worked for you to for a

long time, the premise was that chinese were converging on the western liberal economic model, maybe not political, but the economic. crystal-clear in particular after the party congress last year, that china has no intention to converge from here. what we are looking at over the next 10 years will be a world economy that will probably localize and the current globalized trade will change dramatically from here. if you are looking at the best -- behavior of the chinese, you also have to realize that for an economist regime, there always has to be a hostile other, if you would like. chinalikely that certainly over the course of the next 10 years would not certain

-- necessarily want to dominate the world. francine: diana? i keep being told that it's amazing when you look at the u.s. and where the trump administration is an president xi's stance, that he wants to be the proponent of free trade. is that all talk, or are they implement in it in the country? diana: china has benefited tremendously from globalization as it has been because it managed to grab export market share at the very fast pace over the last 20 years. they have, in particular, administered the cost of capital internally and they have a range of other policies which are not really in line with free trade. certainly, the world as it is, unless we have the free movement of not just trade, what goods and services and capital and

people, we cannot sustain the current framework. francine: diana, you say we are at the beginning of a very u.s.-chinar fraught relations. how does the u.s. retaliate? diana: over the course of this year, they will try and limit the damage from an economic transformation point of view. if china -- china is not yet done with what is a very challenging economic transition. towardinely rebalancing consumer spending, but it is at the start. they cannot afford the external side to be a massive headwind. they do not needed to be a tail wind at this point, but they cannot afford it to be a massive headwind. they will try and get trump some sort of wins in terms of lowering that all important u.s. hasicit that the

with china. beyond that, it's not going to be enough. francine: thank you so much. diana choyleva there and odo economics -- enodo economics. if you have any difficult questions, you can go to tv and click under the video screen. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." guy and francine from london. it's time for single best chart. -- looks at euro and a lot of pairings, but this is what we did. this is a little bit different, it's trade weighted euro. we were talking about the fed and policies from the ecb and mario draghi and the zed number. what does trade weighted euro do from here? >> we think the euro at this juncture is toughish really. we have happen is expecting 130

fairly soon on euro-dollar. our view is the fed will continue to hike, will manage to continue hiking into next year where as the ecb will take a and prudent view on things if you have to wait until the end of next year to stop having -- in negative territory, it's definitely that you are taking the inflationary pressure seriously and want -- want to create the gap with the u.s. flows was the big story over the past months, you had re-waiting eighting of theae euro and the final issue is repatriation, which to some extent is forgotten. guy: what happens if the chinese sees their currency as a trade story? isles: the issue for us

actually not absolutely central toause there is -- we tend export to china -- we tend to export massively cars, investments, goods, and fairly high end consumer goods, the sort of things which are not very sensitive to the rate. on the import side, we will probably see quite a bit because what we import tends to be sensitive. we are in better shape in the u.s. to deal -- we are probably in better shape than the u.s. to deal with that. francine: coming up tomorrow, we will bring an exclusive interview with the barclays chief executive -- chief executive. this is bloomberg. ♪ mom, dad, can we talk?

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drop $60 billion worth of tariffs on china. goldman warns of financial fragility. tech shows signs of stress as the fed gets ready to need. facebook cannot contain the fallout from cambridge analytica. their chief technology officer quits. david: the first day of spring, and snow is going. alix: happy spring. my allergies are aware. join to have hours before the cash of the u.s., it was an ugly day yesterday. its 50 was just below day moving average. you are seeing flat equities across the board. will we see a rebound after that technology rout? 10-year yield any much goes nowhere. you had some