happened. spates -- zuckerberg speaks but wall street doesn't think it's enough. the white house plans to unveil tariffs on china worth 50 billion dollars making markets jittery with uncertainty. david: welcome to bloomberg daybreak. we made it despite the blizzard. alix: he is totally taking a victory lap. it's very pretty, like a christmas card. alix: you are right, i was wrong, the last time i'm going to say that. tone to theoff market right now. dollar-yen is weaker as you see safe havenmove into buying. a similar story across the board

as for us treasuries and europe. buying is coming in across the yield curve. softeril is a little despite a monster upgrade from morgan stanley. they see $75 brent by the third quarter but the risk off town -- tone has to do with the fed. if you listen to jay powell, it sounded like everything was doing great. who knows what he is buying at the moment. alix: you are right. this is the morning brief. the bank of england will release its latest allison decision -- policy decision. at 12:30 p.m., president trump

is expected to announce the 50 alien dollars of tariffs against china in regards -- the $50 billion of tariffs against china. alix: time for our first take. dots.ll about the this felt like it was an optimistic hawkish rhetoric from the fed. the green line is the fomc projection. this gray line was the previous dot. rating see the big three we will see in 2020. what's your take? >> a couple of people have moved their dots up a bit but we have to walk you back. forecasts and in the longer version, we are data dependent.

as the economy goes forward, we would see how things go and things look good right now but things can change. this is a projection so go with it what you will but don't bet on it necessarily. alix: what did you think of the market reaction? >> i think you still have the feding tension with how the grapples with on employment rates and their projections for inflation. have a they start that out without overheating the economy? i think it was interesting that that well admitted don't know necessarily what will happen three years down the road. market realist position. david: it's like show me the money. definitely donald

trump's head of the fed. it sounded like music to donald trump's years. >> if you step back and think why a central banker would be worried if there was no inflation and good growth? the only worry is that they see a recession on the horizon and they don't have the latitude to cut rates because they are too low already. for a central banker to have goodfor a central banker to have good economic growth and no inflation? that's a wonderland. alix:for a central banker to hae good economic growth and no inflation? that's a wonderland. alix: i think is confidence a 25% less than janet yellen. david: this guy was a businessman. he was not an economist. you avoid these topics were you have to pontificate more and

he backed away from that. david: we're not too worried comestariffs but that back today. we are told that president trump at 12:30 p.m. will announce tariffs on goods from china. it's part of the intellectual property issue. these are the principal categories of imports from china. maybe this is part of the risk off? >> sure, jay powell indicated happy aboutre not the tariffs and are concerned about the impact it has on their operations. the real question is how china responds to this and we don't really know. china has taken actions and announced it will improve its dealing with foreign companies. they will guard against this feeling that trump is targeting but they have also signaled that they will retaliate on

other american products. is what willion china do in response and how large will will the response the? david: what's going on in the currency burkitt's? -- in the currency markets? is moving toward a base of 25 which is where it has stalled the last couple of times. onry rally has been a sell these tariffs and trade and as a breakthrough 105, it's got a lot of room to run. alix: unicredit had a report that said only 60% of what's manufactured and exported from china is manufactured in china. side disruption is pretty intense. >> i think that's the big concern. they don't necessarily make everything in one place. they make a part here and there and many companies have worked toward localized manufacturing

strategies that will help them in a tariff war but it's not clear how this plays out and i'm what part of the product tariffs are applied. part that leaves the u.s. factory or the chinese factory? it's confusing for businesses which may's -- which makes it difficult to make the investments donald trump is looking for. david: our third big story is facebook. talked finally last night and there was a statement from him and sheryl sandberg. there is a question of why he has not come forward and why he is not willing to testify. this is what he had to say. is get thetry to do person with the most knowledge for congress. if that's me, i would go. some people's jobs are focused on one area but i would imagine

that there will be a topic where i am the sole authority and it will make sense for me to do it. david: what happened to the buck stops here? >> i was going to say it's time to grow up. this is not a social college game anymore. you're in charge of a multibillion dollar company. facebook is just now invading your privacy? this is been the conversations and stay one and they have done absolutely nothing about it. if i am a facebook user or investor, does he know enough about data privacy to go in front of congress? >> the question is how can you not have a better handle on this question mark i think that's what was lacking is he was not as forthcoming about why this problem exist in the first place and what systemic problems exist in facebook's operation and its

mandate that allows this type of thing to happen. i think that's what people are really looking for from mark and cheryl stan burke. -- sheryl sandberg. the need to take ownership of this. alix: the stock got hit this week that the shows why some investors may not care. this is revenue growth for facebook and google and nominal gdp in the u.s., facebook is the white line. that is monster revenue growth. saying is you're accurate but if you are an investor and looking at this chart, how do you interpret the headlines? >> facebook has no real. there is no alternative. there is no equivalent you can turn to if you are a consumer. they own instagram. they have a corner on the market they serve but the concern is maybe this time is different. been able to shirk off these regulatory questions for a while but now there is momentum behind it in congress

is serious about questioning mark zuckerberg and looking into their business model. could they have regulatory penalties? david: they got attention but not in a good way. we had the 2000 election we called wrong and i had to testify. i spent weeks studying the computer screens on the projections so i understood it because i thought that was my job. will come know, i talk to you. you both so much for being with us. coming up, fed chair jay powell's it's all about u.s. economic performance rather than there is in models. more on his first policy-setting meeting and the first interest rate hike of the year. this is bloomberg. ♪ tothe economy continues

expand and inflation appears to move toward the 2% long-running goal.

alix>> this is bloomberg daybre. the ceos of at&t and time warner will be in washington today. their lawyers will make the case for why their merger should get a green light. the justice department wants to block the deal saying it will lead to higher pricing. the company sued the merger as a way to compete with netflix and amazon. shares are rising in london, the drugmaker is buying a portion of

the pfizer consumer business. the unit is valued as much as 20 william dollars. glaxosmithkline is favored to win the bidding. for the first time, commodities trading is not dominated by one of the top banks. there are losses and natural gas and power from goldman sachs. that's your bloomberg business flash. fed: the fed hike, the forecast more hikes this year and next year. >> fundamentals underpinning demand remain solid and economic outlook has strengthened. several factors are reporting hasoutlook, fiscal policy become more stimulative, i enjoy judkins are boosting incomes and confidence, foreign growth is on a from trajectory and overall financial conditions remain accommodative. alix: joining me now is ever

bloomberg columnist. what was your biggest take away yesterday? powell hubble lot to say but he said it so quickly many people missed it. a press conferences per year are on the table and he said he was open but he did not signal it yesterday. as far as any projections based on models that he does not have much faith in, if you look at 2020, you need to look somewhere else because a lot can change between here and 2020 which is what he said. just saying that he's saying watch what the data do. we will not say we are data dependent anymore versus model dependent. alix: what happens to the dollar? >> if you seen the data in the

west, it has not in as good as people thought so that's probably why he is leaning in that direction. the dollar got wagged. we saw the dollar improve because people were looking at ots.2019- 2020 dot pl everyone looked at the 2018 wait a minute,id things are not that good so the dollar slipped. then we had trade come in on top of that. data theyerms of the are looking at, we have a screen that shows with the projections are for gdp and the unemployment rate and core inflation. something doesn't make sense here. you wind up having and implement rate that continues to fall and you wind up having growth peaking this year. what does not smell right to you? >> the bogeyman yesterday was

inflation. i think jay powell pays attention. he's going to pay attention to the fact that people are finding work at the quickest pace since may of 2009. he will see that people left their jobs voluntarily and are out of work for five weeks or of them are2% finding work. wage inflation will build and what he told us yesterday is if the data changed, i will change with it. i do not look at the increase yesterday to the outlook for growth. it's the fact that they did not touch inflation and that will change. he said that will change. david: the data have to change but the question is when. you can have unemployment well below without getting inflation

sooner or later. >> exactly, which growth will come along but that is part of globalization. if you have low inflation globally, it's difficult to raise wages in the united states because we are not competitive and i can suppressed. wage inflation has that groundswell to lift globally but it's taking longer than people thought. had record insurance proceeds in 2017 through natural disasters. if you look at 80% of the workforce, you saw 3.8% wage gain in manufacturing, 4% wage gain in construction. a massive rebuild after three hurricanes and two wildfires and it's so big it's bleeding into aggregate wage gains. david: i want to turn to tariffs. without they it's that big a problem but we will hear from the president later today. this is what chairman powell said yesterday.

>> a number of participants did bring up the issue of tariffs. if i can summarize what came out there isas first that no thought, i think, that changes in trade policy should have any effect on the current outlook. looks may be like it's affecting the markets this morning. >> there are tons of jitters and rightly so. he said a member of participants. athink he was also saying number of participants but not me. i don't know how much faith he is putting into the potential damage that tariffs can do to the economy. until we see what president trump is going to do whether it's tactical maneuvering or he will really deliver. until we see, until we

see is what we hear. us non-eight economists to say this. are we giving things up in terms of forward guidance? dot plot was a disaster. alix: you're killing me. why are they building the rate hikes out from next where -- from next year, and we said we are following thedot plots. alix: both of you guys are sticking with us. coming up, looking toward make, traders are pricing in near certainty of a fed rate hike this spring. today? see that hence this is bloomberg. ♪

under 40are just minutes from the latest rate decision in england.

the markets seem to be pricing this in. we are potentially looking at one hike starting in may. still with us is danielle and vince. if the boe follows this chart, is that a mistake? they need to bake to increases into the cake this year. they have seen wage inflation pick up, a much stronger pound. they are at a ridiculously low rate. mark carney makes mario draghi look like a hawk. it's time for the bank of england to get off the floor. the data ishough mushy and inflation is at a peak, that does not worry you? >> you have seen the real economy pick up in england. mark carney keeps talking

about wages and they are in fact going up. >> that's what central bankers pay attention to. david: what will to rate hikes due to the pound? >> it has been going up on expectations. $1.40 orin about $1.30. above that level, it's go a lot -- is got a lot of space so that's where we see the pound move if it breaks above those. >> we can have rational discussions about rate hikes in other countries in the followthrough effect in the currency but yet you cannot have the same discussion about the dollar. alix: that's a great point. what about the gilt market? they have been really the outperform her. >> if you see that projection in it's performing in

capital losses. rates will then go up in that market. at some point, the same way in u.s. treasuries, you will see a really attractive yield for sterling that will attract more people to it. you cannot excuse the capital appreciation gain from the pound. investors will gauge what the potential capital losses are for holding gilts against the appreciation of the pound. if that's a positive, then it won't be as bad as people think. this is whatch of mark carney is doing or what theresa may is doing with brexit? >> i think they are keying much more off of theresa may. i think the market is relieved that they get off the starting block and there is no longer this massive negotiation between theresa may and the eu. i think they are seeing forward

momentum. alix: there are still a lot of things they have to work out. a brexitve to have positive outcome in your scenario to justify to rate hikes this year at the boe? >> i don't think so, not with what we are seeing. alix: i am shocked. you will have a brexit outcome this year. >> theresa may bought time. alix: thanks both for being with us. feeling the pain with mark zuckerberg in the hot seat. this is bloomberg. ♪

alix: this is "bloomberg daybreak." nasdaq futures down by 78 points. s&p down by .7%.

europe also weaker. the boe decision later but it is really about these potential trade wars. you have the white house announcing potentially $50 billion worth of terrorists. what is the trickle-down? in other asset classes, it is the same story, dollar mixed, euro-dollar slightly weaker at 1.23. it is really dollar-yen that is starting to underperform as the end gets a lot of jews from that safe haven bid. yields, getting a huge boost. it is five/30 spread, really the 30-year that is outperforming. coming in 41 basis points. now it is all about that ball flight there with that safe haven trade on. david: let's get more on what is going on outside the business world. kailey: president trump is set to carry out his threats against

china over intellectual property violations. today, the president will announce $50 billion of tariffs against chinese products. a number of companies have warned that this will hurt the economy and china is reportedly ready to tell the. last night, congressional leaders released a $1.3 trillion spending plan for the rest of the fiscal year. it increases the defense budget and provides money for the fence along the border and the opioid crisis. congress is trying to avert another shutdown. british prime minister theresa may is warning allies to beware of russia and to expel the kremlin spies. according to people familiar with the matter, may is sharing secret intelligence about a matter, may is sharing

secret intelligence about a nerve agent attack with key allies. may wants allies to kick out spies from their country. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. david: mark zuckerberg broke his silence yesterday over the cambridge analytica access over user data as congress is continued to ask him to testify. send thee try to do is person at facebook who will have the most knowledge about what congress is trying to learn. if that's me, i'm happy to go. theree found so far is are typically people whose whole job is focused on this area. pointd imagine at some there will be a topic where i am the sole authority on it and it will make sense for me to do it. david: we welcome from washington ken feinberg, a lawyer. jeremy khan is also with us from london. ken, you have done with so many ceos who have done with

complicated problems. would you advise a ceo to say i will testify find the right person, particularly when it is something as essential to his company? >> that is up to the company but the politics of this is it is just as likely, even if there is a technical person who is most responsible for fixing this problem, it is likely that the congress would like to see the ceo himself as well. that is a reputational, political thing, then a substantive thing. david: let's go to the substantive thing. let me pull up a full screen talking about the various fronts of the battle facing facebook. the situationwith where you have multiple agencies, challenges. the ftc investigation into possible violations. legislation, a

u.k. info commissioner investigation going on, possible eu action. how do you approach the situation when you have this many problems and probably more to come? ken: most of those items that you have on your list are governmental investigations and potential regulatory change in the way facebook operates. so largely, i think, in a situation like this, you have government both abroad and here it home that will be investigating and perhaps imposing regulatory fines. what i do not see here yet, unlike bp, 9/11, the boston marathon bombings, i don't really see private individual compensation going to the 50 million users. they would have to demonstrate how they were harmed. it may be true there are class actions, efforts to impose equitable changes in the way

facebook operates. fair enough. but i don't think you will see a fund like i have administered in the past, where individual checks will be going to individual users. reportsut there are that if there is a violation of the consent decree, the penalty could rise as high as $40,000 an instance, times 50 million, people are talking about $2 trillion. has that ever been done? ken: who knows. i don't know anymore about this than you do but you will likely see a negotiation between facebook and more than one perhaps regulatory agency. here are the fines that will be imposed -- it will not be $2 trillion -- here are the changes that must be made in the way that facebook operates. i think that will likely be the focus.

of course, congress will conduct hearings, investigation, may impose legislation. but i think it will be a governmental negotiation at different levels rather than individual facebook users expecting money in the mail. alix: jeremy, it comes down to do people stop using facebook, and doesn't cut into facebook's revenue? we are showing their performance from nominal gdp to its competitors. does this fundamental story of facebook get hit? i think it could get hit. facebookrly, the thing has to deal with is the growth expectations of its own investors. those investors were looking at the revenue line to keep rolling at a certain rate of ascent. i think this whole situation calls into question exactly what that slope of the line will look like, and therefore, what

facebook shares should be worth now. it may continue to take a hit as people get adjusted to the idea that they will not be able to see the user growth they were expecting, the engagement they were expecting. that also affects what they can charge advertisers on platform. this whole thing speaks to facebook's business model and exactly how profitable it can be over the near to medium term. alix: ken, this also speaks to the fact that we had never been here before when it comes to social media and regulation. can you help me draw a line from this kind of crisis management through to investor base, as well as user base? ken: as was just stated, there is a remedy for investors, shareholders who have been anmed, and that is old-fashioned american-style lawsuit. a derivative lawsuit brought by shareholders. it all depends on how long this

facebook'sst on overall financial growth. that remains to be seen. this is somewhat similar, i think, to equifax. there was a breach in data. i did not see equifax creating some sort of compensation fund or anything like that. facebook has to do with the regulators, the possibility of shareholder investor lawsuits, but i don't think you will see d that i of fun designed after 9/11 or b.p., or virginia tech, the boston marathon. checks see individual going to facebook users. david: jeremy, are we seeing any erosion of the facebook base? if we want to withdraw our profile, it takes 90 days to get it done. any indication whether users are responding to this? jeremy: we know there is a

tefacebook, which is getting a lot of attention on twitter, of course. i don't think we really know what percentage of the user base is actually deleting the app, will stop using facebook. it will be a couple of months before we have any indication how many people have abandoned the platform. they have 2 billion users, i don't think it will be a huge percentage of those users. alix: in timeline purposes, what happens next? jeremy: facebook announced they will make some changes to the privacy settings, particularly on a news feed, to let people know exactly which outside apps are getting access to their data, and supposedly easy to turn off that data. also if you have not interacted with these apps in three months,

they will no longer have access to your data. i would imagine that will happen soon. you will see facebook making this investigation into exactly what other apps out there had access to your data prior to this change in the privacy settings in 2015. and then doing these audits to see if any of them, like cambridge analytica, and his researcher, what they were allowed to do at this time, taking action against those firms that did abuse. also notifying abusers, to the extent they can tell, if their data was access in this way. a couple ofke months. then we still have this drumbeat from regulators and lawmakers to get facebook in front of hearings, answer some of these questions. i think you will seize or covered in front of congress sooner than he thinks. feinberg, you have been involved in so many of these instances.

let's talk about the corporations now. your responsibility has been getting compensation. you have seen how companies have dealt with it. what would be your main advice to mark zuckerberg if he were to ask you how they restore confidence in their brand? i think they will restore that confidence by being very proactive here. mr. zuckerberg started that last night. i think you will see the company promising to make changes. i think the company will propose changes, there will be suggestions, they may bring in some kind of independent lawyer or consultant to sort of be the face of the company in terms of dealing with the various criticisms coming from different regulators, entities. i think you'll probably see some private class actions brought by lawyers representing the 50 million users seeking reforms. -- the the government

company should be very proactive . in terms of protecting its brand, it might inc. about -- think about retaining an individual who will usher the company through these various reform initiatives and send a sick done of the company means to make changes in the way it operates. david: ken feinberg, always great to have you. german khan, thank you as well. as ceo of johnson and johnson, alex gorsky has not had to manage a crisis like the one zuckerberg faces but he has had to navigate a tricky relationship with the white house. initially serving on one of the president's council's and then resigning after charlottesville. i spoke with him about getting close to the government but not too close. >> it is important for industry to be talking with the government. having a relationship, understanding how important they

are as a customer, stakeholder is critical. i had the opportunity to work with many presidents in my role in different administrations. it is only by sharing those ideas, developing appropriate partnerships in other areas, then i think we can work collaboratively and solve these big issues we have been talking about today. i would expect that to continue. with this administration, there was a lot of outreach really on, there have been issues that we have had to manage along the way. in the end, it will be incumbent upon all business leaders to engage in a positive way to bring about positive change. hear more of his thoughts, you can watch my full interview on bloomberg big decisions erring on friday at 6:30. the question is always how cozy do you need to stay with

the government? there has to be a moment where you have to have pushback, too. david: he got pretty close, he was seated next to donald trump in those meetings. he says there came a time after charlottesville where it became unsustainable. alix: we have some big names in hedge funds getting into the movie business by investing in the weinstein company. after that work out for them? not so well. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." coming up in the next hour,

david owens, jeffrey's chief european economist. alix: we turn now to wall street beat, covering three things wall street is buzzing about this morning. wynn on low 30's 33% of his stake in wynn resorts after a court battle with his wife. bankruptcy filings show hedge funds with a stake in the weinstein company. brood awakening. any headline that references star wars is a winner for me. david: jason kelly is with us now. let's start with steve wynn. big news this morning. he is selling 33% of his company. >> at least and he may get out fully. he has filed to sell some or all of his holdings. this is tied to accusations of

impropriety that were initially kicked off through his divorce settlement with his wife elaine. that snowballed a bit earlier this year. now when it really means is this company may be in play. alix: doesn't make it more likely that it is both? the macau aspect is valuable. >> this is highly valuable. largely because of the macau angle. the question now becomes does caesars take a look at it? it is up for debate who may sleep in. now of course, private equity. has playedity someone successfully, often times not so, in the casino space, through caesars specifically. what seems to be a pretty attractive asset. david: we have seen steve would

go in and out before. alix: this time it's different because it is the me too movement. of our stories, the financial fallout from the me too movement and the weinstein company is no exception. goldman sachs tried to raise money for the company in 2005. some of the buyers were eaten, highbridge. >> that seemed like a pretty good investment. from a business perspective, these brothers were the founders of miramax, highly successful in the media and entertainment world. david: everyone wants to be in a movie business. and then there is the robin hood connection to this, those people that hang out together in new york. up inot of people swept

the financial aspect and the aftermath of the weinstein company. david: has not worked out well for them at the end. at the same time, hedge fund guys have other places they can go. they can find a football team, for example. >> the owner of the carolina panthers is giving up his ownership of the team, in part because of accusations of impropriety. david: the nfl is investigating him and he may have to give it up. billion is what the franchise may go for. sports have gone up and up. whether it is the nfl or especially the nba, we have seen a lot of big financial buyers come in. individually, whether it is the 76ers, the milwaukee bucks, the clippers, everybody. alix: $2.5 billion, is that a lot of money? it would be a record. this is the north

carolina panthers, about half as valuable as the dallas cowboys. alix: you want to own a movie studio, now owning a sports team? there is a survey element of vanity to this. everybody wants to own a sports team. if you are a kid, your dream is to own a sports team. maybe not your dream. you have seen these turn into really good businesses, and there is this scarcity value. you have spent time talking with roger goodell about the value of these franchises because there is a limited number of them. david: also just the asset valuations have gone up substantially. rights.r in media these are very dynamic, profitable. alix: our non-me too story comes from the ceo of anheuser-busch. unfortunately one of two play was how they are going to go green and be sustainable.

>> all budweiser produced in the u.s. and sold here will be brewed with 100% sourced energy from her nubile sources. because our commitment is to have that on a global basis, not just for budweiser but for all by 2025, 1 hundred percent from her nubile sources. budweiser will be carrying the flag of renewable energy around the world. >> that is my latest bald on bald interview. hanging out in a brewery. it was interesting to hear about how aggressive they are being in terms of renewables. when you think about it, beer -- and he said this to me in the interview -- it is water and barley. they had to care deeply about the environment. they also see their consumers caring more about this. as you think about the portfolio of ab inbev, you are talking

about corona, budweiser, stella artois, and also michelob ultra, which we talked about. alix: water. >> it is a really popular beer with the active millennial set. these sorts of consumers care about these elements. it is partially a good business, partially doing good. david: come and bring some. >> never too early. david: coming up, congress rushes to a vote as a spending deadline looms. aix: and if you have bloomberg terminal, check out tv , check us out online and indirect directly with us. ♪

watchingis is what i'm in washington. the omnibus spending bill.

they finally got it last night. we have the summary here down to four bullet points. it will take them about a minute betweenthey finally got it last. now and the time they have to pass it friday. the one thing i want to raise is buried in the bill which could be in court and for gun control. there is something called the dickey amendment which says the cdc cannot gather data about gun violence. they are going to change that with this bill. but if weall thing, get the data and see what is going on with guns in this country, maybe it will cause something a real change. david: now and the time they have to pasalix: and will peoplt with over 2000 pages? moments away from the boe decision. the pound is up by .1%. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us."

that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. >> this was a major breach for

us. i'm really sorry that this happened. alix: mea culpa. mark zuckerberg speaks, finally. wall street and d.c. don't think it is enough. the white house plans to unveil tariffs against china. boe will stay on hold with markets looking for a hike in may. that decision is out right now. rates staying pat at 50 basis point but there was some dissension. to keep interest rates unchanged. two voting for an interest rate hike. the minority did want a hike here. the other headlines we are getting as well, they see ongoing tightening as appropriate to hit the cpi target. inflation in growth is broadly in london with february forecast. the market reaction is what you'd expect. big jump in sterling, up .4%.

1.42. letter run the highs of the year. the gilt market, not a huge reaction. 10-year guild coming down by three basis once. still some buying on the margin. there is some buying on the front end. the 2-year of by one basis point. moving rate hike expectations continuing this year. nine-oht was actually on asset purchase programs. they will wait until may but they are looking at what is going on with brexit and theresa may. alix: let's bring in guy johnson from london. if you are an investor looking for to rate hike this year, did you get some confirmation? >> i think may is further on the table as before. you see that in the sterling reaction. the fact that some wanted to go now is also a factor. the market was broadly on board that they were likely to deliver

that outcome. the pound has been railing into this as well. getting a reaction of of and beyond what we have seen is significant. but i think it is those brexit, center interesting. we have moved over the last few days to a more stable footing. a small move but the talks of transition agreement being made may be starts to reduce that brexit risk of a little bit for the british economy. as the bank signaled this is one of the major factors it is watching, that will make it easier for the banks to hike interest rates. that is what we are looking at, why we see the reaction we have got. alix: we also hear, rate hikes will be limited and gradual. if this off brexit scenario winds up playing out against all agreements, long-term agreements, transition agreement , does that language start to change? >> i think it probably will. you reduce the brexit risk, you for the economy.

but they also talk about the ongoing tightening with the cpi target. the risk of protectionism and how that may stoke inflation. the growth-inflation debate interesting there. ongoing tightening of appropriate to hit the cpi target. it is not massively hawkish but it is a little bit on the hawkish side of the spectrum, and that is the reaction you will get as a result. the fact that we have gone 7-2, and the hawkish members want to go now, points to the fact that we may see something in may. david: do we see perhaps mr. carney feeling more books ability to be more hawkish because of what's happening with wages right now in the u.k.? he repeatedly talked about his concern with wages, but those are coming up. some minimum wage changes, national health service changes. a massive announcement

yesterday about the wage gains we will see in the national health service. that may not ripple out to the rest of the public health sector but nhs is a huge employer. data,e see cpi and wage starting to see the squeeze on the british consumer start to come to an end, albeit at a grinding rate. the wage story is starting to move in the direction the bank had expected. the bank did believe the wage story would start to unwind this year, that we would start to see the british consumer more of an even footing. that is starting to come out. in some ways, that was already predicted. the variable factor remains brexit. if there is a smooth brexit, there is an upside to u.k. rates. the movements over the last few days only pushes us further in that direction. alix: thank you. to reiterate, dissension. 7-2 vote to keep rates on hold.

you had two individuals who wanted to hike rates immediately. some commentary in terms of inflation as well. they say ongoing tightening is appropriate to hit the cpi target. they do talk about protectionism being a risk and brexit as well. guide pointed out, soft brexit potentially equals more rate hikes. seeing the reaction across the market, the cable rate jumping .3%. 1.41. we also rallied into this, so the fact that we are building on that rally is impressive. in the bond market, it's all about a bull flatten her. 30-year gilt yields down for basis point as the front and sees a touch of selling. for more, we are joined by david owens, jeffrey's chief european economist in london, and nick bennenbroek. david, your reaction?

david: it is in line with our reaction. we expected the bank to raise rates twice. this does not cause us to change. was sayingh one guy a moment ago, i will look for further rate rises in 2019. mark carney is also set to revolve off of the bank of england in july 2019. maybe they can get two more rate rises in 2019, so you get rates basically up to 1.5%. the other thing i would highlight, coming out of the financial policy committee statement on friday of last week, the concern they have about growing risk appetite, particularly around the credit markets, concern about u.s. credit. i would highlight that as being one of the factors on the margin influencing their decisions but clearly they are on target to go in may.

david: nick bennenbroek, what does this say to investors in the u.k.? big of aems not as risk, boe thinks things are getting better come a looking toward rate hikes. a better investment than a month ago? nick: at the margin it is. some of the risks are disappearing but you are still looking at a steadier, solid economy, not a strong economy. 1.5% to 2% growth. today is another step, certainly helps may, in terms of a rate hike. i think it leaves a second rate hike this year as not quite a done deal. alix: what is the cable rate upside? nick: i think it is relatively muted from here. we saw that quick spike and then come back a little bit. cable already had a really good week. a transition agreement, the federal reserve announcement yesterday. a lot of this was priced in. we were looking at 1.43 in the

next 12 months. alix: david, if we see a more hawkish boe, to hikes this year, do you read that as an offense of play, stronger growth? or defense, we have to start factoring in higher wage growth and inflation? the bank of england has not reassessed the outlook for trend growth in the u.k., brought down the trend rate of growth estimate. the u.k. is growing at that rate even they also think the spare capacity in the u.k. is all but used up. looking for wages as we keep stressing to accelerate. if they see this, then yes, rates are going up. every central bank does not want to be in a situation of having rates at these levels. they want to start normalizing. twice inan raise rates 2019, they will be more focused on the balance sheet in what the boe will do with its balance sheets later in 2019, 2020.

this all assumes a smooth transitional phase with brexit. indications there are encouraging at the moment, but that could change quite rapidly. david: here in new york, we tend to look at the pound versus the dollar. what about the pound versus the euro? there was a spike up in the pound, but now it is giving back half of those gains. what is this news likely to do, if anything, to the cross pairing with the pound and euro? the important point is whether the current u.k. deficit account closes from here. it last printed at 4.5 percentage points of u.k. gdp. the current account has been financed largely by capital flows. particularly, net foreign buying at the gilt market. the ecb likely to wind down qe later this year, there is some issue here.

i am still very nervous about the pound. the point is, at the end of the day, the bank of england want to continue raising rates. alix: make, what is your base case for raising capital flows? nick: the current account deficit will probably narrow. the subdued growth will probably see imports slow, some narrowing there. i think we have seen a reasonably studied financing of the u.k. external deficit, will continue to see that. ,ne key point i would pick up these uncertainties related to brexit are not going away. we had some very good news this week, the transition agreement, to still a lot of challenges go shooting the contours of this agreement. ,lix: if you look at euro-pound is a hard brexit completely priced out, is there still a risk premium? i think hard brexit is still some kind of a risk. our view is the parties will

keep talking for quite some time. alix: that is a given. [laughter] nick: probably will end of the more challenging for you the u.. one of the things we don't spend at lunchtime looking at here are some of the underlying fundamentals of the u.k. economy. what are things like with capital investment, productivity? where is growth in terms of productivity? david: as i said before, most ,conomists in the u.k. agree broadly now with the bank of england's revised assessment that trend growth is lower at 1.5% than pre-financial crisis. business investment has picked up, less than expected given the improvement we saw in profits following sterling's shot forward in 2016. that was associated with a lot of brexit uncertainty. will change changes

again the bank of england's reaction. broadly moving in the other direction. march 2019rough to and the u.k. leaves the eu, some of these brexit issues will start coming much more to the four. expectation is slow growth. but we are comparing and also with a european economy which has not been fantastic in terms of growth rates. at the moment, eu is growing faster. david: david owen, thank you. nick bennenbroek will be staying with us. coming up, president trump is expected to announce $50 billion in new tariffs on goods from china. what industries could be most at risk of retaliation. live from new york, this is bloomberg. ♪

david: president trump is expected to announce new tariffs on goods from china to sanction it for abuses of intellectual property rights as part of the section 301 trait proceeding. we welcome now kevin cirilli. going back to yesterday, the fed was the big news we thought but if you look at dollar-yen, it actually moved more in response to those tariffs with the dollar weakening. does washington understand how big news --this news could be? on who youepends ask. top retailers in the u.s. coming in advance ofis the announcement which we expect to day. nike, walmart, a host of other u.s. companies saying they are events -- against this type of tough tariff talk coming from

this administration. yesterday, we were briefed by an administration official who laid out the case for why they feel this announcement is necessary after what you describe as months of back and forth between the u.s. and china. it comes at a time when the ambassador was testifying on capitol hill, saying there could be exemptions for the european union and other nations with regards to steel and aluminum. but we don't know if the tough talk will match with backdoor negotiations with regard to china. was one of our questions, what are we going to get today? when it comes to aluminum and steel, it was more come and make me an offer, i may exempt you. is that i what we expect with china? that is what we surmise reading through the tea leaves. i did speak with one source working with the white house who told me there is concern about

the retaliation effort that could happen on the back and from that is what we surmise reading through the tea leaves. china. in particular them in certain states impacted by these types of trade policies. situation where the chinese are going to retaliate from a political stronghold in red states that president trump need for the midterm. alix: kevin cirilli, thank you. nick bennenbroek is still with us. dollar-yen, what is the downside on this? nick: it depends how stringent those tariffs are. it does come down to come are we going to make a deal? often with these tariffs announcements, the first headline looks pretty tough, and then you get slight softening as you go through. of reason from that despite the fact that dow futures are up 176 points. coming up, mark zuckerberg says sorry. the company lost $42 billion as of last night market close. how are investors reacting? this is bloomberg. ♪

david: facebook ceo mark zuckerberg broke his silence on the crisis over cambridge analytica's access to user data. pressure continues for him to testify before congress. here is what he told cnn last night. >> this was a major breach of trust and i'm really sorry this happened. we have a basic responsibility to protect people's data. if we cannot do that, then we don't have --deserve to have the opportunity to serve people. david: we welcome from atlanta dan morgan. .e owns facebook shares selina wang is our bloomberg technology reporter. dan, we talked about this. did he do enough? of the statement he made, was it enough to satisfy people? i thought it was ok, a little bit dry. when i look through the

headlines, i looked through his three point that he made at the end. by response -- and we own facebook, so we are positive towards name. i thought these were things that they were already doing. he did bring out that they would in regards to these various steps to prevent this from happening again down the road. unfortunately, i don't think it changes facebook being in the news, you hear now congressman want to get involved, having him testify. i think it will continue. this will not abate the problem. it will keep holding out here as we go forward. unfortunately, facebook will be in the news in a negative way. an owner of facebook, do you regard this mainly as a pr problem, that they have to handle it will go away soon or later, or is there something more fundamental where facebook has to redo the way it does business? dan: it is tough at this point.

the three things on focusing on our, is going to slow down subscriber growth, is it going to change how much time people spend on facebook every day? and the critical question to me is, is this going to change advertiser behavior? google and facebook pretty much lead in all digital advertising. are we going to see that money that would have gone to facebook maybe siphon off and maybe go to amazon, which is only a $3.5 billion revenue in terms of ads? those are the three areas to focus on as an investor. still too early to make those judgments but we will have to see how it plays out. alix: we spoke to ken feinberg earlier to ask about any sort of issues, potential lawsuits. here is what he said. >> this is somewhat similar, i think, to equifax, where there was a breach in data. i did not see equifax. some sort of compensation fund

or anything like that. , has to, like equifax deal with the regulators, possibility of shareholder, investor lawsuits. alix: selena, is that the next part? selina: zuckerberg did say he is open to regulation, which is a surprise but it depends on what that regulation is. in his statements, he is trying to prevent any potential regulation. he set out some concrete steps, one of them is investigating those apps that had access to large scale data, which will cost millions of dollars, many months. they will also be restricting data over all of these apps and make it easier for people to adjust their privacy settings. they hope this will be enough to the regulators but they are already coming out and saying this is not enough. we need you to testify in front of congress. alix: ken feinberg pointed this out. maybe they need someone to

externally come in and crisis management. these are the steps you need to take, i you portray it. any word if that is happening? selina: we know they will need many third party people to be doing these forensic audits. takesne of these apps that information, facebook does not have it on their servers, they cannot tell who may have violated their policies and what data they have. they will have to hire forensic auditors to go out individually to these apps. this will be a huge task and it is up in the air about whether it even possible to do a full investigation about this. david: dan, it is fascinating to have an investor in facebook here. i want to pull up some of their problems and i want to see how an investor evaluates this. they have investors, users suing, possible u.s. legislation, a u.k. information investigating. one areou say which

important, which are noise? >> hopefully this is something like we saw with google. we know some of the content showing up on youtube that was inappropriate. they tried to clean it up and get it in the right direction. we are hoping facebook and get this behind them, get through it, do the right things, go through these things you're talking about. but again, it is too early. we have facebook on our buy list, pretty much shortly after the ipo. you take out the splits, we have such a low cost basis, even at 1.50, 1.60, it is a three or four bagger for us. you have a pretty good cushion where those investors who bought the stock later do not have that cushion, will have to go through this decision. alix: are you buying the dip?

dan: not at this point on facebook. you need to be cautious, there will still be more bad news to come out. let's see if there any changes to that seven dollars 25 estimate out there. right now the stock trades at 18 times earnings. we need to see come if we see the estimates come down. as i talked about earlier, if we see some change in behavior from advertisers. as you know, they are driven by advertisers. morgan, thank you. selina wang, thank you as well. the latest round of u.s. economic data less than 24 hours after a rate hike. we will break it down. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is "bloomberg daybreak." i'm alix steel. it is a risk of tone developing in the markets today. the ftse also weaker by one percentage point. the sterling rumbles around

neutral. in the bond market, it is buying everywhere you look particularly in the u.k.. yields lower by seven basis points to further out the curve you go. buying picking up in a long and in the u.s. as well, yields lower by or basis points. crude moving on its own with some bullish upgrades. economic data coming out, initially -- initial jobless 229,000, a little higher than estimates on the margin, higher sequentially. again, the firmer job market continued to play out in the data, as you have the fed lowering their own implement rate forecast for the end of next year to be .6%. joining us now is constance hunter of kpmg and nick bennenbroek is still with us. do you expect and overshoot of inflation as on a fleming

continues to grind lower? constance: that is the question. i want tiny what fed chair powell expects, which is that the phillips curve is flatter. this is the call to make in 2018 going into 2019. what we have seen in the data is the survey data indicates companies are having difficulty finding workers. that would normally indicate that wages will go up. but we have yet to see material wage increases. one of the things we saw from last month job report was, at that 313 thousand workers at it, there are still people on the sidelines coming into the labor market. we saw participation rise in the core worker category. that is the question for 2018, 2019. you look at the dollar, what we are seeing impact in the market, are we to imply there is more slack in the labor market and we would have thought? is that why the dollar did not have a stronger reaction

yesterday? nick: the key to the reaction was the dots and signals from the federal reserve. the debate for today is 2018, whether they will signal three or four hikes. they stayed at three, so basically the dollar came off. morethey started to signal moves in 2019, 2020, that is when you expect all of these other central bank to be moving as well. i think that is why the dollar was down. david: how can we not have inflation ramping when you have unemployment, they think going down into the mid-threes now. they say the long-term number is actually in the four's. that doesn't add up, you have to pay people more money. nick: coming back to the point made earlier, the phillips curve is a bit latter. we are seeing the dynamic everywhere. the european economy is struggling to generate inflation. even places like australia and new zealand, not deflation.

if we get and overshoot, a modest one. is one of thet things that powell brought up, this issue of symmetry. tolerates willing to inflation above their target for some time because it's been so low for so long. alix: talking about longer-term growth, the peak of being this year, that also implies that we will see the short-term boot from fiscal stimulus, but then not anymore. potential gdp takes a long time to change. of the growth rate of productivity, plus the growth rate of the working age population. those things are not going to change dramatically, unless we get more people coming into the labor market. alix: let's talk about the market. a traitor for bloomberg says no one wants to trade without being told how by the central bank. the reality is global issues are so intense that no sane banks

are really trying to prepare for the next surprise, not guide us to where we are going. they are forecasting, not planning. i love that. figure it out for yourself, there are the issues that the fed cannot handle. david: yesterday, somebody said, you have to work harder. instead of taking more risk, you could do that. alix: it brings up the question about trade. david: especially a big issue today with the president announcing possible tariffs against china this afternoon. how big of a headwind country difficulties be for the u.s. economy? nick: it's important to realize for the u.s. economy, trade and exports,ports relatively small compared to the entire economy. it is an issue but probably more of a problem for our trading partners than for the u.s. david: coming back to chairman powell, constance, he has a different view of the marketplace. participants in

this fomc did bring up the issue of tariffs. if i could summarize what came out of that, it was first that ,here is no thought, i think that changes in trade policy should have any affect on the current outlook. david: doesn't affect the current outlook. at the same time, the white house making some announcements. you are seeing the dollar weakened against the yen, so the market seem to be disagreeing with the chairman. constance: i think the markets and the chairman have different objectives. the objective of the fed is to look long-term and not in the business of speculating. when it is a want us, they are not in the business of saying anything unless there is a significant impact. whereas the market is very much in the business about what if, let's think four steps ahead, what will this do down the road?

the fed is very much on a trend the path. and if we have a situation where tariffs occur and cause an inflation spike, for example, that is something that that will look through as temporary, just like a temporary oil spike. alix: but if you have tariffs starting to eat into the fiscal stimulus, talking to ceos in particular, who say that tariffs are terrible because they will offset anything that i just got from tax cuts. constance: what we should look to it is larry kudlow's op-ed piece from weeks ago. when we put sanctions on north korea, we deprive them of the privilege of importing goods that they want and need. we are now depriving our own citizens of importing goods that they want and need. now larry kudlow is in the administration. we will see what he has on this. david: he has a new boss. the president has thus far

indicated that he gets the vote. so many advisors, gary cohn was against tariffs as well. do we expect larry kudlow to change the president's mind? nick: no. in a debate, president trump will win. coming back to how important our terrace are for the economy, the direct impact is perhaps less, but what would influence the fed is how much anxiety it causes in the equity markets. what happens to bond yields, the dollar? david: one of the things we have talked about here is, does the president talking about this open the door to other countries , may the eu coincidentally saying we will impose a 3% revenue tax on big tech firms. does the start a cascade? other countries saying, as long as we are doing that, i have an idea. constance: trade war do not benefit anybody if they keep escalating.

this is a critical game very question. do you push back hard and hope to get trump to back down? or do you say, let's try to deescalate this, as the chinese seem to do at the beginning? we will see how that plays out. certainly, an escalation would not be good economically, not good with the u.s. economy, global economy. if we go down that route, market will react. once market start reacting, then you'll see policymakers say maybe we need to take a different tact. much a risk off feel. how long do you expect that to last four, neck? nick: we could have this for a couple of weeks. maybe a month. again, my sense would be, the first pass is the toughest. then things get softened. what is finally lamented is not quite as stringent as those scary headlines. david: the first cut is the

deepest, it wasn't that a song --wasn't that a song? nick bennenbroek, constance hunter, thank you both for being with us. trade continue to play an outside role. whether we are talking about the economy or how multinational companies are doing their business. i spoke with johnson and johnson's head alex gorsky. >> we want a trade environment that is collaborative. making sure we have reasonable trading guidelines in place. that does not mean that we should not be revising, of dating, particularly the amount of time with nafta and other things, but let's not throw the baby with the bathwater. build on some of the constructs, recognize these are important purpose for us in an important local economy. david: to hear more of his thoughts on drug pricing and leadership and what he plans to do with johnson and johnson's big pile of cash, you can watch my full interview friday at 6:30

p.m. and friday at 5:30 a.m. alix: did you get a feel for how nervous he is with you in ministration? david: $350 billion market cap. this is a big company. i have a feeling that he will work with him, he doesn't know how to all the time, like everyone else. it is not good news for him if we have a trade war. alix: there are bigger fish to fry. this is not just a $330 billion company versus president trump. david: what is going to drive this company more? innovation and drugs. if they can find the next big drug, he will be fine no matter who the president is. alix: looking forward to it. coming up, at&t and time warner forcing up in court. how the biggest antitrust trial could play out. as you commute in today, tune into lisa abramowicz and

jonathan ferro on the radio. pimm fox joins the conversation at 10:00. wanted to do a quick market check for you. a risk off tone. nasdaq futures picking up steam to the downside. the ftse also down by 1.25%. in the markets, the move is in the bond market. yields down seven basis points, five in the u.s.. it is a safe haven play but potentially the boe not as hawkish as some thought. buying the back end, a real trade in the markets. sterling flat on the day after an initial spike. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." johng up in the next hour, chen, blackberry ceo. in washington today lawyers for at&t and time warner are facing off against the justice department. at stake among other things is how you get and how much you pay for streaming tv and movies. we welcome now jennifer rie, our senior litigation analyst, who is outside of the court has done there. let's talk about section seven of the clayton act. competition,y hurt why would this merger hurt

competition? >> what the government is arguing is that with the time at&tr content, directv, will be able to beat up on other competitor distributors because it will have this must have content. by virtue of that content, it can increase prices to other distributors who will have no choice but to pay those prices or blackout the content. the way the government. goes, if they choose not to pay those prices and blackout the content, directv will benefit because some of those subscribers will move over to directv. together, that strategy will profit at&t. david: if that argument is comcast-nbcume the deal went through? jennifer it is a similar deal and a good question. to be honest, the government raised the exact same very of harm, that is what we are calling this theory are rising rental costs. at the time they were also concerned about the same kind of

harm from comcast and nbc you merging. they allow that to go forward with a long list of remedies. these remedies were behavioral in nature. in other words, the companies promised once they were merged, they would conduct business in a certain way, not discriminate against rival distributors, other conditions, and were not asked to sell of any assets. the difference here is the government is asking at&t to sell off assets in order to get the deal completed, rather than enter into behavioral remedies under which at&t has made it clear they are willing to do. david: early on people speculated the difference was cnn. the president has said he does not like cnn. is that in or out, whether there is a political motivation here? it is not really in the case. the judge is not prohibited parties from raising what they call a selective enforcement defense, saying they are being discriminated against because the president and cnn. what he did do is prohibit them from getting discovery,

collecting documents on the subject. while they are allowed to raise it, they have no evidence to back it up. the judge does not seem interested in addressing that issue and i suspect will not be a big part of the trial. i am a little envious of you, i have to say. thank you so much, jennifer rie. alix: global beer company anheuser-busch in the has conducted its fair share of m&a including an acquisition of sab miller. jason kelly sent done with an extensive interview with the ceo and asked how that latest merger has gone so far. >> the combination has been really an amazing opportunity for us. when you think about it, our footprint in terms of market stores where we were present was fully complementry. putting the two together, there was hardly any overlap. not only footprint but also skill sets. because we grew in different markets as companies, when we

combined, we are able to exchange a wealth of knowledge, and we learned a lot from our new colleagues. it was the first time from all the business combinations we had done in the last 15 years that we use the name intellectual synergies. we really learned a lot with our colleagues. one thing we learned is something called the category expansion model. this idea that if you understand better consumer trends, where they are headed, where you are and where it's likely to be five years from now, you look at where your portfolio is today in terms of existing occasions, and you project which occasions will grow, and you have conversations about your portfolio, the role of each brand, resourceful allocation. that is a rich discussion to have. then you start looking at what is around beer. things that are near beer, like cider. cannecessarily beer, but appeal to the jason categories.

this framework brought us of the knowledge that our colleagues had been accumulating for eight years that is now at our disposal as a combined company. this idea that together we can do more. jason: as you hear those ideas, does that make you say, maybe there are some things out there that we should buy. are you more in a building mode at this moment? carlos: at our company, 99% of the people, including time, including myself, we dedicate ourselves to building an organic business. global brand,zing talented people, scale. we have everything and we have this category of framework now. we have all the things went together, put to work together, can generate organic growth for a long time. hand,rse, on the other there were four or five guys in the company always looking around for opportunities. once you talk formally about

these opportunities. but the everyday business is growing. topline, organic fashion. that is what we do for business. are those four or five guys knocking on your door a lot these days, what is your sense of what is out there to buy right now? carlos: they do sometimes. there are sometimes bolt on things that are smaller. for example, on the craft side of the business, we have gone to market where we operate around the world and tried to anticipate the craft emergence by sometimes acquiring small, promising craft, introducing it to the country. having a craft portfolio. those are small things, bolt on. the big things don't happen every day. our focus is on the organic growth. alix: that was jason kelly without a tie in an exclusive interview with carlos birto.

what i'm wanting today has to be the markets. a risk of tone developing across the board. s&p futures off by one percentage point, dow jones futures off by triple digits. the money flowing in. big buying on the backend in europe and muttered buying in the u.s. yields lower by five basis points. the risk off time playing off in dollar-yen. the yen really benefits from those safe haven flows. the vix also picking up now over 20. joining us now is julie emmanuelle. julian, when the game plan today? plan is to sit back, relax, and realized the market as is always the case -- janet yellen was the exception, is testing the new fed chair. we are in the middle of this volatile range that is bounded by january's highs and february's lows.

this is a transition time where there is lots of macro noise in the market but ultimately, after some risk off, given the fact that the fed almost moved to a median four hikes and shifted 2019, 2020 higher, this volatility is not surprising. the markets have to work through ofse issues, and another these issues is the transition away from tech leadership. alix: before we get to the individual rotations, what about this as a safe haven bid for tariffs on china? julian: no question that is the reaction in the interest rate market. paradoxically, you are taking care of one of the fears that the market had coming into the fomc meeting, in that there was this view that the 10-year yield would run away north of 3%, and that would be something that ultimately would compress

multiples. but that is not turning out to be the case. for us, the fact that you still have a safety valve in yields is something that will ultimately cushion the downside of this correction. david: that is fixed income, what about the equity markets? you listen to what the chairman had to say yesterday, it sounded like a buy signal, not a sell signal. julian: it did, but the fact is, when you think about it, their certainty about the economy, which we think will ultimately be proved out, has been challenged in recent weeks when you look at the weakness in retail sales, when you look at the slowdown in housing, and when you look at the weakness in the incoming data in europe. so the market is not quite as certain as the fed chair sort of made it seem like he is yesterday. , ultimately, it is a first quarter seasonal affect. when you get into the second quarter, the fed chair's viewpoint will be validated, and

that is when the markets will start to feel a bit more comfortable with the pace of rate hikes. alix: in terms of rotation, take a look at the chart. the russell 2000 outperforming the s&p. if you have a trade war small caps is where you want to be. what is the rotation of the two take place within equities? julian: we see two things. all, the russell yesterday is a manifestation of this whole idea that if there is going to be continued trade friction, domestically sensitive revenue companies are where you want to be. for us, that actually ends up being energy. very much a place that we have liked, has been sort of forgotten for the most part. yesterday, powell remounted us of this idea that we are really turning late stage cyclical in the equity market and in the economy, and that tends to .enefit energy

factually, the energy price has not been a casualty of this volatility in recent weeks. we think that's a positive. alix: oil moving at its own drum. julian, are you playing volatility? julian: i think you have to play it tactically. for us, we anticipated, particularly, given the concentration of international revenue in the technology sector , we anticipated the weakness that we are seeing in technology. for us, that has driven us toward technology put spreads. very tactically, because this is a correction, which we ultimately think will lead to new highs in the second half. david: you have talked about energy in terms of cyclicals, what about financials? julian: we continue to like financials. despite the knee-jerk reaction that we are seeing in the rates market over the last several days, we think the story for financials is very much intact.

goingin general are higher, particularly at the short and come yesterday's message. ultimately, when you look at it, the markets themselves are reasonably healthy. the volatility we are seeing in the markets is actually good for the major money centers and their trading desks. alix: julian, really appreciate you joining us today. julian emmanuelle be tig, the calm voice in the markets. that wraps it up for "bloomberg daybreak." coming up, the open. willchen, blackberry ceo join jonathan ferro. and then later this afternoon, bill gross. what he thinks about the buying in the treasury markets. this is bloomberg. ♪

♪ jonathan: from new york city, 30 minutes until the start of trading. this is the countdown to the open. ♪

jonathan: the white house planning to plant more tariffs on china. a patient fed chairman with very hawkish expectations. sticking with three for 2018. someone finally found zuckerberg. this eeo raking his silence -- ceo breaking his silence. the open is 30 minutes away. futures down 28 points on the s&p 500. the-year-old back to 123.14, down .2%. 10-year.u.s. the top story in the last 24 hours, jay powell showing patience and willing to let the economy's performance guide him rather than theories and models. >> today's decision to raise the