>> trade tensions rise bay jinx ambassador.american global stocks slide. vote on for now. big day tomorrow the prime as defeat that could plunge the u.k. into chaos. kelly is out announcing his departure. potentially aces unruly transition for a pivotal role.ship and good rning afternoon if you are watching from asia. this is "bloomberg surveillance." i'm francine lacqua.

we are seeing a little pressure 600 down 1%, minors under pressure and commodity stocks. people are concerned with the alating trade war or reescalating trade war between u.s. and china on the arrest of officer and ancial concerned about domestic growth in china. we are looking at the key vote in the u.k. parliament over heresa may's brexit plan and coming up we will look at some after cutting earnings force and you can see bafs down race for 4.5%. e will talk to the chief executive of lowe's about the u.s. economy and his hotel business. give as you glimpse into the strength of the consumer later on.

peyt newtime let's get news from york city. >> e.u. top court says u.k. can reverse the brexit process. in a ruling this morning that european appealed the court of justice says it is free o revoke article 50 which signaled the intention to withdraw from the e.u. plans tosays it has no reverse article 50. theresa may is set to decide whether to go forward tomorrow with the vote despite political eat and crisis. over the weekend ministers is sted tomorrow's key vote on. if may loses britain will be on disorderly exit in march from the e.u. but could leadership challenge or second referendum. prefrpblg president is set nation.ss his

yesterday it was quiet are with reopening.shops saturday saw about 1700 arrested after skirmishes with injured and extreme right, left and elements. china's strayed surplus with the record in november as, port growth occurred. icon's total export in dollar 5.4% with imports up 3% leaving the surplus over 44 the highest this year. factory inflation was at the two years more than with the consumer price index slowing. japan's economy contracted morning projected in the third driven by a series of shrinking 2.5%rs

biggest in more than four years. growth is expected to recover in quarter but tension are major risks. back in the united states says he is ump interviewing candidates to eplace john kelly as chief of staff facing a day kwrobgt transition in a vital leadership with vice president aide running.s out of the trump is saying it is fake news ayers was certain to get the job. global news 24 hours a day on twitter.by > the hearing of the c.f.o. continues today. ministry hasortune

summon summoned some saying it will take further action. tensions threatening to -- fragile y r interactions. >> i understand from the chinese perspective how they would see it. justice criminal matter and separate from anything i work on or anything people in ade policy the administration work on. for us it is criminal justice. joining us from hong kong our chief chief asian economics correspondent. the first company to come under pressure from could is but how bad it get? > it is certainly a complication from the broad are trade perspective. tit for n the road a tat retaliation if they view it an attack on change inc.

led story a sanctions the threat of retaliation could come swiftly. there are plenty of observers warning china could more difficult for u.s. disruptingn china by the supply chain and making harder.nt they are critical things are huawei issue sanctions story to the broad are technology concerns u.s. has about china how china responds. so much is up in the air and unclear. to be china to expecting retaliate against the supply china or could there be arrests u.s. executives? > so far it is interesting to hear the rhetoric from

washington officials trying to separate the two. we had one saying he focused on it is something of a national security issue and the been ic from china has pwhrurp defense but s of there's in the been were conflation with the broad are and it is critical how that would play. ou mentioned earlier china's economy is slowing so there's a view they want trade talks on the u.s. for those reasons are talking about making critical al so it is to see whether trade talks can agreede and some deal is or whether it leads to something complicated murkier outlook. much.ank you so keep conversation on trade on joining us is

he global chief investment strategist at block rock. you have a look for 2019 but thoughts on trade. ould this arrest which is an isolated case go back to sparking trade wars? >> great to be here. we look at events the last few days what they have focused -- attention is the ssues are not just bilateral trade balance. markets were hopeful we could get a deal after the trade talks. but this is the longer-term issue between the u.s. and china simply the trade deficit but technology dominance and that is going to be a theme that will be with us for not just weeks or months but tongsly -- but donationpotentially yea. seeing heightened market

tanks on both the -- attention n the trade issue and technology issue. that has been priced in and good a year ago d it there is more in the price. expect takes is you will see trade attention for years to come potentially that overhang to the markets. but they are starting to issue of narrow shoe to technology dominance. >> does it escalate a touch and get back down? is it range bound if it was a currency? i think what you can is we will be d innen a environment where -- in u.s. ironment about the relationship with china is likely to remain high and more over time to get worse than to get better. investors should be

focused on is what impact is that having on the economy. for the first time you are seeing some evidence of that impacting growth and spendingrly investment in the technology sector in the u.s. and certainly in some of evidence of with slowdown as well and it is the impact on the economy that i important.be most >> is the slowdown manageable? >> yes and we are seeing chinese taking premise active measures to -- preemptive in terms o stabilize of cutting reserve retirements easinging it in terms of on some regular to your pressure policy and t some china has a long history of we will a hard line so see it stabilize as we go into are expecting a slowdown in the u.s. economy not trade but the

first impact on capital spend clear particularly in technology and it is exacerbating a sl slowdown. >> richard, thank you. prime may day the u.k. minister face as decision on whether to delay or go ahead brexit vote. this is bloomberg. ♪

francine: this is "bloomberg surveillance" and i'm francine lacqua. let's get to new york city. prosecutors rearrested former nissan chairman on

understating income by they were indicted underreporting has compensation million. they have previously denied those allegations. the fool price is et for the yen and telecom i.p.o. had the fixed price at 1500 underscoring the demand for shares. it will trade on the tokyo stock december 19. decision day for the british prime minister who must decide today whether to put to a vote in l parliament tomorrow. that would risk a human medical can d stating defeat that plunge the u.k. into unrest dented chaos.

option is to postpone it and go to the summit thursday tried to get concessions who made it clear they are not willing to give more. brexit so the u. could. government says it has no doing so.of thank you both for sticking around or joining us. two million e options. tprl she goes ahead as we are how badly ministers will she lose? >> it is looking like it could 100 plus. the reason is that usually if you have a vote and people are you might do something to satisfy them to get it through. unhappye the people are on both sides. if she moves either way she will and one side more unhappy more will not vote one or the other way so she is stuck.

francine: there's no clear way out, right? it is she delays it, unclear how to got it past. it doesn't make that much of a difference. >> parliament has been in gridlock for months. she knows her options and if anything is going to budge it will be at the last minute. that is this week. it is today, tomorrow, could be that e.u. on meeting thursday. rancine: could she extract any concessio concessions? because the e.u. has been pretty firm. >> it would be cosmetic changes around back stop assurances that u.k. wouldn't get stuck in he backstop forever which is the concern on both sides. rancine: what is pricing the markets. 100 no vote priced in by plus or can it tank? > a no vote is priced into the

market today. what market they are struggling to price in is what the scenario that.yond there are at last four different scenarios which are struggling somewhat amended version of the may deal a a ally different dell with senator way -- deal. back to t second referendum or no deal brexit. from a rtant point market perspective all those results with the exception of no lead to some uld no deal scenario is a possibility is a low possibility. francine: richard, again this could be in february? when do the markets price -- we have a constitutional crisis and leadership challenge and vacuum. when does the market freak out. you look at the evaluation of sterling or u.k. equities

international and can of u.s. treasures you see a significant risk premium priced in high degree of the u.k. priced into markets. in the short run thing there is probability that some of those risk premiums get and markets more worried before they can start to improve. scenarios other than no deal risk we would see that decline but right in and out as investor it is difficult to make a long-term decision with short-term uncertainty. francine: we are looking at the spiking at ound and last s times especially couple of jobs. who wants the prime minister's job? are at least nine on the conservative side and

as well jeremy corbin but there are a couple of brexit remainers and boris ohnson was on tv yet and sounded very much like a leadership bid. on.list goes up next the search continues president trump looks new chief of staff as john kelly heads for the exit. ♪

francine: this is "bloomberg surveillance" i'm francine lacqua. donald trump says he is interviewing candidates to and declared elly wasake news that mick ayers certain to get the job. the white house faces chaotic transition nd we have more our senior report for senior affairs. does this mean for foreign policy with his

departure? the interesting thing john kelly is marine corps general he was one of the original room who adults in the was part of the first cabinet put together and one by one they have agagone. is the last but one. ultimate tillotson. mccone, mcmaster and they are all gone. leftu have just jim mattes as the defense secretary. the any countries he was most important. had n the pentagon and partial control over the button. so it was these people are figures especially the first year. francine: especially with allies. is it they who have most to lose with kelly gone? to lose.ave the most some countries larger countries

very rance which have strong military ties with the u.s. not so worried about jim mattes. him.like others like the baltimore particular states have -- baltic states have been reliant on u.s. forces and phatd test is -- mattes building up iven trump's opinion of nato building the amount of money the u.s. is spending on european defense. francine: who would replace john kelly if >> we don't know. saw the tweet there. he has been talking to nick ayers ayers, that were isn't fake news. it was also ayers didn't want to be there for long term. only as transition. so that might not happen. the one who was in the

trail. francine: mark, thanks so much senior reporter for international affairs. stay with us. france as the dent vests threaten to economic growth. we will have the latest from paris. and some of france things that things that their could do to end the crisis. t seems there's a very angry france waiting for that grand gesture and figuring out whether what he could do next. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." overall, there is a little bit of market move. a couple of concerns out there.

first, this trait concern with trades. and china -- concerned with the u.s. and china. people are worried about signs that china's economy remains under pressure. the euro rallying. we are just getting breaking news. this is u.k. gdp. it is a little backward because it is the three months from august to october. i don't think we are seeing a little bit of pound move. let's get straight to the bloomberg first word news. uma: here is what is happening. the eu's top court says the u.k. can now unilaterally reverse the brexit process. in a ruling delivered this

morning, the european justice is saying the u.k. is free to remove article 50. the ok government says it has no plans to reverse article 50. theresa may is set to decide whether to go ahead with tomorrow's brexit vote in the u.k.. parliament, despite risking defeat in the process of a major political crisis over the weekend, ministers are insisting tomorrow's vote is still on. loses, britain may be on course for a disorderly removement from the eu in march. china's foreign ministry now summoning the u.s. and canadian ambassadors to protest the move saying more action against both place. may take

>> shouldn't really have much of an impact. i can understand from the chinese view how that may have an impact. this is completely separate from anything i work on the trade policy people in the administration work on. trump says he is still interviewing candidates to replace john kelly. the white house faces a potentially chaotic transition. trump says it is fake news that nick ayers had been surging up the job before withdrawing. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm uma pemmaraju, this is bloomberg. francine: president emmanuel

macron due to speak today after another weekend of violent protests across france. the president has seen his approval ratings collapse. minister saidance the demonstrations have stripped one percentage point of economic growth in the last quarter of this year. can macron actually offer the french tonight to ease tensions? maria: the french government has already turned on taxis and promised there will be --taxes, and promised there will be any more this year. hand, a lot of people i spoke to over the weekend who came out to protest told me they are underpaid, overtaxed. they feel they don't really have a role to play in french society.

he is going to have to show french people that he understands and also workers are not worse off than they were before the crisis. i think we could be looking at tax deductions, perhaps. it will be difficult in getting the town right. francine: thank you so much. richard from blackrock is still with us. i don't know how you see this unrest playing out in the markets, whether it is an economic story. face to european stocks the challenges. the first is a challenge around geopolitical risk and uncertainty, that is both mastic , europe is directly

impacted by the u.s.-china trade war. the second is an economic risk. if we are moving into a late cycle where global growth is slowing, europe is particularly exposed. in that environment, we have a strong preference for u.s. emerging stocks over european stocks. francine: these protests point to anger in france. the vulnerabilities that a global growth slowdown, europe looks particularly vulnerable. we already have a very low rate of growth in france and other countries. if we see global growth slow, that risk tipping europe into recession earlier than other countries, that risk exacerbating some of the tensions we are seeing across all of europe right now, we don't have the same policy flexibility across europe that

we had in other countries around andworld, notably the u.s. we have greater financial vulnerability in europe in the banking system. we take that altogether and say europe still looks a fragile economy and place to invest. francine: whether it is italy or france, does any of this derail ecb policy? right you're going to see the ecb announced a stabilization balance sheet. be thatctations would the ecb is going to be very cautious about tightening policy, in particular, raising interest rates. given the height and political uncertainty we are seeing and evidence of the economy is slowing. inflation is still absent in europe. i believe the ecb is good to

keep policy very loose well into the end of the ecb president's term. i think it is still a case of dollar strength from here, driven by the fact that we still expect at least one further rate hike from a fed. the ecb being more cautious. francine: i know you're not crazy about europe, you prefer other parts of the markets, but what we are trying to figure out is where is the best 2019 trading opportunity in europe? with think of this from a sector perspective and we look at two that i've you are attractive right now. the industrial sector, a lot of risk is now priced into industrials. they typically get a lot of the revenue from outside of europe, benefit from still strong growth in the u.s.

valuations are attractive in a world of low interest rates. them a look at the health care sector. sectors which are less dependent on whether the economy gets better or worse and racy sustained cash flow balance sheets going forward. still many attractive opportunities within the european market. francine: up next, what will 2019 bring? blackrock expects trade tensions to continue and slowdown in global growth. we really break down richards report on 2019 next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash. tokyo prosecutors have rearrested the former nissan chairman on suspicion of understanding his income. nissan has also been indicted for breaching japan's financial instruments and exchange law. softbank has set the final price telecom ipo at its original target. price at an offering of ¥1500 a piece, underscoring is confidence. the shares of the new entity softbank corporation will begin trading on the tokyo stock exchange on december 19.

the german maker of plastics and citings -- additives fallout from the u.s.-china trade spat as reasons for cutting its earnings forecast. credit suisse is reported to be announcing a share buyback program and increased with dividend and investor days this week. according to a newspaper, a share buyback would be just over which the ceocs is set to outline plans as his restructuring comes to an end. elon musk has launched a direct attack on the securities and exchange commission when asked about his punishment for twitter messages earlier this year, telling cbs news none of his tweets have been censored since

he reached a deal with the commission following the shock of the go private tweet back in august. he also says he has no time for the sec, but what abide by the deal. >> i do not respect the sec. uma: this is a quick look at the bloomberg business flash. francine: after a year of geopolitical uncertainty, what will next year bring? blackrock expects corporate earnings and global growth to slow down as the u.s. economy enters a late cycle phase. the firm does not see the u.s. falling into a recession. richard is still with us. where do you see u.s. treasury setting? richard: we have been cautious on u.s. treasuries. we have seen materials rise since the beginning of this

year. when we look forward, with think there is a case of for a much more balanced approach. have entered a late cycle slowdown phase globally. the u.s. economy is starting to slow. in the late cycle slowdown phase, with heightened uncertainty, we have been talking about european uncertainty and u.s. trade uncertainty, we think it is prudent for investors to take a more balanced approach in a portfolios. that means treasuries play a more important role in the portfolio. the negative returns we have seen from fixed income in 2018, we don't they will be repeated. with think they will offer attractive diversification benefits. francine: do you see a correlation in 2018? richard: this is a very unusual year where you had negative returns for both fixed income and equities.

forward, we expect to see those negative correlations between equities and fixed income return. that is because we see gross being the key driver returns of the future. we have seen. some of this in the last couple of weeks in that environment, fixed income plays a really important role in diversifying risk in a more uncertain environment where short-term buy downs become more prevalent. financial conditions have been easy since the global financial crisis. we are now seeing them approach neutral. they have been rising both because the fed has been raising interest rates. we are seeing that continuing into the early part of next year, but also because broader financial conditions have been tightening. the dollar has been rallying, there have been a rise in bond yields. is wef the big changes

get close to neutral. in our view, that means we're likely to see a fed cause. that is important both from a and emergingive markets. we see that positive the fed is potentially providing relief. francine: the market is going that way. there has been a big repositioning of fed expectations in the last month or so. when we look at what is priced into the market, 2018 was a year in which there was a significant upward adjustment and interest rate expectations because the market was very skeptical at the beginning of this year. when you look forward to next year, that market adjustment has already taken place. we don't think we are done quite yet, but within most of that adjustment has taken place. that relieves some of the pressure on areas of the market,

such as emerging markets we have seen this year. much.ne: thank you so we will talk a little bit more about emerging markets next. crude bouncing back after the agreement between the saudi arabia and russia and other producers to cut output. we discuss that next. this is bloomberg. ♪

>> we were very forthcoming and went ahead of the curve and pumped a lot of oil, more than the market needed at the end of the day. we saw inventories building to dangerous levels at a very alarming rate. we are probably acting a bit late and very conservatively. i think 1.2 is rather conservative. >> that is an interesting opinion. as of now, the decision is made for six months. we could extend it. but at the same time, if we see that the market needs more oil, we have all the instruments in place to make adjustments. we are flexible. but i thinkt easy,

the trust of the organization has let us to become responsive. potentialen a increase again. no one wants to go back to what we saw in 2016. exempted and we received the letter from opec that iran is exempted. when you have natural factors , we would like to take advantage of the natural decline. francine: that was a sampling of bloomberg's many conversations with oil ministers at last week's opec meeting. brent numbers a slightly higher this morning.

the move comes after saudi and russia and others committed to removing 1.2 million barrels a day of output. richard from blackrock is still with us. it has been almost near impossible to predict the oil price in the last 12 months. does that change your portfolio building? richard: it is often difficult to forecast because there has been unpredictable shifts in the supply picture over the last year, particularly around supply some ofut of opec and the increases in supply we have seen around iran. when we think about how you build a portfolio in that context, i think one of the answers is you have to focus on those areas of the market where you have greatest confidence around earnings being delivered. oil price is close to that trough. we still see global demand slowing and holding up well.

we're asking opec to take action reducing supply. we start to see that demand supply imbalance become more favorable. with it about how to invest in that environment, that creates a more stable environment for investing in areas like emerging markets. you really want to focus on those areas of the market where your confident that earnings will be achieved in 2019. francine: the oil industry is one of them. we are neutral on oil. one of the reasons you're seeing oil stocks not doing as well as the oil price earlier this year, you saw significant disconnect as many oil companies still have significant issues of overinvestment and overcapacity they are making progress around. the balance sheets are not as strong as they were before the global financial crisis. what that means is where we want the focus on investment, the

aria we focus on is overall quality. companies with high free cash earnings.predictable we tend to find quality stocks in the u.s. that is one of the reasons we are positive on u.s. equities, but also areas like health care. you are less exposed to unpredictable moves. francine: are there any emerging markets you think are good value right now? richard: across many emerging markets, the whole sector is trading around 11 times earnings, below its long-term average in an environment where many emerging markets have already had an earnings recession. we expect to see chinese earnings or cover next year. we see value in many areas. there is risk in many areas as well. we focus in particular on asia. that is where we see asia being earlier cycle.

within asia, we focus on areas like india and the chinese market health. francine: how do you go when? do you buy currency or credit? have a strong preference for equity over credit right now. if you look at what it is exposed to, it is exposed to faster growing economies. the debt market is focused on those areas which have issued more debt over time. we prefer equities over debt. that is also because you get more upside in equities in a more positive environment. when you are taking emerging market exposure on the equity side, you have to accept you are going to get currency volatility. that speaks to making sure you have an overall portfolio which is thoughtfully balanced. on the other side, we talked about bonds earlier. francine: thank you so much for joining us.

we continue in the next hour. tom keene joins me out of new york. we will be talking about brexit tomorrow,esterday, .om and i will be live i think there will be pretty tough negotiations going on at downing street. today, we will go through what or how the prime minister can win the vote or not lose it by too much. this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. rise.ne: trade tensions beijing summers the american

-- summons the american ambassador. theresa may's big day is still set for tomorrow. john kelly is out of president trump's chief of staff. good afternoon if you are watching from asia. this is global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. -- "bloomberg surveillance." getting ski boots ready to join me at westminster tomorrow, tom, that important vote is still set to be on time tomorrow afternoon. i guess theresa may could always decide to delay it if she really thinks she will get enough support. francine: i go back and forth on that delay. what i know is the news flow this morning is extraordinary. i'm going to show a chart on the collapse of the japan economy. we saw that. the protests in paris and the goldman sachs bombshell.

we will have a look at the rate pause in financial conditions in the u.s. we had a great conversation with the chief strategist of blackrock a few moments ago. let's get straight to the bloomberg first word news. uma: here is what's happening. the european union's top court has just field a campaign to thwart the brexit process up until the march 29 deadline. theresa may must decide today whether to put her brexit deal to a vote in parliament this week. that would risk a humiliating defeat that could plunge the u.k. into unprecedented chaos. france is now investigating possible russian influence behind the countries yellow vest protests.

russian linked sites have pushed questionable reports of immune the monks french police and of officers supporting those protests. president trump is now looking for another candidate to succeed chief of staff john kelly. nick ayers says he is leaving the administration. he had multiple conversations with the president about the position. elon musk doesn't have anything good to say about the securities and exchange commission. speaking to cbs's 60 minutes. >> i do not respect the sec. >> you are abiding by the settlements. >> because i respect the justice system. hasn't had anyhe of his tweets censored since he signed off on the deal. his tweets in august about taking the company private cost months of chaos.

global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm them up him around to -- them a uma pemmaraju. this is bloomberg. we have not broken support. we are right there now. curve flattening off friday. in the vix, some as a this should be higher. threw in the 30 year bond because we are not yet on the 299 month. gary shilling to join us in the next hour. that 3.14 is stunning given with the believe was thanksgiving and back in october.

francine: we look at a lot more on deutsche bank throughout the next few hours. overall, stocks are sliding. there is this concern about a potential escalation in the trade war between the u.s. and china. we also saw signs that china's economy remains under pressure. euro is up on the back of some pretty encouraging german trade data. i'm looking at that pound ahead of that vote tomorrow. francine: 0126 and i would be a big deal. 126 would be a big deal. spirit.japan's nominal here is nominal gdp back with the ugliness of nominal gdp.

the crisis, 2008-2009. here is this recovery in japan. with a vengeance, the combination of lousy growth plus tepid inflation and even deflation has allowed nominal gdp to roll over to a new negative statistic office the lousy numbers overnight. chart.e: i like your mine is a little less fancy but is still significant because it looks that pound volatility. theresa may must decide today whether she will really press ahead to a vote on her brexit deal that will probably result in a defeat. i don't know if it is a crushing defeat or just a defeat, but a lot of concern it could topple the prime minister and change the course of brexit. this is what we need to focus on. francine: first, principles matter and everything we talk about an first principles on china. we must speak.

here is mr. lighthizer. >> they shouldn't have much of an impact. i can understand from a chinese perspective how they would see it that way. this is a criminal justice matter. it is totally separate from anything i work on or the trade policy people in the administration work on. what is the chinese response. bodyu look at the chinese language, what is the distinction of their response to ms. meng being in jail in vancouver. >> a little bit staggered at the beginning, but now it is coming in a little bit slow. the chinese press have been bombarded canada for what they considered to be a breach of then rights and my lading

rights of the detained executive. they are also threatening canada with retaliation. two have not been contemplated. the parallel trade talks and the national security criminal justice issue have not been compared to the chinese side. francine: i'm going out to london today for the brexit vote. i make it detained at lhr because i am wearing an ugly bowtie. this is not funny. is there any idea that a tech executive should travel to china right now? obviously, there is no official commentary from the chinese government or anywhere else. broad commentary is being made about how china could make things more awkward for usa companies operating within china. in this case, the technology

sector slowing down approval for plans, making life harder at the port of entry and all the rest of it. we are not down that path yet, but there is a view among certain china watchers that if the trade talks were to fail and if china were to lump this issue into the broader trade issue, retaliation could be on the table and it could get ugly from their. francine: is this a tech war? are we just going to see this tit-for-tat concern on tech for the next 20 years? enda: it does raise the complication and the stakes somewhat. remember, there seems to be a willingness on both sides to get a deal done. the u.s. themselves have initiated a truce. mr. light has a yesterday said the president had to deal with china. they may noise around their willingness to buy more goods. the structural issues are the

hardest part of all this is. the u.s. doesn't want china to pursue the strategy that it has. china will want to surrender. even if a deal can be made on the goods side, the idea of a tech cold war or economic iron oneain is certainly a live -- that is why there francine: we are now joined by pickeringn and colin to figure what all this means for markets and the trade tensions. thank you both for joining us. isn't justoncern here to stay for a while longer. colin: i think we are learning more and more that the trade issues a tech issues are proxies for what is a bigger conflict

between the u.s. and china. i don't think that we will get a closure on any of these issues anytime soon. peter: learning to live with the noise is one thing, but my concern is that this might escalate. a few weeks ago, we were sitting here and hoped that the worst of the trade tension had been taken away as a result of the g20 meeting. a few days later, we had the arrest. now, we are talking about an escalation. this could be escalated at any time if the chinese a retaliate in the u.s. retaliates again. francine: lots to talk about. we have a set of wonderful guests to talk about goldman sachs as they capitulate on four rate rises.

bit.bring it in a little in our next hour, gary shilling will join us and neil shearing to synthesize the many international events into 2019. this is bloomberg. ♪

francine: it is decision day for theresa may.

her other option is to postpone the vote and had to the european union summit on thursday. there, she can try to extract concessions from leaders who have already made it clear they're not willing to give anymore. the eu's top court ruled this morning that they can unilaterally reverse brexit. if she delays it, i don't understand what she would gain. peter: i think you are right. the sense that the brits think there is no domestic traction to be gained. let's take a two brussels and see what we can do. i don't think they are really going to budge. it kind of is up to the brits to decide what it wants to do. francine: the concern is that no one really likes the deal from either side. remainders, brexiters. question, what

can the u.k. do. this view from the eu is that they will not renegotiate a bespoke agreement to try to pacify brexiters in the attack. -- u.k. the one thing i see is that parliament is doing its best to try to introduce insurance policies. we have a couple of amendments. technically, it is still possible for a hard brexit to happen. because now you have these insurance policies against a hard brexit, i see a higher chance that theresa may doesn't exceed because the cost of failure to the u.k. -- last year, i reduce my heart brexit -- hard brexit prediction from 15% to 10%. if you imagine theresa may's deal as the best case, that would be a smooth road to a

softer brexit. that two thirds majority has not decided what version of brexit it once. -- watns. -- wants. the question is, whether theresa may picks it up or runs with it. strucke: i was thunder in my reading this weekend about how little jockeying there seems to be if prime minister may is shown the door. where does boris johnson stand? does he really have a following or is it so miniscule it is fiction? he does have a large following within the conservative party. the problem is that conservative mps don't trust him. when it comes down to choosing the next prime minister, the two candidates will have to be chosen by mp's before it is put to the wider party. the parliamentary party will do everything they can to prevent

boris from being on the ballot. francine: this is my pound of volatility chart. where do you see it going? what is priced in at the moment? ater: when i look parliament, i see of market perhaps less concerned with a hard brexit a more concerned with what plan b is. we will see volatility remaining elevated because i don't think we are going to get any more clarity. i think a hard brexit is less likely than it was, but we still don't know what the in game is. -- end game is. kallum: i would expand the scale on the right-hand side. be priced at ato more downside risk when it comes

to brexit. when we eventually get rid of the hard brexit risk, i would expect an uptick in sterling. basis, on a trade rated we are undervalued by about 10%. francine: peter and kallum stay with us. bloomberg will, be bringing you special coverage of the vote in u.k. parliament across all platforms. at westminster directed tomorrow. giving forward to giving him an english breakfast and then talking brexit. this is bloomberg. ♪

uma: this is "bloomberg surveillance." in japan, prosecutors have indicted the former nissan chairman three weeks after his arrest of allegedly understating his pay. he will be re-on new allegations. for now, he probably will not be released on bail. nissan is also facing charges that it underreported his compensation. credit suisse will announce a buyback program this week worth millions. it will also hike its dividends. the ceo is under pressure to raise the share price. that price dropping by about a third this year. goldman sachs is lowering the chance of a federal reserve rate hike in rate

march. the bank says that holding firm in march would likely coincide with a volatile. -- follow the period for markets. markets.le period for francine: thank you so much. and then there was one. the one is the one left. he is a general, as there have been many generals within the trump administration. mattis of the pentagon going. i think you nailed that interesting tension of, there is one. from where you said, is the president done with generals? mark: i think he probably is. at that initial part of his

presidency,, when he formed his first cabinet it was pretty clear he was looking for figures who would be seen from the outside to be strong, dependable and would get automatic respect. the ceo of exxon and then these generals. now, mattis will be the last one. he is at the pentagon, so it is a little less surprising. nevertheless, he was always for u.s. allies, the most important because he controls the pentagon and the largest military in the world. -- thiss the thre reassurance. look?ne: how does europe mark: tillerson was a particularly popular either.

he was rather invisible. he was seen as not having any real clout in the white house, which made him not very useful. by contrast,, pale has that and has clout in the white house. -- pompeo has that and has clout in the white house. he is with of the agenda and has more clout. francine: if you look at who has the most elusive john kelly gone in terms of foreign policy, is that the europeans? marc: the is an interesting point. eastern europeans are most concerned about mattis because they are very dependent on u.s. force and grateful to him for having boosted during the trump administration, u.s. spending and dependency on europe.

as for some of the larger countries like france, which have a very strong military relationships and work with the u.s. all the time, there are pretty sure that whoever is in the pentagon, that will continue and they don't feel any particular threat from russia. threat of kelly going is really the question of, who replaces him? francine: we're going to have to leave it there. i look at your story out on twitter as best i can. please stay with us in the 3:00 hour. joseph davis from vanguard. look for that. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. tom: good morning. bloomberg surveillance. francine in london, i'm tom keene in new york.

goldman sachs with a shift on fed policy. we will touch on that. right now, your first word news. uma: thank you. british lawmakers are calling on theresa may to seek a new brexit agreement with the european union. may must decide today whether to put her deal to a vote. the move could lead to a diffie. the top court has fueled the campaign. the e.u. court of justice ruling that the u.k. can unilaterally reverse the brexit process up until march 29. president trump's trade team is trying to isolate talks with china from that arrest of that while way executive. the chinese demanding the u.s. ambassador explain the request that she be exit divided from canada -- she be extradited from canada. the white house is saying trump did not know in advance that canada would arrest meng wanzhou

. comey making remarks in a closed-door session on capitol hill. a transcript was released over the weekend. president trump says the fbi was on the record for lying in testimony. in japan, the economy is shrinking more than expected, driven by the%, biggest drop in business spending in nine years. recoveromy is likely to but trade tensions and a slowdown in china are risks. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is "bloomberg." francine: thank you. is due to speak today after another weekend of protests across france.

approvaldent has seen ratings collapse while protests have put a dent in the economic growth rate -- economic growth. the finance minister said it has percentage points off the economic growth. is there anything the president can do to placate anger? >> it has been weeks of protest. this started because of a fuel tax. that has been scrapped and the government has promised we will not see any more taxes into 2019. this is the biggest you term. that is not enough. if you look at the protest we saw, behind me it is cal mer. onurday, there was tension the streets and there is a working-class anger. people in paris feel overworked.

in terms of today, we are going to see measures to bring down the cost of living. tom: you nailed it. i thought the essay in the new york times a few days ago was dead on. she went after mr. micron and his ability -- mr. macron and his inability to address the working class of france. is this the price he paid? thissed on what i heard, is something we heard time and again. looks from top to bottom and they feel he is not listening. he does not see there is life outside of paris and it is different to the life he sees from the palace. this one line i kept hearing, we are underpaid, overworked and we are seeing our livelihood improve.

what we could see from him is compromised, it made in key has been wrong, maybe he is not doing things right. tom: let me look at the crystal ball. are you going to be there next monday? are we looking at protests this weekend? ofi have to say the level violence at this weekend was less than the previous one where monuments were destroyed and it felt like there was tension. that is because paris was on lockdown. there were no tourists and police were everywhere. what i am hearing from people who supported the movement is that they are not making money and this is having repercussions on the livelihood of people who need those because we're getting into christmas. what i hear is protest will continue unless we see macron

eating humble pie today. francine: thank you. still with us, peter dixon of commerzbank and kallum pickering. that thisn i get is anger may not be diffused unless you have a populist government. kallum: that is the worry. is a little more safe because he is a president with a party. structural reforms are necessary. they will bring down unemployment but they are a slow burn. they cause insecurity and uncertainty for workers affected. the way to defuse this and finance it is fiscal stimulus, a transfer so they know they are benefiting and overtime time, the lower unemployment will

finance that spending benefit. francine: where do you see value in europe given the populists? peter: if you're talking equities, it is hard to find it. --many is the least works least worst option if you're looking for value. investors are looking at asset classes and struggling to find value. i think investors are under waiting your. they look at -- under weighting europe. tom: if we have a japan slowing dramatically. peter, if we are having a slowing economy off trade war, how does europe shift? does it have a real impact? will have a bigger impact the longer it goes on.

we are a modest slowdown at the moment. the risk is clear to the downside. they're not getting the domestic traction that would offset some of those international problems. european consumers feel under strain as we have been hearing from france. it is across the continent. consumers are being squeezed. it, within the european growth, there has got to be investment. explain to me where the confidence comes from? we did not see that with capital goods in japan. are we going to see the same dance in europe? growth ine slow europe as a result of accumulation of risks in 2018, brexit, trade wars, the higher

oil price, weakness in emerging markets. this will persist. in 20, european growth can improve. boost his this confidence and we should see more investment. it is harder for firms to take the gamble on capital investment when there is available labor supply. we may see capital investments often. francine: what does it mean for ecb policy? does it mean the changes retract? peter: what will happen is that the ecb will announce they will end the asset purchases at the end of this year. into 2019, they will be looking at ways to continue injecting into the system.

they are going to be supportive. they are going to be less aggressive with regard to cutting back. kallum: the ecb will probably end qe in september. the next rate hike in q3 of next year, is more uncertain than before. of cyclethink the end will get generally tight monetary policy. get is awe will gradual normalization if inflation expectations remain elevated and economic aid prouse. aid him.conomic -- aid improves. an important synthesis of american business, where are we into 2019? consumer, loews corporation chief executive

7:00er james tisch in the hour. this is "bloomberg." ♪

tom: good morning. bloomberg surveillance. i will be flying over tonight to be with francine to be a westminster. are we doing it vote or no vote? francine: we are. it is also four degrees celsius. wrap up. i will bring two bowties. we will see what we have tomorrow.

join us for our coverage from london. let me go to america, the bombshell, goldman sachs optimistic for the fed looking to get out front of a better economy. i'm as guilty as anyone. dge in. we think the storm will pass and this will keep officials on a normalization path. i want to make clear he did not shift to dove. goldman sachs shifted to middle ground. it was giving up on a march rate increase. with us in london, peter dixon and kallum pickering. that isthe attribute allowing for all this fed adjustment? is it gdp growth or is there more going on? there has been a sizable

acceleration in u.s. nominal gdp growth. the thing i am uncertain about is where u.s. potential growth is. for the past two years, we have had factors, the fiscal stimulus, and the supply-side reform. we will not know if the u.s. fed monetary policy is tight or loose until we get to the other side of the stimulus. the uncertainty around employment growth creates a problem. while the is no inflation problem, the fed will try to stay dovish. we will get a hike in december, maybe two next year and they will is off pending data. what is so important about this is the gloom crew is going to say the fed is catching up with other central banks in their delay in raising rates. do you see that? peter: i think that is unfair.

the federal reserve is ahead of other banks. assuming it goes in december, that will be the ninth hike of the cycle. the fed thinks rates are close to neutral and given the length cycle, haveeconomic to be concerned about how much further it has to run. the fed is right to be circumspect heard whether it goes -- circumspect. i think i agree, two rate hikes next year. francine: let's talk about the timing. peter: i would do march or june. overm: i would get things as quickly as possible but have a dovish communication. the last thing we want to say is we want to say is we're going to hang off. if data is good, that induces unnecessary volatile effect.

francine: what is the one thing we should be watching out for? peter: in the u.s.? francine: yes. peter: the trade war and the wider effects on the economy. the u.s. has been able to shrug that off. it is in a better position than china. businesses are starting to think this is beginning to hurt and that starts to knock on and we see softening in the labor market. you know the story. is highu.s. confidence across almost all measures, it is in the top 10 percentile. if confidence were to soften, i would worry. for now, you have a healthy upswing with no signs of excess and providing we do not have a political accident, that can last. tom: caleb pickering and peter dixon. -- caleb pickering -- kallum

pickering and peter dixon. marc chandler will join us. a good time to speak to mr. chandler about the quiet of yen. pound-sterling and the threat of that brexit vote on tuesday evening. marc chandler in the 7:00 hour, bloomberg radio worldwide. this is "bloomberg." ♪

uma: this is bloomberg surveillance. let us get they business flash. underscoring his confidence in judging the demand for shares of its japanese telecom unit. the company is setting its final price at its original target despite follow-up from a recent outage. shares of the softbank unit begin trading next week. the world's largest leading company plans to cut 100,000 companies. -- 100,000 jobs. it is eyeing 13 countries in emerging markets. the company includes catering and security. shares of iss are down 19% this

year. uber joining lift filing for an ipo. , submitting its confidential filing last week. uber's ipo could be one of the five biggest of all time. it could being uber worth as much as 120 million on the public market. back to you. francine: thank you. we are breaking news out of the u.k. 1.0202nd touching eight against the dollar, a record low. that meeting may start in the next 30 minutes. we do not know if this is to delay the vote. tom joins me at westminster tomorrow. will the vote go ahead?

it is going briefed ahead whether theresa may pulls any delays at the last minute, we need to wait and see. 202, a lowtouching 1.7 on the session. we will have more on brexit throughout the day. tokyo prosecutors have rearrested carlos ghosn on suspicion of understating his remuneration. nissan has been indicted for preaching financial instruments by underreporting his compensation by one $4 million. $44 million dollars. what does this mean for carlos ghosn and renault? >> reanult is facing a tough choice.

it has interim leadership. they have an interim ceo and there is a chairman and the company is working business as usual. carlos ghosn is unlikely to get out of jail until the next few weeks. important issue this week will be the release of the first results of an internal audit that they are doing about ghosn 's pay package and that might help precipitate a decision about new leadership. whether: do we know this is something to do with is there a case of wrongdoing? it is hard to tell. unlikely.

the impression among some people in france is that there is some kind of coup against carlos aren because the charges ghosnning the fact that underreported income and did not mention the issues of company money or houses. and is a coup against him renault is demanding evidence from nissan. tom: unfair question. long is he going to stay in jail? do we have any idea? officially, we do not know. what we know is it is likely that the next trial will be held in about 50 days.

he has been rearrested for underreporting income. whereld be another period he is in custody again. we could expect him out of jail before christmas. tom: thank you so much. we have so much to talk about, not only europe, the goldman sachs shift on fed policy. what we need to do is take a monday victory lap. there is no one better to do that with him low interest rates think gary shilling, love him, hate him, we do that next. ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪

mom. ♪ tom: this morning, markets struggle as goldman sachs shifts. the dots will move toward fewer

rate hikes. gary shilling. this monday, brexit continued protests in paris, an outraged beijing in search of bail for a jailed executive in bank uber. , individual two, has burned every bridge in washington. individual three, president trump cannot find a new chief of staff. live from our world headquarters in new york, i'm tom keene in new york. this news out of business insider up prime minister may with another tweak. is a call what she is doing? francine: what we will know is she will meet with ministers. what we think is she is meeting with him now and hold a conference call with other ministers in 30 minutes.

this could be a number of things. this could be the prime minister asking her ministers to rally the troops. there is 48 hours before that bone. it could be a prime minister discussing to delay the vote. we could not jump to conclusions. she has called a conference call, not unusual. we need to know what she asks of her cabinet. tom: sterling moving on that business insider report. we will see. in the early morning, here is a. -- here is uma. france is investigating possible impose behind yellow bass protest. there have been reports that social media accounts linked to moscow have targeted the movement. russian linked sites have pushed questions of a mutiny amongst french police and of officers supporting protests.

president trump is looking for another candidate to succeed john kelly. the front runner for the job, nick ayers, says he is leaving. ayers had months of conversations with the president about the position, leaving many in the media to assume he would take kelly's place. elon musk does not have anything good to say about the securities and exchange commission, the agency he reached an agreement with in october. musk speaking to 60 minutes. >> i do not respect the sec. >> you are abiding by the settlement? >> because i respect the justice system. uma: musk has not had any tweets censored since he signed off on the deal. his tweets about taking the company private caused months of chaos. the sec tried to improve the governance of tesla's board which had been criticized for being too close to musk. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

this is "bloomberg." tom: thank you. equities, bonds, currencies, commodities, futures at negative eight. dow futures up. rebound off the carnage of friday but curve flattening is what we have seen. vix, it was 24 early. bond, 3.15% and sterling 126,92. weaker sterling. i put deutsche bank in there to keep the continent happy. thee pound -- francine: pound falling as theresa may is meeting her cabinet. the euro strengthening, the arear drifting and traders

fretting over the outlook for global growth and escalating tensions between washington and beijing. tom: we will go to the bloomberg here. it is sterling intraday. japan, this is pound-sterling. thank you. a breaking this with news out of england, the move down on sterling. i'm looking at is a simple pound overnight volatility spike. it is interesting to see what that does over the next couple of days if they vote goes through and he gets voted down by a majority -- and it gets voted down by a majority. right now, in washington, kevin cirilli. and iraordinary moment want to go to why is it so hard to select a chief of staff? come on.

there has been some other claim of leon panetta. and why is important this so hard for the president? kevin: it is the manager of the white house. the former national committee who was the first chief of staff. we remember how that was. you had john kelly come in to rein in order. whereu have a situation an was supposed to be next in line. now he says he is going to help on reelection. another name is mick mulvaney. , that new director was confirmed last week. he is someone who a lot of folks are buzzing about this morning. tom: i thought it was

extraordinary. i remember standing as alan simpson spoke at the eulogy for president bush. here is read stevens in the new york times, and essay off of senator simpson's comments. until the end of his presidency, he could nevered get and an appetite for destruction he could never achieve. it is the same with trump. wit.on churchill was a nixon and jimmy carter were not. it comes down to a lightness of touch. that makes it difficult for a chief of staff where humor is front and center, isn't it? on is what you're hitting the style and temperament of president trump which has been documented. is i haveld add noticed if you look at how general kelly has to parted the administration, -- has departed

the administration, it appears he has done so with resignation. it was more dignified than what we saw with reince priebus who was fired by tweet. francine: what does it mean for foreign policy, depending on who gets picked, how much does the chief of staff have power to change course on foreign policy? a significant contribution, francine. to be candid, i think general kelly's departure is expected. the shelf life of a chief of staff is about one and a half years to two years. the chief ofthing staff had forecasted. i'm not sure anyone was surprised nor were people surprised by nikki haley, auert being named

as successor. this type of transition halfway through the first term regardless of his party is to be expected. much, our you so chief washington correspondent. it has been extraordinary. said rates will be tempered but there is no one who called for a low rate regime like gary shilling. nowadays, gary shilling and company has written a newsletter and an important research note that has been founded on disinflation and lower yields. gary joins us this morning. goldman sachs capitulating from four rate increases. they do not go more cautious

like you. they bring it in. that has been the theme, isn't it? gary: i think it has. in december,ed off 2015 raising rates and they were into forward guidance. now, they are deciding they do not know what is out there. it is dated dependent and they are backing away. not only are they tempering rate increases with what is happening. i think we will get into a recession. forward guidance has not done much good. do respond to people that say they have to raise rates to give them room to lower rates? do you buy that? gary: they do not want to go below zero. the ecbe seen that in and the bank of japan and in

japan, negative raising courage to people -- negative rates encouraged people to save more. bojfed said let the ecb and experiment with that. is they have been concerned about low rates with yield. people rushed into leveraged and thed hedge funds fed does not like speculation. francine: do you worry about a global slowdown in 2019? gary: i think so. of 13 prerecession indicators. there is nothing definitive now but when you look at things like the fed tightening, the yield curve close to inverting. commodity prices decline,

emerging market troubles mount, the red sox win the world series, they are all here. i do not know who won the cricket match. i love cricket. once you come back, we will talk cricket. tom: manchester city was a disappointment this weekend. francine: you follow the premier league. i am impressed. gary shilling stays with us. coming up, we talk about the fed at 10:00 in new york. this is "bloomberg." ♪

all roads remaining open as we await the prime minister to start talking on a conference call with her ministers. the press was talking about she could postpone that vote. we happen briefed the vote is tomorrownned afternoon, evening actually. theresa may will talk to her ministers in about 15 minutes from now. we do not know what the message will be. joining us now is neil shearing of capital economics. and gary shilling. thank you neil, for joining us.

does brexit have 125 ways in which it could go. neil: we should be so lucky. they had pages of ways in which it could ample. they have seven ways in which it could go. nobody knows. it would be foolish to come up with a view either way. would be amazing to think the government would issue a vote where they might lose. francine: what is priced in? difficult to know what is priced in. my sense is, no vote, we are down to 125. no deal, 120 or below. there is less reason to think the pound by fall sharply now than after the vote in 2016 because the pound has weakened a long way.

tom: let me show, this is how we make regressions. this is sterling back to 2014. i'm going to take it from a moving average study. this is the way you do it. massivery, that is a wealth distraction for the united kingdom from 155 down to 125 on their pound sterling. how long can that go on? neil: you look at the performance of the u.k. economy with this puzzle about productivity growth, why it has been so weak? a weaker pounde when you are running a structural current account deficit. you cannot devalue your way thisgh to prosperity and

is the distraction of wealth in global purchasing power. what i have seen in history is the parties change hands. i love what the guardian said this week, corbyn by christmas. where is the labour party? neil: may be power does change hands. rty isnservative pa the greatest anywhere in the world. the opposition is missing in action. there is as political calamity on every house in the u.k. both in the government. the labour party is missing in action. we are getting to the stage now where there is a sense in which it does not matter what the decision is so much as can we get a decision so businesses can plan. francine: what is your base case

scenario? let us assume the vote goes ahead. neil: she loses. francine: by less than 100? than 100.ink by less anything over 100, there could be a leadership challenge. i suspect the first both they lose. that says the stage for a back-and-forth between london and brussels. is that once people's backs are against the wall, they will think it through. if not, it will be no deal. tom: thank you so much. this is developing this morning with prime minister may. sterling reacting to that as well. we will get back to gary shilling, much to talk about on the economy and fiscal stimulus.

on foreign exchange, on bloomberg radio this morning, the chandler will look at dynamics of yen-euro and against the dollar call for 2019. this is "bloomberg." ♪

francine: we are getting breaking news out of the u.k.

this is the theresa may spokesperson speaking to bloomberg. we have confirmation the vote will go ahead tuesday. there was speculation theresa may may decide she wants to delay the bow. for the moment, it is going ahead. confidentminister is she will win the vote according to a spokesperson. what i think is more relevant is that the prime minister is looking at amendments given parliament -- giving parliament a say on backstop. the only way she could get the vote through is if she goes to the house of commons, you guys will have a final say on this. this is not the vote. you get a vote with conditions. tom: i will take your point and i agree that is the most important. what i see is the prime minister spoke to merkel and a host of

other officials over the weekend. let us bring in neil shearing. what did they say to the prime minister? neil: who knows what they said. this backstop thing is critical. this is the thing that the brexiteer wing of the tory party is up in arms over. this could be locked in purgatory with no way out and less sides agree. -- unless both sides agree. if she can get some kind of deal over the backstop, it would be a big win for her. whether it is enough to get it through parliament, let's see. at this stage of the game, i do not see why they would give her a major win. would parliament vote on a deal if it gives parliament a deal on entering the backstop?

neil: it depends on language. think.ossible, i might buy bank some people in the party over. let us see what is in the detail. earlier, these are the types of things that would be critical. francine: if she gets it through, does the pound rally? neil: i think pound does rally. how far, who knows? we will get to 130 if this goes through. tom: thank you and we will continue to monitor headlines. gary shilling with us as well. this is important if you have

younger girls. this is the interview of the day, not jerry showing, not weiss.-, emily we will talk to emily about boyb row. you need one for every room of the house as we have. glossier, their chief executive officer. this is bloomberg. ♪

place, the xfinity xfi gateway. and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything.

leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. francine: breaking news out of the u.k. but fornfusing for us viewers and listeners. we understand that the prime

minister is said to pull the vote on her deal. in the last couple of minutes, what we knew is that her spokesperson is saying the deal is going ahead. we had a minister briefing us. the vote on the deal is going ahead until it stops. which has been speculated in the media that the prime minister may pull the vote on her deal. we have cable, not much movement. i am looking at pound overnight volatility. this is in the last day, moving sideways. there is a lot priced in in the markets that she may not get the deal through if she delays it. tom: it is starting to spread off this headline. what i would emphasize is the phrase is said. this is reporting from bloomberg.

the phrase is just that, there is a vagueness to it. the headline out confirming she spoke to mr. juncker. this is a movable feast and we are at sterling as one measure of the veracity of the headlines. 127.07,w, off my chart, sterling with a bounce. notnt to be careful about the quality of these but they are opaque right now, aren't they? francine: yes. we know that the prime minister talking to the president of the commission, jean-claude juncker. theresa may is trying to seek a last-minute change on her deal to push it through the parliament. decide byy had to today whether she was pressing ahead with that vote.

she is speaking to her cabinet now. we are trying to put everything together. the boldsperson saying is going ahead and our sources saying the prime minister may delay the deal. tom: this is according to a person familiar with the situation. is giving us this news now from bloomberg. officeme minister's insisted it was going ahead as recently as 11:20 london time monday. the prospect of revolt, the prime minister to think again. there is the reporting from tim ross now. francine: or, the prime minister makes a guess that if she talks with the e.u., she gets concessions which means it would be easier to go to parliament. let us get to the politics

reporter following this. what do we know? ifshe delaying the bochy and she does, what are the reasons -- the vote and if she does, what are the reasons? >> we have heard she is delaying. she has been talking to her counterparts in the e.u. there is a summit on thursday. a fear if shead waited until thursday she might be able to get concessions on the backstop from them and she could take the vote to parliament with more chance of winning. francine: how much do we know about what the you could concede on question mark the sticking point is this backstop. there is ais deal, risk that the u.k. could end up getting stock in the -- getting

itck in the backstop where has to abide by rules but has no say on them and has to make payments and if they could get assurances into the text to say that will not happen, that might satisfy some of the parliamentarians who would feel they are able to vote for this. tom: will this change in the next minute, in the next three hours? true, can she is come back from delaying the vote? jess: it is hard to say because we have had deadlock and that feels like things are moving and changing and decisions are being made. we have this report, sources telling us the vote is delayed. there is an option for her to

change her mind. until she makes a statement to the house, what would happen is during the debate, there would be five days of debate, they would defer the vote at the end of the debate. tom: and the sterling right now, fractional lift, a strengthening off this headline and the summary from tim ross. concern, there is chatter, why are we not seeing a bigger market move? priced in because people and markets do not know where they are. u.k. publication saying this would have been pulled. if you are a participant, you hedge your bets with taking a position on short sterling. i do not know if that makes it

more likely you get a softer brexit. if she pulls it, it may mean the prime minister think she can get a better deal. if she delays it, does it mean she is more confident about getting it through with concessions? neil: it depends on whether she manages to get concessions and what they plan looks like going forward -- what the plan looks like going forward. if there is no hope of getting this through, we have got to pull the vote. is no game plan afterwards, all bets are off and we head towards a no deal brexit. , theere is a plan europeans canceled a meeting, there is progress on the backstop, that gives it a point. tom: let me interrupt. this is out moments ago.

e.u.ommission says the will not renegotiate brexit. i am going to let you and neil translate that. gary and i are befuddled. the commission says it will not renegotiate. francine: this is simple. this is a couple divorcing. you get a lawyer and they hammer out a deal which is what we have. theresa may is struggling to get this through parliament. she could lose big. the thinking is, maybe i get something else out of this agreement. maybe i get the kids, the house, so parliament says yes. the e.u. saying we are not renegotiating. , can theyeds to be help in any way? neil: welcome to the world of euro speak.

the analogy is a good one. it is a couple divorcing but in which one partner has been bad to the other half and the other half holds all the cards. the e.u. holds all the cards and it knows it. there is not much that prime minister may can hold this point. -- hold at this point. it could mean the e.u. will not allow us to renegotiate, what about the fiscal statement. what about the referendum? it is difficult to know what that means. francine: there is something that caught my attention which was a headline saying theresa may could put the backstop vote to parliament. would that make things easier? jess: should i think this is what she has talked about -- i think this is what she has

talked about, giving parliament a veto over the backstop. that would make mps feel more in control and this risk they could get stuck in this limbo of backstop would be less likely. tom: we make jokes about the divorce angle of this which i do not buy for a minute. i can think about who gets a beach house. this is not a divorce. the e.u., you are just going to wait. what is the incentive for the union to act? for the e.u., this is a financial issue not just as much for the u.k. , as we saw from reports last month, a no deal brexit could have a devastating effect on the u.k. economy but it would have an effect on the e.u. never been divorce,

it is a good analogy. they are trying to get through this protests -- process but there are a lot of feelings between this countries that have had relations for years and they need to try to extract themselves from the e.u. without upsetting to many countries. here is another headline across the bloomberg. we thank our team. you commission says e.u. prepared for all brexit scenarios. what a bologna headline. what are all scenarios? it means everything from financialrough to disagreement coming through parliament. there is one thing we can agree on which is both sides are not

prepared for every outcome of this. there is an infinite number of outcomes. you talk about the incentive for the e.u. the incentive is on our side. the disaster for the you would be a it is left to the last minute and we see dislocation. that would have an impact on the european economy. francine: this is a concern, the and you make the u.k. capitulate. if you delay it too much, the u.k. could crash out and that is no good for anyone. you could see financial turmoil. this is the latest we have, the prime minister has called off this vote in parliament on whether to approve her deal or not. , this headline that

theresa may's office insisted it was going ahead as recently as 11:20 a.m. if the vote is just delayed by three days, does it make a difference to theresa may? sheer calculation that could go to brussels and get something so she has a better chance of getting this past? jess: there is a council meeting on thursday and if she could get some concession from them, even if cosmetic, but it gives assurances to brexiteers, it could make a difference. tom: there are currencies. there is euro-sterling and cable. this is sterling-dollar right now. gary shilling with us. you know currency speaks.

there has got to be a point where a weak sterling makes everybody set up. whatever the debate, there is a point where currency matters. when peopleters decide it has gone off the cliff and you get a ganging up and the question is, who is next? the dollar is a safe haven and that is what we are seeing. concerns of their, dollar benefits. tom: come over here to the long-term brexit chart. bring it up. here is brexit, down we go, lows of 120. this is the rally. we are rolling over. do you have a level on sterling where this becomes serious and overwhelms the political debate?

neil: as far as the bank of england's concern, it will work through any currency weakness and spike in inflation. in 2015, consumers about the squeeze. we saw weak consumer spending there. 130, 125, thehat pound is cheap. it is difficult to see it getting weaker. you were saying that if the prime minister, if the gets putter head either tomorrow night or at a later date, could she get those 80 people onside as long as the number is smaller than 100? jess: hard to speculate on the numbers. what we can be sure of is that theresa may's team will be doing

will knowatics, they who is planning to vote for and who is not and they will have made the calculation if they can get the concession through, this many would vote for the deal. boris johnson was saying yesterday theresa may should renegotiate and that is what he would do. if she was able to get that concession, he is very powerful and influential and that could sway enough to get the vote through. tom: i want to review this again. prime minister may is looking e.u. you response -- response. review why europe has to worry about this. is it just as simple as that? is it trade dynamics that make the e.u. involved? neil: there are but there are

other things. the first is that the fx on europe are asymmetric. they would be exposed. there is the irish question, the trade question, the risk of financial market dislocation, what happens to the credit markets, what impact does that have? that sends off volatility throughout the eurozone. finally, is the political dynamic playing out. this could have been less of a crisis. francine: let me jump in. we are getting breaking news. we can confirm that the indian central bank governor has

stepped down or will. this has significance when it comes to indian economics. india, theyed about have deal with inflation, concern about the emerging markets anxiousness and what that means for india in 2019. the fact that the indian economy could be rattled by the governor stepping down is something we need to keep an i on. tom: one more thought on this. formerly with the international monetary fund to had to fill large shoes -- who had to fill large shoes, this is , lot of politics with mr. modi hydrocarbons, the depreciating rupee had been a struggle. we will look to our india team in a bit. i am looking at sterling

breaking up. why don't you reset what is going on in the u k and we see this with deteriorating u.s. futures. there is the plunge in futures. levels a drop below 127 for pound-sterling. francine: we have two main stories, brexit, our sources telling brexit -- telling bloomberg theresa may may postpone the deal. the other piece of news is the rbi and the fact that the governor is stepping down. if you go to the brexit headlines, we are trying to figure out what that means, whether her political calculation is she gets a e.u.,,sion from the whether she will go to that summit to renegotiate.

let me look at a market perspective which is euro-pound. this chart is amazing because you can see it range bound. cable butatility on euro-pound has not broken out. what will it take? neil: this is a good question. it comes back to what we were saying. the dollar is a safe haven. thee are downsides in eurozone. it is not surprising that the pound-euro is range bound and the move has come against the dollar. tom: what will happen in parliament today? there is a vote tomorrow night. let us assume that happens. what happens today? lords, i the house of mean the house of commons.

jess: what is going to be happening today is what has been happening for the last few days, which is they have five days of debating and a vote. debates continue today and tomorrow. they continue today, i presume. there will not be a vote. the vote will be deferred. the house of commons is an institution and it has processes. these will be in place and continue. i do not think there will be the chaos of it not happening. tom: are we in better condition now then in your youth and have we got more floating rates? the fiction of the paris accord was how many fixed rates there were.

is prime minister may advantaged because there are things ?uffeting off each other late you look back at the 1990's when you had fixed rates in the emerging markets and it is a no lose situation for speculators. they pile on. there is no way it can go against them. fixed rates are disastrous when you get any kind of economic weakness because you invite speculation. with floating rates, you have a mechanism to adjust. it is an adjustment and it is not a step up the cliff. it is a slide, if you will. go back toet's brexit and the fact the vote may be postponed. what does this mean for the economy? let us say there is a general

election, which we cannot rule out, does it delayed the pain? neil: there is something to that. ,ne point to think about that howbig one, i talked about we have the squeeze on consumer spending, that has faded. the pain is coming through the uncertainty and the effect on business investment. that has not some of the gdp. if you delay the vote, you are not sure what the post-brexit looks like. you prolong the uncertainty and the loss of investment bills. that is the channel through which you start to get pain. whatever happens is going to be a period of dislocation in the economy. francine: let us go to brussels.

e.u.ere anything that the and jean-claude juncker could give the prime minister? could they make the deal easier to get through? european union and its leaders have been saying all along that there has been an agreement reached last month in brussels and this is where we are and today, we have journalists asking officials, is there room for negotiations? is there leeway? they got the same answer. no renegotiation and this is the only deal possible, on the table. tom: what would we expect to listen for from mr. juncker up

to that evening vote in london? what will you be watching for? interesting thing is whether there will be any offer from the european side. as i said, there has not been any so far. that will be the most interesting thing. at this point, it is unlikely because we have had repeated remarks from leaders this is the only thing possible. tom: thank you so much. that headline just out. ledsom has all her meetings today canceled. werecine: if the vote to be delayed, she would be the person to announce it. our own sources telling us this and we have market reaction, pounds lighting -- pound

sliding. neil shearing there with capital economics. also, gary shilling. and just who has been following this closely. i do not know whether you are flying to london. i am sure you are. tom: got to go. francine: if she delays the vote, it may be she has more of an inclination the e.u. will give her something in return. it is crunch time for what markets do and for her legacy if she is going to stay on or not. tom: you and i have dinner reservations made. that is the reason i am coming. we are looking forward to a week in london, an important week not only for london but for the continent, all of it pulling back into the united states. a busy week and some of that with the markets.

pullback onsachs the number of rate increases. bring up the chart. this is intraday sterling, which speaks volumes. gary, thank you for joining us today. you watch currency, i watch dollar-yen. london and their historic debate. crisis.constitutional tomorrow, we join you from westminster. this is "bloomberg." ♪

>> brexit breakdown, the u.k.

prime minister theresa may is set to pull a vote on the deal to avoid a huge debate. equity selloff, blame the fake news, jpmorgan says that the biased media projects are responsible for the consistent selloff and that hedge funds have more to sell. china summons the u.s. ambassador, the foreign minister summoned ambassador to china to protest the arrest of the huawei cfo. welcome to "bloomberg daybreak --," i'm alix steel alongside carol massar. david is off again. but you argue with me, good to see you. anotherarkets here, lower open and there is geopolitical political turmoil over in the u.k.. that will be key going into the open. to that point, cable rates are down by 5/10 of 1% around the