flexible. -- we are flexible. warns on inflation with cpi on deck. nupathe forward. -- nor lindsey graham path forward. federal workers missed their first paycheck. jobs, lowerants cut price forecasts and pulp land because of market volatility just days before earnings season kicks off. -- pull plans because of market volatility just days before earnings season kicks off. david: the pound went up and the pound went down. alix: the currency is so

sensitive, it feels like an emerging market still. we get this headline, totally not confirmed. holding onto its rally, then taking a dip lower. time, if you same read that piece, they listed the things they have to get done, they have a lot of bills they have to pass to get out of the european union. it is a mess. alix: well said. a bit of a mushy day in the market. the real action taking place in the bond market. the currency market is interesting as well. the worst week for the dollar since last january. buying across the board in the bond market. europe is the outperform or, particularly italy. -- europe is the outperform er, particularly italy.

crude holding onto that gain. for brent, the longest -- brent, the longest rally ever. the word "hoodwinked" anymore? david: isn't it their job not to be hoodwinked? time for the morning brief. at 8:00 eastern time, we will get cpi data. launch.other spacex completing an upgrade to support the overall internet of things. today, general motors holds its investor day here in new york. this is in the wake of the announcement yesterday of big cutbacks at jaguar land rover. they will tell us how they see 2019 when a lot of people are

nervous about autos now globally. they make their big announcement about what they see in 2019. alix: what is the number one thing you want to get out of that? david: what investors are looking forward to. since last year, they've taken , moved there president over -- their president over, they've made a lot of changes, what's left? alix: and ford? david: cutting back in europe. we are joined by gina martin bostick. romaine we are in the 21st day of the shutdown. lindsey graham rather frustrated, saying i think we are stuck, i don't see a way forward, i've never been more depressed about moving forward than i am right now.

i'm not sure he sees a path forward. he does capture the sentiment around washington right now. the sides don't seem to find any common ground, the president is clear about what he wants. the democrats are clear about what they want. maybe the way out of this will be some sort of emergency declaration. in the meantime, we will be dealing with this for the next couple of weeks. alix: the conversation has changed from it doesn't matter to the stock market to maybe it does. happen,pections can't m&a is not being approved. on and theme goes shutdown goes for longer and awayr, it starts to take at greater portions of the economy. the stock market still doesn't

really care. it is this peripheral issue that we have to start to get worried about as it weighs a bit longer. we start to think about things like what happens to wages, the sentiment started here he ate -- does sentiment start to deteriorate, we'll those government contracts get renewed -- will those government contracts get renewed? david: why can't the senate republicans bail this thing out? alix: next up, let's talk data dependency. this is jay powell's message yesterday. >> we have the ability to be patient and watch patiently and carefully. we can be patient and flexible and see what does evolve. we can be patient and watch and see what goes along. you should anticipate that we

will be patient and watching and waiting and seeing. [laughter] alix: he's even making fun of himself. romaine: a lot of patience and flex ability. -- flexibility. that is not what the market wants. at least now he's being consistent about what he saying. david: how do you square patients with data dependency? the data are not patient? gina: what i thought was so interesting about his comments yesterday, the minute he started to mention the balance sheet, markets started to react. we saw this in december and again earlier this month. as much as they are going to be patient and flexible, they need to be patient and flexible with respect to the balance sheet. alix: what is so offensive about

the autopilot nature of the balance sheet? of it has to do with the issue that the market does use the balance sheet as a major policy tool. in a shift in how the fed uses that balance sheet, that's what the market is reacting to. that is the perception right now in the market. you saw the's what knee-jerk reaction in stocks yesterday. all those company clouds cuttingg -- blackrock 3% of its global workforce. macy's cut its full-year sales forecast. american airlines cut profit outlook and united technologies of chubbff the sale fire safety. we normally get a lot

of revisions and outlooks at this time of year. the companies that really didn't target saying they weren't ready to give a forecast for the 2019 period. that's a bit more concerning. you are seeing more tangible impact from trade and the issues with china. alix: can trade be a tailwind? gina: it could be, especially now that valuations have reset. they implied that we were expecting rosie outlooks, all great news into the future. the market anticipates a much weaker earnings trend. you need to see reaction follow that up. we saw intense reactions to negative earnings. not just an average price decline, but three or four

times your average. reactnt to see stocks positively or less negatively. andets will start to climb ignore this bad news going forward. they are expected to trough by the third quarter. this is a different scenario we in 2018.were in you have to feel a bit more confident in that trough and things will start to look better in 2020 to really get the market moving. it is a matter of squaring up inexpensive valuations with the likely deterioration and data in the near-term. romaine bostick and gina martin adams joining me later. you can browse the features, powell'sout -- more on

pledge for patients. patience. this is bloomberg. ♪

>> this is "bloomberg daybreak." inbevser brewer ab considering an ipo of its asian operations, looking for ways to unlock value after a string of acquisitions left billions of that -- left it with billions of debt. deutsche bank at the forefront when wall street began losing jobs to cheaper cities around the u.s. now, the german lender is taking some of those jobs out of the country, off shoring 50

accounting positions from jacksonville to mumbai. this is part of a larger shift that will see jobs move to india this year. -- average percentage increases will be in the single digits. accounts for more than a third of jp morgan's revenue. powell preaches patience. >> we have the ability to be patient and watch patiently and carefully as we see the economy evolve. we can be patient and flexible and wait to see what evolves. it gives us the opportunity to be patient and watch and see what does evolve. anticipating that we will be patient and watching. [laughter] alix: joining us from baltimore, bastion page -- sebastian page.

bondsa cell the dollar by story now? >> i counted seven mentions of being patient. it matters to the market. the fed will step back if they need to. thing into the selloff underweight stocks relative to bonds. at this point, with valuations pulling back, we are marching back to neutral. alix: we took away the patien ce, flexible -- he also warned on inflation. >> inflation has surprised to the downside. it's not yet clear that at 2% on as sustainable basis. alix: what does that mean for rate hikes in 2020?

>> at this point, the market expectation is for no hikes in 2019, perhaps a cut in 2020. inflation is very important. that is the factor that would force the fed's hand. patient would be more difficult. the fed being patient would be more difficult with inflation. unemployment, we are seeing wage pressures. we poured gasoline on all of this and we have breakevens this morning on the 10 year at 1.8%. they are long-term secular forces working against inflation.

it's also a bit of a puzzle. right now, it is not a key worry. we have inflation sensitive stocks in our portfolio and we have under weighted them. david: markets really need this patient's -- this patience. i'm wondering whether we still need that kind of accommodative policy. we have finally gotten into positive real rates after accounting for since 2008. what does it say about the economy that we still need the fed to hold our hand? >> the market anticipates the economy -- the data dependency is important. if you have decent growth, you have room to raise rates. we have lowered rates outside of the u.s. still at zero basically, close to zero on a real basis in the u.s. we bumped 20 trillion through kiwi into the global market -- qe into the global market. we've fired a lot of bullets in terms of monetary response.

related. things are think of the market as anticipating the economy. one of the things the market seemed to react to yesterday was the suggestion that we would come down off the size of the balance sheet. he did say it would be higher than when he started out. why are the markets surprised by that? >> we all know this and it's all a question of the level versus the change. if you care about the level of liquidity, there's still a lot of liquidity in the markets. it's not just about the fed. it's about qe globally and central banks globally. rates are quite low from a historical perspective. if you just care about the level of things, you should be relatively confident. the issue is the change and the

rate of change in the path going forward. markets -- gets me gets markets more nervous. which will become more important as we work through qt. it's those unanticipated changes that create market volatility. alix: what i found interesting over this week, the auctions did not go particularly well. meanwhile, europe is inundated with supply, particularly in italy. what does that tell you? year isately, the 10 firmly below 3% for the time being. deficits will matter at some point. there's a lot of sentiment involved. selloff,ad a big people look for safety and there aren't many places where we get safety in the markets except for u.s. treasuries.

that's always a factor driving in. that's what happens to the auctions and generally what happens to the rates. people get nervous, they will buy treasuries. page will beian staying with us. you can watch the full conversation with jerome powell on the david rubenstein show wednesday in new york at 9:00 p.m. and thursday at 7:00 p.m. in london and hong kong. coming up, grim company outlooks. global risk spread. what is the connection? this is bloomberg. ♪

david: a wide range of prominent companies were hit by market uncertainty. it seemed like a global gloom spread across the industry. bostick and sebastian

still with us. --x: everything you don't what did you miss? david: sebastian, i hope you followed all that. it did seem like we had company up the company, whether it was macy's or blackrock or american airlines, is this all just a coincidence or reflecting something more troubling overall? look, we look at the key factors that have given us 20 plus percent earnings growth over the past 12 months. we look forward and expect 7-9% and ask are these key factors going to prevail going forward. we've had relatively low dollar, which helps big exporters. we've had recovery energy

prices, a big contribution to that past recent earnings growth. stimulus,he fiscal which is estimated at about 7% of that 20% realized earnings growth over the last 12 months. ask,u look forward, you which of these factors will continue to prevail? you have to start stripping away those factors. prices,t lower energy lower oil prices from a longer-term perspective. on the upside, perhaps you can expect a weaker dollar. all these big factors really matter and you have to watch the earnings come out. alix: drill down certain sectors. we've gotten warnings from most all sectors. everye: pretty much earnings estimate, analyst earnings estimate has come down with the exception of materials.

just going back to where we were at the beginning of december, the biggest one is obviously energy. we were expecting 20% earnings growth six months ago. it 1.5% decline in other areas like consumer discretionary. in a bit slower than what they expected. you are seeing similar declines on the earnings side. the only thing holding up his financials for some reason. david: this is what i don't quite understand. we have gangbusters employment numbers out last friday, including on the wage side. shouldn't that help the demand side of the equation? sebastian: it should help and the consumer is a big part of it. you also get the dividend from lower oil prices. we are close to the consensus that we don't expect a recession

in 2019. there's a probability of a recession but it's not a recessional scenario. we look at stocks becoming more attractive because nothing has changed from a fundamental basis from before versus after the selloff except a lot more negative sentiment and volatility. alix: earnings revisions started to come down, margin revisions started to come down. wasine: the whole narrative the economy might be slowing, everyone gets into more consumer spending. you get this report out of kohl's and macy's and target, their outlook was axed. of factor in apple, a lot those pillars of consumer spending are showing weakness. alix: what will we learn monday?

romaine: the banks are still struggling with slower loan growth. you will see a huge drop-off and trading revenue. alix: sounds great. romaine bostick, thank you very much. sebastian page will be sticking with us. coming up, government shutdown day 21. analysts forecast the shutdown could weaken quarterly growth by -- if it drags on. acouple can't get married at national park it is shutdown. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. alix: this is "bloomberg daybreak." happy friday, everybody. day 21 of the government shutdown. futures a little softer. s&p off by five.

this is the best seven-day start to a year for equities since 2006. some of the small cap gains have been stupendous, really wild swings in the last seven days. david: the worst december since 1931. alix: real buying into short covering. part of that is the currency story. the cable rate shooting higher here as we wound up thinking maybe brexit would be delayed past march 29. if we can get the cable rate up, you can see it a bit tighter there. oil, brent, best rally we've seen ever. seeing a monster rally. now saying let's calm down a bit here. we have the first word

news. >> u.s. troops have begun pulling out of syria. the process ofd the delivered withdrawal -- deliberate withdrawal. president trump said he was bringing them home because islamic state has been defeated. standard says that much delayed immigration bill has not even been published yet. brexit bill is widely expected to be defeated next week in parliament. the trump administration looking at ways to use money from a disaster relief bill to help build a wall on the mexican border. president trump would potentially use the money after declaring a national emergency. he informed congress he would do that unless they reach a deal on paying for the wall.

the government shutdown is now in its 21st day. there are no negotiations scheduled. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vivienne rotondo. david: jay powell told the economic court in washington that although a short government shutdown shouldn't affect the economy, a longer shutdown could be very different. >> we have been extended shutdown, that would show up in the data pretty clearly. david: kevin is the chairman of the council of economic advisers. michael of jp morgan in his latest note took that .1% and said it would not be coming back in the second quarter. welcome mike mckee and still

with us as sebastian page of t. rowe price. do we expect it to show up? is it a timing issue? michael: a little bit of both. it's hard to say that it's showing up yet. it may. we got a $20 trillion economy. .1% is very small. compare this to the second shutdown in 1995 -- it was 21 days. cost $1.4gether billion. i adjusted those numbers for inflation, would be $2.3 billion if it happened today. there were more workers off the payroll. the second one was longer but fewer workers.

that is the direct payroll costs. you have to add in the ripple effects through the economy, contractors who don't get paid, lost revenue from the national parks. alix steel not buying a dress to go to a wedding at a national park. a lot of that is made up despite what mike is saying. this is where the 1995-9096 gdp the 1995-1996-- gdp was hit a bit. that huge 1996, snowstorm hit the east coast, 800,000 jobs were lost. the gdp shifts from quarter to quarter. much of what we lost is either was in the flow or

brought back once people got their paychecks. obviously terrible for the people who don't get their paychecks today. bill clinton changed the way he governed after that shutdown. he brought people in and said i have to move to the center to govern the country. do we expect that out of donald trump? michael: no. that is the difference this time. davos.eled his trip to that is what jay powell is talking about. 21 days is the longest we've had and we aren't sure how fast it ripples out if it keeps going. -- the groceries you don't buy today, you aren't going to buy tomorrow. it's hard to estimate where this is going, which is why you get a range of estimates.

it could start to really affect particular localities, small where there's a federal prison and most of the workers are off work. going back to the shutdown, the question is, do you have to start hedging the unprecedented waters we are in with tomorrow being they 22? --day 22? sebastian: this has a real impact on 800,000 workers. the market historically shrugs it off. gdp, 400,000 workers will get back pay when they get back. that's part of the bounce back effect mike was talking about.

we are starting to watch this for several reasons. first, it is the longest in history. that matters. the effect is cumulative. continues, it is going to start to print into the unemployment number. i've seen estimates of .2-.3% of -- .2-.3%d created by unemployment created by this. recession models will start to flash red, for example. confidence, this idea that partisan politics is going tuesday and is going to and is is going to stay going to make negotiations more difficult. it will start showing up in data

like unemployment and impact confidence. david: we hear a lot of concern about the debt ceiling. they've done some fancy things in the house already that might make it less of a threat. michael: under ordinary circumstances, you say that. the democrats readopted something called the get heart -- h -- death hard rule gethardt rule. there was a hope this might lower the temperature and make it easier to pass the debt ceiling. with donald trump in the white house, you don't know. usedebt ceiling has been deliberately to cause problems. do you need to start hedging? yen. of gold, a bit of

>> if you look at the balance in our portfolios between safe assets and risk assets, we are back to neutral. we look at the government shutdown as one of the factors we are going to pay attention to over the next 3-6 months. our horizon is more 6-18 months. we are comfortable sitting at neutral, ramping back from underweight to neutral. alix: michael mckee and sebastian page, thank you very much. you are leaving me to talk more about this. david: to talk with senator chuck grassley of iowa. we will ask him how the senate hopes to get us out of this jam. as well as some important trade things in front of him right now. alix: we know how senator graham thinks. david: we talked to david purdue

of georgia who said it is up to senate republicans. the senate republicans could figure out a way to get past this. down to the racing new york stock exchange to interview senator grassley. barra sees 2019 and how they are coming along with their electric vehicles. she has a lot going on in china. chinese auto sales are down. is she worried about a recession? alix: i'm really interested about electric vehicles. good luck. get down there. from hong kong to the hamptons, real estate experts protect 2019 to be the year of the buyer -- predict 2019 to be the year of --

predict 2019 to be the year of the buyer. this is bloomberg. ♪ r. this is bloomberg. ♪

>> this is "bloomberg daybreak." coming up in the next hour, senator chuck grassley. alix: this is "bloomberg daybreak." >> we will be getting a number of updates from general motors on financial performance and product lines. gm hosts an investor day-to-day. next week, the north american international auto show kicks off in detroit. they want to know gm's strategies for dealing with the fast evolving market. coming up, we will speak with mary barra on bloomberg tv. ceo rewardings

investors who've stuck with him through a three-year restructuring. this was lender expects to buy back $1 billion worth of shares by the end of the year. shareholders -- google for .pproving an exit payment say he was allowed to resign after an investigation found allegations of sexual harassment to be credible. we turn now to business must reads. up, all the focus on u.s.-china trade talks, we look at china's relationship with big tech and the impact of its digital silk road. experts predict luxury real

estate discounts from hong kong to the hamptons. up, lisa abramowicz and carol massar. let's kick it off with a cover, china entech and president trump. >> very interesting. there this theme in the magazine, several different china stories. interesting, this story gets into the digital inroads that china is making. >> not only the digital inroads, but the implications. you think silk road, you think silk and spices. now, we are talking the infrastructure of technology. with that comes a cultural implication because china has cracked down on certain freedoms of speech, video games and censorship. they are importing that ability to censor to other countries and

therefore also the cultural implications. >> we take a deep dive into the nba in particular. show --those colors smart tv, internet connected appliances, this shows where china has either sold goods into , in particular in emerging economies. it is digital infrastructure. with it, there are surveillance methods, cameras are being imported. what's interesting, especially they are saying the west did nothing for us, so let's take a look at a different method. china is loaning us a bunch of money to build up our economy. >> this goes to the battle for cultural hedge enemy -- cultural

hegemony. which cultural -- alix: the u.s. in some ways is very far behind what china is doing in some ways. >> that's interesting. >> you could talk about the tech giants from the u.s. that have gone to the rest of the world and exported their technology. >> you go there and you really find out what's going on in china. she coined this term digital iron curtain. ultimately, you might end up with china in a certain part of the world and the u.s. in a certain part of the world. alix: interesting. somehow, there's a connection. i'm trying to think of a way to make it go to paypal. here versusents areas like india that don't have banks. has skipped which

some of the digital financial infrastructure. paypal is responsible for 30% of e-commerce around the world. great, deep dive. drake spent a lot of time reporting on the company, taking us back to the paypal mafia. peter teal was involved in he had an online payments company that ultimately paypal bought. reid hoffman was on the board. max was a computer scientist. did notder of this wanted it to be used for ebay -- want it to be used for ebay.

this andpurist about it took off without his wanting it to. the story highlights dan schulman, a ceo. it was this pivotal shift -- do we cooperate with the visas and mastercards of the world or fight against them? the banks saying we will crush you, paypal. dan schulman said let's stop with the whole paypal killing discussion. maybe we can work together and make paypal a more dominant source. >> basically frenemies. apple and google were greeting their own payment systems -- creating their own payment systems. alix: where you vacation if you are really rich -- >> it is a buyers market. this year is set to be a buyers market.

this chart shows what the expectations are versus the price declines in real estate. withof it has to do wealthier investors pulling back because of the stronger dollar. you have bigger, broader macro issues like brexit. >> and then you have micro issues like the developers in 2016 who didn't want to unload their condos. now, they are saying we can't wait any longer. alix: good stuff, guys. thanks to lisa bromwich and abramowiczr -- lisa and carol massar. we will take a look at the biggest risk to earnings. this is bloomberg. ♪

alix: what is the real biggest risk when it comes to earnings? joining me now, gina martin adams. set the stage, gina. the white line, the s&p. the blue line, price to earnings. this?is europe in gina: it is a much bigger risk then china. reason is 35% of sales come from outside the united states. that's the biggest risk within earnings season because international sales are did hear your rating faster -- are deteriorating faster. pmi, the composite is below china and nobody is paying attention. we always focus on china as an area of risk.

it seems we are not really centered on this european risk. that is a bigger risk to the broader outlook. alix: this bar chart shows the percentage of sales for s&p companies to different parts of the world. i'm surprised that europe is higher than china. sales, this is based on company disclosures. if you look at total sales for the index, 8% of them come from the european, middle east and african region. japan,le, 5% come from 1% from china. within the index, sales exposure, europe is roughly three times that of china. companyd see european exposures reflect that.

alix: are the sectors different? gina: they are. it's more a company issue than a sector issue. isiconductors and technology more focused on china then europe. -- than europe. there are 30, companies on the index that suggest -- 18 companies on the index that suggest a third of their sales come from europe. booking.com -- it is a company story. you see a lot of staples companies with a lot of exposure to europe. alix: what is the why? will it get better? gina: if you look at the stock

prices, the companies that have the most exposure to europe, stock prices are trading above their ted near -- there average -- theirluation t average 10 year valuation. don'tgina martin adams, trade without her. coming up, an edward jones senior investment strategist will be joining us. this is bloomberg. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience.

my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. unstopand it's strengthenedting place, the by xfi pods,gateway. 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. be patient and

flexible way to see what does involve. >> we are patient and flexible. jay powell declares a message as they worn on inflation with gpi on deck area no fast-forward. senator lindsey graham says the government is stuck. economists start to downgrade their growth forecast. 800,000 workers missed their first paycheck. and company clouds are gathering, from tech two retails, corporate giants lowering profit forecast because of market volatility with the days to go before earnings season kicks off. welcome to bloomberg daybreak this friday, january 11. you made it. congratulations. david westin is on his way to the new york stock exchange with interviews with senator chuck grassley first, who will likely have a lot to say about the government shutdown, in 30 minutes. the 9:00, the big event. he will speak to the gm chairman has their investor

meeting, and they will talk about trade and electric vehicles. do not miss that at 9:00 a.m. on bloomberg television and radio. in the markets, crazy week. we have seen the best seven-day ,ally in equities since 2006 the best seven-day start to the year since 2006. coming off a little in the lows of the session, down by seven points on s and p. i wanted to highlight the dollar trading down .6, but the pboc is of the sharp depreciation, so noticing the speed of rereading was steep thomas of there is a question about the pboc and what they will do. the 10 year moving lower by 10 basis points. in europe is absorbing a lot of supply out of italy and germany. earlier itby .4, but was 10 days of a rally that would have been the best rally that brent has ever seen, but we are losing steam on the

downside. it's getting update on headlines outside the business world with first word news. >> the trump administration is looking at ways to use money from a disaster relief bill to help older while on the mexican border, according to a aide. president trump would potentially use the money after declaring a national emergency and warned congress who would do that unless they reach a deal on pain to the wall. the government shutdown is set to become the longest in u.s. history come on now and its 21st day. 800,000 federal workers are about to miss their first paycheck. no new negotiations have been scheduled. an impactwn is having on at least one large airport. more federal security screeners are refusing to work without pay. they will work over the week -- over the weekend, i am the international will close the terminal. the workers will be sent to busier checkpoints. tsa screeners are calling in sick at twice the normal rate for miami. global news 24 hours a day on-air, and tictoc on twitter,

powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana rotondaro. this is bloomberg. alix: thank you. well, powell preaches patience. he sat down with david rubenstein yesterday and his message is clear. >> we have the ability to be patientlyd watch and carefully as the economy evolves. does itait to see what evolve. it gives us the ability to be patient and watch to see what evolves. usually, it anticipates we will be patient and watching, and waiting and seeing. alix: joining me now is nela us.hardson and jim malon he actually made fun of himself for saying patient and flexible so many times. what was your biggest take away from yesterday? nela: that the fed will be patient and flexible. [laughter] alix: what does patient mean?

nela: whatever you want it to mean, but i think what the fed is saying is something different than what the markets are hearing. the market is hearing the fed will not take action in 2019. that is what is being priced in, but what the fed is saying, which is different, is that they will be data dependent. basically, they are not saying anything. they have not changed their message. they continue to be data dependent and they haven't changed their guidance. ony are still an expectation the fed part that they will hike to more times. we think they will cause during the course of 2019, so we still see a disconnect between what the markets are hearing and that message that chairman powell keeps reiterating over and over. alix: what does patient mean to you, jim? jim: i think what we have seen is with the tightening in the u.s. financial conditions, the widening in corporate spread, that will eventually follow through to hurt u.s. growth. in the fed mandates, it vocus is on full employment and labor markets, as well as stable

inflation. inflation conditions have not pointed to much upside inflation. the market is tight, but the fed does not want to be to tighten fall behind on inflation, but it has seen headline below expectations and core has not punched above 2%, so they don't have as much wiggle room, whereas on the growth side, they are keen to ease financial situations, so i think it is temporary, but it is also important to think about not have necessarily tight and strong fed hikes have been recently. that is what the market is obsessed about, but where does the fed on hold? i think that is what investors will start thinking about as again to 2019. maybe the fed is actually easy? and maybe the fed is easy because it goes sideways, and may be 3% isn't actually tightening monetary policy? maybe they go on hold the level that is not restricted for the economy. that would mean the fed is easy

and there is more room. alix: that would imply you would have to have real growth moving higher at a neutral rate moving higher, as well. is that fair? jim: i think with the fed has done, ever since they released to the dots, they have steadily decreased the expectations for gdp and -- increased expectations for gdp and decreased terminal rate expectations for growth does not necessarily need to be 3% for monetary policy to be easy. growth could be 2%, but if policy is at 3%, and we are not seen the housing market continued to suffer, or household spending on herbal goods suffering, or corporate investment under pressure, that tells us the u.s. economy can handle it three handle on the fed fund. that would change the tone of the discussion later this year. right now, the market is focused on tightness. alix: nela? a sourcehink this is of volatility, but we are in an underappreciated period of economic growth in the sense

that most of the growth of the expansion has come a little inflation cost. inflation is very to a, so it saying,e, as jim was the wiggle room to both be to ant and to infiltrate more normal range. in the interim, before we get to that point, we will see volatility as the market tries to adjust to what the fed is going to do. right now, we are seeing above trend growth. as long as that condition holds and inflation stays came, as it has, the fed has room to be patient. alix: and we also saw about more wiggle room with speaking of inflation and inflation is not yet clear that it has moved back to 2% on a sustainable basis. jim, is this a green light for risk assets or what? jim: i think what we saw in early 2016, there was a shift away from the selloff from recession to a bull market that

lasted about 18 months. we saw two fundamental conditions underpin the bull market run. the fed backed off in 2016. it was going to raise rates four but only raise them once in december, and more importantly, the chinese stimulated. if we do have a rally, we think we will get a rally and we just recently moved to overweight stocks after moving down to neutral last summer, and we do think the valuation makes equities and risk assets attractive, but it is -- but if the chinese economy is not accelerating as it did in 2016-20 17, then the character of this rally will be different areas that is one component but i also say china is important. nela: and the fed continues to tighten in the background. we are not ignoring the balance sheet. there is tightening going on, so they have to be careful because now they are trying to manipulate two levers instead of just one, and that is the difference in this return to normal than the have seen in the past. alix: yesterday, jay powell

talked about the balance sheet, reiterating that autopilot sentiment. he said, look, we will have still been elevated balance sheet and we will reduce it, but we don't know where the market moved. why? nela: it has never been done this way, and the fear is that the fed, with the slight increase of short-term rates and running off the balance sheet, that you will get a spike in interest rates that is an anticipated or a spike in mortgage rates -- that is on anticipated or a spike in mortgage rates. right now it seems unjustified but it is a concern because we have no history on this. if the fed is successful, we do think the bull market continues and that there is some space equity returns this year. alix: and if you look at the bond auctions this we can take away the 10 year, we are having a harder time absorbing the supply, and then you have a qt backdrop. jim? jim: i think the fed has taken

the past eight years to move investors, and along with economic community, academic community, toward a thinking that we need structurally easier monetary policy. it took 10 years of inflation in 1970's. and it might have taken 10 years now to get jay powell, who will be more inclined to stay on cautious tilt, as we have seen, and the balance sheet fits in there because it is on autopilot and they want to make sure they are clear and separating the balance sheets from interest-rate policy, and i think that is what they will do. alix: so it is a quantitative tightening and not quantic nothing? i will also say many people have tried to estimate how much of that tightening and unwinding of the balance sheet flex higher fed funds. estimates are wide. i have seen people that were o years ago saying qt

does not matter, and now all of a sudden matters. alix: nela richardson and jim mylonas are sticking with me. you can watch the interview with jay on the david rubenstein show. do not miss that. coming up, a grim outlook. the retail to airlines financials, it is a grim look. more on that, next. this is bloomberg. ♪

alix: this is bloomberg daybreak. is consideringr an ipo of its asian operations. they are looking for ways to unlock value after a string of acquisitions left it with billions in debt. they may try to value its entire business at about $70 billion. from gm on updates financial performance and product lines in the next few days. they are hosting an investor day today. next week, the international north american auto show kicks off in detroit. wall street looking longer-term. they want to know gm's strategy for dealing with a fast evolving market. coming up, he will speak with the ceo of gm at 9:00 a.m. new york time on bloomberg tv .the ceo of the center stepping down leaving for unspecified health reasons. he has held the job for almost six years. the center has named an interim ceo.

alix: thank you. market uncertainty is weighing on a wide range of big names in many sectors within half a dozen. orbal sectors have job cuts hold a plan. richardson and jim mylonas, what struck me apple,ay, it was macy's, blackrock cutting jobs, so when you look at this and to season, what does that tell you? nela: we still think the bull market has some life despite the lower guidance. this is consistent with our view that we will not see to earnings return 20% plus year over year as they did the last two years. it will be much more in line with historical averages, about 7% to 8% for s&p 500 stock. plus, we will see some effects of this fiscal stimulus and stock cuts. we are seeing higher wage growth. that is a headwind for corporate to the, but a strength

consumer spending economy. consumers make up a book of the economy, so that is a draw, and we are seeing all this uncertainty. tell us, that is what is really weighing in corporate investment. from tresuncertainty complex, not knowing the rules of the road yet, and that is going to put a positive some investment and the ability to capture the sources of revenue gan. gain.en retreat -- and then retail has a whole host of speculative trends we could get into, but they are facing a structural shift. that is a bit different than the others that we are seeing reported. alix: i know that you are positive on global equities, jim . if you come inside the bloomberg, you can look at the most short , which is the white line, and it has seen the biggest rally since it started. does that tell you that this is shortcoming of positioning versus fundamental? jim: i think it could

potentially be technical near-term. we don't focus on market moves within a month, but look more at the cyclical conditions, tactical opportunities. we start by looking at valuations and we have clearly seen a d rating of equities, which has made the hurdle for earnings growth much lower than it was in the past. moreyou are trading at a elevated valuation and earnings growth goes from high teens to thatsingle-digit, then valuation becomes more constraining and problematic, but the de-rating has lower that far. we think there is opportunity for earnings to grow and they will continue to grow and high to middle digits. alix: so you are a cyclical by? growth guy? jim: at this point, the rest of the world matters when you get into cyclical versus the fences question. the chinese economy continues to disappoint, we will continue to see data like that i is some data continue to be on downward

pressure. much of the manufacturing data in the u.s. and the rest of the world has been downward pressure in 2018 and the u.s. more recently with isn. if china is weak, that will continue to make circles off base. however, if we see stabilization in the chinese economy, which we expect could be coming through in 2019, if we see some type of trade deal between president trump and president xi, then all of a sudden, the dynamic changes and that looks more attractive. a fair point. when it comes to earnings, one, the bar is low now. and two, trade has potential now to become more of a talent versus a headwind. so is there some kind of big risk to the upside that we are not factoring in europe? nela: right now, we are seeing risk as fairly balanced, but it is important to remember that because valuation has come down, they are now trading at 15 times ,arnings instead of 16.7 times

historical average. stocks are no longer expensive, so we see this as a good opportunity to diversify the filling gaps in the portfolio and to invest internationally because of the discount, because they are trading so far removed from their own histories relative to the u.s., so there is a lot of opportunity in the that uncertainty is kind of masking and clouding for the long-term investor, but they are there. alix: you are positive on this friday, guys. nela richardson and jim mylonas are sticking with me. breaking news concerning box and disney. -- concerning fox and disney. fox regional sports networks says disney may sell. remember, disney lot it, and they have to up load stuff to win -- to mike the stocks were, and 21st century will not bid for those regional escorts with the doj, and they require disney to sell that to complete that

merger. so that is kind of fun and interesting to track. we will catch up with a be bev, sharing the possible -- ab bev sharing the possible working with a business. this is bloomberg. ♪

opinions, bloomberg first, ab inbev is, looking to spin off an ipo of its asian business. what was your takeaway? >> couple of different things. one, ab inbev has way too much debt and they are desperate to find ways to bring that down. they already cut their dividend last year, and i think investors are looking for an answer, so this would be one possibility, to bring some money in the door. there are some debate on what exactly the valuation would be on the business. people familiar with the matter said $70 billion and analysts have said that is way too high,

the whatever it is, they will bring cash in the door. the other thing that stood out as one to separate the asian business, it has its own currency, and it's on capital structure, so then maybe you can reopen the door to that is ms., making some acquisitions. been a bigbev has acquisition. >> it has been the entire cuttegy, to buy businesses, costs, improve margins, and have not been able to do that because they have so much debt from the purchase of miller, about $100 million that deal was. as you look at asia as a growth market, ab inbev has been able to compete there, and in some places, it still probably cannot do deals. like in south korea come i think it has a what he 9% market share, but in other up-and-coming markets, you could reopen the possibility of doing that want to have a separate entity. alix: same strategy, different entity. all right, so technologies is helping the sale of its champion it. they say market volatility. what does that mean?

>> so you have seen with people familiar reporting is that the bids came in to low and they were not been $3 million range that united technologies was looking for for that security business. the company makes things like fire extinguishers, and i think part of that may be just that we have seen in equity markets. you have seen a significant om of then s industrials. the couple of interesting takeaways from he is united technologies has said it is going to break up into three different parts, when climate the otisd, and one in elevator business. some analysts have said, could they sell the climate? if you are not selling fire and security, cubb, does that make -- chubb, does that make a better market deal? you could possibly see a deal. i think consolidation is a big theme in the industry and we

have heard some comments about seeing opportunities in sales to cut costs and better compete, but i think it goes to the fundamental question of this is the right timing for united breakup?ies they have been under pressure for some time and they sort of kicked the can down the road waiting for that deal to close. that you have markets all over the place and you have to wonder spinning off the business is the best move. alix: how open are the capital markets now? well, there is shifts. i think business people when they are thinking about long-term investment, they are not just thinking about one type of trade. and the cost function, they have been made much more complicated

by uncertainties. you have a rising cost of capital, so that increases uncertainty with how you are going to be projecting future earnings and what you can learn from that, and also, you have uncertainty on global growth, so that will create a market environment, which will be less conducive towards the type of activity that we are seeing increased. alix: unless you borrow in the junk market yesterday. then you are feeling pretty good. thank you very much. coming up, cpi on deck. we will bring you the numbers. and a partial government shutdown is about the longest on record. chuck grassley joins us next. this is bloomberg. ♪

alix: this is bloomberg daybreak. i am alix steel. you made it to friday. it has been the best seven-day start to year since 2006. a little softness, down .2. the foot see down .33 -- the

ftse down .33. there are questions of will brexit happen, or over they get pushed back, causing uncertainty in the market? you are seeing a lot of bond buying here and in europe with the dollar weaker. cpi data just crossing. year and year basis, in line with estimates, coming in 2.2% on the year on year and basis, and 1.9%, slowing a little sequence and sleep -- a little sequentially month by month. and you have cpi going down by .1. no doubt that will be a lot about oil related deals, as well, as you had a huge selloff in oil prices. that will be a little drag on cpi. richardess, you had clarida and speaking in the evening about how he doesn't necessarily see 2% inflation a sustainable now and that

expectations have re-rated to the downside on that. here, intodeeper what works and what didn't with downtransportation was about 2%. housing and food slightly higher . but it was energy prices down by 3.5%. i want to get back to one of our top stories, the government shutdown. it paralyzed the u.s. government in many ways, going on now for 21 days. david westin joints me now from the new york stock exchange. david: thanks so much. big story down here. the 21st day of the government shutdown and we welcome from washington now, senator chuck grassley, a republican for iowa and the chairman of finance committee. thank you for joining us. senator grassley: thank you, david. david: let's start with the shutdown a move to other issues. position ofn the the republican senators to really solve this thing, it doesn't appear nancy pelosi and donald trump, this begun the president, will solve it, you

can't republicans in the senate fix it? we will fix it, but only as an agreement that mcconnell andand lastresident agreed to december that what good does it do for the senate to do something that the president will not sign it? so back then, chuck schumer said the agreement is, we will go with what the president will sign, so then we have had this pelosi hasnce nancy become speaker because i think chuck schumer is responding to her leadership on this, so the president over the weekend or maybe monday put a plan on the table because they demanded that he said what he wanted to spend the money for, detailed plan, and then he immediately expected an offer in opposition to that,

and normally, when one side wants to spend $6 billion and the other ones to spend $1.6 billion, then you kind of cut it down the middle. and then for republicans, probably you will have to give a little more than the democrats will give, there is an opportunity from my point of view because this was a bill i had before the senate in february that did not get 60 votes, but do something for the daca kids. in this for a win everybody if we can just get nancy pelosi to put something on the table and you cannot negotiate just from one side. david: you have talked about a bipartisan approach. we talked to one of your colleagues from georgia, west virginia, and a lot of senators seem to say there is stuff for both sides, for the dreamers and money for the wall. but if you got together and agreed on that, you could overcome the veto.

lies in that a solution? sen. grassley: well, -- why isn't that a solution? sen. grassley: well, we ought to be passing something that the president will sign, and not something delayed by a veto debate. we need to get this done quickly, and that is with the president's signature. we have of you were calling in and they would like me to ask you, why don't the republicans have a straight up vote on the budget? sen. grassley: because the number one responsibility to the federal government's national the safety of american people are affected and drugsare affected when cross the border or terrorists cross the border, there are not many terrorists crossing the border, but there are a lot of

criminals, and these are things that you back up with very strong statistics that the government keeps, that we can prove that, so we should be doing things that protect the borders and protect the american people, and that is not this republican's judgment. that is the judgment of the responsible for border security. the border patrol people. they are testifying to this all the time. who is going to argue with making sure that murderers do not come across the border and and like the san francisco policeman that happened? for the people that are dying every day from drugs that cross the border? or later, we will get past the government shutdown. let's talk about how you move forward to redo are the chairman of finance committee and the senate. let's talk about your agenda. one specific question, bloomberg expanded power

over trade was asked for, and versuse been outspoken the congress and the constitution gives you a lot of responsibility. have you heard from the white house about requests for expanded authority for the president over trade? sen. grassley: no, but i would advise him not to do it and that note the constitution gives just significant authority to the congress on international , totaleign trade authority to the congress, to the united states. as far as negotiating with other countries, the have learned members of930's, 535 congress cannot negotiate with other countries very well, so we give the president some authority to negotiate, but quite frankly, in the 74 legislation,- 1974 1963 legislation, we delegated to much authority and i am for curbing some of it. david: do you expect to proceed

with legislation? for example, the section 232 authority that has been used. sen. grassley: at this point, it would affect to 32 primarily, but i would not want to go beyond a lot of things with real one. but the real one probably deals whichore reform to wto, would not be the responsibility of the congress, but working with the other countries with wto to speed up decision-making there. as far as to 32 is concerned, i do not -- as far as 232 is concerned, i don't have is specific piece of legislation, but i have spoken favorably to what two senators have put forward in regard to that. i am not endorsing that legislation right now because we have to find a bipartisan i think it has been too much authority delegated by the congress. right now, it is very volatile

between the legislative branch and the executive branch. maybe when kennedy was president, there was more cooperation and confidence, but i think now that confidence has been reduced. david: another important trade farmersvolves iowa, the in iowa, north american trade per you were quoted as saying you would favor the president pulling out of nafta if the democrats try to change the deal. as i understand, you might change that is issued a bit. what is your position on it? sen. grassley: i'm not changing my position. i actually stated what the headline said, but they left out what i said before that. ' said, surely, the democrats questions about usmca would not lead to a point where they would object to what the president has done, mostly to satisfy unions and manufacturing in america. they would not want to do away with nafta and go back to the high tariffs that mexico had on

.ur products going in there that would be a worse environment then we even have with nafta, so at that point of frustration, i said the president has a real lever to push the democrats to reach an agreement. now, the democrats have some legitimate concerns that i think , as chairman of the committee, working with senator wyden, we , but i hopeider they can all be considered short of renegotiation because that is a no-brainer, not to renegotiate. that would be labor and environment and enforcement, and there are certain things we can do short of amending nafta that would ought to solve their problems. i will sit down with democrats and see what we can work out in that area. finally, senator, there has been a lot of talk of drug

pricing. is that an area where republicans and democrats can come together in this new congress? the president has been outspoken. we have heard from the democrats. as you look forward, is that something to expect legislation on? sen. grassley: without a doubt. i have already been involved over the last few years as chairman of the judiciary and our legislation with cobra tar, to do away with pay for delay and another one under the acronym create, and with that legislation, introduced yesterday a bill for to theortation of drugs competition to drive down prices. i think there are things we can do. d ofy much support part medicare, and a still do not want the government negotiating and reducing the formulary for drugs that are senior citizens can have, but there are some things that can be changed within part d that ought to

lower drug prices. ok, thank you for being with us from capitol hill today. alix: thank you. good to see you. also, nela richardson and jim aloneness with us. -- jim mylonas. government shutdown here, when did it matter on gdp basis? >> it probably will not matter a lot. alix: even if it goes past 21 days and you cannot pay bills? >> it matters to the people directly affected in their the next, but over couple of quarters, we are not -- we're notupdate going to see a big dip as a result. so that is the hope of everyone, that there will be a solution, but the more uncertainty that bleeds over to the economy and the financial markets, the

bigger the effect. but the effect will be short-lived for the economy as a whole. it will be quite impactful for the workers facing this right now. agencies havee pointed out, the risk of the debt limit debate is causing material risk in the market. do you need to hedge? we need to remember that president trump has one thing in mind above all else, and that is reelection. as soon as we see that the shutdown -- and we would agree the shutdown is not going to produce material headwinds to the u.s. economy -- but as soon as we see signs of the shutdown or discussions of the debt limit, producing material headwinds that are reducing the likelihood of reelection for president trump, given the economy is most important to real election, then i think you will see a deal and an agreement between potentially president trump and others, which fundamentally oppose him, so that is a trump option, if you

will, that is in place because he is focused on the election and it comes down to the economy. alix: we got the latest read on cpi told minutes ago. i want to highlight energy prices that caused the fall. nela, likeils, apparel price did not going your, food cost did not go anywhere, this feels like a benign report that accept vice chair richard clarida. this report really substantiates this messaging we keep hearing of being flexible and patient. with inflation low, it gives the fed that opportunity, so they can really be data dependent and that is what we expect. alix: we have some market coming out on monday, and that is citigroup coming out with earnings but today, we had information on two companies. one with 32 shares of the sunni group, -- 32 shares of the

group, so value ask has a position in alliance data systems as a competitor of cities and business line, so if they can work that out, then potentially valueact could propose a candidate for a board seat and citi could consider the request. , along with other banks, have been beaten up the year. they are down in the last 12 months alone, and we have learned before earnings on monday the 32 million shares are held by valueact not taking a board seat at this time but could do that later on. nela richardson and jim mylo nas, thank you both. coming up, hit after hit for pg&e and the latest movie downgrade of the debt to junk. the utility is unlikely, and we will tell you why. this is bloomberg.

♪

viviana: this is bloomberg daybreak. coming up on bloomberg markets, an exclusive interview with kkr head of global macro and asset allocation. this is bloomberg daybreak. j.p. morgan chase plans to increase illnesses at its corporate investment bank this year. bloomberg learned average increases will be in the single digits.

equity traders and investment bankers will probably get more. it accounts for more than one third of jpmorgan's revenue. ceo is rewarding investors who have stuck with him through the three-year restructuring as they expect the buyback of millions of dollars worth of shares by the end of the year. credit suisse is falling -- it shows credit suisse was falling last year. millions in liabilities over wildfires and moody cut pg&e's credit rating to junk. s and p taking similar action, or seen pg&e to force cash collateral to guarantee power contracts. alix: thank you. let's start with pg&e because shares of the share fell and that is trading like junk. the commission's meeting, they talked about any kind of broad measurement that they were going to take.

as well, joining me now a, head of north american utilities research. he has an equal rating on pg&e. how in the world do we get to a one dollars price target? stephen: a great question. how do you stabilize pg&e to make sure the company can spend the capital that they need to not just spend where they are but to increase spending on electrical vehicle charging, etc.? the state does need to have a healthy utility. from how we get to hear to there is uncertain. why we don't have an overweight rating at this point, even though i we look at the sum of potential value, however, it is unclear how we get from here to there. that is the key thing for investors and what they are wrestling with now. from the takeaway yesterday was california did not bail them out. there was no specific we will help you or initial step towards that.

then you have aggressive protesters at the same time. them?es the state support on a pr basis or on a fundamental here is billions of dollars basis? --phen: the cree question the key question is they have to accomplish safety is number one. the state needs to make sure pg&e can raise capital at a reasonable cost. that is an absolute requirement but there are lots of ways that could happen that are not shareholder friendly. at the end of the day, putting all the politics aside, that is what has to happen. the company has to spend that money on safety and increase the budget. right now, it is unclear how they will do that at a reasonable cost, so we need to see further state support to make sure that can happen. alix: obviously, like i mentioned, the debt is trading like junk, the equity is trading $16, has this wound up de-reading other utilities in california that should not be in that provide a better opportunity? stephen: yes, some of the other

utilities have been hit. edison international has seen a significant fall. operationally, edison has had a better track record and they do face some higher claims in southern california but they are smaller. so it is a question investors are looking at and thinking of pg&e can be resolved, eix might be able to rebound. alix: could clean energy see contracts re-rated? you talk about a buying opportunity but is that more of the selling opportunity? stephen: around power contracts, we have a near-term and long-term issue. the near-term question is if pg&e files for bankruptcy, what happens the contracts? we believe the contracts would be maintained in achieving energy goals. longer-term, if it is impaired at the cost of future contracts, that means consumer bills would go up. it is in the state's best interest to try to stabilize pg&e so the cost of the future

solar and wind energy contracts are at reasonable prices. event?hat is the next what are you looking at as an analyst for pg&e? stephen: a lot of us are looking at two things, the report on the fire from last year, which we expect soon, and the fourth quarter earnings call. many investors expect the company to take a large charge with the camp fire this year. the company is expected to speak about what is the liquidity plan? later in the year, after some change, the company will run out of capital. what is their plan to address that?will they start to cut now to conserve cash? that is on a lot of investor minds. alix: thank you, stephen byrd of morgan stanley, great to talk to you. coming up, a look at auto industry challenges. creede's autoelle executive analyst and david's big interview is coming up. we will go to the floor of the nyse with mary barra, gm's

ceo. this is bloomberg. ♪

we are moments away from david's interview with the general motors ceo mary barra at 9:00 a.m. eastern time. there they are, talking gossip. there is a lot of news from the oil industry. ford and jaguar announcing job cuts, and signaling enormous challenges and the former nissan ceo fighting for his reputation. with all of that, the government battles, ongoing trade there are a lot of potholes ahead for the industry. to help us make sense is michelle creede from auto trader.com and executive analyst from detroit. walk us through what the overarching issue is for the auto industry this year. michelle: well, this year and going forward, the audit industry needs -- the auto industry needs to focus on today's business and generate as

much profit as they can and invest in the future for general motors is the prime example. they are focused on electric vehicles, a time in this vehicles, but to fund that, they had to do well selling trucks and crossover vehicles, and every automakers in the same position. alix: so the auto show is coming up and you have the general motors announcement coming up. that really sets the stage for the auto show. themes going to be the that automobile makers will try to get across to the investment community? hearlle: i think they will good news from general motors because they have done a lot of the work. the announced the plant closings, some layoffs, restructuring of the company, and may have been a leader in mousng towards autono vehicles. i think we will hear different stages of that from different automakers at the upcoming auto show, where they are on that, but in general, everyone is moving in a similar direction, albeit at different paces.

alix: something we have heard from mary barra is the money you will have to spend for technology is going to be offset by the cost cuts you will get. it is a very aggressive forecast. do you think that is right? michelle: i think we are not as optimistic read we think that 2019 and 2020 will be good years for the u.s. auto industry. we don't think they will be as good as the past four. that could change. there are a lot of uncertainties. we don't know what is happening tariffs, and we do not know her interest rates are going. if interest rates do not rise, we could see some upside potential he. we had a forecast of 16.8 million for 2019, but with no interest rate hikes, it could be higher. itx: that is for the u.s. with china, where gm has exposure, they are down 20%. actually, they are down for the first time in 20%, down 6% to read walk me through how bad china can be for the automakers

and what upside is there if the government stimulates? shell: i think there is a lot of upside -- michelle: i think there's a lot of upside and they will get it under control. i think you will hear mary barra talk about the upside potential over the long term for china. of, theeaking announcement is out now, gm received 2019 industry sales near $27 million, in line with 2018. and sales are in the low $17 million range, and they will plan to secure a $3 billion revolving credit facility, and they see their full year earnings for this year at the high end of seven dollars and the low-end $6.50. the estimate was for under six dollars, so a huge re-rating. on the high-end, seven dollars of earnings on adjusted basis for 2019, and they also see a cash flow exceeding their view for last year.we are seeing a big jump on the news for that . michelle, quickly, your initial

reaction? michelle: i knew that information going into this interview. be veryit should positive for wall street. and i think it demonstrates that general motors has been very disciplined and running their business. we could expect that going forward -- we can expect that going forward. alix: what companies is this not good for? i look at ford, for example. michelle: ford will have to catch up. they are doing a lot of things that gm did, but later. we are seeing them restructure europe. general motors are ready got out of markets that they did not feel they could do well in, and now ford is looking at that, so other companies have to do that work that general motors has done. s of: michelle krevb autotrader.com. china u.s. industry sales in the , and inillion range

china, $27 million range. and their guidance is huge, blowing past estimates. i want to get right to david westin, who is live at the new york stock exchange with their ceo, maryborough. barra,we welcome mary president and ceo of general motors. good to have you. mary: good to see you. the news just heard about general motors, 2018 and 2019, i think surprising to the upside. what happened? mary: i think this is a result of what we have been working on since 2016, to transform both the core business and the investments we are making in connectivity. we see that coming to fruition. we still have work to do. that is why we made the difficult announcement at the end of last year. we are focused on this transformation to make sure ge