♪ francine: on the brink. after a defeat in parliament, theresa may's government faces a confidence vote tonight. markets brush uncertainty after jpmorgan, wells fargo, and bank of america report earnings today. -- will no longer become chief executive at -- welcome to "bloomberg surveillance." i'm francine lacqua lived for a second day in westminster, where theresa may suffered a pretty big blowout loss to date. she faces a vote of no-confidence tonight. we will of course break down all

the possible scenarios and what that means for your markets. we have a great lineup of guests, including iain duncan smith. he is a former u.k. conservative party leader. is the leader of the u.k. house of commons. also about 15 minutes from now, the boe governor, mark carney, will testify. we will bring you his testimony live. first, let's quickly check in on the markets in our studio in london. here's nejra cehic. nejra: we are seeing a little bit of risk appetite in. equity markets. . the stoxx 600 a little bit higher in today's session. also, u.s. futures pointing higher, with the s&p 500 gaining more than 1%. cable absolutely study, doing pretty much nothing over the past two days. if you look at the closing levels, today we saw some volatility.

our traders looking through what happened? are they waiting on the sidelines or are they actually just taking a bit of a positive view that from your the government will remain, we could get a softer brexit, or no bugs at oh? the euro is step -- brexit at all? the euro is steady. the 10 year treasury yield is moving up by a basis point. morgan stanley has revised down its 10 year yield target to a 235 handle. that's important. dollar-yen on the back foot. the yen is bid at a safe haven. wti heading higher. let's get your bloomberg first word news. >> theresa may's brexit deal suffering the biggest effete for any government and modern u.k. history. lawmakers -- defeat for any government in modern u.k. history. pre-brexit conservatives uniting numbersi-brexit labour

-- members. jeremy corbyn will attempt to force a general election. he's calling a no-confidence vote later today. theresa may expected to win this vote. >> it is clear that the house does not support this deal, but tonight's vote tells us nothing about what it does support, ithing about how, or even if intends to honor the decision the british people took in a referendum parliament decided to hold. says the euroi area is not heading towards a recession, but softening momentum underscores the need for central bank stimulus. the ecb president warning members that the current slowdown could be longer than expected. investors are questioning whether the central bank will be able to start raising rates this year after disappointing data from the region.

kenya's president says security forces have ended on attack on an office in the capital with all assailants killed. at least 14 people are reported dead in nairobi. security officers engaged the assailant. it is the first apparent major attack by an al qaeda affiliate in kenya in almost four years. thailand the bank seeing an --unction -- injection thailand's bank seeing an injection. home price growth -- china's bank seeing an injection. government -- that was ain a months -- the slowest pace in eight months. renault is preparing to move -- remove carlos ghosn as ceo.

he failed in his latest appeal for bail in tokyo. he has been in jail for eight weeks now, although he denies financial misconduct. renault directors expected to be in the coming days, and some say he will be replaced as chief executive, regardless of the case against him. brazil's president has signed a decree loosening the country's restrictive gun laws. bolsonaro's degree scrapping the requirement brazilians -- scrapping-- decree the requirement brazilians need to prove that they need their firearm. tencent has reversed course on installing a new ceo after a standoff in tens of millions of dollars in deferred pay. he led the ubs investment bank until recently, with the swiss bank holding a hard-line that after deflecting from arrival, he would not receive bonuses

from previous years. hosea le pen tony alvarez continue as -- jose antonio meade's will continue as ceo -- alvarez will continue as ceo. the institute of international finance saying that the debt to gdp ratio exceeding 318% in the third quarter of last year. death a fraction below the record 320% in the same .imeframe of 2016 > it's up 10% in the decade. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. that is a lot of news out there. we will get back, but now let's continue with brexit. theresa may's brexit your has suffered the greatest in feet for any government and modern u.k. history -- greatest defeat

for any government in modern u.k. history. a third of her own party members voted against it. the historic defeat was quickly followed by jeremy corbyn: a no-confidence vote. theresa may is expected to survive that vote, which will be held in parliament later today. so what's next? joining us is income can smith -- iain duncan smith, a former german conservative party leader . do you expect theresa may to when the no-confidence boat tonight -- win the no-confidence vote tonight? iain: yes. this is about making the right arrangements that we leave with the right terms. the majority of the conservative party come are backbench is certainly, did not think this did the deal. the backstop was a row issue, a real problem -- real issue, real problem.

we have this threat hanging over us which allows them to just drift towards that point. they will get pretty much anything they want. so changing that and making some of that 39 billion absolutely targeted is important. francine: i understand the procedures. can be aand that there challenge against theresa may herself, but after that crushing defeat yesterday, issue the right person to continue delivering brexit? iain: i think the issue we have right now a she is the prime minister right now, and the prime minister has this task. normal politics has been suspended because we have a clock ticking on the time. we are leaving on the 29th of march. we have a deadline. now we have to get on and get this arrangement. made. . i believe the eu is ready to negotiate. the john foreman minister yesterday said -- the german foreign minister yesterday said

if they don't accept this deal, we have to negotiate. we have to get the prime minister to ensure that she is ready to go back and say look, there are strong elements in this deal. there are strong, very significant elements that are simply unacceptable, and they don't make a big difference to the eu, so let's change them. francine: what kind of deal duping parliament would actually vote favorably for? what that deal be palatable -- would that deal be palatable for the eu? >> some of us published a written statement that laid out a few things. the backstop is the issue. if the u k and e u at a trade arrive -- if the u.k. and eu don't arrive at a trade deal, it would require us to have a border. the area between northern ireland and the eu in the u.k.. northern ireland would be outside of the u.k. single market, because they would be

forced to accept that they still pretty much remain in the eu after we left. so that could be changed. francine: right. but do you see any appetite for the eu side to change it? can they were ago much further -- really go much further? they keep on saying they cannot renegotiate the deal on the table. iain: the problem with the backstop right now, which they note, i've had discussions with mr. barnier, they know and understand that this backstop, which leaves northern ireland is separated from the u.k., is simply unacceptable. they understand that they are --dy accepting that when already accepting that when push comes to shove, by the end of it, it will be something different. has openoes do is it borders based on an early protocol to a free-trade agreement. that works. we already showed that works.

there is no need for any checks at the border. the key thing is that the eu needs to get their heads around that and accept that they need to do that with the withdrawal agreement. there are other issues, for example the 39 billion. we need to say look, the second tranche of that, the remaining 20 billion that we paid after staying in, that needs to be angst on delivery of h -- hinged on delivery of a trade deal. there are other issues, but those two -- francine: the issue of renegotiating another deal. out of these three options, what do think is more likely, general elections, a second referendum, or a notable exit -- no deal brexit? iain: i don't think a general election is going to happen. we have just had one a year or so ago.

i personally think it was a mistake in 2017, but that's where we are. to extend article 50 leads to massive repercussions, because you have a european election in july, which means by may come well, actually by april, we would have to commit to putting candidates up for an election, which is a disaster. the third element is that we do a no deal. a no deal is in fact a deal, because it would be an arrangement, but a different arrangement. my view is we will reach an arrangement and accommodation. if the eu wants it, then the u.k. will meet us. the eurozone, 80% is now in a recession. germany is teetering on the brink of declaring a recession. the last thing they need right now is to end up with a better arrangement with the u.k., it's number one market. that's what really i believe will drive negotiations to get more realistic over the next few weeks. , whatne: mr. duncan smith

do you think is the probability of a no deal brexit at this point? have the odds increased since last night? iain: i think they remain the same. that is at least a 50-50 likelihood of not reaching an agreement. i keep coming back to it. this is much more nuance than that. will have an agreement. even if we were not to have this agreement, the eu has already made provision for a nine-month interregnum where we complete any issues around the wto stuff. it's not as if we will have a final moment when everything changes. it will be a negotiated process, because we still have to make the arrangements, the schedule. there is still a real desire in the eu, the commission and negotiators, to reach an arrangement with the u.k. our problem is that we have not directly told them what we want.

they keep saying, when i have spoken to them, they have six -- they say i have no idea what the u.k. government wants. let's tell them what we need. and those changes i laid out earlier i what we need to reach a proper settlement. francine: iain duncan smith, thank you so much for joining us today. he is of course a former conservative party leader. coming up on bloomberg surveillance, look at the markets. mark carney is also testifying in front of the treasury committee. we will bring the backend of his comments live and in full on bloomberg. ♪

♪ francine: economics, finance,

politics, this is "bloomberg surveillance." i have francine lacqua here live from westminster. we will of course have your markets covered. not reacting like many market participants expecting to that massive defeat to the theresa may plan, and theresa may facing a no-confidence vote tonight. let's get straight to the bloomberg business flash in new york city. >> bnp paribas reportedly losing $80 million in derivative trades. this as turmoil grips global markets. sources, to bloomberg their head of u.s. index trading has yet to return to the bank since going on his christmas vacation. the index posted several sharp declines. alpenaranc shipper and frank shipper facing

-- the operas 24% about their last closing price -- the offer is 24% about the last closing price. blackstone group is close to raising $20 billion for its largest ever real estate plan. it always start of visually marketing the font for the end of last year. blackstone is already the private equity industry's largest real estate investor. a source says it plans to close the new fund at the end of the quarter. snapchat's finance chief disappearing. this sudden departure by former ad is on -- amazon executive another sign of volatility at the social media company. the company says it expects to report earnings slightly favorable to the top end of previous guidance. his departure is not due to internal disagreement. that's some bloomberg business flash.

francine? francine: european stocks --mbing as investors prospects for global policymakers to stop doing growth. in ftse is the only negative today's session ahead of a no-confidence vote in prime minister theresa may's confident -- government at 7:00 tonight. joining us now is richard jones. great to speak to you. what exactly is going on in pound? our markets now betting that we will have a softer brexit and that theresa may gets her confidence vote? >> i think the only thing we can say about what we have seen in the pound over the past sort of few months, and culminating in sort of the price action we saw yesterday, is that nothing is certain right now. if i look at the eurosterling exchange rate, over the past 12 months we have traded between them 86-91 range. that is exactly where we are stuck right now.

what that's telling me is we are still waiting for a proper resolution to brexit. i think there is still a lot of uncertainty. volatility is not quite as high as it was this time last month, but it is still more elevated than what we saw through the course of last year. so i think everybody is still very much wait and see. there are still a lot of questions to be answered. i think the vote last night, the loss, although it was very heavy, was anticipated by the market. we are going to have to see a little more resolution, some answers to those questions that you are asking -- were asking iain duncan smith in the previous segment. we have not had any of that yet. francine: richard, thank you so much. mark carney, the bank of england governor just started testifying in front of the treasury committee. here he is. >> there was a sharp rebound and , anding following the vote in public market commentary, also consistent with our market

intelligence, that rebound what appeared to reflect some expectation the process of ,esolution would be extended dealhat the prospect of no may have been diminished. now that, i am not getting my opinion, i am giving the -- giving my opinion, i am giving the markets initial take. that is in the hands of parliament. the markets, as the country are looking to parliament for direction. what would -- one would expect continued volatility. in the very short term, there has been consistent with what i just said, a small rally in bank, some tightening in funding spreads, u.k. bank funding spreads that would be consistent with that. i would not put much weight.

>> the market is waiting basically? governor carney: the market is waiting, the market is waiting. >> you know the government is blank secondary legislation in relation to onshore and of eu ofislation -- on shoring u.k. legislation. there has also been a paper published last year. it would be helpful to note your colleagues, the discussion the bank has had with the treasury about the powers required to manage a no deal brexit. are there any additional powers that you as a regulator would need in that scenario? governor carney: the powers that theeed -- there are 16 of 600 statutory instruments that

are of relevance to the bank. the majority of those that have greatest relevance to financial stability have been made. there are few remaining outstanding that are particularly important from our perspective, with respect to the over-the-counter derivatives counterparty, and amendment related to solvency too. an amendment, and i think this crosses over with your exchange with the ceo of the fca, dr. bailey. this is relevant, particularly for firms that are widening out. you know this, but just for the record, the firms that are continuing -- what have continuing operations we can address with the recognition region. for those that are winding up, this would be relevant.

we don't know the exact numbers there, because it's a question of who has come to us to approach for future recognition. we can make some estimates of those come and it would be potentially some insurance contracts. the u.k. that would be affected u.k. that here in the would be affected by that. we are in regular discussions with the treasury to ensure that the minimum authorities are given to us, in order to make sure that this market runs smoothly. it's of use to have an subsequent or communication on that, obviously we would arrange it. >> does the bank have a view on when it needs to put those sort of no deal powers in place before the 29th of march? carney: i think in this

case, it's before the 29 of march. >> it cannot be done right after? governor carney: when i come back to the bank, there will be some stern looks at me for testifying that. firms that are coming to us, getting the temporary recognition was important, because that is a clear signal to eu firms that want to have continuing operations here. for those that are running off, they need to know. if i may put it this way, the intense of the government -- intent of the government, and the predisposition of parliament is clear in this respect. the u.k. is looking to facilitate ongoing commerce, but if you are running off a business, you just have to know what happens in advance. >> back to the financial stability report. i wanted to start with the

transition. wonder whatd -- progress has been made so far in amending the existing contracts. francine: well, that was the bank of england governor, mark carney, testifying at a parliamentary select committee. one of the quizzes is nicky morgan. mr. carney basically saying that market sentiment seems to be affected by brexit, but the short lived rebound shows prospect -- dsom, theandrea lea u.k. house of commons leader.

francine: economics, finance, politics. this is "bloomberg surveillance." where monitoring mark carney's testimony.

the bank of england governor talking about market sentiment, saying they will be affected by accident. -- brexit. the rebound of pound is probably showing -- little keep an eye on what governor carney says. nejra: as the pound has been holding up, let's take a look at this december inflation rate falling to 2.1%. where looking at the u.k. inflation poised to hit the boe target with feel prices tumbling. -- fuel prices tumbling. factory outlet prices following 0.3% month on month, up by 2.5% year on year.

we also got some house price data coming through. november house prices rising two point percent on the year, london down 0.7%. the 10-year gilt yield has risen five basis points. headlinesso had coming in from the spanish prime minister. disaster,ng exit is a -- brexit is a disaster, but must be respected. he says he regrets the rejection of the brexit accord. a lot of news flow around brexit. for the first word news, here is the -- viviana. viviana: lawmakers voting by a majority of margin to-one against her eu withdrawal agreements.

the defeat by a majority of 230 leaves may's deal all but dead with 10 weeks until brexit. jeremy corbyn will attempt to hold a general election. >> it is clear that the house does not support this deal. tonight's vote tells us nothing about what it does support. or even if ithow intends to honor the decision the british people took in the referendum parliament decided to hold. >> we will remain united and determined to reach a deal. viviana: mario draghi says the euro area isn't heading towards a recession. the ecb president warning

members of the european parliament, the current slowdown could be longer than expected. investors are questioning whether the central bank will begin raising rates this year after disappointing data from the region. security forces and it an -- ended an attack in nairobi. explosions and heavy gunfire were heard by security officers engaged the assailant. it is the first apparent major attack by al qaeda affiliates in more than 10 years. 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. this is bloomberg. francine: thank you so much. prime minister, theresa may's brexit feel suffered a landslide defeat last night. the european union, in its response has ruled out further

negotiations.our next guest says the government will not be delaying brexit nor will it be revoking article 50. i'm very pleased to welcome the leader of the house of commons. thank you for giving us a little bit of your time. what are the chances of theresa may actually losing the confidence vote? >> i hope and expect we will have the confidence of the house. it is really important to test that. it vital the house has confidence in its government. vote, she will then move to senior parliamentarians across the house, to try to find a way forward, to make more progress on this deal so that we can deliver on the referendum on march 20. francine: would you be in favor of inviting opposition leaders to talk about the way forward?

i think it is vital that we understand from our own colleagues. i have had a number of conversations, and i think there are areas forward that we could potentially look to change, that might mean our and colleagues can support the deal. also, it is important that we talk to senior parliamentarians from opposition benches. jeremy corbyn have not set out what he wants to see, how he intends to deliver on the referendum. he set out a number of different alternatives. he wants a second referendum, but he doesn't. two supports free movement, but he wants to deliver on the referendum. he has had ample opportunity to set up his alternative vision, and he hasn't done that. while the government will be talking to senior it will needans,

to look at how do we all come together to deliver on the referendum decision that 17.4 million people voted to leave the european union? francine: is there enough time templates to get all the necessary brexit legislation for the u.k. to leave the eu on march 29? andrea: as leader of the comments, my job is to get the legislation through. looking at this very carefully over the last year, i do think we have time to get legislation through. i would have liked more time to be able to get brexit legislation through, but i do believe we have the opportunity a possibility still. toliament does need understand that it is a shared endeavor. the overwhelming majority of parliamentarians voted to trickle article 50 -- trigger article 50. francine: it british legislation

isn't passed in time, do you believe that you would likely give the u.k. increase. period.the u.k. a grace andrea: i would hope so. i don't i also enter into this negotiation in good spirit. they want to seek a deal. they don't want the legal default of a note due -- no deal brexit to happen. it is vital that the eu decide what they can do to facilitate a deal for the u.k.. the speaker has made a number of unusual rulings. do you still have fiscal confidence, or the other way around. do you have full confidence in him? andrea: i have absolute confidence in the role of the

speaker of comments. mons.m there needs to be a shared understanding of what those s mean and howrule they will be interpreted. what happened last week i way of an amendable motion being amended once, was to put that in doubt, to raise an issue over whether infected rules would be implied for all parliamentarians. i think it is very important that the speaker demonstrate that the rules are applied and adhere to. mencine: what you're telling is you believe his decisions were strictly impartial? no.ea: what i'm saying is that the decision last week to allow an amendment on an unimaginable

motion went against the idea. important forvery the efficient working of the house, but the speaker does make sure all rules are applied impartially and in accordance with what the expectations of the house are. i just want to be sure. you think she is not being impartial? is this a concern you think needs to be raised? andrea: i have made clear that the role of the speaker is to impartially apply the rules. francine: you think this happened been done? -- hasn't been done? week, a decision was made for an amendable

motion. a number of colleagues were told it was an amendable. the issue is that one amendment was accepted. the issue that throws up is that it means all members were not treated the same way. that is the concern. i merely make the point that it is important that the house understands what the rules are and that the role of the chair is to apply those impartially and equally across all members. in a word answer, do you still have confidence in the speaker of the house of commons, yes or no? i have absolute confidence in the role of chair in the house of commons. francine: thank you so much for joining us. that is the leader of the house of commons. let's get straight to the markets.

nejra: really interesting moves we are seeing in guilt. sterling has been resilient with the historic defeat from theresa may. the markets seeming to expect that the government is quite together the no-confidence. two of the tail risks have been more likely. yield, in particular heading up six basis points. interesting, particularly as we showing. cpi data inflation falling to its lowest in more than two years. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in westminster covering brexit news. john hardy joins us as well as the chief economist at -- thank you both for being here on this pretty historic day. let me start off with you, life the market actually taking almost what happened yesterday as positive news? we saw pound of a bit. -- up a bit. john: i think the immediate reaction was sold by the rumor the marketf anticipation with that volatility risk for sterling was lower in options terms. outcome thatis an

is going to continue uncertainty. immediate reaction sees us unwinding that volatility risk. i don't think we should take this as a sign of things to come. the only thing we know now is that assuming a confidence vote passes, we are not likely to get a corbyn government. i think there is some relief on the. nobody is really telling me what we are going to get. i think we are going to get a brexit at some point. the question is the timeline in the terms. francine: do think what is priced in sterling, is now almost no chance of a hard brexit or no deal brexit, and is that a mistake? john: possibly. i think it is justified to price out this idea that we are going over a cliff edge on march 29. that brexit could resemble a no deal, but a no deal with a few bells and whistles.

the uncertainty is justified more than anything else because i still don't know what this looks like in the end. i don't think any of us to. francine: it just seems to delay the question. the vote of defeat yesterday was by so big. depending on the options, what kind of economy will we get? lot forps is quite a theresa may to be able to go back to brussels and satisfy the house of commons. i don't think we should underestimate the possibility of a no-confidence vote happening again further down the line, and how that will impact the economy. it is very likely theresa may will win the vote tonight. it has happened before in british parliament that prime's have eventually lost the vote of no-confidence. the country still in a period of uncertainty.

francine: i have a viewer question. the impact of a hard brexit on the eurozone? outcomet is a negative for the euro area and the u.k. that is something europe wants to avoid. the euro area economy is also in a difficult position. as we heard from mario draghi recently, profits are still week for the economy. i think the whole issue of brexit should be seen by the eu it isay -- a signal that not that the country should status because it is difficult to leave, the because they want to stay in the european union. serious reforms are needed to

make countries want to stay because it is the next interest, not because it is so difficult to leave. francine: what does this mean for the markets as we get on to march 29? john: the situation has become much more fluid here. we need to see the actual news of the delay coming here. that brings some added relief to markets. in general, i'm hopeful for sterling upside. basically, that is a long way of saying, i don't know. francine: how much volatility are you expecting and what will it take to move euro pound? ohn: euro sterling is normalizing to the middle of the range the last few months. they committed significantly higher, you have to have a seven reproduction of either immediate no deal prospects or of heading towards an election or a

no-confidence vote not passing. low odds there. i think lots of staying in the range as we move toward the consensus expectation of a delay. that could bring us down to 8650, towards the bottom of the range since six months ago. a vote of no-confidence in the government can actually come back, and we could have multiple votes.do you suggest as a one and done? done? this as a one and danea: i think it will give theresa may some strength, but i think from the point of view of labour, it will be a sustained policy to keep bringing this up because it is unlikely she will manage to get some support from the house of commons for any type of deal. the mps voted against the deal yesterday voted for different reasons.

thissa may can take brussels and say this is what i can get my parliament to agree on, this is what i need you to give me concessions on. this is her weakness, was jeremy corbyn will want to take advantage of. francine: what kind of deal or brexit or timeline do markets want to see right now? do we have a clear idea? john: i think the markets would appreciate not having something butuptive around march 29, i don't think the markets really care if it is a so-called brexit deal or a no deal. i think investment will come back into the u.k. i think there is plenty of capital willing to flow into the u.k. once we know with the steal looks like. i think, eventually the message could look quite positive for sterling, we just need to know what the future looks like. much.ne: thank you so

danea.d up nex how are the markets faringt? we take a look at your markets. this is bloomberg. ♪

respects,ar, in many the markets have anticipated that. i know the chinese authorities are aware of the softening, and not is why they have put in place some considerable stimulus. nejra: this is "bloomberg surveillance." we have been monitoring mark carney's testimony in front of the treasury select committee. let's recap some of the headlines for you. the carney has been saying bank of england has confidence the financial system is resilient.

he has been saying that the boe, that chinese growth would decelerate further. he is commenting on china here, but saying the u.k. direct exposure to china is relatively modest. he is also set a rebound in the pound has shown that the prospect of a no deal has diminished. referring to brexit and on brexit, he said the bank of england is discussing a no deal powers with the treasury. the scale of the defeat left might was perhaps not expected as much. if you look at cable, it was gaining a little bit earlier. eurosterling, with her for a fourth day. -- weaker for a fourth day. let's switch up the board. you are seeing the risk appetite

bank a little bit when you look at european equities. to looks like we are not been to see the point in the session we saw in the u.s. yesterday. morgan stanley, another one of the big houses to downgrade its forecast. 4.25%.sees the euro came under pressure after dovish comments from mario draghi. we had dovish fed speakers as well. without giving up gains. hour.tinue in the next tontine joins us in westminster to continue our live coverage all day today. this is bloomberg. ♪

francine: on the break after a humiliating defeat in parliament, theresa may's

government faces a confidence vote tonight. jpmorgan,, wells fargo goldmans and bank of america report earnings today. good morning, everyone. surveillance.erg tom and francine from westminster. after that pretty bad crushing defeat on the vote in a house of parliament for that brexit deal, what happens next? we expect theresa may to win a vote of confidence. with any vote, we need to be careful about predictions. what happens afterwards is that we find a way out of here. tom: what i find today is the somberness of the green. the drum is gone. the bills are gone, but there is a somberness. francine: there is. if you are theresa may, and let's say you when the

confidence vote today, what happens next? she is time to get all the leaders of the opposition party to figure out a deal in which parliament would actually vote for. tom: i'm glad he put in your opening the risk to markets. francine: quite a lot of money being pumped into the economy. let's get straight to the bloomberg first word news. viviana: theresa may is on the brink. she now faces a vote to oust her government after parliament emphatically rejected her brexit deal. the humiliating defeat was the biggest for any british government in modern history. there is growing concern she will not be able to end the impact in order to avoid a no deal brexit. the u.k. is set to leave the eu in 10 weeks. bloomberg speaking to the house of commons, andrea leadsome. >> i do believe we have time to

get the legislation through. we are pushed for time. there is no doubt i would have liked more time to get brexit legislation through, but i do believe we have the opportunity a possibility still. parliament does need to understand that it is a shared endeavor. the overwhelming majority of parliamentarians voted to trigger article 50. we do need to come together to make sure we deliver for the people. viviana: now to nairobi, security forces and did a deadly attack at an upscale office complex by islamic militants. 14 people were killed along with all of the attackers. the group intends to keep attacking kenya as long as they maintain soldiers in somalia. korea arend south looking at ways to reward kim jong-un if north korea continues to get rid of its nuclear

arsenal. the measures could include anything from easing sanctions on north korea to normalizing the end of the korean war. bankina, the central pumping in $83 billion into the financial system. that is the biggest one-day injection on record. the people's bank of china offering the money by purchase agreements. the bank of japan is almost certain to cut its inflation forecast for the next fiscal year due to the sharp fall in oil prices. bloomberg has learned there is no indication monetary policy will change. the current forecast calls for prices to rise. oil down roughly 20% since the last outlook report in october. 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. this is bloomberg. tom: thank you so much.

a real risk on feel to the markets. euro, 114.10. euro churning as well. vix well in under 20 over the last two or three days. extremelyt is an impressive number. i will let francine talk about the euro. my number one thing i am looking at is the negative two-year yield in germany. that is going against everything else. i feel like we have been talking about repricing of the german bund for quite some time. left right andy, center we are seeing fluctuate a little bit before the no-confidence vote in the prime minister's government.

european equities are slightly higher. the ftse is down, gilts falling. i'm looking at oil continuing its advance above $52 a barrel. the u.k. standing at the most dangerous crossroads in decades after parliament emphatically rejected theresa may's brexit deal and left are facing an uncomfortable vote to oust her government. the eu said it was horrified by the skill of the defeat. >> we went as far as we could do with the agreement. and trying to resolve a problem of internal british policy, we won't abandon the interest of europeans. united andremain determined to reach a deal. >> winning to sit around one

table, opposition and majority in thet out what national interest is the best relationship between the u.k. and eu in the future. and we need to do that as fast as possible. francine: joining us now is maria tadeo in brussels and david mary. let's start off with you. are expecting to resume to win the confidence vote. what happens next? issue really going to try to figure out what parliament would vote on and go back to the eu and try to renegotiate? we do expect her to win tonight. there in mind, we only need seven of her own lawmakers to vote against her for mr. corbyn to win. , if one oreans is

two of his colleagues do decide they would rather let the government because they feel so strongly about this issue, mr. carbon can come back with another no-confidence motion in a few days. maybe there is more of a wedge to drive. she is not out of danger after tonight. what she said if she is when to start cross party talks in some ways to try to work out with the house of commons could vote for. we don't know what those solutions are. european site is not budging on the big sticking points. as yet, more confusion. francine: what the market yesterday seems to have determined is a no deal brexit. are they right or wrong? decides,atever she they're going to have to extend the process. yesterday, i am much more for leaving with a good deal been no deal. parliament has expressed the view it is going to try to stop no deal in its tracks. the clock is still taking.

it is on the statute books to leave at the end of march. the no confidence goes back to the 1740's. motion andlly had a the government fell in 1782. this is not unusual. tories and labour, conservatives afraid of a general election? david: the polls are neck and that. mr. carbon is the most left-leaning -- mr. carbon is is thet -- mr. corbyn most left-leaning leader. they fear some of the policies he would implement. all of these things are going to cost a lot of money. that is a bigger danger in many people's eyes to the economy.

they will do whatever they can to prevent that election happening in the risk of jeremy corbyn's labour party taking power. francine: let's also remind ourselves that this is a new procedure. the rules have changed. it theresa may wins the confidence vote or her government was the confidence vote, and she goes back to the eu and says this is what parliament wants, is the only way? -- is there leeway? one of the things we hear in the eyes of european leaders, they do think this deal is dead. she would have to come up with a plan b. the bottom line is that two years after the vote, they still don't know what kind of relationship they want with the european union and the system. before we going, to another potential new deal is the fact that european leaders really think brexit is not going to happen in march. extension,ot keen on

but they are just waiting for prime minister may to make that petition. by now, everyone thinks it is just went to go on for way longer than expected. tom: the challenges here of you in brexit and all the rest of the back-and-forth, the point is that a historic vote today, what would you suggest happens tomorrow? i read 14 newspapers today. let's get them up here. the guardian. i like this one, the daily mirror. francine: good headlines. tom: what happens after this vote? david: there is huge mystery to everyone you speak to. you talk to members of parliament, people briefing from the cabinet. there are so many different versions of brexit and the point is no one can come together around a solution. the newspapers leading with the

skill of the defeat. -- scale of the defeat. the sun has got her dressed up. tom: that british humor. david: the leader of the house saying the basis for going forward is still going to be her deal. tom: if jeremy corbyn didn't exist, when we be having this discussion right now? david: that is an interesting question. time theber the last conservatives were in this kind predicament, you have to go back to major's government with tony blair sitting across the aisle. rbyn is nott mr. co preferred to mrs. may as a prime minister to the general public.

francine: it is amazing. jeremy corbyn is probably more to the left that a lot of people in the labour party. how i can't convey enough foreign this is to an -- how foreign this is to an american. francine: thank you so much for joining us. -- weook at your markets will get back to your markets. tom: coming up, a conversation with the london school of economics. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." annual car sales in europe dropping for the first time since 2014. passenger car registration is dropping four months in a row afternoon eu in mission test rules came into effect. this led to production bottlenecks. result -- at japanese court requesting gohn's request for bail. santander has a great not to make andrea its next ceo.

his former employer says he was defecting to arrival. santander doesn't want to have to make it up to him. the banks of the current the ceo will stay in the job. that is the bloomberg business flash. get back to westminster. much.hank you so extraordinary political events in the united kingdom. the exit in the united states with another day of shut down as well. when he to focus on the global economy and central-bank. thank you so much for joining us. to walk away from brexit here for a moment, we see inflation in japan, the economic data out of germany, really soggy, the challenges here and around the world as well. how is state street global advisors adjusting to the new reality of a global slowdown? rick: we are expecting growth

next year about 3.5% global growth. we are also expecting growth, unemployment to remain low, inflation to remain contained. for that reason, we remain with somewhat of a risk on position. we don't think the recession risk is high. tom: we have been linking that into the politics of the moment. you're talking about a dampened business animal spirit. francine and i heard the uproar of british business over what happened in the last 24 hours. with that said, what will governments do in response? to we continue to see populism and revolt or can we actually see programs to jumpstart or reflate the global economy? rick: you shouldn't forget that we have had a pretty buoyant economy from an employment

perspective in many parts of the world. dictated 80 the case that a narrative has developed -- it may be the case of a narrative has developed. we have had pretty buoyant conditions. i think the populist argument is not all about people struggling. it is about other things as well. politicians have continued to struggle. globalization has been a real -- 4s. if the brakes are put on the, that is damaging to future projects. francine: let me ask you about brexit. what do the markets want? what a delay in brexit or beyond march 29 be a good or bad thing, positive or negative for the market? : i think markets become too optimistic about prospects for brexit. if the consensus is we now kick the can down the road and end up

with a deal, that neglects the possibility that kicking the can down the road allows those to say we should prepare for a no deal brexit, a little bit more time to make that preparation in the u.k.. i don't think it takes no deal off the table at all. kicking the can down the road may actually increase the possibility of a no deal brexit, even though parliamentarians don't support. tom: thank you so much. megan desai, we will talk to him about the equilibrium of the united kingdom. please stay with us. from the green at westminster, this is bloomberg. ♪

francine: this is "bloomberg surveillance." wherever new year the latest from brexit after that vote yesterday that was defeated by a huge margin. francine: the drummers and bell ringers were up until 2:00 a.m.. francine: there will come back as soon as we finish up here.

george has urged her peers to be patient. minneapolis that chief says there is no reason to tighten fed policy -- monetary policy. word, is itout one caution, and is our central bank, does it really have the right to because this? sense tomay make untiluntil june -- pause june to see how the economy absorbs the changes that have already been made. i can understand and say that is a good judgment, but it doesn't mean that rate rises are over. i think there is an underlying in the u.s. economy that still

would justify a normalization of rates. it isne: how much of underlying fundamentals of the economy in the u.s., but also other central bank policy, and how much of it is pressure from investors that are questioning the ability to hike rates? independent.e not we are all looking at the same data, in a sense. we are expecting growth about frequent 5%. we know europe is weakening. all of that data informs markets and the fed. is looking atrket a rational reactor. i think there is a confluence of data points that suggest that some of the rate rises are feeding through in a way that you would expect, but also, there are events that are

causing growth to be a little weaker. cause makesson, a sense -- pause makes sense. francine: coming up a little later today, the financial secretary to the u.k. treasury. it will talk a little bit about brexit and the timeline and that march 29 deadline. will it be extended? that interview at 6:30 a.m. in new york. i'm looking at pounds, fluctuating a little bit.we're live in westminster . this is bloomberg. ♪

francine: this is "bloomberg surveillance." live from westminster. votell go through the

against her majesty's government , that expected at 1:00 p.m. after the crushing defeat of theresa may's deal yesterday. tom: let's go to new york city for our first word news. theresaext hurdle for may is a no-confidence vote in parliament. it could out her government. one day after she suffered a humiliating rejection of her brexit deal. her plan was defeated by 230 votes, the biggest lost by any british government in modern history. there is growing concern jewel to be able to end the impact avoid the potential economic catastrophe of and no deal brexit. that u.k. is set to leave the eu in 10 weeks. the trump administration is ordering government workers back to work without pay. they will monitor food safety and facilitate the sale of oil drilling rights.

president trump's choice for attorney general promises to protect the pressure investigation from internal interference. william barr telling a senate and noton that he robert mueller may write the public version of the report. william barr is on the hill today for the second day of hearings. causey ortez will take aim at wall street. joins almost certain to the house financial services committee after fellow democrats voted to recommend her for the panel. she is expected to call for more scrutiny of financial firms. senator gillibrand of new york has taken the first step towards running for the democratic nomination for president. she is forming a exploratory committee. she is one of a dozen congressional democrats who are considering or have announced they are running.

24 hours of global news, on tictoc on twitter, powered by 2700 analysts in more than 120 countries. this is bloomberg. francine: santander has her first course. executive officer after a standoff of tens of millions of dollars in deferred pay. joining us now to discuss is bloomberg's suisse finance reporter in zurich. patrick, how unusual is it there such a fight about deferred p ay? bit of ait is a shocker and the huge surprise. bankerths ago this star said he was joining think of sending their -- bank oh santander -- santander.

ubs is sticking to a hard-line saying they are not going to pay you for joining a competitor. it is not something which i've seen recently in any case. francine: i know that we have sources and if spoken to insiders. what has changed in the last four months? it was always going to be that amount of money. was a calculated incorrectly? was the sentiment in spain changed? patrick: i think that one of the key questions is why wasn't this dealt with sooner? surely santander and ubs would have known about this all along. why didn't they say andre isn't joining two months ago?

santander thought that ubs would relax saying we would pay half of these bonuses and perhaps he cut. also agreed to a pay they're saying they aren't willing to pay up to $50 million for new guide to join the bank in this day and age. mr. orcel's, how is remit change that ubs? can he continue his normal process of business in zurich as before? patrick: in terms of ubs and santander and their relationship with each other, surely it can't the a positive they have had a falling out over this. in terms of orcel himself, i find it hard to believe he would return to ubs and be a star banker for them, although i would not rule anything out. santander was a huge client of

ubs and orcel led the relationship. that might have been one of the relationships why the chairman of santander hired him in the first place. tom: patrick winters, thank you so much. francine: this cup people by surprise yesterday. was the three months first we heard that ubs was trying tordball and work out the gardening leaves, the rivalry, between the chairman and chief executive of the possible succession. there may be a link. we are looking into it. tom: we are thrilled to bring a member of the house of a very emeritus

professor of the london school of economics. you invented the idea of the short century and have been a great advocate of this equal it -- disequilibrium. equilibrium ofis politics. anys hard to imagine that mature political democracy could be in this bad of a situation where we don't know who the next prime minister is going to be. it is basically our decline from empire. we have not adjusted. tom: what should boris johnson do? speak last night. what does a guy like boris johnson who represents that nostalgia do?

bike borisst people johnson are very smug. cleared out of the system. we are not going to be able to reach a progressive solution in this country. i don't know who should replace him, but i certainly think it is -- who got us into this deal. they were very confident they could do brexit. they had no idea how real life -- francine: i don't know how many the conservative party. what is the solution here? meghnad: it would take a lot of time to find it. francine: march 29. you put that to one side? meghnad: march 29 you put aside.

it is allowable under article 50 to change the date. that is not a problem. we may have a problem passing that in parliament, but forget about march 29. say, how does the system solve the problem of arriving at a consensus on the kind of brexit we will be able to manage? francine: the consensus is crucial. this is what we're trying to figure out. i also want to bring you into the conversation. what do you think parliament would say yes to? there may be support for some deals.style the northern island or irish border question is it going to go away. provided that the european union spherereland within its for solidarity perspective and

the u.k. can't negotiate with ireland, whatever deal they cook up would be tripped up i that issue. it is not obvious other than kicking the can down the road. thereby allowing a little more time for more extreme outcomes, which could be no deal, or even softer than the one proposed. does your labour party need a new leader? matter that of the mr. corbyn is so unacceptable to so many people in the united kingdom, that as you call it the new liberal order the labour party has to find a different liberal? meghnad: the way we have set the machinery we cannot usually find a new leader of the labour party. there are a number of different movements that corbyn was

elected under the system that made the labour party more receptive to members with a lot of power. labour party is run by people not in the parliament. tom: one question off of brexit ofic, you on the concept disequilibrium. how is disequilibrium now and can we have confidence that central bankers can meet the challenge of our new disequilibrium? meghnad: it is very difficult to predict unique events. the unique event we are probably going to face is a very serious breakdown, especially in the u.k.. the european union is not in a good commission, and the u.s. also has problems. we could take it very seriously and get very upset. do central bankers have the

tools to deal with this problem? thing we were taught was if you can print money you can do anything. tom: we will see. desai with us. and emeritus professor at the london school of economics. shocked by the quiet of the green today. francine: the vote in confidence in her majesty's government starts at 7:00 p.m.. james foley about joining us. that is 15 minutes from now. this is bloomberg. ♪

tom: we welcome all of you worldwide to the green at westminster. a quieter green after the historic defeat for prime minister may. a vote of no-confidence is scheduled for today. we will be joining later for a perspective on the economic history of the united kingdom. we have been speaking with desai from the london house of lords. desai, the challenges that mr. modi has. new challenges for mr. modi within the domestic mix of india and the evolving capitalism of india. how is india capitalism different than when modi took office?

>> he is not done very much to liberalize it. he has actually formed the law of bankruptcy and insolvency. getting away from the crony capitalism? and finally clear markets be enough to make it a more cogent economy? modiad: on my thinking will come back with not as big of a majority as before, but he will come back. francine: you spent time talking about emerging-markets. rick, what is your take on emerging markets in 2019? is it a dollar play and therefore central bank play? rick: it is a little bit of a dollar play. they are cheap markets but there is a fair amount of volatility.

the trade dispute between the u.s. and china hangs over emerging markets because china growth is essential to the growth of emerging economies. if it is as we suspect that we will get a deal from president trump and xi in the next several months, that would provide a relief rally fueled by the dollar weakening a little bit. we are not at that point yet. reforms: we saw the tax yesterday. there's quite a lot of money being pumped into the economy again. do you feel the chinese authorities have a good handle on trying to stabilize growth without pushing back to far out the reforms that they promised? challenge they may face is if the trade dispute goes on for longer it may not be easily fixed by fiscal policy, although their scope for that is greater than the european union or the u.s.

the scale of the problem and threat to employment growth is substantial. it is the reason why there might be a little acceleration on both sides to a deal. desai, you have a phrase in your wonderful book. social astronomy. would you please explain the social astronomy of europe? it is a mystery to francine and myself. thenad: europe lacks divergence of america. a post war piece of sword. dynamism into this?

jump start something that has stalled and is happy that it has stalled? francine: what about the rest of europe? you talk about france, they are pretty unhappy if you look at the yellow vest movement. is it the end of austerity? do they need to spend their way out of this? meghnad: they have created conditions like the euro where it is impossible for a particular country to print its own money or do a deficit budget. you have to have a coordinated jump, and we need leadership for that.we don't have it . francine: what is your take on europe? will we see a stronger slowdown economically than expected? rick: i don't think so, because the euro is quite weak, and europe in the central bank is aware of the risk. some of them are very visible like the italian challenges. some are below the surface, and

some of them are temporary like the german automakers. i don't think that it accelerates, but it is a subdued growth picture and makes political challenges of the movement more severe. maybe it needs to be asset based rather than expenditure-based. tom: did you see on the data screen how desai just weakened the euro? [laughter] francine: we will be back. to the be speaking insurance chief risk officer. we are also traveling to davos. quite a lot going on in the next couple of days. that interviews coming up at 6:30 a.m. in new york.

this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." an extraordinary moment for the

united kingdom. we saw that last night and we see it today with a vote of no-confidence. had our studios downtown. i can find my own way now. rick, we see again further interest rates on the two-year yield in germany. how can europe be financially better with a regime of negative interest rates? it has become chronic. rick: it is not a positive, but the alternative is worse. if you look at the potential for tightening policy at a point when you have challenges in italy, the banking system in some quarters is under pressure. creation.edit negative interest rates provide the potential for that. when the two-year rate goes negative, that tells you people are really expecting those

conditions to persist for longer than originally thought. pessimistic outlook for the euro zone economy. it doesn't mean it is a recession, but it is a prudent policy that damages pension funds. desai spoke about the need for a better market mechanism. tot is europe need to do make for a more vibrant, dynamic europe? rick: you always expect a market guy to talk about liberalization and how that can unleash more in the economy. there areshowing limits to that in terms of what is politically acceptable in the

short-term. you have to have a fiscal lever to allow people to see that the economy is still going to be projecting growth from more risk on the fiscal side. i think that can't happen where we have a disconnected fiscal position across the eurozone. quickly, when are we going to see a repricing of german bonds? rick: i'm sorry? when are we going to see a repricing of german bonds? rick: not soon unless the data changes. not for several months unless the data turns around. good.ery thank you so much. we have more to come. aboutmuch more to talk with this no-confidence vote tonight. it does it mean she can't be re-challenge.

i don't know exactly how the but it iske that, interesting her plan is to get leaders from the opposition party to find a cross party way forward and give an idea to what parliament would vote yes. tom: what is the next step with the eu? that is a huge mystery this morning. francine: they would give them an idea of what parliament would vote for. with us. worldwide, this is bloomberg. ♪

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tom: this morning, a persistent risk on field to the markets. the exception, ever lower yields in germany. watch the security lines grow at american airports. will sick tsa workers be the catalyst to in the shutdown? a crisis in the united kingdom, there is little confidence in a prime minister defeated. fear of themply a next general election? we are live from the green at westminster. we welcome you. i am tom keene with francine lacqua. what is your sample observation? know whatwe don't happens next. i think it is worse than yesterday, because theresa may's plan lost by such a big margin that it's unclear if that plan revived. can you give an indication of wants?rliament

i like the papers, a couple of them are really good. am: i have "the telegraph," complete humiliation in the 8:00 hour last night. francine: i have one from "the brextinct. a lot of other news flow as well. in new york city with our first word news. in nairobi security forces in did a deadly attack on an upscale office complex by suspected islamic militants. 14 people were killed along with all of the attackers. to al qaedas links and are claiming responsibility and vowed to continue attacking kenyans as long as they continue to kill soldiers in somalia.

south korea's foreign minister is providing few details during conference. the measures could include everything from easing sanctions on north korea to formalizing the end of the korean war. in china the central bank pumped $83 billion into the financial system. that is the biggest one day in injection on record aimed at meeting seasonal demand for tax payments and major holidays. banks'lps to reduce funding costs. the bank of japan is almost certain to cut inflation forecast do to the sharp fall in oil prices. there is no indication monetary policy will change. the doj's forecast calls for 1.4%. oil was down 20% since the last outlook report in october. global news, 24 hours a day on-air and on tic toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. this is bloomberg.

back to you. equities, bonds, currencies, commodities, a risk on field except for germany. a list of the market with better yields, that is curve steepening. 18.62. the difference signifies a shift as we get further into january. notice oil is a little light. there is a weaker euro this morning. the vix 18.14. the german two-year yield is higher today. at pound i am looking fallinging, gilt after a no-confidence vote

may'srime minister government. investors are trying to figure out if they can stop the global slowdown in global growth. let's get back to brexit and look at the options for theresa may as her government faces a vote.fidence the u.k. is at its most dangerous crossroads in decades after the parliament rejected theresa may's brexit deal and left her facing an uncomfortable vote to outstrip government. the impact on sterling. here is jane foley. it baffled a lot of people on the market after the huge defeat on the theresa may plan the pound was up. what do the markets believe that the next step is? jane: i think that's it. the market had significant pieces of news. the vote was a wider margin, but we knew the outcome. we knew that she was likely to fail to get back into this vote. we like to thank during the seems of yesterday it

likely that she will survive this no-confidence vote. we had the dup suggesting they would back in. it would be a narrow victory for may, but it seems likely that ernservative mps will back h to avoid risking a general election and handing power. that is significant. event is that she hasn't resigned. if thered resigned and was supposed to be a leadership election in the tory party, we johnson, ande for they would be more likely to push us through to a hard brexit than may. tom: i remember the chaos in july of 2016. everyone got that wrong on flows into the united kingdom.

what is the state of trust in the united kingdom? where do you see money flowing in, capital flows and such? jane: for an awful lot of real money investors, they are quite wary. what investors are betting on and what they are seeing in the future, if you are real business thinking about workers, factories, or exporting/importing you need to go with the facts. the facts now is that the uk's on course for a hard brexit. that is something is if you are in business you will have to plan for. that is a significant lori, and and likelyant worry, to be a drag on investment. investors are betting on the fact that there will be a delay. we need confirmation of that politicians before real

business can really begin to feel comfort here. tom: jane foley, thank you so much. desai earlier. , a student of the present condition of his united kingdom. it is wonderful to have you here again. the last time that you visited us on the green you said, "i only want to speak of ireland." was there no discussion of ireland yesterday, or has the elite of england become distracted by other things? >> the backstop is they hang up. that would have been a deal had the irish issued not come to dominate everything. they still haven't resolved it, really. the dup will back the

conservatives. tom: they will not do the no-confidence vote, they will support the prime minister? robert: they will back the deal because they think it will create a hard border. francine: can it be salvaged? robert: they can be salvaged. something like this can be salvaged. ireland, which was always going to be difficult, made a huge mistake when she didn't engage the labour party. referendum. given the fact that she was determined to respect the referendum resolve and that labour was not in favor of a second referendum, she had to start talking to labour and say that this is a national thing, can we agree? francine: this is now her plan?

you think it is too late because jeremy corbyn wants an election because he thinks he will win? robert: in terms of the emotional response, it is never too late. better late than never, but a huge amount of resentment has been created en route. she thought she could do it all on her own. tom: what was the mistake of labour last night? blair, brown, back to callahan and even further, what is the state of the labour party in the united kingdom right now? does corbyn need to step aside to move forward the left dialogue? robert: there is no challenge to corbyn at the moment, but labour is divided. best of thisas the

because it has not had to declare its own position. got themd have committed to something. taylor: what do the elites get wrong about the broader people of the united kingdom? as a foreigner i am thunderstruck five the distance of london to the rest of the nine it kingdom. how do they bridge that gap? robert: london is a world of its own and the elite is an even smaller world of its own. --i have always been against the liberal democrat really that you should go back to the people. it's interesting they call it the people's way. the people were not there last time. it is the same people.

referendum, and i think it was a mistake to have it in the first place, you can't stupid, badly educated, and misinformed. this time when you have all of the facts and we have done all of our stuff you will change her mind. i think it is condescending and disrespectful. why have a democracy? -- they probably should not have gone to a first referendum at all. that was cameron's mistake. he is going to be regarded by history as such a superficial, inadequate prime minister. tom: do you see how vicious he is? [laughter] ticket david cameron equal time -- to get equal time

here. robert: and you get into the house of lords you are told never to be vexacious. tom: we will continue in our own vexacious way. that would be the state of global wall street, in particular american wall street. the challenges the revolution of technology across all the financial services. the matter of the american --ernment, we will be joined stay with us from the green in westminster. this is bloomberg. ♪

>> this is "bloomberg surveillance." the sears chairman winning a bankruptcy auction that will keep the 126-year-old department business.in in it could preserve tens of thousands of jobs. he beat out proposals from liquidators that would have forced sears to shut down. bloomberg has learned board members of the french auto company believe that a decision is needed fast. a japanese court is denying his request for bail. santander has decided not to 's next ceo after a dispute of tens of millions of dollars in deferred pay. he former employer ubs said would not receive bonuses from previous years. santander does not want to make it up to orcel.

he says the current ceo will stay in the job. francine: we are just getting breaking news out of blackrock. it is earnings season. we are in the thick of it. blackrock earnings adjusted its top flow estimates, things are $6.ing in at this is back to the markets talking about inflows and outflows. tom: i would say mixed reviews. team, may be they get firm of the year awards setting up the framework of how you gather assets versus the rest of active management. francine: we have seen larry fink talking about changing to have more robust announcements. losses -- that was the

headline yesterday. tom: more robust, whatever. francine: speaking of brexit, we heard from the commission saying that the time is almost up in the brexit process. opening -- is tom: he was going to say bye-bye. it is going to happen. francine: the concern is a lot him.ople don't believe i am hearing this is the way that europe works. it is the 11th hour on the 11th day that they will come up with something. let's get to a member of the u.k. house of lords. is it the way that the european union operates? can they give something back to the u.k., or is it this deal or nothing? robert: i don't think they can give anything back to mrs. may. she goes back alone, so to speak. the house of commons, if it gets

together behind something -- but that involves reaching out to the labour party in particular, and she comes back with a different mandate from the house of commons they may be able to give. all of these great deals of the european union happen at 4:00 in the morning. there is always another hour. francine: i have covered many of meetings. a.m. will be often forget talking about brexit is that europe is at a crossroads. you have a yellow vest movement in france and a populist movement in italy. how do you rate the european economy now? robert: the european economy is not good. it hasn't recovered properly from the slump of 2008 because of bad policies.

it is also because of the way it is set up. cart wellhe economic in front of the political horse. they tried to do too much on the economic side without creating a set of political institutions to manage it. w inink that was a real fla the way that the union was and particularly the single currency approach. tom: and it was a gilded age. the last 24 months is a dawning awareness worldwide, particularly in america, of the use of technology. did they have the same challenges of their gilded age? was technology shifting the debate? 1920's there was a huge technological -- but, what this produces is a kind of

euphoria. you still have to manage it. you have to manage a market that -- - you know how do we pull up so many people that feel challenged? say,rt: you have to, dare i realize that the market economy is not very stable. the financial system is not very stable. europe is a big problem. is not going to last unless they get politics. up, stay with us

from the green at westminster. this is bloomberg. ♪

tom: francine lacqua and tom keene from the green at westminster. good morning across all of america. in 2011, really a change.i looked at the 18th-century

1911. here's is the quote making the rounds of the media today on the full-term parliament. here it comes. in the active parliament, you can read that. it is about this government serving at the behest of her majesty and the risk of a no-confidence vote. what is the likelihood we see prime minister may move aside for someone new? isere is a -- there not anyone to succeed her, that is why she is still there. 2011re right about the thing, that put together parts of the coalition formed. such ae: she lost by huge majority. so many of her own mps voted against her. should she resign? her,t: i would if i were

just to take a rest. she has been so pilloried, mock ed, and humiliated over the last 2 years, and she is a very stubborn lady. she is not one of the great political leaders of all time. maybe someone else would be able butalk to labour better, the point is there is a softer brexit available. francine: thank you so much from the u.k. house of lords. we will come back to brexit and talked china. 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. tom: good morning. francine lacqua and tom keene in london in westminster.

at not been remiss looking at all that is going on in american politics. kevin cirilli joins us. our chief washington correspondent. people are waiting for the catalyst to get this shutdown done. we have the tsa and security and alice morning the washington post talk about employees of the rs coming back unpaid. the catalyst to get republicans and democrats together? kevin: the state of the union address now less than two weeks away. whether that will be the time for president trump to declare a national emergency. i was shocked how we start the day thinking there were democrats and republicans negotiating at the white house and then democrats are uninvited and just republicans go to the white house to continue to talk about voter security. on capitol hill, the president's nominee william barr floats the idea we might never get the

public results of the mueller investigation. you want us to get out to the state of the union. i think that is impractical for people with no paychecks. what is the study you have of the chronic nature of no paycheck? day one is ugly, paycheck two three and four, that is impossible. isn't it? kevin: it is. from an economic standpoint, think about the role the federal government plays as an employer in towns not just like washington, d.c., but towns across the country. when those hundreds of thousands of employees are not reporting to work they are also not going to coffee shops or going to lunch. they're having to not take cabs or goobers and that decimate --

and that decimates local economies. to begin the year on that note is devastating. they will haveel back pay. they passed legislation to get them back pay. people in the side channels i just mentioned are not getting a check. francine: does this impact foreign policy? i was reading about how south politics the u.s. -- in the u.s. completely dominated by the shutdown. kevin: totally year domestically. over the past several days mike ,ompeo in saudi arabia especially with the issue of jamal khashoggi. meanwhile, in terms of national security, i do not think the u.s. national security is hurt as a result of the shutdown. in terms of getting ahead.

agencies are being hit. their employees are not able to show up to work. that make sit more difficult for every day federal employees to complete their job. kevin cirilli, thank you so much. now in new york city with our first word news. the next hurdle for theresa may is a no-confidence vote in parliament that could oust her government. that coming today after she suffered a humiliating rejection of her brexit deal. the plan was defeated by 230 votes. the biggest loss for any british government in modern history. may believes she will survive the vote, but there is concerned she will not avoid the impact of a potential economic catastrophic of a no deal brexit. president trump's choice for a --orney general robbing

promising to protect the russian investigation from interference. telling the senate he and not pobert mueller may end u writing the public version of the report. alexandria ocasio-capo has will now take aim at -- alexandria of ocasyou -- alexandria io-cortez is expected to call for more scrutiny of financial firms. senator christin gillibrand has taken the first step toward running for the democratic nomination for president. she said she is forming an exploratory committee. she is one of a dozen congressional democrats who are considering or who have announced they are running. global news -- 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. this is bloomberg. thank you so much, viviana.

it is appropriate we now turn to our first discussion of the meeting of the world economic forum at davos next week. with the cold descending from scotland, the next days in london will be called. we speak with allison martin of zurich insurance group. as the world economic forum begins to look at a study of risk for this year. thank you for joining us. basis, thistical has been an extra ordinary 12 months, and extraordinary 24 months. what is the geopolitical need to get to less risk? allison: not only have we seen increasing tensions in the last 24 months. -- effect of the short-term 91% of the survey respondents -- what do we need?

we need global institutions, multilateralism and on geopolitical issues as well as many others we see that severely lacking. theory of has to be a a unilateral, a bilateral, multilateral world. if we cannot get back to a wto multilateral world, what world do we need to get back to for proper dialogue and negotiation? alison: back to a world that is not the age of anger which we seem to be living in today. if you look at the gallup survey results looking at whether people are experiencing negative emotions on the day before the of 10, we see four out are experiencing stress, three out of 10 experiencing physical pain and two out of 10 experiencing anger. there's a significant uptick in negative motion. we see that playing out now in

inequality. we see it happening on the streets. francine: it seems to me that it is the same risks as 2018. it is a repeat of 2018? what changed? alison: geopolitical ngo economic risks have not changed in terms of the short-term. one thing noticeable this year when you look at the longer-term trend risk, these are the ones people expect to emerge, then we see environmental risks and that quadrant of high likelihood, high impact. the second they just risk is a failure of climate change mitigation and adaptation, which had previously fallen in the rankings and we see that as a result of the report last year and the failure to work on the report. andee the political will

the collective unity is lacking in order to tackle some of these risks. the failure is high on the agenda. tom: thank you so much. allison martin, zurich insurance group. the world economic forum survey on global risk. every year they come up with a theme and this year's theme is globalization. i have no clue what globalization five looks like. francine: i think that is part of the agenda -- trying to figure out what kind of world we are left with in five to 10 years. we do not want to alert our competition. have a couple bankers and many chief executives from the financial sector. tom: a lot of good people to speak to. this year we will really dive in to the tensions of the times. diving into technology, they

will do that on bloomberg markets. meg whitman will join us. she is iconic at the hewlett-packard company. stay with us from westminster. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua at westminster. a lot of the talk has been on the future of the conservative government ahead of the vote that starts at 7:00 after the huge defeat of theresa may yesterday. let's talk a little bit about banks. our full coverage from westminster. let's get straight to matt miller at queen victoria street in london. of the day istion

what issue has brexit in drowning out and to some extent u.s. banks are an incredibly important issue we are not focused on enough because of this brexit drama in the city of london. bank earnings are in full swing. so far they've been a mixed bag. a down arrow story. on monday citigroup reported a grim quarter. shares rallied after the lender said the worst was over. yesterday jpmorgan out with a miss in fixed income trading. record equity trading revenue. today we will hear from bank of america alongside goldman sachs. joining us to discuss further is alison williams, bloomberg intelligence senior analyst and john taft. on what weour take

have seen so far with wells fargo and jpmorgan and city. is it a negative picture? the bank earnings we have seen are indicating we are not headed into a recession. this is something the market is having trouble digesting. we are dealing with slowing economic growth. people are conflating that with a recession. recession fears are what drove banks down at the beginning of the year and with those fears -- this earnings report on the market recovery, people are saying maybe we have some time left in this economic cycle and recession is not around the corner and banks will do better for longer than we thought. we have been saying that we think we are more in the fifth and sixth inning of this long economic cycle rather than the eighth and ninth inning of the cycle. i think the bank earnings we have seen demonstrate that.

matt: that is a bullish perspective and i've heard that from a number of investors. i spoke with freddie from latitude and he thinks the u.s. banks are positioned. on the other hand, alison williams, we are in an environment where rates are rising. that will probably slow down if you listen to the doves on the fed. on the other hand, the inversion of the yield curve makes it difficult for banks to cash in on that net interest margin of power they should be able to, right? allison: keep in mind the yield curve is something that worked into the margin over time. for the important thing banks has been rates rising from unsustainably low levels. now that the rate has come up, to have pricing power. if you look back to previous

times in our country, the banks were able to protect their net interest margins through pricing power and because of where short-term interest rates are. the fact that rates of come up is helpful to the bank. what is important for the story is credit remains very solid. loan growth remains healthy. it has been a disappointment over the past year. we saw decent results out of the bank so far. that is one thing will be looking for bank of america. it is loan growth that will be the driver for the bank, given how late we are in the interest rate cycle. john, do you see long growth expanding? --s is a key as the would make is the sensitivity of different financial institutions to dramaticallys is

-- varies dramatically from organization to organization. a wealth management firm that deposits that theyts have been using to sweep into their balance sheets to make loans -- matt: i after break into here because we are getting bank of america fourth quarter. fourth quarter is beating estimates. for the quarter it was $1.3 billion. 1.2 $3nly looking for billion in our survey of analysts. bank of america doing better than the street was looking for. the overall eps was $.70 at bank of america. oneave a common equity tier ratio fully phased in approaching 11.9%. the estimate was for 11.3%.

for a balance sheet and regulatory perspective, it is also a pretty strong picture from bank of america. we are getting those numbers from bank of america. john, let me get your reaction as i give you the net interest expense number. $22.7 billion. the estimate was for $22.3 billion. is this a positive picture? the middle of saying every organization will respond differently. that theicture is consensus projection for 2019 is zeroient-fed hiking rate ratesa patient fed hiking . we get those things plus modest growth. banks are going to do fine in 2019. they were oversold in december

and we are looking on top of the rebound we have seen for opportunities to make money in the bank sector. matt: i appreciate your time, john. john taft. allison, i want to get you on the last headline. it is to some extent a disappointment. that is for fixed income trading. citi, not news at good at jpmorgan, not good at jefferies. $1.45trading revenue billion. what is the problem? it should be volatility. they should be putting in the volumes and they are not. alison: i think the number that came in his in mind with what investors may have expected. this number was extremely volatile and some of the consensus estimates may not have

caught up. earnings, ithe think the first quarter is more important. it is a seasonally stronger quarter. we are already off to a stronger start. that is more important as far as the ficc revenue goes. we have to look through the revenue. caution line is something investors are looking at. we saw it at jpmorgan and citi. in an uncertain revenue environment, investors are focusing on cost. executing atlready a very high level in terms of their overall return on tangible equity profitability. their costs came in higher, but again, focused on the balance sheet there. bank of america looks like they hit the cost target but that is what is important. i want to bring you a chart. i do not know this is from a piece you put out. it is something i grabbed off of

bloomberg intelligence that shows the deposit rates, the national rate on non-jumbo loan deposit rates. you can see the climbing from december 15. we are starting to grind -- rise up one or does go basis points. is this a key chart -- one or two basis points. is this a key chart for 2019? alison: it is but you of a number of lines in that chart. what we're seeing is deposit rate hiking be more accelerated. in the core retail business, think of that as mom-and-pop checking and savings account, deposits come in better than we expected. prices are not rising as fast. is more important, especially for bank of america or jpmorgan or wells fargo. those deposits are such a low fee.

spread, no matter what is happening with the yield curve, to the extent you can hold onto those deposits, that is going to be a positive. matt: alison williams, thank you for your time. talking about bank of america results. check out bi at the bloomberg to get a quick snapshot or even to do deeper research into a sector or a company. that is where i get my information when i'm looking at the banks. i want to recap as far as what we have got with fourth-quarter earnings from bank of america. it is good with an eps of $.70 and the investment banking revenue beating estimates at $1.3 billion. revenue missed the estimate by a long shot. back to you at westminster. westminster,k to

back to brexit. thank you for those earnings. this is what we are hearing from the irish prime minister. he was just speaking moments ago as we try to give each european capital to try to find out contingency plans and whether the eu is getting ready for a no deal brexit. we are hearing from the irish prime minister talking, saying they will work on her brexit deal. the problem now lies -- work on a brexit deal. the problem now lies in london. contingency plans are being prepared across the board. we are joined by the financial secretary to the u.k. treasury. you caused a lot of waves when there were notes put across the papers where it said no food, channel concern. are you concerned about a no deal brexit? >> it is the least desirable of all the outcomes would be to go

out without a deal. i'm confident we will get a deal , but it will be a bumpy ride. as to the questions of the notes i was photographed holding, there is no question it is not having the right contingency plans in place. will be well prepared in that sense. when people talk about stockpiling, is it scaremongering? mel: it is not necessary. there is plenty of food available in the united kingdom. there is no question of people not getting what they need in order to move forward. it is not an issue. anycine: do you have insight as to what kind of deal parliament would vote yes to? mel: that remains to be seen. we had a significant vote last night and a clear message from parliament with a deal we have negotiated with the government of the european union. the prime minister is rapidly

and rightly saying we need to consolidate across parliament to see what we can now come together as a majority around. that will happen after the no-confidence motion tonight. francine: was the worst case scenario for the economy? what does the bank of england need to do? mel: rather than speculate on no deal, what matters now is that we focus on reaching out across parliament, talk to senior colleagues. look at all the ideas there are and those ideas primarily being the ones that will be realistic in the context of the eu and then move forward on that basis. if the dealen yesterday was voted unfavorably -- voted upon favorably, is there enough time to put legislation through? after the vote tonight the

prime minister will be holding a series of meetings across the house of commons listening to those ideas in that space of being realistic in terms of lending a deal with the european union. let's not forget there is an overarching desire not just on the case of the u.k. parliament but from the irish and others across the european union to get the deal in place. there is the overarching impetus. francine: i know you do not believe there will be a no deal brexit. is the u.k. prepared for it? mel: absolutely. we have been contingency planning for months and years. if you take areas like customs that i am responsible for, all of the trading's trading solely between ourselves and the european union are not used to having customs arrangements in place. we have been contacting them in getting the messages out about what steps they need to be taking to make sure that in the unlikely event of a hard exit,

we are ready. francine: thanks so much for joining us. the financial secretary to the u.k. treasury. coming up on bloomberg surveillance, we will have plenty more from westminster and look at what the next step is for theresa may as she faces this vote of confidence in her government. what happens next? --understands he will reach she will reach across the aisle to understand what kind of deal the parliament would vote favorably to and then go to the .u coming up, more from the banking industry. we expect figures from goldman sachs. this is bloomberg. ♪

>> bank of america delivers.

beating estimates. goldman sachs on deck. u.k. government fights to survive. parliament rejecting a brexit plan. theresa may faces a no-confidence vote. let the doves cry. fedral bankers reinforce a pause in an ecb committed to stimulus. avid: welcome to bloomberg daybreak. i am david westin with alix steel. theresa may resoundingly defeated yesterday and now she will have to go back in this morning for question time before they debate whether she gets to have her job. alix: that sounds fun for her. one of the best analysts notes i have is that it is so bad it is good. it is so terrible yesterday there is no way can be anything but good. david: