♪ francine: doj indictments. frauds. accuses huawei of and ip theft. backing down on the backstop. theresa may abandons her brexit deal and tries to secure one with her own party. she says parliament will have a series of crucial votes today. the trump administration plans new sanctions on the venezuelan oil companies. how long can maduro's regime survive? ♪ francine: good morning, everyone. good afternoon if you are watching in asia. this is "bloomberg

surveillance." these are your markets. the stoxx 600 gaining, a lot of the focus is on u.s.-china trade tensions. today there was quite a lot going on, first the geopolitics and whether it could impact dollar, and we are also dealing with those crucial couple votes for theresa may in parliament. all of that is on top of some economic data out of the u.s. that has not been published because of the shutdown. pound 1.3164. coming up, we talk brexit with the former party leader, iain duncan smith. that will be at 11:00 london time. let's get straight to the bloomberg first word news. >> the five-week partial u.s. government shutdown will ultimately caused the world's biggest economy $3 billion, according to the congressional budget office. they also reported the budget

gap in the u.s. is widening. the deficit could now top $1 trillion in the fiscal year 2022. the last time the u.s. had a budget gap that large was between 2009 in 2012 following the financial crisis. donald trump's state of the union address take place on february 5. the president accepted house speaker nancy pelosi's invitation. the speech was delayed because of the government shutdown, and now acting attorney general caseew whitaker's says the run by robert mueller is "close to being completed." the trump administration issuing new sanctions on venezuela's state-owned oil company. it's the toughest blow yet for the country's authoritarian leader, nicolas maduro. they block the regime from exporting to the u.s.. maduro accuses the u.s. of

trying to steal venezuela's riches. and theresa faces losing control of the brexit progress. one amendment would hand power to parliament in delay brexit in order to prevent a no deal divorce. last night, the prime minister effectively abandoned the divorce agreement. she spent 18 months negotiating. she threw the way to for government behind a proposal to rewrite the deal, both set to take place tonight in the commons. california utility giant pg&e has filed for bankruptcy. this follows the board voting to file for chapter 11 protection despite the interest from investors, including elliott management. the court filing indicates that california's biggest power company had more than $50 billion of estimated liability, including for a series of fires in 2017 and 2018. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm city on heart taught a. this is bloomberg. francine: thank you so much.

canada says the u.s. has filed a formal extradition request for the huawei chief financial officer, in beijing has again asked for her release. they say huawei use life and deceit as a business strategy. they allege bank and wire fraud, sanction violations, and intellectual property theft that was widespread and accepted at high levels. >> a grand jury in new york has returned an indictment alleging 13 additional crimes committed by huawei, its cfo, its affiliate in iran, and a subsidiary in the u.s. >> this could have just as easily been announced next week after the trade talks, but the fact that it is being done a few days, it would be hard to admit it will not have an effect. >> timing, of course, is at least interesting, in the sense that it is coming ahead of these trade talks, but i don't want to

see any political motivation. i do believe in the independence of the justice system. >> the competition is always healthy when it spills over into a cold war mentality, which some people, some commentators say it is, and i don't agree with them. if they did do that, it would be unhealthy. >> i have little faith in the trump administration's ability to do a deal, but what i do have faith in his the need for both xi and trump to get a win. >> so long as we have a president that believes that obnoxiousness is how you project power, we will continue to have a president who weakens us. there's no other way to look at it. we are not going to have a better relationship with china until we have a president who is more diplomatic. francine: joining us now for more, our chief asia economics correspondent, enda curran. what does it mean for this week's trade talks? >> well, it certainly complicates the outlook, francine. on paper, there are two separate

issues. officials, including the commerce secretary wilbur ross, have said they are separate issues, but whether or not they can be kept apart will become the critical question. justi is accused of not security concerns around sanctions, but stealing technology. on the trade side of things, one of the core complaints of the u.s. complaints against china is that china's companies steal u.s. technologies. it really overshadows the trade talks in washington, and it will be critical to see whether the two tracks are made separate or whether huawei becomes embroiled in the trade talks. francine: enda, what exactly are we expecting in those discussions? >> well, the chinese officials have arrived in washington, according to the official news service, and it's a pretty powerful moment. the vice premier, and we also have the head of the central bank.

the expectation is also that president trump will meet the delegation at some point. by all accounts, this is no cabinet level. this is where trade negotiations are expected to get serious. i'd be very interested to see whether or not -- even if they don't agree on a trade agreement the idea that talks can continue on their path of back-and-forth negotiation ahead of the marsh first deadline, or if they come out negative and we hit a brick wall. that's a critical distinction that people will be looking for in the coming days ahead. francine: all right. thank you so much. enda curran. let's keep the conversation on trading. joining us today, the global head of research at blackrock, and the deputy governor at the bank of canada, head of u.s. equities. thank you both for joining us. enda talking about the machinations of this. will we see repercussions?

what is the market reaction to the u.s. being tough on china? >> i think we can debate about whether these things are related or not, but for the markets, the context in which we need to evaluate the news flow, for us, the main story for markets in 2018 has been about the trade talks, which we think are not about trade, but more strategic confrontation. i think this is material. we think and 2018, those kinds of noises will shake 10% of u.s. equity. that's the major story. francine: overall, what kind of trade agreement can we get? will only get anything at all, and will it have teeth? will that give something to the markets? >> i have some skepticism about the ability to get real, concrete agreements by march. i think we will be looking for some framework, some positive noise out of this, and that

might be helping the market momentum, which is already performing well this year . the broader story will not be resolved separately, that's going to be with us for months and years. francine: what's the catalyst? if we do have some kind of agreement, what is the catalyst for stocks? >> i think that would be a big ,atalyst, i agree that in 2019 that has been a big factor in the stock and its performance. but i do think they can find a general agreement, a general principle on which to agree by the end of march, without injuring too much, giving them time. i think there's willingness on both sides to find a compromise, and both sides have said that. i do think that by march, or even before that, the stock should move favorably to some sort of resolution, or

principal. francine: is there any indication that both sides want an agreement? >> i think it's in the interest of both sides to have an agreement, but again, unfortunately it is delaying to a broader context. i think you can get some agreement potentially on tariffs, maybe we have some noise around trade balances. but i think they are both approaching that more from a strategic confrontation perspective, and that is not something they will agree on resolve over the course of the next few weeks. francine: how concerned are you about the slowdown in china? unrelated to trade, or partly related, but just as a domestic slowdown? >> so it has a rippling impact on some of the u.s. companies we follow. themn see that some of have been slowing down in china.

apple was one of the first to come out and cite this as an issue. we're looking at a very is alsoy, and there stimulus coming this way. there and policymakers there are responding to that. should come to fruition. as it pertains to u.s. earnings and companies, they will file or their reporting season, and you are still having about 70% of the companies beating at the bottom line or beat to a lesser extent on a lower magnitude. francine: this is our question of the day. we are trying to figure out how big the slow down in china will be for the tech stocks. i urge everyone to go on to mliv. >> very much agree with what has

been said. i think the key questions are what will happen to the stimulus. we expect it to come in china and globally. how quickly it comes, and the effect of the stimulus will be key to the outlook. i agree with that. in terms of the impact on the china slowdown on fangs and others, i think, given that we expect stimulus, we expect the impact to be limited in 2019. the bigger story is trade. the trade tech war is really what we think is driving those stocks. francine: ok. thank you both for joining us. they both say with us. up next, theresa may faces a series of votes in parliament today which could shape the direction of the u.k.'s divorce from the eu. we will bring you the latest on that next. this is bloomberg. ♪

♪ finance, economics, politics. this is "bloomberg surveillance ." theresa may faces losing control of the brexit process tonight. one amendment would hand the power to parliament to delay brexit to prevent a no deal divorce. last night, the prime minister effectively abandoned the divorce agreement she spent 18 months negotiating, and through the way to for government behind the deal. both amendments are set to take place in the commons tonight. joining us, the founder of number crunching politics in amsterdam. also, the global head of research at blackrock, and from

columbia. so matt, thank you so much for joining us. you are one of the posters people still trust. you are good at numbercrunching. give me a sense -- the second referendum in the next two months, what do the polls tell us? is it remain or leave? well, the polls are telling a variety of different things. one of the interesting things to keep in mind is that, if you think another referendum will have the same question is the first one, a straight remain or you'd been you -- interested in how people think on that. there has been a slight shift toward remain since the last referendum, but it's a small and incremental shift. what's interesting on the polling on different types of brexit, versus remain, that has

a much more mixed picture. as complicated as a topic it is, and obviously quite an important topic, you get a lot of different answers. people are asked in many different ways. it is often quite tricky to pick one's way through all the different results these holes are getting -- these polls are getting. francine: because you are a master of pulling, you wrote a beautiful piece on bloomberg opinion. you outlined what kind of brexit deal the citizens of the u.k. could live with. do we not think about an focus on that enough? what do people actually want? >> well, what we did was try to go beyond what people's first preference would be, whether that be leave without a deal, leave with a deal, or not leave at all. when you ask about it in that way as we did, you tend to find

that the government's deal ha tends to be less popular than the hardline options of remaining in the eu after all or leaving without a deal. we tried to go a little deeper than that, we tried to explore what people could live with. for each of the options, we asked whether people would be acceptable or unacceptable, and -- allretty clear that t of those three options got a fair number of people saying they would be acceptable. the really interesting thing was , along the lines of what the government has proposed, would have the fewest unacceptable, saying it would be unacceptable to do them. it would be the least divisive

in terms of whether people voted remain, and how they would split between it. there certainly seems to be some compromise from the public at least. francine: all right. do you have any insight into what people worried about -- worry about? whether they would expected deal? what do people care about? quite -- int's terms of what people care about, the usual things will apply to both sides. people are obviously interested in their job security and so on. but in terms of what would actually -- in terms of things that are different between people who voted remain in voted leave, you get quite a different set of answers based on the two. for example, people who support much lessrexit are

concerned about the consequences of that than people who are opposed to it. ame of the people who support second referendum or softer brexit are considerably more concerned about things like, for example, difficulty in supply chains and things like that. there's quite a big difference between the two. ultimately, people are concerned about the things they are normally concerned about, but in terms of brexit, it is very different depending on which side they are on. francine: all right. thank you so much mat. one whogh the only, predicted the polls failed in 2015. we'll be back with our guests. up next, the bellwether caterpillar and nvidia see slowing demand from china. we will talk equities and earnings. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i'm francine lacqua in london. caterpillar and nvidia predict slowing global demand, heightening concern that the trade war with china is actually hitting corporate profits. what should we expect as earnings season gets underway? still with us, our guests. there's a lot going on here.

brexit, a shutdown, the trade concerns. what will be the main catalyst for earnings? sentiment, or capex yes, i thinn catalyst for earnings is really for companies to show that they will continue to execute, and show this trend of the domestic economy, it has been slowing but is still growing. as earnings continue to deliver, the market is not pricing that you believe valuations are cheap on the s&p 500. so we're seeing that execution, and it should be a good place to start. francine: how do you look at earnings? this is one of my favorite charts, basically looking at the s&p 500 positive surprises, in terms of total numbers, they are slowing down. >> again, broadly, the trade

tensions seem to be playing out in china, and i think this story is keeping. at the same time we are getting late they go. we are in the late cycle final stage, that could last for a long time. but we tend to see a slowdown in earnings. we will need to watch the pricing power of these companies, around which are bigger questions, but i think it is in line. francine: all right. thank you both for joining us. stay with us. coming up, the trump administration's toughest move yet as the u.s. ramps up the pressure on nicolas maduro. the details next. this is bloomberg. ♪

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viviana: the five-week partial u.s. government shutdown will ultimately cost the world's biggest economy $3 billion. also reporting the budget gap in the u.s. is widening. the last time the u.s. had a budget gap that large was between 2009 and 2012. the state of the union address will not take place on february 5. the u.s. government shutdown delayed the primetime nationally televised speech. acting attorney general matthew whitaker says the investigation is being conducted by special counsel robert mueller is close to being completed. tonight, theresa may faces losing control of the brexit process. one amendment would hand the

power to parliament to delay brexit. my, the prime minister effectively abandoned the divorce agreement she spent 18 months negotiating. amendments on the deal are set to take place tonight in the comments. pg&e filing for bankruptcy following the board voting to file for chapter 11 protection yesterday despite the interest from investors. filing indicates a california's biggest power company has more than $50 billion of estimated liability, this includes for a series of wildfires in 2017 in 2018. -- and 2018. 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. the trump administration has slacked sanctions on venezuela's state owned oil company, blocking crude exports to the

u.s. resign.ssures maduro to justin joins us. how much does this latest measure move the needle in the venezuelan story? justin: it certainly raises that pressuret. it shows that the u.s. is prepared to ratchet up the stakes. continue touaido face each other across the political barricades. what is more significant is that the u.s. has been thinking about this for a long time and has now decided to take this measure. perhaps it is a sign that the u.s. thinks that now something really is different in orezuela, that this protest upsurge in popular sentiment against maduro's government is

of a somewhat more strident nature than in the past. who actually is in charge of venezuela revenue? in: it is a very difficult question to answer. clearly, maduro is still in the palace. he appears to have pretty from control over the military. as we have been hearing throughout this conversation, the military is really the key piece in the jigsaw here. has beenhy guaido trying to encourage members of the military to swap sides by offering them an amnesty against wrongdoings in the past. i think it is safe to say that maduro is still firmly there, but guadio is making inroads. francine: who actually backs maduro as president and is

actually too early to back a new venezuelan government? : as far as the international community is concerned, we have russia and china. china has been fairly quiet, but has a certain amount to lose in this debate because it is a big provider of loans to venezuela in return for venezuelan oil. candidatescattered such as bolivia in south africa in turkey. francine: thank you so much for the update. let's keep the conversation on emerging markets and bring in the head of research at black rock. this is very idiosyncratic. it could have implications on the global stage. how do you treat it from a marketing point of view? , more venezuelan story

broadly, i think this speaks to the importance of geopolitical landscape and how important that can be for markets. i think that is the story of the em world. in 2018 and 2019 we have been seeing a series of idiosyncratic stories that have played out. i think this is the latest on that front. this one could be positive eventually, but it speaks to the broader idiosyncratic stories. helps in this context is we have a monetary policy that is more supportive, which will help em assets. atncine: we just had a look what venezuelan oil means to a lot of the country. venezuela has the most reserves in the world and is one of the biggest producers.

the heydays of the 1990's for them are well over and they are producing about one million barrels a day. thecan see some of countries that actually by the venezuelan oil being china and also india. what is your take on emerging markets? i feel like a lot of market participants want to be productive, but what would support that moves? said, there is a series of idiosyncratic stories that need to be followed. one of the mistakes in 2018 was not paying sufficient attention to what was happening on a micro level. in terms of the broader story, the key catalyst that underpins fairly positive em assets is what is happening with the fed. i think the information that the fed is set to pause and 2019

would be supportive for the em complex. francine: thank you so much. plenty coming up including ditching the backstop, theresa may abandons key parts of her deal ahead of a crucial battle in parliament today. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

with two months until the u.k. is due to leave the eu, theresa may loses -- faces losing control of the brexit process. tonight, lawmakers are set to vote on a series of amendments which would give parliament the ability to put the divorce on hold. brussels is still refusing to budge. and who official has said there is little chance to persuade the bloc to make compromises. joining us now is the director general for financial stability and capital markets for the european commission as well as david marriage and jean from blackrock still with us. thank you for joining us. has is your view all of this? view -- europer view all of this? is the commission engaged? i'm not in charge of these

negotiations, they are all handled by michel barnier. i am busy enough with doing my own job, which is to try to prepare contingency in case of an appeal, which is still as we speak, a significant probability event. ready, if there was a no deal and what country is most prepared and which one isn't? olivier: we have had since june a group led by mario draghi and marconi to which myself in the commission in order to identify it.main -- to prepare for

this work has been done in the commission has taken european wide measures. member states are also taking in fields measures where there is no a european harmonization. the commission is coordinating these efforts. i would say all major you -- jurisdictions in the eu are preparing to be ready. francine: what does this mean? if there is a no deal brexit and rules, what ina practice does that mean? our trucks went to be able to go to claalais? what happens if there is a crashing out the day after? vier: you are asking me out

of my field of expertise which is markets. your terrace -- you have tarrifs, a number of things like this. francine: it must have an application on money markets. how much of a systemic risk that we go to wto rules. i'm trying to get a sense of how bad it can get in the impact they can have on financial services. olivier: it has a direct impact on financial services. that was mainly the case of the derivative markets. also, the case for central securities, the political risk.

of course, there will be global impact on the economy and that will have an impact on the financial markets as well. that authorities and supervisors will monitor the situation closely and be ready to act around a no deal brexit date. francine: i know you have a lot on your plate, so let me ask you whether you worry more about brexit or italian banks, including how to deal with -- about theg to ask you italian government is openly speaking about the option of recapitalization of the italian bank. olivier: that is a bank we have known for a long time. it is not new that this bank has had difficulties.

what i want to say is that overall, the situation is bettering in the european banking system. the level of nonperforming loans is going down. it is going down quite significantly in italy. we need to deal with this individual bank, but i think in the context of banking markets it is much more resilient than it was. francine: thank you so much. let's bring in our european news director, david marriage and je an from blackrock. it is so complicated these votes. today is a chance for parliament to assert its preference. we know what they don't want

which is mrs. may's current to deal. of amendments.ge one is around delaying brexit and trying to take no deal off the table. that is the one the remainders are particularly fond of. the other is send her back to brussels to renegotiate the withdrawal agreement. in angly last night, private meeting with tory mps, agreed that that is her preference. up thewilling to rip steel and go back to brussels and say i need to renegotiate the irish backstop. they europeans have already said that is not possible, but the theory goes that if president and so there is a majority for that opinion, delicate impetus to the idea every opening the talks. francine: we will have an idea on what parliament once today?

david: maybe. it is possible that all or none of these amendments achieve a majority. fact becomen may in markets using because we have people saying they are going to vote for both of these amendments, potentially. process, with this clarity may be -- there is a chance we get a bit more direction. there is a consensus forming in the conservative party that they want to ditch this backstop. again, if we get the approval of the cooper agreement which is around changing legislation around the brexit date, that is what to be taken positively by the markets. i think you will see a list and sterling because that of the chart for the first time properly of averting the no deal that you just heard. it is still very much view by the european regulators. francine: what does it mean for u.k. assets? outcome or do you

expect parliament to get rid of this no deal possibility? watch is thing to particularly this cooper amendment on extending and giving some more power to parliament. that is the thing to watch. if that were to get momentum, maybe not today, but eventually if it passes, this'll will be seen as positive news for the markets. i think what we have seen -- in fact, two things i have seen assets, one iso the likelihood of a delay and the other is a reduced probability of a notice brexit. sterling is up more than 3%. i think it also means that there's is a probability of a no deal brexit. it is reduced, but still there.

there is a binary outcome probability that is still something i think we need to keep in mind. whatll, i think this is makes the market more relaxed. i think we have seen an extension be more and more priced in. there could still be movement upward. a lot of it has been priced as -- a form of aly deal is what is in the markets right now. francine: in terms of the players, we know that boris johnsons, who else should we be watching out for? obviously.dup, they have got to come out and say whether they are going to support what has been called the brady amendment which is sending me back to brussels -- may back to brussels.

their votes are crucial. we need to wait to hear which amendments are going to be voted on as well because mr. berger is a very crucial player in the history we know he has -- player in this. we know he has not made life easy for the government, so who is to say that he will actually choose the option that will give up the government and easy out, or see going to cause them more pain? we are quite to learn around lunchtime. intoe should start falling line or giving indications about the way they are going to vote. the prime minister is quick to open the debate and we will have debate all afternoon. francine: thank you so much.

coming up, the fed they have taken a break, but the economy is still expecting tw rate hikes is hereo. this is bloomberg. ♪

francine: this is "bloomberg surveillance." ahead of tomorrow's decision, j ean is still with us. he was previously the bank of canada's deputy governor. thereou look at the fed, was a lot of data we didn't have because of the shutdown, and the market is still pricing in two interest hikes. chances are higher than we might have expected six months ago. we are going to learn this week that they are setting themselves up for an extended pause. by extended, we need to be clear because markets, some participants could extrapolate more into that. hiking,t them to resume

not before the fall, but sometime in the fall. that is pretty different from what we might have expected even six months ago. a much easier path. i think we have a fed that is cautious and wanting to wait to see the impact we are going to see from the previous tightening. i think the other key element is that it is a fed that is very worried or should be very worried about what is going to happen when we get to the and the ability to respond to the next downturn is much more limited. is needed toit make sure we are not participating the economy to the next turning point. i think they're going to be very cautious and that is why we think they are pausing for the first part of this year. francine: overall, are we at the forof monetary tightening central banks around the world? fact, many of the

central banks haven't even started tightening. that is the case for the ecb and boj. the only central bank that has a move in that direction is the fed. i do think we are going to see personally a resume of hike eventually, so i don't think this is the end of the tightening phase. a few more hikes eventually and that we are quick to be pretty close to the peak normalization. in the ecb, we don't expect anything to change soon. francine: thank you so much. jean joining us for the hour. we continue to next hour. tom keene joins me out of new york. we will be sticking brexit and look at your markets. this is bloomberg. ♪

indictment, the

u.s. accuses while t -- huawei of fraud. deal --may\hard brexit backs off her brexit deal. maduro'scan nicolas regime survives? good morning, everyone. francine lacqua here in london. tom keene in new york. there is quite a lot going on. i think markets are trying to get a sense of what is happening with trade talks because of huawei. complicated. there could be as many as eight amendments. whethersee tonight there is a majority for something in parliament. hopefully, we will know what that something is that theresa may can go to the eu and say my

people will vote on this if you can meet me halfway. tom: exceptionally fluid story. phrase, which new i know is brand-new the houseaph, the malt compromise, which i think means remain. is chaos the operative word for this morning? tom: chaos is probably the operative word. i don't know if it is theresa may that can actually choose what she goes for. but she is trying to do is find something that will get through parliament. she needs a majority, and it does seem there could be something with these alternative arrangements to avoid a hard border. it is all about the backstop. we will get plenty more on brexit. but let's get straight to the bloomberg first word news. viviana: the trump administration imposing new sanctions on venezuelan state-ru

n oil company. the restrictions block it from exporting crude to the u.s. donald trump has upped venezuela. viviana: the u.s. and other countries recognize guaido as it venezuela's president. canada says it received a formal request to extradite the huawei ceo to the u.s. -- cfo to the u.s. china's economy slowing in january for the eighth month in a row. that is the signal from a bloomberg gage.

devastating wildfires in california the last two years have brought one of the nation's biggest utilities to its knees. pg&e filing for chapter 11 bankruptcy, lifting more than $50 billion in estimated liabilities. investigators are trying to see if pg&e's equipment caused the deadliest fire in california's history. 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: thanks so much. lots going on. a fed meeting coming up tomorrow. the markets, a little bit of a risk off. today.f stuff going on curses steepening with the euro curve steepening with the euro out. gold gets my attention out to a new high. with all the turmoil of brexit,

where is sterling? bitcoin simply grinds away, searching for new recent flows. what do you have? francine: i am looking at a mixed picture across global stocks. i'm looking at european shares up. are actually think what a lot of market participants are trying to figure out is the fallout from america's trade war with china. at the same time, we are seeing hopes for progress. we are seeing a couple of sectors under pressure. we did have caterpillar laying slow global growth. at 13160.e pound canada says the u.s. has formed a formal request for the huawei cfo.

the u.s. also announced criminal charges against huawei announcing wire fraud. from hong now is enda kong, bloomberg's chief asia economics correspondent. how ugly will this get? you have the u.s. doubling down on the accusations. are we expecting or afraid of retaliation from china and is that mean that trade talks are dead in the water? enda: these latest charges certainly come at a crucial time for the broader trade negotiations. i think one of the critical questions will be whether or not to remain separate. whether the u.s. charges against huawei for violating sanctions against iran and technology somehow gets intermingled with rotter concerns of chinese treatment over u.s. iep.

somethingly comes as of crucial timing. it is going to overshadow the trade talks. it is certainly probably not want to be much for relations between both sides given how the human italy china continues -- vehemently china continues to strike back at against these obligations. -- allegations. francine: it is very clear that huawei became a target for the u.s. government. how much are these accusations real and how much this china say they are fabricated? enda: china is certainly pushing back hard. they have been using a very consistent rhetoric saying that huawei hasn't been given due process and all of this. the u.s. made the opposite case. i think it will be interesting to see as we go forward, how

much further evidence comes out against huawei on the legal side of things and how much has been used by the trade negotiations to leverage connections outside of the chinese side. i think that remains a critical question. also forget, these are about concerns. question, what is the outrage of members of the communist party and the people around president xi to this moment for china in vancouver? we have that the father and ei are going huaw to write into the politics of china. linked right into the politics of china. enda: it certainly struck a nerve.

it has gone global operating in the telecoms market right around the world. because it has become something of a national icon and it is happening against the backdrop of this broader trade story, certainly in the terms of the official press, it is all being viewed as something of an attack on china's own economic ambitions. there is anecdotal evidence that there is some street of nationalism running through. what happens in china is she is extradited to the united states of america? is that a trip switch for action? enda: the rhetoric from china has been pretty fierce in terms of criticizing the u.s., but so far they have kept it separate from the broader trade talks. i think that is what will be

interesting. if we reach a point where china walks away from the table, if they consider themselves being attacked by the u.s. on all points or if they allow huawei to proceed and they keep trade talks going at the same time. i think that is the really crucial question. thank you so much. is the ubs wealth management had of the u.k. investment office. how do you look at this? are we actually going to have some kind of trade agreement or huawei situation impacts decision-making? eoffrey: what happens on the doj side is completely different, but as we know the way politics works in china, that separation may be slightly harder.

will beijing be able to maintain that line of separation? we will find out soon enough. i think for now, there will be a compelling national interest, especially for the sake of the economy to reach trade accommodation on the side of the u.s. there is time to work on this and separate the issue. tom: our banner says trade war back in focus. if we see things fell apart , or chineseuawei difficulties, in trade negotiations how will foreign exchange react? geoffrey: i think risk offers a quantity back and play. for last year, the dollar have benefited from trade tensions. in terms of commodity exposed

currencies, it will probably be hit the most. call ont is the ubs pound sterling? y: we still like sterling over a 6-12 month horizon. you mean it ubs doesn't have an opinion on sterling's 18 commitments today? geoffrey: on 18 amendments or 27 amendments, they will move as much as possible. tom: it is chaos. francine: let's see what the markets think of it. geoffrey yu stays with us. coming up, we will be speaking to the euro intelligence director to talk brexit and also italy. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. theresa may faces losing control of the brexit process tonight. tonight, the prime minister effectively abandoned the divorce agreement she spent 18 months negotiating and through the weight of her government behind a proposal to rewrite the deal. amendments are set to take place in the commons tonight. joining us now is the european managing economics director. thank you for joining us. there are as many as 12

amendments. what exactly can the parliament coalesce and support? what kind of deal can they get behind if it gets renegotiated? wolfgang: i think that is the .1 needs to make rather than focusing on taking no deal off the table because they can't do this. they need to do something positive. the only thing that i see is a withdrawal agreement. which is close to what she has riders ond with some the backstop. letter, someite kind of more or less legal agreement. there are different shades of gray or legality attached to this potential side letter in terms of expressing a wish are giving an incentive to people to not trap the u.k. in this

backstop. that is the most that one can expect from this. francine: do you agree with that? if there is change to the backstop, will the british parliament get behind it? ew: i don't think that they would even with changes to the backstop because i think that labour has now from its weight behind what is called the cooper amendment, the idea of extending. i think they're going to keep up the pressure for that in due course and back a second referendum. areeuropean research group unlikely to back things just on the basis of changes to the backstop unless they are very specific. i think it is very unlikely that any of those kinds of things will go through. summary offgang's what he sees as the events right now, i go to the idea of no alternative arrangements as one response from brussels. there's all of this uproar in the united kingdom. what do you perceive is the eu

response now, what is the response of the eu tonight at 7:00 p.m. when there is some kind of vote? what is the response of the eu tomorrow, february and 2020? ew: i would say tonight, the eu will keep up the pressure. they will say no changes to the withdrawal agreement. they could say we may offer reassurances, but they won't reopen the agreement at all. that is also part of the reason why some of the stuff in parliament today is rather futile because the eu is not interested in changing anymore. 2020,e get to february that will depend on very much what bp has done between now and a years time. the likelihood is that brexit will be put off or cancel by parliament. i don't think that will change whether we believe in the end.

i think it will just mean that the way we leave gets more chaotic. i think that is where we are likely to be. this story is likely to go on for sadly quite a while yet. mercifully, i think much of us 29, but ish march don't think it will. tom: what is the out here for prime minister may? i'm confused by 14 amendments. 47 other people's analysis. in the telegraph this morning, the chance says basically no. best out for the prime minister of the united kingdom? wolfgang: the best path out for her is the cooper amendment which delays brexit for a few months to be defeated tonight. that is quite important. whether the other stuff is defeated or not doesn't matter so much for her.

he reported recently that that a consensus going on between the hard brexit are's and remainders, which is based on the withdrawal agreement. some changes that would have to be negotiated. i don't buy the idea that the eu is not going to negotiate. if you wait until the 29th of march at 6:00 p.m., negotiations will change. francine: so far, the eu has been in solidarity with ireland. if they get rid of the backstop, does this throw ireland under the bus? wolfgang: they won't do that. the position of ireland -- the question is what will the position of ireland be at the end of this procedure? if there was a trade opportunity. i would still think the dojo probability is higher and many people in brussels think so, too. the markets have kind of taken

it off the table. there are excellent potentials when a deal is in past, when a second referendum majority doesn't exist. when no majority exists and no deal happens as a result of legal automaticity. --ncine: injured, geof ndrew, geoffrey and will -- wolfgang stay with us. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." a mixed bag of earnings for europe's largest software company. the company beat estimates for sales last year. cloud revenue growing 30%. out --duct the ceo telling bloomberg china remains the company's fastest-growing market. >> there is no question that there is a tension in the global trade community over the terrace matter with china -- tarrif matter with china and the u.s.. the one thing i always my people, we live in uncertain times. tom: thank you so much. let us digress away from washington, away from brexit. let's take a brexit break. we can do that with jeffrey you yu and wolfgang.

this is a fabulous chart. the white line is it eurozone gdp and the success of it. the green light is a flat-out failure of the italian economy. how do the italians reverse there to last decades? geoffrey investment:. then, the question is where is the investment going to come from? that requires further investigation. thrilled to have the two of you with us. what does germany need to do to help italy get a going? wolfgang: germany needs to reduce its surpluses. we need of -- to make the rose to make thee --

eurozone a sustainable would require a change in the rule framework that allows people to invest in stocks austerity policies. tom: they're going to come back on this. extraordinary, the position italy is in. french in the koran just killed in driving this story forward which affects all of europe. stay with us. this is bloomberg. ♪

francine: mrs. bloomberg surveillance. tom and francine from london and new york. -- this is bloomberg surveillance.

tom and francine from london and new york. first word news. isiana: president trump waiting into talks aimed at ending the dispute with china. president is expected to speak with a top negotiator when he comes to washington this week. steve mnuchin saying the u.s. will press china to prove it can keep promises after the u.s. filed criminal charges after -- on why way. -- on huawei. the union addresses back on on february 5. nancy pelosi refused to let the president give the address while the shutdown was going on. president trump responded saying we have a great story to tell and great goals to achieve. the acting u.s. attorney general says robert mueller's investigation is almost finished. whitaker saying he has been briefed on the investigation and he looks bored to mueller

delivering his final report. whitaker will look at -- he looks bored to mueller delivering his final report. whitaker will look at decisions but has no intention of changing them. >> it seems to me the only credible thing to do is to put the issue back to the electorate and let me be clear, although i want scotland to be independent, i care what happens in the rest of the u.k. nucleic -- therefore, if there is an option of another referendum, that should be taken. theana: it is one of biggest privacy related problems for apple, iphone customers discovered a bug it lets people listen in on others by way of

facetime. apple appears to have disabled the flaw remotely. it said it would release a software update this week. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thank you. i know we want to talk about we are thinking about the spat between the u.k. and the e.u. and we thought about the spat between france and italy. tom: one more crisis. macron, he isnuel trying to knock them off balance ahead of the elections. a geopolitical european expert to talk more andt this, geoffrey yu wolfgang munchau both with us.

the italian populist leader was accusing the french president of protecting dissidence. is anng: you can say this example of the european elections becoming european when the leaders of one country attacked the leaders of another. that is something we have not happen before. i am not concerned about that. campaign, what it will do, it will show, salvini is his ratings in italy are high, his goal is to maximize those and this kind of language will do that. this is the kind of europe we have become after 10 years of the eurozone crisis. we have a discourse that is different, rougher, bordering on violent.

it is the consequence of decisions taken by mr. micron and his-- macron predecessors. francine: as soon as one politician starts attacking another, is it the end of solidarity in europe? it is that end of interstate solidarity. you may find new groups emerging , you may find the populists , they are an international force and they are trying to run europe and dismantle it from within which is more insidious and dangerous. francine: what does this mean for bonds? unds? it is extraordinary. sayfrey: what does that about future expectations as far as monetary policy. our view is we do like the

andet and the quality names the fact that they are down further and they are trying to limit your exposure if growth is going to slow. the euro might bounce a bit from these levels. that is preferable to cash. francine: go to cash, tom has a chart on that. geoffrey yu stays with us. theresa may faces losing control of the brexit process tonight, one amendment would have the power of parliament to prevent a no deal divorce. we will have more on that shortly and we will look at the implications and what is happening. joined byhted to be the former leader of the conservative party, duncan smith.

what will parliament vote on today? what will there be a majority for? >> i think there is a majority for the prime minister to go to the european union and renegotiate elements of her agreement which have become toxic. is the backstop, it is not just about open borders. it is also about some of these things it binds us to an the future, locking us into higher alignment, things on agricultural goods. number of different amendments to the motions, each does something different. the government is behind one amendment which, if they make themselves clear about what they are going to do and whatever

they do is legally binding, i think they will get a significant level of support for that. francine: if there is a brexit backstop amendment, will it be enough for theresa may to win the vote? duncan: like all these things, you can never say in absolutes. theink the key element is government has made it clear what they want to do. they have to make it clear in the house of commons. to set out the clear elements they are seeking. they want an agreement but it has to have certain parameters and that they will come back and overnight, there has come out , those who wanted to remain and those who are leaving have come together to give the prime minister a plan which allows us to leave with this agreement or without but leave

in a managed process that allows us to continue full discussion and cooperation with the european union. that brings the whole of the party together. tom: you have a knowledge of northern ireland. today, ishese actions parliament leaving the republic of ireland and northern not -- leaving the republic of ireland and northern ireland out? all, there hasf only's been a border between northern and southern island. been ae has always border between northern and southern island. there would be no hard border. there are no requirements for that. there is a border. there are issues room currency.

that does not necessitate a hard border. the key thing that both sides there willve is that be no hard border after we leave. there will be arrangements but that hardot need border which continues in line with the good friday agreement to make sure the people traveling do so with no problem and goods and others can cross back and forth without holdups at the border. tom: is prime minister may going to go to europe with what you said? do you envision the prime minister is going to renegotiate the question as you said? go because has to the existing backstop is what blocks off parliament's agreement and this crosses into labor mps who wanted in recognize that we have to leave but want to do so with a better

agreement that does not leave northern ireland isolated outside of the union, which is a vital marketplace. to cut them out of that by various checks, which is what the present system does, would be wrong. we need that agreement. the prime minister is recognizing that has to be done. for her to make that clear today, it is important to listen to this speech. this could be the most important speech she has made since she was elected. what will be e.u. respond to that? the e.u. has shown such solidarity with ireland, if they renegotiate the backstop, is it not the e.u. throwing ireland under the bus? duncan: what did ireland want?

no hard border. i understand why. i him an agreement. northern ireland did not want a hard border. there is a way to resolve the border issue through what we call this protocol process that allows you to have an advanced customs protocol which allows this trade to take place. ireland, it is a bio security zone. we except passports over here as british citizens. we spoke to the irish prime minister and he says we do not have the technology now. duncan: it is not about technology. these systems exist. , there is aexperts group made up of all of the that do all customs

transactions across and outside of europe and they have made it , what is being proposed does not need new technology. it is important to point out you take a poor like rotterdam, the biggest port in europe -- a port like rotterdam, the biggest port in europe, they never spot check more than 2% of all the good sick come in through the port from outside the european union -- 2% of all the goods that come in from the port from outside the european union. that allows us to make this proposal. tom: onto a busy day and the speech of the prime minister. much more to talk about. cannot convey how the team is working on these stories,

huawei, the other news in washington and this historic moment for the united kingdom. of vanguard, look for that in the 11:00 hour here on bloomberg. please stay with us. this is "bloomberg." ♪

francine: this is bloomberg surveillance. hastrump administration

flagged sanctions on the state run oil company. it will block exports to the u.s.. the venezuelan leader responded in a televised address. donald trump has upped venezuela. francine: joining us now is the chief energy reporter. they produce little because what has happened. what do sanctions mean for who is in charge. venezuelan oil cannot go to the united states. .here is a wind down period company is ail designated entity, that means

u.s. persons cannot touch whatever it is producing. more importantly, what we have seen is when you get into the sanctions, that has an impact beyond american borders because banks would refuse to deal with venezuela, shipping companies would refuse also. thatwe can see is venezuelan crude may not find a home other than traditional outlets. francine: i am glad you brought it up. my favorite chart, it is u.s., china, and india. where do china and india side? withr: they are siding maduro. times what matter at china and india and russia want to do if you cannot find a ship that will take the crude oil. wantes not matter what you

to do if you cannot find a bank that will ensure the goods on the water. somemay try to get venezuelan crude but venezuela is going to find it difficult to find buyers and to get the money of any crew there able to sell. tom: -- they are able to sell. big oil benefit? is there not to new for exxon to assist the people of venezuela? javier: we see an opposition change. we see an opportunity for big venezuela was welcoming international investors in the oil and gas sector and the country will need a lot of foreign aid for increasing production in the future. if there is a transitional

government, this could be an opportunity. francine: what does this mean in your world of how people should view emerging markets? geoffrey: i think two things, one view is there can be a process through which venezuelan output increases over the long-term, this could add to the downward pressure. there is going to be a supply drag on crew so where positive on oil prices. we have got to talk demand as well. e.m. is softer. tom: thank you so much for giving us wisdom here. there will be more on venezuela in the coming days. we are going to continue with geoffrey yu. i want to go back to this italian chart, talk about how that folds into europe. coming up, we will look with goldman sachs at the cycle of

commodities. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado.

, saudi arabia expects to cut oil output again. accepted under opec. speaking to bloomberg. >> what we will do is work with our partners to bring inventory level well below their five-year average. we are going to do it by ensuring supply is below demand for 2019. viviana: that is the business flash. tom: thank you. -- i thought this was an extraordinary essay on the fragility of italy with a chart by an economist with the bank of america. this is the chart of the eurozone the gdp getting a going out of the financial crisis and forward into into 2013, a

legitimate gain. yu cannot getfrey it done. italy gdp not back to where it was in 2007. the system is broken and some of the politics we have been talking about are on that. what is the thing that needs to be fixed so the e.u. has a normal system? what is the thing they can do to bring economies together? geoffrey: the obvious answer is integration which will allow stronger north to south investment. you need to get productivity up. demographics take longer to resolve. these are the components to growth. italy, what can get spending up again? an important thing for italy, on

the flow basis, italy can finance itself on the flow basis in terms of short-term financing for the government. it is important to translate that into something tangible for the economy and it you mentioned debtoverall rise in jet t to gdp ratio. tom: it is about courage and they will to get this fixed. does that -- and a will to get this fixed. does that come from brussels? ?s it a bilateral relationship where does that come from to get this fixed for italy and the other italys? geoffrey: let's look at what happened between greece and macedonia. they got it done.

with the endorsement of outside parties but it came from the countries themselves. that is a model. tom: thank you so much. thanks for an important perspective. will continue to drive forward to these stories in huawei, brexit, front and center, the importance of the prime minister's speech today. joining us on the markets, troy gayeski. do not forget, jeff currie will be with us as well. stay with us. this is "bloomberg." ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. tom: this morning in london, the

malthouse compromise. it is a path to brexit salvation. 10 downing street reserve judgment as prime minister may jettisons the irish backstop. silence from dublin. in washington an indictment against huawei. the u.s. demands the extradition of the cfo to washington. according to her attorney. in china, it slows. jeffrey currie with us of goldman sachs. this is bloomberg surveillance, live from new york, i'm tom keene. in london, francine lacqua. what is the prime minister going to do as we move through the day into the evening? francine: we will find out in about one hour.

this is procedural. the u.k. parliament works differently to any other parliament in the e.u. clearer picture, it will be complicated to follow , but we will have a clearer picture on whether there is a vote parliament can get behind. hope that with that, we will have a clearer view of what theresa may's next step is. tom: extraordinary. may our european team is the most important team today. -- may be our european team is the most important team today. here is viviana. viviana: the trump administration imposing new sanctions on venezuela state-run oil company to pressure nicholas maduro to resign. block it from exporting crude to the restrictionsblock it from exporting crude to the u.s., that prompted a response from the leader. >> donald trump has upped venezuela.

viviana: the u.s. and other countries have recognized one uaido aseying -- juan giad the president. the u.s. is filing criminal charges against huawei, saying it stole trade secrets from an american rival and violated trade sanctions against iran. canada says it received a formal request to extradite the cfo to the u.s. huawei denying wrongdoing. china's economy slowing for the eighth month in a row, as -- that is the signal from the bloomberg economics gauge. it uses early economic indicators. weaker global demand and decelerating factory inflation combined to undercut chinese global growth. devastating wildfires in california the last two years bringing one of the nation's biggest utilities to its knees. pg&e filing for bankruptcy, listing more than $50 billion in estimated liabilities. investigators are trying to see

if pg&e's equipment caused the deadliest fire in california's history. today, theresa may risk losing control of brexit to parliament. lawmakers face a series of crucial votes. theeffectively abandoned deal she spent the last 18 months negotiating. she through the weight of her government behind a proposal to rewrite the agreement. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." equities, bonds, much going on this morning. strange yesterday. futures lie. euro strength -- futures light. euro strength. we will do more commodities with jeff currie and venezuela.

the vix, 18.97. gold gets my attention, lifting four dollars. this is a hodgepodge, 135.65 on sterling. bitcoin is giving it away, bitcoin was different than the opera we saw last year. uproare: -- then the we saw last year. francine: mixed, people are hoping for progress in this week's talks but they are worrying about america's trade war with china. in asia, technology stocks. a lot have underperformed because american prosecutors file charges against huawei. i am looking at pound because it is another brexit until today. tom: we do it quickly.

chart, hereunning is the eurozone gdp in 2013. they get their act together. italy cannot get it done. i knew this but i did not realize how laggard italy was. francine: it is important and they have to settle, that italian bank is small but is the force of a lot of anxiousness. i have a simple pound chart. we are looking into on the back of these amendments and these multiple votes today. if all the permutations for another round of brexit today, the most likely result is a stronger pound. looking at technical levels and what we have seen here, it is interesting to pit

that against the volatility coming down. tom: the news is extraordinary. audience, there is nothing like the focus on washington and we do that with kevin cirilli. talk abouthing to huawei, it is another for the acting attorney general to say we have 13 indictments. what changed? the investigation concluded. and the timing of this while the administration wants to save it talks are separate, it comes at a time in which the chinese delegation is going to arrive in be negotiating. -- and be negotiating. this is the dominant backdrop to these talks. tom: that is where i want to go. technology theft, what

ever the allegations are with navarro, ross, the free trade debate, can you bring those together? kevin: the administration would inue that is the strategy terms of having opposing viewpoints. blunt, there is growing consensus on capitol hill with the issue of intellectual property. it is a divided time. who are senators working to form a consensus on related toting, developing the international geopolitical cyber intellectual property agenda for this administration that is going to serve as the force of u.s. form

policy on these issues for some -- u.s. foreign-policy for some time to come. francine: does that mean it is unlikely we get a trade deal by march 1? kevin: the administration would like to see agreement. or not the market views that as a strategy or a deal, i am not optimistic. i do not think you're going to see what was developed out of nafta. the administration has said they do not believe they would need congressional approval. any framework would be small. they want to have a win coming out of these talks. francine: bring us up today with the mueller investigation? kevin: there is not much new to report. roger stone is here in washington, d.c. everything that had gone on hypocrisy.

i think he is going to fight this. he himself has told me he is going to fight this. it is interesting because the administration is distancing themselves from roger stone. on friday, president trump did not take questions. that struck me as a sign they are trying to distance themselves. tom: thank you so much. our chief washington correspondent. the terrific news flow, there is the markets. we digress. troy gayeski, skybridge capital on the making of investment and assets. , as atalk about huawei china technology evened. how do play huawei? -- how do you play huawei?

you have a view the fed is going to move slower and be could have anu unusual circumstance where you have weaker outcomes and yet stronger market outcomes, the reverse of last year, higher stocks have a chance to outperform the market again. we saw significant underperformance last year. company, it is a bad omen going into the trade talks and it is unlikely we get resolution. would be chinae agrees to buy more from the u.s. , open up their markets. conclude they can come to a resolution on intellectual property theft, etc. it is not a rosy outlook, it is a volatility inducing catalysts. . francine: what do you think is

priced in at the moment? get a lift if we see a deal between the u.s. and china even if it is light on details? in real what say markets are pricing in. ,f there was some resolution that could give a lift to markets. it is one of the positive catalysts coming up. if it does not work out, 50 basis points, 100 basis points to the outside. we think fed policy is more critical than a trade resolution with china. francine: thank you so much, troy gayeski stays with us. coming up, we talk oil and commodities which are very of goldman -- with jeff currie of goldman sachs. we will also talk venezuela.

this is "bloomberg." ♪

francine: this is bloomberg surveillance, tom and francine. theresa may faces losing control of the brexit process. one amendment would have the power to delay brexit to prevent a no deal divorce. the prime minister of effectively abandoned the agreement she spent 18 months writing. to the billndment are set to take place tonight. edwards,s now is anna breaking news out of the dup, arlene foster saying she endorses the mall tells alternative.

althouse alternative. it is about the backstop. >> indeed. things move quickly, don't they? the malthouse compromise emerging overnight, crafted by warring factors in the conservative party. it tries to bring conservative factors together and the dup. we can agreedes, to get rid of the backstop , the signatories would agree to get rid of the backstop and in exchange, another year of transition. it seems to be uniting some of the tory party. one of the authors -- i spoke to one of the authors

and asked her how much support she think she has? of details to lot be discussed with the e.u. a majority of mps want there to be in negotiated settlement. we have got less than 60 days to go. one of the big debates is how do we make it clear that a no deal is not acceptable to parliament. interesting to see the tory party coming together over this compromise and the dup. ablef the reasons they are to come together is it does not answer some of the things they have fallen out about. a news there would be backstop but it does not say what that would look like. the future relationship remains unspecified and that seems to be deliberate. put together the

things they can agree on and none of the things they do not. does spend a lot of time talking about wto rules. interesting to see some compromise from the conservative party the whether this will win others over and what the e.u. will have to say is another question. francine: did the markets want some clarity on what parliament can go behind and how can we make sure that whatever plan they come up with, there will be a majority on? >> right, so, we will come to the e.u. but the e.u. has said it wants to be sure that theresa may knows what kind of majority she can get support for. we will know a little bit more about the type of brexit their parliament would be prepared to come behind and that is why we

have amendment today. it looks as if we could get a vote. get aks as if we might vote on the brady amendment which goes some way to delivering the malthouse compromise. brexit lingof the we have to get our heads around. donald sutherland was in the malthouse compromise, a great movie. i hear the screaming behind you, the color on westminster green. usedf the phrases that is in the telegraph is from backstop to front stop. if theythe front stop are going to shift from something new, what does it mean for the republic of ireland and for brussels? >> well, we will wait and see for brussels.

the dup seems to be backing it. they do not speak for northern ireland in its entirety. there are other voices. about,ey are talking they are trying to come up with something where you do not need a backstop, that seems to be the of it. it -- gist we do know it has got the attention of the top table, we understand the cabinet is talking about it. tom: special correspondent on chaos. i am told guy johnson will be at westminster through the evening. coming up, a conversation with james stavridis, on china, on the united states, and canada. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. a mixed bag of earnings for europe's largest software company sap. the company beat estimates last year, cloud revenue growing 38%. new cloud bookings slowed down. yearrofit outlook for this

lagged expectations at the lower end. the ceo telling bloomberg china remains the company's fastest-growing market. >> there is no question there is a tension in the global trade community over the terror of matter with china and the u.s. we are hopeful that will resolve itself. we live in uncertain times. royal philips began a share buyback after posting better-than-expected sales. the health tech company boosted its dividend by 6%, trade tensions prompting philip to redesign its manufacturing footprint. it will start making products for china, in china. in one of the biggest privacy related problems for apple, iphone customers discovered a bug that lets people listen in on others by way of facetime. apple appears to have disabled the flaw remotely. it said it would release a software update this week. that is your business flash. tom: thank you.

ray dalio with a lightness in his step. he had a bank up year. a lot of alternative investment and hedge funds managers did not. troy to gaia ski -- troy gayeski to tell you when you need to invest in two and 20. when does it end? troy: we have had good negotiating power to lower that. we think one in 10 is as low as you can go. year after year, the performances underwhelming on an average basis. how do you pick the winners? troy: where there is inefficiency and markets, where there is complexity and where underlying fundamentals continue to improve.

also, on regulatory reform that has impacted credit quality regional banks. classestart in asset that have strong fundamentals and they are inefficient due to complexity, you have a fighting chance to have high single-digit return. tom: what is the return? troy: 1.2, 12%. calculationto do a and see if that is going to work. troy gayeski with your alternative investment report. coming up, julia coronado.

francine: this is bloomberg surveillance. tom and francine from london and new york. ,e will talk about brexit

italy. let's get to first word news. president trump's state of the union addresses back on. he accepted the invitation to deliver the speech the very fifth. she refused to let the president give the address while the shutdown was going on. president trump responded saying we have a great story to tell and great goals to achieve. in houston, four police officers were shot in a gunbattle when they tried to survey search warrant. two suspects were killed. police suspect drugs were being dealt from the home. to taket minister wants a second vote on leaving the union. bloomberg spoke with the minister. >> it seems to me the only sensible thing to do is to put the issue back to the electorate and let me be clear, although i want scotland to be independent, i care what happens in the rest

of the u.k. it will always be in scotland's interest for the rest of the u.k. to remain in europe. therefore, if there is an option of another referendum, that should be taken. viviana: saudi arabia expects to cut oil prices output again. -- oil output again. bloomberg speaking to the saudi energy minister. >> what we will do is work with our partners to bring inventory down to a level well below their five-year average. we are going to do it by ensuring supply is below demand for 2019. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: thank you.

troy gayeski with us and joining us now jeff currie, goldman sachs. much more, on the dynamics of commodities itself. does goldman sachs have any knowledge or understanding that you can inform our audience on on the transfer of gold out of venezuela? do you have any update? jeff: the remaining reserves are and their ability to access any international reserves is curtailed. that is one of the key issues, ,o cut off the current regime whether through gold reserves or through oil. these financial tools, and dilute back to john taylor and allude back to i

john taylor and his work. are there processes in place to defeat mr. maduro? they tried towhat do last night. in terms of what we have seen , these sanctions that have been imposed on whether, it is north korea, russia, and even venezuela happen crippling. the key issue -- have been crippling. the key issue with these sanctions last night is they did not use a blanket secondary sanctions like they used with russia which means will both china and india continue to take the barrels out of venezuela? the u.s. refiners are not going to take it. francine: good morning from london. venezuela, physically, has the most reserves in the world and was once the biggest producer. depending on who is in charge of

the country, how quickly could that change? jeff: if you look at history, rst's take columbia, two yeas before you see the increase in supply. , ite is another issue requires the large expensive upgraders, a lot of before you get an uptick. to the 2017em back levels, 300,000 to 400,000 barrels per day increase. you have got to wait years before you see a game changing increase out of venezuela. francine: let me ask if this has an impact on your emerging-market views or other asset classes? troy: venezuela is more isolated, due to production capability of fracking in particular, we have been able to

exert our weight from a sanction regime. you look at this year, emerging markets, after getting hit hard last year due to dollar strengthen risk off, the big driver is if the fed decides it not to hiking goes slower on their balance sheet. --t will dwarf in the impact decides not to hike and go slower on their balance sheet. that will dwarf any impact. does venezuela at the margin change the oil dynamic for japan? jeff: absolutely not. it is hard to hurt yourself from falling down at that level. we have lost supply going back, going back to 1998 when chavez

took over, nationalization in 2000 by. --has been a steady decline 2000 by. it has been a steady decline -- 2005. it has been a steady decline. have an optimism bankers can facilitate transactions to rebuild venezuela, is the contract in place to help caracas? in 1990.ad optimism the current environment, it is going to take time. that place where you facilitate the capital going into these countries, rebuilding the country. is it going to happen in the next 18 months? highly unlikely. is two yearsation minimum. the average length of a civil war is 7.5 years.

once these things start to take hold, it could be time-consuming. i am optimistic. i have been for some time. going to take time. francine: we have a viewer question. please continue writing questions. last week's accident in brazil impact global iron-ore markets? jeff: the impact is relatively small. the you go back to situation in alumina in brazil, it underscores the environmental and safety risks with these projects. you will see more costs. it is likely to raise the cost of operating in this business and we have seen it across the board in the other metal markets. it does not have a

substantial impact directly, the indirect impact will be material. francine: if you look at iron ore, how is the chinese economy doing? storyit is a boring because the supply side is so micromanaged. -- if we look at ,emand, the supply drops leaving the price trading at that $65 to $70 a ton range. tom: we are getting all this fancy talk from jeff currie. can anybody make money at the stuff jeff currie is going on about? troy: not really. if you look at discretionary macro managers that focus on commodities, there was the heyday.

you had a lot of spread. a lot of it was spread driven and managers printed money for years as markets became more efficient and in the run-up to the crisis, you had trends in the oil and the collapse. after the recent collapse, it has been more range bound so it is more challenging. the big opportunity is going to come as we enter the next bear market and the 10 year goes to one. tom: it is tuesday, gloom free day here. troy: you have got to look ahead. francine: we will do gloomy wednesday and thursday. jeff currie and troy gayeski stay with us.

coming up, morgan stanley wealth management chief investment officer at 8:00 a.m. in new york this is "bloomberg." . ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. defend its planned merger with sprint on capitol hill next month. the ceo and sprint chairman will speak to it skeptical democratic-controlled committee. brettfounder and ceo smith will not be forced to step down later this year. the independent directors agreed to have the mandatory retirement age apply to directors who are not company executives. he turned 75.

or years ago, the board took a similar step when he approached the then mandatory limit of 72. tom: thank you so much. jeff currie with us and troy gayeski as well. cycle,modity super everybody is waiting for it to come back. where is the recovery of the super cycle? we have seen a drop in long cycle investment across the economy. china overbuilt the previous decade plus the returns have been poor and uncertainty. i attribute a lot of the myths in the survey data because we do not make long cycle investment. ishink the key point there

you have a big structural story. it may take us five plus years to hit it. in the meantime, you have a tactical story. highet the low end, long, end, seldom. the great commodity deflation going back 20 years. there is squishing us to the math. and startingomberg after 2007, down we go. how do you make money off that chart when you have ?nstitutional disinflation how does troy gayeski survive? troy: trade oil, do not trade non-energy. that space has a long duration, it is things like copper, it is going to take a longtime time to eat through that capacity.

you have a structural decline in china. let's go back to that point about trading the trading range. i do think there is opportunity. we could see it in copper. you get down to that range we are in now. you traded up. we are not going back to 11,000 like we were. the big picture is super cycles are called super cycles for a reason. you need to of underinvestment and a big demand shock like in the late 1990's, early 2000's from chinese growth. after the super cycle collapse, it is unlikely we get another one in the next five or 10 years. thecine: if you look at u.s. china trade tensions, how does that impact the commodity? is it just the fundamentals or sentiment which is hurting

people from building things in china? jeff: it is more sentiment. the tradenk about war, i like to call that the cyclical component of the uncertainty with china. a lot of it has to do with a shift in the policy in china towards one of selective easing. people do not know what to make of it now. of uncertainty is structural and it is impacting the willingness of consumers to make large-scale investments on a longer-term basis. it goes back to the point to him was asking, we have a drop in investment. to impact the market further out. the situation creates a higher level of political and economic uncertainty there reduces overall supply in investment going forward. francine: what is your favorite play in commodities? jeff: long gold.

we believe that the world is ok right now. recessionary fears remain high. that is increasing the physical demand for gold. wealthy effect is better for gold and the central banks are buying. india bought 70 tons last year. china started reentering the market last year. .ur target is 1450 jeffrey currie with us, troy gayeski as well. i want to bring you these headlines. there is nothing new on the table regarding brexit. do not look to brussels on brexit, look to london. that is the response, isn't it? francine: it is. i think what is important is the timeline. people are saying, is there a

deal people would get behind and is there any movement on the e.u. side. continue here, much more to come. joseph davis of vanguard, that in the 11:00 hour. please, stay with us. this is "bloomberg." ♪

tom: so much going on this morning. thank you for being with us, for streaming on twitter. francine lacqua in london, i'm tom keene in new york. single best chart on apple, we are going to dive into this, apple going back 20 years, up up and away. a persistent see and just sort of as a random idea, the courage it takes when apple acquires new shares and this goes around the unit dynamics and price dynamics. troy gayeski with us of skybridge capital and joining us

will power. which matters right now for mr. cook? the unit dynamics or the price dynamics so he can get to a successful outcome? >> good morning. in the end, it is both. it comes down to revenue and cash flow and investors are going to be focused on march guidance. the other key is understanding this business. that is what provides the underpinning. how large is the service business now and how large will it be in five years? will: if you look at the december quarter, they reported $10.8 billion of revenue in that segment.

it is going to be getting that north of that and adding additional services will boost that. you have got to see grow from services to make that grow. that should continue to march forward north of 20% and from there. francine: how hard does the china slowdown hit faang stocks? will: there is no question china is in an important market for apple, others as well. degree, there is a pullback in spending, we saw that from companies the race ported -- that reported spending yesterday. that is a headwind. i guess investors have be willing to work through that. albeitone market, important. think they canu

make up for revenue elsewhere in the world? you look back in the december quarter results, interestingly, if you peel back the onion, while china was a headwind, they had records in a number of markets, the u.s., spain. getting greater traction in developing markets will be crucial, whether that is india, , etc. there are economic challenges and some of those as well. penetrationide for long-term. the other element is new services and new features, whether it is video content, streaming gaming, what ever that might be. the watch has done well. there are other opportunities as well. tom: thank you for this briefing on short notice.

troy gayeski with us. up to their eyeballs in apple. is there a wait to apple as a dominant vehicle for alternative investment? troy: they are still everyone's favorite growth play. as we discussed earlier, now the you have less crowding and you do have the situation where the fed can move slower and get a better outcome, there is room to run over the next weeks. is, the difference tomorrow, francine lacqua will be at the prado. francine: will i? i will be at the stock exchange. talking -- i have a couple questions on brazil and venezuela.

executive thatef was meant to go and he was no longer wanted. tom: a timely interview. we will see that tomorrow. this has been extraordinary. all of our brexit team in london for continued coverage, through the day, guy evening.nto the please stay with us. much more coming up through the day and on the equity markets, a churn based on china and the united states. this is "bloomberg." ♪

jon: indictment showdown.

huawei seek extradition of the cio. beware trade and china slowdowns. global earnings barely beat estimates as intel warns on slowing china and margins. the biggest company in billions insked liability. david: welcome to "bloomberg daybreak." i'm david westin, back with alix steel. alix: good to be back. david: you could have fixed brexit while you were there. they are going to have a vote later today on a couple of planments to theresa may's for brexit. the infamous backstop involving ireland, we will be watching that debate throughout the day. alix: