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: the cable rate going nowhere this morning, but

overnight volatility did pick up a lot. you will be up six or down six. it will be extreme either way. david: we will talk to alex chalk, a conservative member of parliament. alix: too much stock wherever you look, not a lot of price action anywhere. zero dollar also and changed, 10 year yield unchanged. very modest.8%, considering the u.s. has oil sanctions on venezuela. it seems like it's earnings for direction -- verizon earnings missed estimates. in stronger than estimated but revenue was light. david: the question is the guidance, what they are looking for in the next year.

there's been a real warning on the guidance. beat by asu didn't much as you thought, you got killed. david: we saw some extreme reactions on caterpillar involving china. now, time for the bloomberg first take. we are joined by romaine bostick -- this really explosive indictment of huawei, 13 different counts. china was pretty emphatic right urge theng we strongly u.s. to stop unfairly targeting huawei and other chinese enterprises. the chinese are not too pleased. can we separate this from the trade negotiations that will take place tomorrow with robert

lighthizer in washington? peggy: i don't think we can. investors are looking for some type of positive news this week that could potentially stabilize or increase a truce around additional tariffs. this case shows the overhang of tensions between the u.s. and china will be protracted. david: it goes to the heart of the most difficult issue, this alleged theft of intellectual property, the national security issue. we are insisting they have to fix that. remaine: they are denying that -- romaine: they are denying that. huawei's answer was these were remote actors, not coming from the top of the company. this seems to suggest this is more systemic. alix: this is a new york court.

it has nothing to do with the federal government. it does raise the question of will this push the u.s. government into demanding more substantive changes? peggy: that is part of the issue here in terms of some of the indictments being read as a way for the u.s. to point to u.s. and saying their infrastructure is being used for espionage and that is a threat to our national security. that overhang is still swirling in the air. separate justice department investigation and trade talks will be used as a bargaining chip. alix: we just hold a couple of things -- pulled a couple of things from the earnings calls this week. caterpillar, that is impacting their business.

talking about sluggish industrial activity and a reality check on slowing markets wherever you look. what do you make of the commentary coming out and the stock reactions to earnings? beenne: it's what we've bracing for the last couple of quarters. the second largest economy isn't in the type of shape that a lot of companies were hoping for. the companies you mentioned positioned themselves to take advantage of china's growing middle-class and massive population. now, they are getting hurt by the slowdown in the economy. david: the dog ate my homework excuse. there are problems with china -- alix: like the weather and retail. david: when they were on their way up, i didn't hear that it was china taking them up.

peggy: a lot of these companies have been touting their business expansion in asia is something investors should be excited about. we are in a dramatic different situation than a year ago. first-quarter earnings last year were a pop. we have interest rates rising, trade wars, and some companies starting to pause a bit in terms of research and development. alix: it is still hard to see what kind of earnings growth is priced in. it's hard to say because most people are trying to price in a global environment that is more fractured than a year ago. you talk about synchronicity over the past year. now, we are dealing with a separate issue. we have a completely different economic animal in europe and question marks about how strong

the u.s. economy will continue to be. you are seeing that reflected in the beats and misses, which are typically a slam dunk for companies, but not this time around. david: pg&e went into bankruptcy. we had hedgeecond, funds coming in saying we can bail you out. 4.25%.et, they are down this chart explains the entire story. debt, theine is white line is market cap. at that point, bankruptcy is your best alternative. peggy: we've seen a lot of hedge funds in the stock. taken in thatve -- there are others out there who own the debt and some who

own the insurance claims. it will be interesting to see how this plays out. romaine: pg&e seemed to force this. they seem willing to embrace it. it does give them a bit more of an edge to place a finite number on some of these liabilities. peggy: that is a great point. it is still to be determined in terms of both fires. we are still working through the liabilities. there's too many questions out there for the company to be able to mark. alix: thank you both very much. pg&e is one of the most fascinating stories of the year. it affects alternative energy, credit. in the markets, we still have a lot of earnings coming out.

allegan the very latest. they wound up missing, but the stock is flat. the first quarter came in light, shares not reacting quite that much. share, $3.40gs per to the estimate of three dollars 68 -- $3.68. share, for dollars $.29 -- $4.29. the full-year earnings forecast higher than estimates as well. verizon had a miss on revenue. davidson tied to trade. $.17 as had a big miss,

share versus estimates of $.29. overall revenue for the fourth quarter came in under $1 billion. david: motorcycle shipments 217 to 222.er -- alix: and it was international. the u.s. had more riders. international finished slightly ahead in 2017. david: europe was going to impose tariffs on harley davidson motorcycles. alix: retail sales fell 6%. light. coming in a touch lighter than what analysts had been expecting. on the earnings level, they ended up doing pretty well. david: harley really falling

now, down 8% in the premarket. earnings-per-share was a really big miss. alix: the commentary will be super interesting as well. the whirlpool call is at 8:00 today. seeill be interesting to what commentary they have as well. 3m coming out earlier, they see full-year estimates lower than what they previously had seen. ir top end, $12.90. it is a trend. david: it feels that way right now. develops.e how it alix: much more on earnings, coming up. trade tensions taking a toll anywhere you look, from caterpillar to intel.

s&p futures flat after a mixed bag of earnings results. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." mixed bag of earnings for the s&p. -- s.a.p. new cloud bookings slowed down and the profit outlook for this year lacked expectations at the lower end. t-mobile will defend its merger with sprint on capitol hill next month. john leger and the sprint chairman will speak to a skeptical democratic-controlled

committee. one of the biggest privacy related problems for apple. iphone customers discovering a software bug that will let via theisten in facetime chat service. that is your bloomberg business flash. alix: apple earnings are out after the bell. have several tech industrial companies already out with results. it is rough out there. iny all cited slowing demand china and they talked about slowing markets in general. ohmcing us with more, j senior manager. what is your biggest take away? earnings willerly get extremely focused on it. you have to take a long-term

view. if you take the quarterly earnings year to date, only a third of the s&p 500 has reported. we are calling it a 3% beat. it's not that terrible. what is really key is the outlook. we are forecasting 12 months out. unknown. lot of do i think they are being a little more conservative? perhaps. we have to see. we have to deal with china, sumer,the u.s. shutdown, the fed -- the consumer, the fed. i would do the same thing. just slow it down a bit. no one will give you credit if you say i will grow excessively next year. david: let's go back to last june.

we have a chart that shows beats, it has a pretty clear trendline. will that continue? lale: here's the bullish scenario. who ise president trump a deal guy, he loves to do deals. yet democrats in the house that you have democrats in the house -- you have democrats in the house -- the market likes that. you go to the democrats and say how about a spending bill on infrastructure? let's improve the economy. democrats are much more amicable to it than republicans historically speaking. we are off to the races. david: trade negotiations going on tomorrow in washington.

listen to secretary mnuchin yesterday who addressed this. that wepectation is will make significant progress at these meetings. these are complicated issues. we have a timeline of how we've knocked out the 90 days. david: he's optimistic we will have significant progress, but it's complicated. wilbur ross saying it's miles and miles before we go. lale: it depends who has president trump's ear. you have the market focused people who want a deal. they know we can't live on this uncertainty. you have other people who are much more hawkish, focused on national security. be able to sort out national security issues in three months. this has been going on for a long time. we have these sanctions and trade and tariff issues.

this has been going on. it's not going to get resolved. can you slice it up and do it into parts -- in two parts? alix: if the deal is we will buy more soybeans versus a more structural reform -- lale: the markets will be more comfortable with it. at this point, you want to protect the downside that there is no deal, all bets are off. if we get what the market is ,xpecting, some sort of a deal ,hey keep buying our treasuries a bit of friendly here and there, talks continue, that is ,ey, you have to keep talking then we will see. the issue is not going to get resolved overnight. .avid: you have the bull case

coming up, one of america's largest utilities falls to its knees. pg&e files for bankruptcy with n inbillion an debt. this is bloomberg. ♪

alix: one of america's largest utilities falls to its knees. files for chapter 11 protection with $50 billion in debt. anding us now, molly smith manager, laleund topcuoglu. molly: this is what we call chapter 11 protection, giving the company some breathing room for creditors. we will try to restructure our debt and keep the lights on in california. wex: for the broader market,

have seen downgrades of competitors, the whole sector got hammered in the debt market. will it be sector specific? lale: it tells you people focused on the wrong things. everybody has focused on the triple b's. this is what will tip them over. pg&e,ddenly have idiosyncratic risk and boom. we weren't too focused on the individual risks that were inherent in this industry. utilities are in this business, these things happen. how do you assess a legal liability? how do you pinpoint who is liable, especially in this extreme? they probably did the right thing by filing for bankruptcy. you hope somebody will swoop in and rescue you. investor, that is

challenging. utilities getting downgraded, part of it is a bit of a cause and effect. they are being more bearish. it's a bit of psychology, too. you get beaten down a bit, you start testing more negative scenarios. david: what was the rush? maybe it was a good alternative -- the board rushed to vote on this late yesterday. molly: we had known already for a week or so that pg&e had january 29 on the calendar. this day was marked on the calendar, which is atypical in bankruptcies. are, both of these companies are bankrupt, pg&e and sears -- there are certain

optics in pg&e's case. will be seek this last-minute rescue financing? that was secured, subordinates the other liabilities and claims. all these other hedge funds are during asenior humanitarian crisis here. lale: if you forget it is a utility actually servicing people, you take it as a plain old corporate, that is the tricky point in this scenario. it might be the right thing for the community it serves, but it inherently goes back to that issue, is it a community? david: the laws work, the courts work, if things go bad, things happen, but at least we know the rules. lale: traditional bankruptcy is

well defined in the court system. this goes back to the extent of the liability. this may be a long period in court. by the time different parts of the shareholder group try to make their claim that their plan could have been better, you could keep hearing this story. alix: thank you for joining us, molly smith and lale topcuoglu. a supply risk to the oil market? you are showing off. of oilmorgan global head research will be joining us from venezuela. this is bloomberg. ♪

alix: this is "bloomberg daybreak." in the market, it's the earning craze in the geopolitical risk surrounding the markets. european stocks a little on the upside, up .8%.

the dax side, you have issues -- brexit overhang and earnings. flat, cable flat. let -- the 2-10 spread also flat. markets are literally doing nothing. david: crude is now moving around despite venezuela. alix: certain spreads are moving. david: what is moving his brexit. -- is brexit. there debateided will begin at 1:30 their time. it ends at 7:00 p.m. this evening. the chancellor has said we are "absolutely determined to avoid a no deal brexit."

theresa may has resisted that. agrees, we don't want a no deal brexit. alix: lockheed coming out as well. they had a really nice beat on at $14.4coming in billion. earnings coming in a bit light, $4.39 per share. i'm interesting to see the call and what they will say about double demand that global demand -- what they will say about global demand. ity seem more confident when comes to their earnings outlook. .2%.tock off by tw david: let's turn back to venezuela now. late yesterday, the u.s. took

action against venezuela. ofectively stopping imports oil into the united states. the new sanctions should not significantly increase the cost of fuel in this country. >> this is about 10% or less. here's plenty of supply at sea that has already been paid for. there's been inventories, excess oil. many of our friends in the middle east will be happy to make up the supply as we put down venezuela's supply. david: we welcome abhishek deshpande, jp morgan head of global oil market research and strategy. lale topcuoglu is still with us. is this going to affect prices here? abhishek: it should . , on the other it

is, you are seeing that opec reduced its supply in december. down 300,000n barrels per day of oil. that can be brought back. alix: is the take away for this going to be about spread and not absolute price? venezuela has heavy crude. there aren't many producers of heavy crude that aren't under sanctions. abhishek: exactly. that's where the markets are concerned right now. we took out many heavy blends from the market because of the opec cut. that market is really short. if you take another 500,000 away from venezuela, you are providing support to that kind

of crude which is medium heavy. david: can venezuela sell that oil to other countries? abhishek: it can, but it has to find a way. alix: and at what price? abhishek: it will have to give deep discounts, like iran has to do right now. -- it receiving that was upgrading its oil. that could become a high cost issue. with threecitgo refineries here in the u.s. -- what do we know about where those revenues will go now? they are trying to reduce the cash flows into citco

generally. form a parallel -- way, you try to reduce the cash going into citco. they have debt coming up, too. withr ago, they negotiated the existing lenders and the existing lenders extended the debt. citco, if you look at the core

asset, it has really good assets. you thinkk at pg&e, creditors will love to get their hands on it. alix: investors are winding up with art of citco that's part of winding up with part of citco? lale: it's hard. you a creditor perspective, kick the can a little further down the road, pay people extra fees and keep it going until we resolve it. creditors would be equally satisfied with that. solid,co debt has been it rarely responds to numbers. now, you will have to play this game here. alix: we talked about opec cutting production, the saudi minister talking today, they could cut below the recommended

target for another six months. do we need that kind of cut right now? abhishek: definitely not. reconsider. might david: abhishek deshpande of jp morgan and lale topcuoglu of .ohcm really good to have you here. really great to have both of you here. viviana: good morning. is waiting into those talks aimed at ending the trade war with china. saying the u.s. will press china to prove it can keep promises. all this coming up to the u.s. filed criminal charges against huawei. in houston, four police officers

were shot in a gun battle that broke out as they tried to serve a search warrant. two suspects were killed. saudi arabia expect to cut oil output again. the saudi energy minister -- >> we will work with our partners to bring inventories down to where they belong, well below the five-year average. supply do it by ensuring is below demand. viviana: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: earlier this week, i sat down with lorenzo simonelli in florence, italy.

i talked about his company's push into the middle east. gas, numberng on one. gas will continue to grow. obviously, we play in oil sectors, each country has its own dynamics. we look at our full portfolio and make sure we are providing what is necessary. there a gasle east, aspect coming on stream. we are making sure flaring stops. within the kingdom, there is a gas push, there's several areas where there will be continued expansion of oil. 5%x: when you look at the

stake, do you see more of those types of investments? >> i think every model is different. we said this last year at the conference as well. collaboration will required a different solution and different models. as a company, we are testing different models. in some cases, it might be an equity stake. in other cases, it may be more localization by ourselves. and others, it may be partnering without a full venture. alix: how much revenue growth do you see from that? what is the timeframe? >> from a business case perspective, it stands on its own right. when you look at the drilling expansion plans, we will be increasing steadily our share. we have a good return. there is also a dividend that

comes through. also, saudi arabia potentially announcing an infrastructure program. what is your business potential in saudi arabia? >> you look at the role we play, first of all, this infrastructure investment is to continue to journey the kingdom is making into progression. especially partner, in the gas and lng. alix: part of my interview with lorenzo simonelli. wanted to buyon baker hughes, baker hughes was paralyzed. they couldn't cut cost, they couldn't grow, they couldn't invest. this is a revamp of them in the middle east. gasd: it's going to natural

because of sustainability issues and prices are really low right now. alix: in terms of longer-term, how much demand will come from china? that will be huge. baker hughes is the only services company in that field. they own it right now. .t's about advancing that coming up, hedge funds looked up on pg&e shares -- bulked up on pg&e shares. this is bloomberg. ♪

alix: this is "bloomberg daybreak." the formerming up, foundertive and xlr8 and ceo. we turn now to wall street be. -- wall street beat. pg&e files for bankruptcy. what does it mean for the hedge funds invested in the utility? to $1tone's race trillion. funding not secured. months after elon musk touted funding to take tesla private, saudi arabia hedges -- alix: let's go to my favorite story -- pg&e. the hedge funds that tried to

rescue the company and the hedge funds that got hurt in the next quarter. >> the filings are coming out in early february. we will be looking closely to see which ones still held pg&e shares. we saw a number of hedge go into pg&e in september. at the time, there was some regulation moving through california where some hedge funds thought that would play in their favor, but that was before november.in owneder of hedge funds the shares and some of the debt. owned insurance claims on pg&e, which may act as a hedge against some of the shares they owned outright in the market. david: blackstone wants to

manage $1 trillion. has been a champion, bringing tremendous creative energy to the growth of this firm. >> this is a concerted effort by blackstone. there biggest investors have been pension funds, big pools of capital moving out towards higher net worth individuals. quadrupleming to the number of assets they have. they have some competition out there. a lot of firms are seeing this type of investor is the key growth area -- as the key growth area. alix: but they don't have joan.

she is awesome. super unassuming, really focused, supersmart. she grew up in queens, has really risen through the ranks at blackstone. they are putting a lot of faith in her efforts to build this unit. had a stake in tesla, now going to jp morgan to hedge that risk. thet is so interesting, saudi fund has been in the spotlight with tesla for a while. elon musk had that tweet about taking the company private. he said funding secured, pointing to the investment by saudi. that is a big indicator in terms of the volatility around where this company will go. david: if you get dragged into

that by elon musk, you don't like that. it's not a good investor relations thing at that point. >> we are putting a lot of money into your company, let's not talk about what we are doing to other people. david: thank you for being with us, peggy collins. coming up, theresa may wreps up her brexit plan -- rips up her brexit plan. we will talk with alex chalk. it is bloomberg. ♪

david: the british parliament will vote later today on two amendments to theresa may's plan for brexit. one would put off the date and one would change the terms of the backstop provision dealing with the irish border. whoelcome alex chalk,

supports the letter amendment -- latter amendment. >> great to be here. david: explain to us why you support the amendment that would attach a deadline to how long you can have the stopgap go on. it's really important to be clear when we talk about a backstop. it's an insurance policy in the event that the two sides can't reach an agreement on the future trading relationship. the backstop is designed to kick in to ensure no hard border at ireland. that. are concerned about we need to get a deal for the british economy in the european

economy -- and the european economy. let's take the backstop off the table. a brexit is super toxic, second referendum is super toxic as well. none of those are good options. time, it the same takes two sides to agree to a deal. we've heard from brussels that they don't want to put a deadline on that backstop. is it realistic to think you can negotiate that before march 29? >> what they've also said and what is in the legal wording of the withdrawal agreement is they've said any backstop should be temporary. i think it's credible to offer a counter offer. if you are saying it is truly temporary, what's wrong with having it expire at the

end of 2021? it puts the ball in their court and provides a good faith counteroffer to address this we can continue onto the next stage and have a compromised brexit. david: you were a member of theresa may's party. have?oes she want to >> what she wants to do is get this deal through. none of the alternatives are really attractive. they could cause democratic and economic instability. she could try to resurrect the deal that got beaten last time. to do so, she has to deal with the backstop. that is option one. if that fails, the drumbeat for

a more cross party approach will grow louder. a customs union has real concerns of its own. people behind me will be protesting, that's no real brexit because you can't do your own deals. if there's a date certain that the backstop has to go away, what is the default? what happens? >> the point of this stage is to recognize if you have three years and you are serious and credible and acting in good faith, there is no legitimate reason why to counterparties -- ought not torties

able to negotiate that. more earningsp, breakdown and what it means for trade negotiations between the u.s. and china. lisa shalit of morgan stanley wealth management and david of cumberland advisors will be joining us. not a lot of movement. you get some earnings coming out. markets go nowhere. currency markets flat as well. this is bloomberg. ♪

alix: beware trade and china slowdown. global earnings barely beat

estimates. companies worn on china slowing and margins. indictment showdown. u.s. files formal charges against huawei just as president trump plans to meet with china's top negotiator. pg&e files for bankruptcy, seeking billions in liabilities. the winners and losers of climate change. david: welcome to "bloomberg daybreak." i'm david westin, right here with alix steel. it is brexit day. upouple of amendments coming there. we just talked with alex chalk, a conservative member of parliament, allied with theresa may. this is what he said. >> we need to get a deal for the british economy and european economy. let's try to address this issue of the backstop, take it off the table and detoxify it. otherwise, no brexit, super

toxic, a second referendum, super toxic as well, or indeed no deal. none of those are good options. david: makes perfect sense. a couple problems. brussels doesn't want a date certain to put off the backstop. dealhave the overall trade over the next couple of years. alix: you look at the market, it is surprisingly calm. the cable rate going nowhere. you have to wonder how binary this negotiation will be. get mucht this shier? david: the only market moves

were at the very beginning. alix: hard to price in that uncertainty. the markets not pricing in a lot of anything right now. some mixed earnings. you saw some strong earnings coming in from lockheed. missed,oint guidance you had a write down for elegant. -- allegan. cable rate goes nowhere, euro-dollar flat as well. a bit of buying in the 10 year. not a lot of buyers coming in. crude up 1%. oilresting to see how the cutback in venezuela -- filters through. david: we welcome now taylor riggs. biogen seeing full year

revenue and revenue per share topping analyst estimates. drug coulder's change the shape of the company. 3%.er of 3% -- up revenue at $4 billion. -- pfizer down 3%. revenue at $54 billion. they will be repurchasing $9 billion of shares in 2019. allegan off 3%. next quarter's earnings per share guidance came in off estimates. they are authorizing it to billion dollars share buyback program -- $2 billion share buyback program.

alix: after robust start to the year for equities, the earnings season has been pretty mixed so far. slowing demand in china cited for lower earnings. david kotok,w, cumberland advisors cio. is this appropriately priced? david: i'm not sure because we have crosscurrents with trade, the shutdown, and this transition period that is impossible to know. we have to wait until april or may to get a real look and have no more shut down. david: what is driving the downturn right now? is it macro issues, geopolitical

issues, fundamental underlying economic growth? david: how do you measure sentiment uncertainty premium? how do you measure risk that is affecting behaviors that is in a narrative, not numeracy? if you can't put a penny on it, you deal with this narrative. we were talking off-camera about the history of this narrative. look at where we are. we haven't had anything like this for a while. you need to expand uncertainty premium and widen the direction. xle isthe weight of reporting earnings this week. the highest weight of the sector -- how do we know how they are going to shake out and how do we know what is in expectations, anticipation? alix: the comps are going to be really good, but that might not

make a difference at the end of the day. the earnings beat -- they are there, but there's a sloping downtrend. david: they are old news. the news flow is way ahead of the earnings you are reporting. the sequence of things -- you used a term earlier about brexit. -- thed this lobby youbby, it is wonderful, coined a new term. we will muddy along here, we will go through a sequence or process and we have no clue how this will shake out. steel.tical expert, alix david: how much of it is shlubby ness and how much is pure noise? in the u.s., the consumer is in good shape, the employment situation is good and growing.

the employment situation is doing well -- is the consumer enough to pull us through? david: i think so. we are about to have china consumption exceed u.s. consumption in retail. that will happen this year. that changes the narrative again. we don't know for sure how much china is winding down. yes, incomes are rising and people are working, inflation under control, interest rates are low. that could go on for a while longer if it doesn't get ness ord by shlubby events. alix: joining us on set, lisa shalett, morgan stanley wealth management cio. does this make you want to take on more risk or take off more

risk? lisa: our perspective is there is still significant earnings risk out there really heading into the first, second and third quarter of 2019. many of the companies have begun to give an outlook that suggests there are headwinds from things like china trade. that is a backward looking narrative. the forward-looking narrative is what has happened with overall global growth. profits40% of s&p 500 are coming from economies outside of the united states. that's different from the composition of the u.s. economy, which may only be 9% net trade. when we are talking about the s&p 500, the global economy -- and in the slowing

the slowing will filter through the earnings for a good portion of 2019. david: small and mid caps not as dependent on foreign earnings. lisa: the u.s. economy is also slowing. last year, small and mid-caps had the benefit of tax reform. benefits and that tax bill -- in that tax bill accrued to small caps and mid-caps. that tailwind is behind us. overall, there's not a lot of places to hide the u.s. equity markets. david: how much has the market discounted this? to some extent, valuations are reflecting some of what you are saying. lisa: i think there's a second risk we didn't talk about. we just talked about the earnings risk. the second risk comes from the

federal reserve. the markets have adopted a view that the fed is on the market's side, we will be on pause. that that maye is be a generous interpretation of where the fed is. within morgan stanley, our view is the fed will still hike two more times. david: i need to play a word game. yness and we make it fedyness. the market with the fed is an ongoing narrative. lisa is right. at issue is the markets don't understand the fed balance sheet size issue. the fed has never come out and said here's the optimal size of our balance sheet and here are the pieces.

so much for treasury, so much for bank reserves, so much for currency. i see reserves that are a couldon wide best the fed give us that clarity tomorrow. alix: they will be asked. i have no doubt. david: not sure if jay powell wanted to be real clear at the moment. the u.s. sends, the world a message, escalating attacks on huawei in china. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." devastating wildfires in california bringing one of the nation's biggest utilities to its knees. pg&e filing for chapter 11 encryption protection, seeking billion dollars -- in bankruptcy -- chapter 11 bankruptcy protection, seeking $50 billion in liabilities. deep cost cuts in the last 2019, of 2018 -- for analysts predicting 1% growth. china's largest technology allegedly violated sanctions against iran. huawei denying any wrongdoing.

stay on thent to subject of china and the extent developmentt huawei might affect the negotiations that start tomorrow. in the meantime, secretary expectssaid he significant progress on the talks. still with us, david kotok of cumberland advisors and lisa shalett of morgan stanley. you think china is an important piece of this puzzle. david: it is the most important piece. it will be the most important piece, four times the size of our population, roughly equal now in retail consumption and they are growing faster. we have the one and two largest , allompanies in the world

others are very important, but not as big. it's more important than any other issue has been and will be. it is the number one. david: you were talking about u.s. growth earlier. to what extent are our economies really integrated at this point? our export portion is not that large compared to germany. lisa: that's right. dominantly still domestic oriented. net trade is about 9% of gdp. the issue is really around global supply chains. as we talked about the disruptions of inputs that we import or that are part of intermediate goods. that is really the issue. for china, the u.s. consumer has been a huge market, will likely

continue to be a huge and market -- end market, and that's part of what is up for grabs. as we think about the subheading of technology transfer and how those things work, i'm not entirely sure that will get done anytime soon. alix: that's basically what the huawei conversation is coming into play. the china administrative affairs saying we strongly urge the u.s. to stop targeting huawei and other chinese enterprises. -- the china minister of affairs. the this bring in structural changes that need to be made more prominent now? exchange had an email

a few weeks ago about you catching nuances in an interview. lisa'ssa plus comment -- comment, add canada, detained the chinese in canada, extradite a government official -- not a government official, huawei's person, fromty canada, where she is under house arrest. mix of a china trade negotiation. complex,uanced and exceptionally complex. david: when you talk about technology transfer, , chinalarly ip theft

hasn't admitted to doing that. if they can come to terms on access and market say we will have further talks about ip, how do the markets react to that? the: again, we remind folks markets were fearful in the , we camearter o into january and hope springs twofold,nd hopes were we will get a deal and the fed is on pause. we were skeptical about both of those. on trade, we will get something really week that suggests anre's progress, some talks, agreement that china will by u.s. commodities, there will be some access for certain u.s. industries, but i think this clearly, the u.s.

government knows exactly what it's doing with this timing, it is very provocative, but i don't think it will get done in the next month. alix: lisa shalett and david kotok sticking with us. more trade tensions and how they relate to earnings. this is bloomberg. ♪

david: time for the bottom line. first up, uber. this happened 18 months ago. travis kalanick stepped down. we now know why that happened. a group of five major venture andtalists wrote him a memo sat down with him in a hotel room in chicago saying he need to permanently resign as see you -- as ceo.

the board will exercise appropriate oversight. we talk about boards that don't step up. this is not very ambiguous. alix: a little late, though. david: we are finding that out now because there's a lawsuit involved. alix: fair. lockheed martin, super interesting, it boosted its cash forecast for 2019 quite a bit. yet, their expectations for earnings for the full year missed. there earnings not coming in as strong. they will throw off a lot of cash from the 35. -- the f35. david: president is proud of the fact that he's spending a lot of money on defense. theory, this seems like

results for boeing, their defense contracts -- good results for boeing, their defense contracts. >> the stock is up this morning, which is interesting. may be a reflection of the selloff we saw across industrials yesterday. i don't think 3m's numbers are that great. they are cutting their outlook for organic sales growth this year. they just gave those targets in november. the analysts thought they were fairly aggressive, especially on the growth front, because they were calling for stronger growth than we saw in 2018. that was a forecast that never made a lot of sense. now, they are walking that back. 3m has a new ceo.

he's only been there since july and this has not been the first time he's had to walk that guidance. -- walk back guidance. 3m has limited forward visibility. some of the big drivers for them, the automotive markets, electronic markets. those have not been areas of strength in the industrial sector. they didn't have a strong growth number in the consumer segment, which is interesting given what we've seen in the retail sector. alix: it's interesting that the stock is up so much. they gave the outlook and then what happened? >> there's a bit of discrepancy in their fourth quarter earnings number. they seem to be factoring in gains from a divestiture. there seems to be a bit of a

deposition change here playing into the degree of that outperformance. they seem to be changing the parameters around their guidance. alix: we have more earnings coming up in the next couple of weeks. coming up, theresa may set to speak in parliament in moments after ripping up her brexit plan. one of america's largest utilities falls to its knees. pg&e files for bankruptcy with $50 billion in debt. the repercussions hitting the industry. this is bloomberg. ♪

alix: a lot of headlines and not a lot of action in the market. the s&p is up by three. we are getting some good and bad earnings coming in.

the markets are not really moving much on that. european stocks are coming up by 1%. the action in the macro and lines is what happened with brexit. that currency is not moving. what kind of a poor downside was the asymmetric rift on brexit. they will start debating in just a few minutes. crude is holding onto to its games, up by 1% as the venezuelan oil sanctions relate to the market. one of the largest utilities falls to its knees. for protection. fires drove the company into bankruptcy grid join us on the phone is a securities analyst. thank you for joining us.

it happens now? does it get where you want a more constructive view on equities? now, it is certainly shareholders that are upset, one of the most vocal has been blue mountain. they say it's not right to stakeholders. reasons they say it's not right is because pg&e a not be responsible for one of the biggest fires, which they warrant. they could've raised rates. they said that bankruptcy advisers may have a conflict of interest. forg forward, it's hard victims to recover, it's hard for stakeholders to recover. shares, i'mthe surprised to see them up 7% this morning. that wenot be something

would want to hold onto. david: talk about raising rates. we had a chart that came out of a bloomberg opinion piece. ins is how much per capita disposable income, what they spend on electricity. california is so far down the chart. it's like forth from the bottom. at the top is alabama. income perposable capita. why do they have such low electrical rates? >> i'm actually not sure. i would imagine a lot of has to do with the way they subsidize electricity. it may be a factor that there are so many people living there and the costs get spread around more easily. that's all i can give you. if we get some resolution

here, if we move on from this, could those competitors by here? >> if you want to play at california, as though shareholders were saying, they did not feel this was necessary. if you want to play at recovery, or a california regulators will want to make sure this does not happen again. recovery, there could be legislation that is already favorable to protect these utilities. , thoseinternational could be in play. we have a buy on them. david: thank you so much for joining us today. he is of argus research.

still what us is lisa and david. i will turn to you. what does this phenomenon, this problem, mean it to the debt market? limited, we can measure it. if it's a message that there is something else, that's harder. i would've asked a question if we had time. is there an entry level at which this is a bargain? what do you do about pipeline and secondary effects and distribution? they will not go to chapter seven liquidation. will is a concern this overtake the shock. it took half the game out of xl. we are halfway back to the 48 where we started as a price two years ago. maybe it's too soon to go into the utility sector right here. it's getting riper. alix: what is idiosyncratic or

structural? her and this is what she had to say about pg&e debt? >> everybody focused on the triple b's. this risk.y had it went boom. people were just two: place a. -- too complacent. alix: what do you think about that? lisa: i think that's absolutely right. we need to separate what is idiosyncratic from what is structural and systemic. i think i am closer to david's perspective. been a problem, it has had inherent risks for years. this didn't just come out of the blue.

from a sector perspective, we are getting a lot more interested. how do you look at the structural risk? they go back into the market, they will have to pay up for that. if it feeds through two other and their loans get renegotiated and they can pay back their loans, the market could get hit in certain areas. how do you think about the structural shift and who plays -- pays for climate change? you've got 30 seconds. >> there is a point in which there is a bargain and you want to buy it. between now and then, you don't want to go too soon. you don't want to catch a falling knife. lisa: the broader question you asked, how does the world pay for climate change, that is too big.

we can't tackle that one today. david: thank you both very much for being with us today. common up, theresa may is set to speak in parliament. this is after ripping a pre-brexit plan. we will bring her comments live. we also have our next installment about inside ge. that's coming up in just a few minutes. this is bloomberg. ♪

hewlett-packard enterprise greenroom. sam nunn, former george are from georgia.

-- senator from georgia. bloomberg business flash. shares of harley davidson or falling. they reported fourth-quarter sales and orders that missed estimates. they shipped 8% fewer of their iconic bikes. the company was caught up in the trade war. tariffs hurt sales overseas. the company beat estimates for sales, cloud revenue grew 38%. new bookings slow down. the profit outlook for this year lags expectations on the lower end. t-mobile will defend its $26 billion with sprint -- merger with sprint. skepticalspeak to a democratic-controlled committee. it would reduce the market to three carriers. that is your bloomberg business

flash. thed: it's time for follow lead, a deep dive into the stories making headlines. all of this week, we look inside general electric. our focus is on what went wrong with its power division. ge has a big power problem. 2015.ought them in then, it ran into problems. >> it tends to be very challenging, it continues to be under pressure from energy efficiency, penetration of renewals. david: orders crumbled well cheap clean energy get cheaper. the power generation forecast was too optimistic. the penalty was a $22 billion write-down. whatke no mistake, we know has to perform better. david: larry culpas splitting it

into two units. turbines, thegas other will focus on steam, nuclear, and power conversions. ,> this will keep everything they will else, likely wind down or exit over time. during this is the founder and ceo. years as anrly 30 executive at general electric. bloombergng us is our opinion columnist. the prospects for the plan on the power division? brooke: this is not going to be the type of thing that larry will solve in a quarter this year. its need to really rethink

footprint in the power business. they have to make aggressive cost cuts. some of that will be very difficult to do. is not the easiest place to make cost cuts. gmail out of commitments to the french government about jobs and investment. david: is it a good business? is the power business a good business to be in? bob: it's a great business. i ran it from 95 through 2000. we doubled the revenue. we were producing gas turbines for year. -- reallyly's billet split into three. we had oil and gas, power, and the rest of the business. the other little-known fact is we bought also the first time. we but the cass turbine business. -- gas turbine business.

we did 50 acquisitions in 18 months. we got into water treatment, we got into a number of business renewable power. the team did a fantastic job. it sends me to see what happened to power and they got rid of oil and gas. now they split into two. you have three different businesses calling on one client. that led it to a lot of confusion. that's why we brought it all together. we have a long-term service agreement. that gives you predictable revenue flow, even if the business get soft. a lot ofar is there is projects they inherited that ge wouldn't even been on themselves that are upside down. businessinto the hydro .

i think there was an exuberance to do a deal. they did that deal. we can see the impact of it. brooke: some of these deals had to be signed at a lower rate just to get the business in the door. we saw them continue to sign these contracts. back to a bring power position of strength? you have to have revenue coming in the door to make the business grow. you have to have discipline to keep the margins up. bob: it is in the ditch. this is a long lead business. unless you have turbine orders on the books, you're going to build and install, that's the first indicator you want to look at. they have that problem. now the have developed an oxidation problem. this is unfortunate. lot's going to cost them a

to shut down the turbine deck and look at what's going on inside. maybe it's the air cooling system. they have taken some reserve. it might be a good start as we see what happens. brooke: what would you do? think weuld like to wouldn't have done that deal that broadly. the big thing is, i've been fortunate to have experience running healthy businesses and businesses you have to run for cash. that is one of the biggest faces ge.t they didn't have anybody there when jeff left. he inherited a fairly healthy

business, but didn't have the cash crunch that is going on now. analyze. you've got to make decisions. why did they wait so long to sell a billion dollars of venture capital. you've got to make quick decisions when you are burning cash to keep the boat afloat. i just don't think they did that. i would be going back. to go to your point, we've got to get some orders. you work back through your supply chain with vendors. you've got to start restructuring. you've got to be able to produce quality to get rid of some of the trappings. brooke: as you look at ge winding down some of its

businesses, is aviation and power going to be together long-term? someu need to have structure? bob: they could be standalone. m 6000.the l ,e were putting portable power when we were having interruptible power, we would boost so they did not get line sag. as long as you have an arms length relationship and you can get the derivatives, i would hate to see aviation stay. it gets trained to support power systems. it might makes sense to spin that one out. have an arms length relationship. it doesn't get negative impact. if you look at the lease

billion, there is $40 potential purchase, that gave the stock little bounce. that's a great business. that was part of ge capital. it's well-run. that's a bright star for ge. david: my experiences you need to get to ground zero as fast as possible. you have to figure out what the core business is and stick to it. does he have that? bob: it's interesting. i have a lot of respect for larry. he did a heck of a job. he is a bright and knowledgeable young man. he is coming out of a private equity environment, which is different than a public environment. he was able to do what he needed to do.

he has the equity market looking over his shoulder. he needs to stand still and do what is right for ge. brooke: how much time does he have? what this fast mean in the world of ge right now? now is runningt fast to catch up. time is not a friend when you have that situation. i know running chrysler would we month,rning $1 billion a time is not your friend. work at blink speed to turn this around. you cannot live in the past. that's one of the advantages larry should have. he is not locked into the legacy in tradition. he's got to move extremely fast. thank you both very much

for being here. we have some headlines coming. they will haveg a vote today on two amendments. one is to delete brexit altogether, the other is to renegotiate the deal. they will have votes on both of those. he is giving remarks live in parliament. we expect any moment for the u.k. prime minister theresa may to give her opening statement about what she wants done with her plan. alix: the eu is like what you're talking about. we're not going to renegotiate. david: we will just renegotiate. i'm sure they will go along with it. we are going to go live to theresa may. thise past few weeks, house have left no doubt what it does not want.

it does not want to eat leave the eu without a deal. that would hurt our economy. it doesn't want to hold a general election because it would waste time and solve none of the problems we face. the house renewed its confidence in the government. neither do i see anything approaching a majority across the house to hold a second referendum. the people's vote campaign agrees with me. i also suspect the house is not wanting to the deal it curly exist. the vote was decisive and i listened. the world knows what this house does not want. today, when need to send a message about what what we do want. that must include honoring the votes of our fellow citizens and completing the democratic

process that began with this tose voted overwhelmingly form the referendum and then trigger article 50. see brexitd to through. >> she pleaded with other european leaders that her deal was not only the better deal, but the only possible deal. she repeated it time and time again. she wants to rip up the withdrawal agreement. and start the process again. why would leaders agreed to that? >> listen to what i'm going to say. believe that means seeing through by reaching an agreement. one that works for this country

and the 27 nations of the european union, including ireland. that means listening to the messages being sent, that they need an implementation time. it means protecting the security partnerships that keep us safe. it means caring about every part of the united kingdom, including northern ireland, who should be as just as much as the concern in this parliament as their fellow citizens. a good deal that sets us on court -- course. that's what i believe this house wants. it's what the government wants. it is what the british people want. chance tohave the share the european union what it will take to get a deal through this house of commons.

what it will take to move beyond the confusion and division and uncertainty that hangs over us and onto the bright new open relationship we want to build and canned build with our european friends. >> the prime minister knows our analysis shows every plan for brexit makes us poor. confident, will she publish it? documents.published what those show is the proposal that was put forward was the best deal in terms of honoring the referendum and providing protection for jobs in this country. i know you don't agree with that. it's our duty to honor the referendum.

>> she has had very strong words against this house not forming an alternative consensus to her deal. she is now supporting the brady amendment and she will be voting against her own deal tonight. how can we provide an alternative when she is voting against her own deal? >> they stood up and asked me to listen. now i have listened. the way to make clear what it will take to move to a situation restate can agree is to what we don't want.

i give way to my old friend. right aboutsolutely altering the referendum. millions of people voted in huge numbers to leave the european union. many wanted of them to make good on the referendum. if they vote, they will be voting to dishonor the referendum. >> i think he makes a very important point. manifestomember the in which they were elected. cast were casts for honoring the results of the referendum. that's what we need to do. we can honor the results by showing what it will take to

enable this house to agree on a deal. longer faces the backstop. instead, alternative arrangements. can we set what those are? >> he references alternative arrangements as if this is something that is coming to use. it does allow for alternative arrangements. to ofd like to turn it the amendments. i appreciate the spirit of my friend. i want to avoid leaving without a deal. i heard the concerns and

anxiety. they worry about what would happen if we left without a deal. all the hard work that is seen this government delivered record high employment. wages are growing at their fastest rate in a decade. the amendment is missing the upper half of the equation. the only way to avoid no deal is to negotiate a deal. i want to go back to brussels with the clearest possible mandate to secure a deal. secure deal that this house can support. that means sitting the clearest possible message. that means sending the clearest possible message about what we do want.

to say i aming always generous. i know that some members of been concerned that the debate could be the last chance to vote. i want to reassure that we will bring a revised deal for a second meaningful vote. if he wants to comment on what i am saying about the process, he waits until i complete what i am going to say. both of them are very senior people. they should behave wit