francine: china vows to buy substantially more u.s. goods, but there is no end in sight with just a month ago until trump wreps up tariffs. cap it a sales forecast and raises concerns about rising cost. the lender declines and cfo tells us a merger has not been ruled out. like,have talked, if you and there's a lot of talk in the sector overall. that over time, murders and consolidation in the banking sector would be sensible for a variety of reasons. so we tended to agree with that and what form it takes and how long it takes to do is anybody's

guess at this point in time. ♪ francine: good morning, everyone, and welcome. in on your markets, we are getting some news out of the euro area. this is for manufacturing pmi be much in line with expectations. looking at the stoxx 600, they are gaining 0.2%. we had better than expected figures in terms of earnings in the markets are watching the resumption of trade talks. euro-dollar much more stable. we're getting economic data out of the u.s.. a lot of investors think that actually will not move the needle because we had such a dovish fed a signal. coming up, after the u.s. jobs data, we will speaking to the director of the national economic council at 2:30 p.m. london time.

but get straight to first word news in new york city. china's contraction deepens, factory pmi had the worst readout is 2016. it is the latest indication of a slowdown. to 48 pointlling three, the lowest reading in nearly three years. it is also well below forecasts of 49.6. but business confidence is at an eight-month high and the gauge for new export orders has risen. that is back into expansion. amid a traits that, china's holdings has fallen to its lowest level in a year-and-a-half. infell to 1.12 trillion november, according to u.s. treasury department data. and the u.s. is reportedly withdrawn from a nuclear arms treaty with russia. sources telling bloomberg they will suspend a 1987 pact with the former soviet union as they

prepare to pull out entirely. it has since become a pillar of international arms control, representing a flashpoint in u.s.-russia relations. rejection of an international agreement by the white house. president is reportedly considering herman cain for a seat on the u.s. federal reserve board. the former executive ran for the presidential nomination in 2012. kaine raises the prospect of a grueling senate confirmation. she faces accusations of sexual harassment and infidelity that ended their campaign. they have declined to comment on whether trump is considering him for the job. 's venezuela, juan guaido report of the announcing a global coalition to send aid to venezuela. reporting the opposition leader is defined the government ban on humanitarian aid, this is as they say a

special police squad visited gu aido's home. the forces commander denied the visit. and india's budget just announced, these plans are seen as a last-ditch attempt to win voters. india has missed the deficit targets for a second consecutive year, but growth has been positive. toy have overtaken france become the world's sixth largest economy and is on course to replace the u.k.. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine. francine: president trump said trade talks with china are going well but there will be no final deal until he meets xi jinping. he has told reporters that tremendous progress in two days of discussion does not mean there is an agreement. out a newto work

trade deal with china. i think it will happen, something will happen. but it is a big deal. if it does, it will be by far the largest trade deal ever made. francine: joining us for the our guests. when you look at the trade talks, is there a danger we go back to what we had a couple of months ago? or is it because it is in the right direction, we should end up with some kind of deal. >> i don't want to be overoptimistic. it could be simply that the truce is extended for another 90 days with token agreement. i think the incentives around trade wars have changed now that you have softness in the chinese economy, u.s. data turned a little. it is not the sanguine environment trump was enjoying. if you really cares about the economy, i think he will ease up

on trade wars a little. francine: is the truce and off for markets to rally? -- enough for markets to rally? >> it is something that will feel quite temporary. it is an extension of the deadline, china buying more soybeans, importing more oil. but the big structural issues will not go away. so in the context of a dovish fed, it will help in the margin, but this is another issue that will continue to take over the background. so we still have that inflationary pressure on it for good. francine: how much stimulus would china have to put in for the market stabilizes? a lot of it is sentiment over trade concerns. >> that is a good question, there will probably be some monetary stimulus but those tax cuts would try to stimulate private consumption and demand. are not as strong

as we saw. the stimulus does not seem to be working quite as well. bea finally see, they will building more direct measures, direct stimulus. and probably stimulate domestic demand. the last time we saw this followed by a recovery. of oure: this is one favorite charts and looks at some of the satellite indices versus the official manufacturing. what does it tell us about the strength of the chinese economy? do we believe the numbers? the data is soft. you can see that in official numbers, interregional trade data. the data in korea has been softening, other economies has been something. very clearly, to my colleagues point, i think the data is soft,

both in china and regionally, and that is having an effect on how the policymakers think. as things go forward, we think that weakness will drive more stimulus. after the new year, we think they will be pretty supportive. whereas i think for the u.s. markets, it will be a little better news on trade, but that is not going to change the conversation that the fed has now put itself in a more challenging position. we do have some more ongoing slowing of the economy that will be with us for the rest of the year, creating a more difficult backdrop here. francine: is the dovish town going to be supported for risky assets? >> i think it will be challenging because now they have to deliver. either the data will not weaken and the fed is in a awkward position and the underlying data is more stable, or the data does

we can. ,hen we look back in history that has usually been a pretty bad time for investors. when they have been pausing and accelerating data, that is usually meant worst returns, not better returns so i do think they are in a difficult position. moret does not solve meaningful issues. >> the fed looks at financial conditions. what they are focusing on now is not boosting the prices of risky assets, but they want to rip move themselves as risks. when will the fed stop with rate hikes? are they going to signal to markets? but there is a broader question for monetary policy perspective. sometimes, it makes sense for markets to become risk averse. and we are in a risky environment.

what they do not want to do is reduce excessive risk-taking. the correction down the line would be bigger. it would remove themselves, rather than giving the markets a reason. thank you very much, both stay with us. coming up, we talked deutsche bank after the lender resulted reports. we hear from the chief financial officer. in the meantime, a press conference is happening christian sewing. -- with christian sewing. this is bloomberg. ♪

francine: economics, finance, politics, this is bloomberg surveillance. revenue at deutsche bank contracted for an eighth straight quarter, confiscating christian sewing turnaround plan. this as reports continue to build about a merger. matt: how much pressure do you feel from the german government to show them targets or go into merger talks? >> we are in control of our destiny. we are proud of having achieved the milestones we did in 2018. work, frankly, achieving the potential milestones. we intend to do the same in

2019, leverage the work we have done with businesses, stability and the platform and serving clients. i think that all of the stakeholders around this should see us execute on that. that puts us in control of our destiny. francine: is there some strategic health -- health that merger with another bank would offer you? >> i will not comment on specific items. we have talked, and there's talk in the sector overall, that over , would be sensible over a variety of reasons. have yet to agree what form it takes, how long it takes anybody's guess. francine: previously -- matt: previously, deutsche bank has said it no merger talk until 2020. is that still the line, or could use for see a merger situation happening? >> we have an clear that we have

homework. we want to continue to deliver evidence of that in 19. matt: could you rule out a merger? >> i will not comment on specific mergers. i have answer the question on our general view of consolidation. onin, we are focused executing on our plans and. to them about them today and demonstrate progress over time. francine: what about the external issues -- matt: what about the external issues? much of a difficult variable are those offering? >> as financial institutions, we operate in the environment. is working within the interest rate environment or the underlying economy. we swim within those tides, we need to adapt our strategy and business models to reflect the environment. as well as to adapt to the

challenges the environment throws up. we have been working through that, it has not been easy. i would cite the interest rate payingment when you are for cash that is deposited after central bank versus earning, it is a huge competitive difference between being a euro bank and a dollar bank. but it is part of the environment, something we work through will hopefully be able to overcome. francine: that was deutsche officerhief financial james bond moltke -- von moltke. when we look at the sector, will we see more consolidation? or will it be banks within countries that merge? >> i think more consolidation would make sense. i'm not sure that we will see that. consolidation has been there for five or eight years. of hurdles,number

including national priorities and different banking cultures, that a lot of these banks have spent the last eight years addressing their own internal issues. it makes it more difficult to merge. but you do have a sector with excess capacity. when you have excess capacity, the mergers make sense. strategically, that does make sense. i had you can't talk specifically about deutsche bank shouldmerzbank, but consolidation make investors worry? generally, the case sectorsolidation in a with low capacity and margins is that the consolidation reduces excess capacity and increases margins. that is the reason a -- to paper companies would merge in a sector with excess capacity. faces excess

capacity, lower margin businesses can get together and have higher margins. that is am is that general description and does not fit every specific case. there are complications in every sector. francine: talk to me about how this crosses over into your world. you need an ecb tightening monetary policy, and it is not happening. >> as a push, you make it a surprise increase in the depot rate. sense toot make much penalize the banks for doing nothing more than leaving. later this year, we'll probably get a hike in the depot rate. a broader question is what kind of challenge is a banking system that is not in good health present for its policy initiatives. in this is a key question. it is much-u.k.,

easier to transmit monetary stimulus to the real economy. when you have healthy banks, it is easier. if we consider when the next recession comes, sadist 2-3 years down the line, they will be resorting to liquidity measures. these are genuine risks. , the banking story is actually a monetary policy story. calls around morgan stanley is that the ecb will raise rates this year. francine: looking at what data? >> exactly, people say that is crazy but we do think the data will bounce some off of current contemporary factors. rates, itou raise the might not be seen as tightening. they release pressure on the , and there could be, i

think, and emerging arguments that what ecb policy might be counterproductive to some banking strength and could shift. francine: if we do see an increase in interest rates from the ecb, is that to get rid of the tail risks of trade? what needs to happen for that? >> we need to get through this a very gray winter. the euro zone hit by a succession of shocks and those risks are weighing on activity. fundamentally, the eurozone economy is in ok shape if you remove some of the risks, trade wars, brexit, italy -- francine: that is a lot of risks. >> knocking on wood. by spring, we will see an improvement. we will be back to a trend growth, a little under 1.5%. that will give the ecb confidence. i think first we will get a hike in the depot rate to reemerge the symmetry around the three rate corridor.

heading into 2020, we will get to rate hikes, provided that growth is around trend, which it should be. francine: does that depend on who replaces mario draghi? >> a little bit. but let's think about the following. i think the markets will assume, rightly or wrongly, will assume -- whoeverill be replaces draghi will be more hawkish. it could potentially be a way to help the banking sector, and then draghi is a place by another individual. the market can then further extrapolate rate rises would be behind that. francine: thank you of. -- thank you both. coming up, we speak to larry kudlow after the u.s. job numbers. that interview is at 2:30 p.m. london time, happening in washington. this is bloomberg. ♪

♪ this is "bloomberg: surveillance" let's get a look at stocks on the move. >> let's talk about electrolux, over 10%. are the ones that brings all of the refrigerators and stoves hotels around the world. 4%, thedisk also up world's biggest makers of diabetes drugs. they're showing high profits.

deutsche bank down more than 1%. this is revenue contracted for its eighth consecutive quarter. we spoke to the ceo and we'll hear more from the interview throughout the day. francine: thanks very much. last deal attempt to salvage a brexit deal. they're setting out to woo lawmakers to get the agreement through parliament. we will look at table, euro-sterling. is a lot going on with brexit. we will look at that, and your markets, this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's get straight to the bloomberg first word news in new york city.

viviana: china promised to substantially expand purchases of u.s. goods after the latest round of trade talks in washington. both sides have decided on a breakthrough. president trump seems optimistic about a meeting with his chinese counterpart. there's only one month to go before the trump administration is set to ratchet up tariffs. >> you have to get this public paper at some point if we agree. there are some points we don't agree to you, but i say we will agree. china's factory pmi had the worst readout since 2016. this is the latest indication of a slowdown in the world's second-biggest economy, still has a way to go. it is also well below the forecast of 40 96. aniness confidence is at

eight month high as a gauge for export orders has risen. 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.we getting breaking news out of the u.k. a little bit of u.k. data. january manufacturing pmi falling. it is a little bit of a miss, but nothing huge. count is moving on the back of cable. look at eurosterling. we will talk about what it takes for it to move. you can see table at 130.89. on the back of the two data, let's talk brexit. the discussions have included enhancing british employment rights, increasing employment

protections and guaranteeing money for private price of the country. joining us now is a taxable as kallum andell andrew. withuch of this has to do him peace focusing their minds and trying to find a deal before march the ninth, at how much of it has to do with the eu be more flexible? kallum: i don't think we will get much flexibility from the eu. parliament week, have created an opportunity for itself to get some control over the brexit process. if those amendments have been permanent the ability to ask for an extension

and discuss the alternative option, i think we would be a little bit more relaxed. parliament to take that opportunity. rallied aroundes theresa may and her to make one last push to brussels to try to renegotiate. . what we are now doing is waiting for parliament to repeat tuesday's vote with the ability to steer some influence away from the prime minister. buthink they would do it, because parliament has missed the opportunity, there is a -- in noty of a and brexit. francine: what does that mean for the eu side? are they willing to change or are they willing to be more flexible to avoid a hard brexit? operative: -- alberto: this

might inject some new dynamics. there are legal options. the possibility of including a protocol to the withdrawal agreement might set up a process for agreeing on a time limit to the current backstop option. these legal formalities might the difference between now and march 29. francine: we have heard from ireland that they don't want a time limit. aswas basically seen insurance running out and they don't have insurance. can the eu extend it? an extensione is that could be given for three months in order for the u.k. to hold elections.

that extension will be much larger sting for the u.k. because the political leadership in europe would change as a result of the elections. that in theargument case of an extension, the withdrawal agreement would be put on hold. this might be interesting from the u.k. perspectives. francine: what do the markets want? i think the markets just want to avoid no deal. if the pound is cheap, the ftse is cheap. of a to the point that both my colleagues just made, a think we are entering a tricky month period because i think the u.k. is going back and asking for something that has repeatedly been rejected. decisions have still not been resolved on this issue and we are rapidly getting down to deadlines.

deadlines that have been with us for long. period of time. francine: getting breaking news out of the european council, they are saying eu envoys agree -- i am not 100% sure if this is the visa free travel between the u.k. or between eu countries. are recited said that the government will not change the red lines? if theresa may goes back on the red lines, may the eu is ready to renegotiate. kallum: i don't think the eu to the spoke agreement if theresa may keeps her red lines. what we are doing is looking at parliament struggling with a kidney stone. we are looking for it to pass. if it dissolves, that is theresa may's policy going through.

my base case would be that theresa may gets one last chance to sell her deal to parliament. she will fail and that the majority in party parliament will take all of the situation and seek out an agreement. completely strapping her red line. and the question is how much legislative space to be need to do that? on this specific issue of the extension, there's no reason for the eu to extend article 50. once the key makes a political decision, whether it is a referendum, you decide how much legislative space you need and the eu will accommodate in that regard. if theresa may holds on to this aal and it fails, we risk nobel brexit. -- no deal brexit.

as european earnings season gets into full swing, we asked chief executives how they are preparing for brexit with the risk of a disorderly divorce. >> we are making sure that we has inventories of products that are sold in europe that made in the u.k. on one side of the and products made in europe and sold in the u.k. on the other side of the channel. >> we really want a sensible deal done quickly. having said that, we can take the brexit scenarios in our stride. we are planning for some of the eventualities. >> this is our key concern as it look at brexit to ensure is set up for success as it makes its move and that the u.k. clarifies how it will the

regulation of medicine as it exits the ema and finds an appropriate way to leverage the u.k.rtise in the >> we are prepared for all scenarios that could come out of brexit. software will need to accommodate any of the changes in governance and global trade that will result of a matter of any decision but ultimately takes place. >> we believe the sector is ready for brexit. there is one thing that would harm the economy and would not be good for our customers, would not be good for s&p's and that is a no deal brexit. ♪

francine: this is "bloomberg surveillance."

let's get straight to the bloomberg business flash in new york city. viviana: deutsche bank suffered its eighth straight revenue contraction in the final months of last year.the fourth quarter was overshadowed by market gyrations and images of the police raiding its headquarters. it may see a merger by the end of the year if they can't turn the bank around. talked, and there is a lot of talk in the sector mergers,hat over time, and consolidations in the european banking sector would be sensible for a variety of reasons. to have tended to agree with that, what form it takes, a long it takes to do is kind of anybody's guess at this point. viviana: apple temporarily pulls important app developments after the iphone maker is decidedly the internet giant broke its

rules. apple reinstated the access later. this is a sign the tech giant is flexing its muscles of the operator of the most lucrative u.s. app store. that is your bloomberg business flash. francine: thank you so much. powell has made investors question what is going on in the world's largest central bank. ay sends signals on wednesd that its next move might be a cut. you are talking to little bit about this kind of bunnies the market or said can really follow through with what it is saying. at the margins because of political interference and because they don't want to be blamed if something goes on? lum: the fed is always in the

discussion in the u.s. with an unusual president, the last thing the fed wants to do is become a major discussion in the 2020 presidential campaign. they do not want to be the apparent cause of a slowdown in the u.s. what is going on at the fed? the market always thinks the central bank knows something but it doesn't. back in december, it sounded powell had a tenure with the data was strong. francine: please comfort me. they do have a lot of economists working for them. they should have more visibility than we do. andrew: economics is always a challenging subject. it's hard to overestimate how big of a ship this was. just in mid-december when the s&p was lower than it was today.

they indicated they were very comfortable with further hikes and sato shipped to the balance sheet policy. these are really wo big questions. we have payrolls coming out today. inflation in the u.s. has a tendency to affect the upside for a variety of factors. will they be able to hold that position given the incoming u.s. data, especially as trade tensions follow it, the government shutdown has been put on hold, etc. secondly, if the data continues to deteriorate, can the market believe that the path in the fed is enough to accept that would history suggest it often is not? francine: visit hiking too late or too soon? probably- kallum: hiking too soon. up, it scarescks the fed into thinking we need to create employment in order to meet our target. pregnancy any -- i don't see any

data that suggests there is tightening in u.s. monetary policy. what we have noticed is despite the fiscal stimulus, the wage data and inflation data did not pick up as much as anticipated. we have seen a higher info of workers that work at the labor market for the last 10 years. keynote is that take up in the participation rate in the fed is ready to look at the tightness in the labor market and respond to it. a think about the heat in the u.s. economy given the global --k could be thousands positive for the set of market. andrew: the key is going to be what does it do on the balance sheet. of think that is where the market expectations already are. it is the balance sheet where there is the greatest potential difference between what the fed things and some market participants think. is interesting as watching paint

dry. and morgan stanley think it is quite a key factor in explaining the weakness we saw late last year. it,fed said we will look at it made statements to suggest it might change it, but if it doesn't change the balance sheet approach, think that is something the market can interpret as we less optimistic about this cents shipped than we originally were. : the main thing is how we define this issue of liquidity. the central bank is the ultimate source of liquidity, but not the monopoly source. s2 the risks around it mainly as an expression around the risks in the economy. if they fade, we should have markets.ng and selling the fact that the fed is draining liquidity as markets are increasing reinforces the problem. the central problem is not a fed one, but a macroeconomic one.

the fed needs to the economic and economic economy in justify this strategy. i think that story has changed. the u.s. economy is falling and i don't the fed would continue in autopilot if the data really deteriorated.i think we would see a definite change in strategy . the first sign that that was the seven updates its balance sheet news to be baked on a permanent basis. that individual and sooner than we previously expected. francine: is this the biggest gift to emerging markets? huge gift.nk it is a two things have helping the narrative. of think ironically the fact that china got it is so weak, pmi's are back down to levels where china has been more aggressive for stimulus, i think raises the prospect that we see more stimulus.

i think sentiment is getting more positive on emerging markets. francine: thank you so much for joining us today. up next, amazon's grand plans are going into doubt as the company discusses more e-commerce regulations. this is bloomberg. ♪

>> we have made tremendous progress. that doesn't mean you're going to have a deal, but i can say there is a tremendous relationship and more feeling that we have made tremendous progress. workingve been conscientiously with ambassador and secretary mnuchin of his past couple of days. of discussions are going well. >> let's hope this trade agreements, the beginnings of it can enable the country to really focus on collaboration on so many other issues confronting the world or both u.s. and china cooperation are fundamental and

key to the solution of those issues. >> we don't really know what has been agreed to or the basic approach that has been taken. we also don't know how easy and smooth it would be to that this agreement. we still have a lot of questions. >> the bar is set pretty low. as long as no one stormed out of the meeting, of think everyone is going to call it tremendous progress and success. no one stormed out of the meeting. this is the challenge that market watchers have. it is still unclear, what is it that china have to deliver in the next four weeks to call office escalation of the trade war? francine: that with some of that reaction we have seen to the progress in the trade talks. pledges getting a look at breaking news.the ftse passes the 7000 mark . points. amazon's fourth-quarter sales and earnings topped estimates. slowedin the retail unit

over the holiday period. shares are falling in premarket trade down more than 5%. what are the main reasons why amazon's shares came under pressure despite decent top and bottom line numbers? it is mainly an excess several things. you have already mentioned retail growth slowed in the u.s. and the key holiday season. the outlook in the current quarter doesn't look very exciting. then, there is shipping costs that have increased. amazon has pioneered free shipping and that is hurting amazon a bit. then, there are of course is the u.s. and elsewhere. it means that amazon is poised to spend more on its logistics. lastly, there are concerns about

its international investment, mainly in india. invested amazon has big in india, but what is worrying investors there? india: the situation in has taken a turn for the worse for e-commerce giants like -- flipnd for card card, which is owned by walmart. to indian government adopted a new regulation that makes it really hard for these e-commerce countries to do business. amazon is now barred from striking exclusive deals with sellers. it is barred from owning stakes website.ies in its that really makes it difficult for amazon to continue its strong growth push. analysts have said they expect it will take money, and many months for amazon to work around those new regulations.

that is what is really worrying investors. francine: thank you so much. we continue in the next hour. tom keene joins me out of new york. on the back of today's u.s. jobs report, we will be speaking to the director of the u.s. economic council. in the meantime, this is what your markets are telling you. they are a little bit shy about what is happening in china. china vowed to buy more u.s. goods. they see progress in trade talks. if you look at the markets, stocks are drifting about it on earnings as a way to see what happens in trade. this is bloomberg. ♪

francine: trade progress. china thousand two by

substantially more u.s. goods. there's no given site just a with trump ino go tariffs. amazon disappoints. shares drop after the eu, giant shows tepid fourth-quarter forecasts and raises concerns about cost. hello, everyone. this is "bloomberg surveillance." if you look at the markets they are trading sideways. earnings were pretty good. we have strong numbers from some of the tech stocks in europe. we look to the u.s.-china trade concerns and we are looking at a truce, at best but no real sign of it possible concrete deal. tom: a massive data don't in the u.s. today -- dump in the u.s. today. dume's also an information going on with deutsche bankp. look at these headlines coming out.

pay says he is focused on achieving 2019 targets. francine: we also have euro area inflation. let's get straight to the bloomberg first word news in new york city. viviana: china is promising to --stantially that announcement coming after two days of high-level trade talks in washington. if there is no deal a month from now, the trump administration is set to boost tariffs on products from china. u.s.berg has learned the will suspend its obligations under its 1987 deal and eventually scrapped it altogether. the agreement was seen as a pillar of international arms

control. the administration argues russia has violated the treaty for years. now to deutsche, the slump is getting worse at the bank. germany's largest lender reported revenues shrank for the eighth straight quarter. that will complicate the ceo's plan to turn the bank around through cost-cutting. bloomberg has learned executives believe a government brokers merger with commerzbank is possible. talked, and there is a lot of talk in the sector but over time, mergers and consolidations in the european banking sector would be sensible. we attended to agree with that and how long it takes to do is kind of anybody's guess at this point. viviana: all of that interview -- i will have an interview with the deutsche ceo in a few minutes. the uk's beginning to lay the groundwork for a potential delay on brexit.

the prime minister says she doesn't want a delayed exit from the european union, but she is still time to come up with proposals after parliament voted to scrap key parts of her proposal. 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. at 7.62.bank flat on the s&p 500 before all of that data. currently steepening still off of the palo presser and the fed meeting. euro stronger over the last several days. the vix, 16.59. that is an awfully good number. ten-year. a german john and i were glued to this in davos. screamsgerman ten-year

disinflation. sell the bitcoin this weekend. francine: i'm looking at dollars studying. steadying. i'm looking at treasuries retaining most of their gains since the pivot wednesday from the fed on a more neutral stance on monetary tightening. this is the story of the week. you see a huge repricing of risk assets. tom: of love the headline there on inflation. not only slower real growth, but slower inflation. have about the 30 year bond? here is rollover from frequent -- 3.4% in october. deviations, which is a huge move. deflation up as the yield drive slow.

and looking at manufacturing in china as they are going to buy more u.s. goods, but also sees progress in trade talks. this is one of hillary clark's favorite charts. it is basically looking at the china manufacturing pmi in blue and satellite index in white, which monitors 6000 industrial facilities all across china. you can see there is a little bit of discrepancy depending on what do you look at. tom: that is a really important idea about the chinese statistics. with all of the geopolitics, it would be important to drive james into our studio to help francine get ready for friday readings, saturday readings. francine is going to be watching the super bowl on sunday and she is going to be pondering what to do going forward.

how do you correlate slowing economic growth, disinflation with a desire to own stocks? how the link those two together? s: i can justify this investec to policy and growth. lower interest rates means a lower hurdle in terms of what you need. more certainty of recovery and central-bank policy means the opportunity for a lower risk premium. we could think that in the days when stocks violations were really rich. 42 times is not unusual for a company to deliver the sorts of return on equity and cost of equity structures. tom: do we underestimate how corporations and multinationals will adapt to a global slowdown and a disinflation? james: i think analysts this year are overly bullish. on expecting no more than five

percentage points of earnings growth this year and 4% next year. that is roughly half of what the street is projecting. a don't understand how the stricken can have double-digit when everybody knows the world is growing quickly. on top of that, i worry about the months of april and may because you know that those are the months when the treasury and fed are going to be asked the markets to money the funding. francine: but the fed is on hold. the whole rhetoric changed on wednesday. is that not good for risky assets? james: i think the fed is going to be re-handling its cash balance. is definitely going to be calling for cash, notwithstanding the fact that they has put interest-rate policy on hold. the other issue is that they are clearly talking and not walking. we have not seen any clear policy intent that the markets will end up worrying that the fed is doing too little, too late. francine: i was i had time to go

to the super bowl, is watch the super bowl. i will be in venice moderating a session on banks. my question to you, if you look at all the risks around the world, where does monetary policy fit in? : monetary policy is critically important because governments don't have enough firepower to allow fiscal policy to become the next driver of support for markets. the federal reserve and people's bank of china are center stage. the u.k. central bank can do relatively little. i think europe is a passenger let the u.s.ing to and china does rather than what it is doing itself. tom: it is friday, i'm speechless. francine, you are going to venice on sunday? francine: yeah. i will tell you all about it.

tom: can i have your life? it is so cool. francine: i am more resilient. tom: it is actually very serious. one of us mark off back on the struggles of italy. it is actually exceptionally timely that francine will be having that discussion. lots to talk about as well. all of the economic data today. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." shares of amazon are falling in

premarket trading. the world's largest e-commerce company gave a lukewarm first order sales forecast that has raised concerns about rising costs and a murky outlook for amazon's business in india. apple is flexing its muscles as the operator of the most lucrative u.s. app store. they reportedly pulled important app tools from google after deciding the company broke rules. apple did the same thing to facebook after discovering it was using app development to collect user data. honda reported third-quarter earnings that missed estimates. profits fell 40%. honda says weaker sales outside of japan are hurting growth. that is the bloomberg business flash. francine: thank you so much. pressure is nothing on deutsche bank as revenue contracted for an eighth straight quarter.

top executives believe they may not be able to avoid a radical solution, such as a merger with commerzbank them as they can show improvement this quarter. bloomberg's matt miller spoke with the group' chief financial officers. matt: how much pressure do you feel from the dirt -- german government to show them targets are going to merger talks? >> with field are in control of our destiny. we are proud of having achieved the milestones we did in 2018, whether it is the actions we took around the businesses or achieving financial milestones that he promised the market. we intend to do the same in 2019. leverage all the work we have done the businesses, stability in the platform, serving clients executing on our strategy. fits all of the stakeholders around us should see us execute on the. that puts us in control of our destiny. matt: is there some strategic

help that merging with another bank would offer you in terms of raising revenue? >> i'm not going to comment on specific items. we have talked, and there is a lot of talk in the sector mergers,hat overtime, consolidation in the european banking sector would be sensible for a variety of reasons. we have tended to agree with that. what form it takes, how long it takes to do is kind of anybody's guess at this point in time. matt: previously, deutsche bank has said no merger talk until 2020. is that still the line or could you see, could do for a merger situation happened before that? >> would have been clear that we have hallmark. we want to continue to deliver evidence of that in 2019. matt: could you will out a merger this year? >> i'm not going to comment on specific mergers.

we're focused internally on executing our plans. aboutl talk to investors those plans today and demonstrate our progress over time. matt: what about the external issues? with talked about trade and the european economy and brexit. how much of a difficult variable are those offering? >> we operate in the environment, whether it is the financial markets, the underlying economy working with clients to support their businesses. the interest rate environment as well. naturally, we swim in those types. we need to adopt our strategy and business models to reflect the environment, the opportunities as well as the challenges the environment throws up. we have been working through that. it hasn't been easy. i was sides the interest rate environment on a relative basis when you're paying for cash that is deposited at your central bank versus earning on it.

it is a huge competitive difference between being a euro bank and dollar bank, but it is part of our environment and something we work through and hopefully we will be able to overcome overtime. francine: that was the deutsche bank's chief financial officer. that joins us now from frankfurt. great interview. there is also a great opinion piece saying this deal would look like the option of last resort. she says if you combined two of their most inefficient banks, you may not necessarily connected solution. it certainly isn't the first choice of the executives at deutsche bank. have a planristian that they really want to execute on and they prefer to go it alone rather than merge. they didn't want to do any kind of merger talk until 2020 and they are being forced to bring forward according to sources as

reported by bloomberg news. think it is one thing to look at this as a bad idea for a european bank. it is another thing to look at this from the point of view of in the finance ministry in that they want to ensure that there is one german champion to help continue to find their sme's here in germany. usncine: what can you tell -- yesterday we were hearing that this would be if all else fails. what is the if all else fails that they would merge? isn't that they would be able to execute? a share price number? matt: the big concern is the revenue dropped that we have been watching. eight consecutive quarters of falling revenue. they will need to figure out a way to turn that around, but it is difficult when you're cutting cost, especially at the speed

that they are cutting costs. they are needing those targets and expect to cut costs even further this year. the question is, if they turn around profitability to the extent that it is not as painful to see the revenue fall, when that be enough to save them or do they really need to maintain a certain level of employment here? they are cutting jobs at a pretty rapid pace as well. they had even brought forward those job cut targets. they are doing better than the even announced in terms of headcount reduction. can they do that and still keep the talent they need to make money? , i don't carekly what the executives think, i care what the regulators think. you are expert at this. who is applying the greatest pressure, u.s. regulators, the ecb or german government? matt: the problem is that

regulators are at odds with the german government on this. the bank regulator that would prefer to see across european merger and then you have the people in berlin that want to see a deutsche bank commerzbank merger. those two forces almost as usual are at odds here. that continues. francine: thank you so much. that miller in frankfurt. we will have plenty more from bloomberg surveillance throughout the day. we will talk about banks, consolidation. lots of focus on some of our markets. that is all coming up here on "bloomberg surveillance." ♪

francine: this is "bloomberg surveillance." amazon's fourth-quarter sales and earnings dropped analyst estimates. wewth in north america's tell unit slow dramatically during the holiday period. shares down over 4% in extended trading for amazon. james is still with us. the like amazon? amazon seems to have peculiar problems. james: last year, i spent a lot of time selling amazon shares. i do believe the long-term fundamentals for this business are very robust. i think it is going to build

long-term shareholder liberation. there will be markdowns. equally, if one looks at the analyst behaves they will replace their expectation level and become positively surprised. francine: was her biggest concern when it comes to amazon? is a regulation? james: the risk of antitrust movement by president trump. be isal risk amazon must that he slaps an order on insane -- tom: have a discount revenue growth like that? everybody else is trying to do single digit revenue growth. you have these juggernauts. as ao you model, conservative button down shirt , 50%, 20%, 30% revenue

growth? issue is me, the real what is the margin and how is it funded? amazon be nothing without its web services division. is a cash cow and allows amazon to invest aggressively. the real issue in analyzing amazon is looking at the incremental capital return on the new acquisitions they are making, the new developments they are undertaking. i'm probably impressed that management are not just going for growth's sake but pretty focused on how this eventually translate into incremental value. tom: how do you buy in the dips? how do you mentally go through the process of buying on the dip? james: i said very clear price targets and i look away. and on emotional. when i had the price target, i begin purchasing.

when they go further down, i buy more. if they go down and out that i've only got a little bit, so be it. strategyk:. the what an eight weeks it has been. jason furman looking at december, february. looking at the nation's budget out to 2020 and 2030. the former chairman of the president's council of economic advisers in the 4:00 hour. stay with us. this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. day inod morning, jobs america. lots going on in europe, italian recession.

francine traveling to venice this weekend which is a good thing as well. francine: i will send you a postcard. tom: it is an important conference on the future of italian government. right now, first word news. viviana: both the u.s. and china say there has been progress after trade talks in washington that they stopped short of calling it a breakthrough, beijing promising to substantially expand purchases of u.s. goods. president trump is threatening to increase tariffs if there is no agreement a month from now. it is a sign president trump wants more progress in his upcoming summit with kim jong-un. the administration says north korea promised to destroy all its facilities for making nuclear bomb fuel. kim jong-un has made no comments since agreeing to work toward the denuclearization of the peninsula last june. more speculation president trump may declare an emergency to get

his wall bill. a committee to attempt a government shutdown will be a waste of time if it does not include money for a wall. open pelosi said she is but not a wall. cory booker of new jersey is joining the crowded field of democrats running for president. started calling colleagues in congress to let them know. 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. the u.k. government ministers are settling to members of the opposition party to get the deal through parliament. it will guarantee money for deprived parts of the country, many of which vote labor.

still with us james bevan. have about six or seven options on the table, march 29 is the deadline. we have eight weeks. what does it mean on what happens next? does the e.u. given or does this parliament vote for the deal? >> i do not expect you will see much movement in the next two weeks even though theresa may has this mandate to renegotiate. the e.u. is not going to reopen that. whatare going to see happens when theresa may returns to the house of commons and tries to pass her deal. as it becomes clear that the options are her deal, there is going to be known renegotiation -- going to be no renegotiation and the issue of the backstop, the backstop is the way it is ownuse of the u.k.'s

redline. theresa may might not get her deal the second time through again. the nou will see is as deal option emergence, you will get labor supporting her deal and even softer brexiteers supporting her deal. she might need to put it to parliament again. my base case is that some version gets through without changes from the e.u. side. chances of a no deal brexit are increasing by the day and our markets ignoring it? james: by accident. it is easy to find there is a no deal because parliament has not got round to any other way forward. about a referendum, that is not going to happen. no one knows what questions to ask. for people not familiar with politics, no one wants a general election.

corbyn happens to have hull and hampstead. out, hampstead wants in. tom: is it about the irish border? are we focus totally on the irish border? i think theresa may is aware that in order to get her deal across the line, she might need the support of labor mps. she is reaching out. that the surprised conservatives were talking with substance. what you might see is in order to get the deal, either jeremy butyn will abstain vis-a-vis the irish border,

nothing is going to change. in my view, if it came to a no deal brexit, it would be because if the government's position they -- is that you need to have the position endorsed by the dup, that it needs to be removed from the agreement, there is no deal. if it came down to that, i think the e.u. would hold its line on that. bottom line is, there , no wayy the e.u. they're going to hang the republic of ireland out to dry, right? nina: they are not. even thoughrget both dublin and london are not engaging with us now, if there is a no deal brexit, you have a return to the heart border. that is the -- the hard border. that is the reality. forerg is saying this holy

a border with ireland is a hoax. -- this need for a border with ireland is a hoax. it would make it difficult for with.k. to negotiate a fta the e.u. after it had departed on such hostile terms. francine: the base case is when it gets passed parliament after two or three votes. how long could it take and what our markets going to do? more volatility? james: markets should fret because of the uncertainty. after we have got some form of brexit deal through, i believe the economy has a chance to positively surprised. i would be expecting money rates to rise, bond yields to rise. francine: is there any chance that they you says we can do some kind of backstop -- the e.u. says we can do some kind of backstop? nina: the you can give

concessions on the backstop. if you look at the withdrawal agreement, they say they should never come into play. they can clarify their position in some political statement but to think they will reopen the agreement and offer a guarantee this will never be used or remove it from the text which has been agreed with 27 countries is a nonstarter. by the british government is the erg, there is no room for compromise. francine: a lot of companies are preparing for a no deal brexit, that means stock filing. -- stockpiling. if they do not have a no deal brexit, what do they do with the stockpiling? would it hit the economy? james: there will be reduced orders the cousin of the reduced -- pre-ordering.

-- because of the pre-ordering. they would have to sell off the goods. one might hope there would be an uptick in optimism. that would be the hope. to put numbers to where the bank of england may take rates, if there is no deal, it would cut rates. deal, i would not be surprised if rates go to 1.5%. francine: would be cabinet try to topple theresa may? is there someone that would do a better job? nina: this goes down to the wire. is a realization that a shift in prime minister is not going to influence the outcome in a more positive direction. what you might see is that the members might resign if they are not given a free vote if the deal does not go through

on the next time on the extension of article 50. that is what theresa may promised when they voted for the brady amendment. tom: i want to bring up an op-ed to get francine ready for venice . this is from bloomberg opinion. here.really in crisis even if the liga managed to ditch five star, it would not fix the patient is. that moneyto say would be far better used to spur investment as germany is considering doing. is italy the same old story? nina: the red light lights on the italian economy have been

blinking a long time. , tax cuts, free income benefits for all, doesing the pension age not work with the deficit reduction targets they promised the you. -- the e.u. you are going to see the slow burner crisis with the economy. 2007,ot think it is a 2008, 2010. expect more of the same. , theine: coming up next president of the german association of the automotive industry. we will talk trade, we will talk brexit. this is "bloomberg." ♪

francine: this is bloomberg surveillance. as always, tom and francine from london and new york are at -- new york. those help lead the stoxx 600 rebound. with european autos having a large exposure to china, the industry remains vulnerable to trade tensions. they see ines as peaking and demand slowing. the president is of the german association of automotive industry. joining us, we are eight weeks away from brexit. are we underestimating the possibility of a no deal and what would that mean to the manufacturing and auto sector in germany? strong supplyery chain between europe and the

u.k. all our automotive companies and the suppliers have plants in the and and here in europe components and so on are going across the channel several times and therefore we have to do everything to avoid a hard brexit with tariffs and borders and all this because the free and fair trade between the u.k. as one of the biggest markets in europe is of great importance for our industry and the supply chain. thecine: what do you think future of the auto manufacturing industry and the u.k. will look like post-brexit? bernhard: i do not want to speculate but it is clear they companies are looking at various

options, what could happen in what they would do. i do not want to speculate what would happen. the main thing is we have to encourage politicians to do everything to avoid a hard brexit and on the other hand, to keep the e.u. members together. tom: you have a wonderful history and this, starting out at bmw and your service to afford. d.r the complexities our norm us, beginning with the idea of 430,000 cars that move out of the u.s. every year into the global market. what is the best outcome to advantage all? on brexit? what isthe tariff war, the best outcome for the german

automobile industry? i mean, what we prefer and what makes the german automotive industry strong is free and fair trade around the globe. are it comes to tariffs, we optimistic to be strong and competition, even without tariffs. globally andis good freetically, a trade agreement and no additional tariffs tom: and no barriers. -- tariffs and no barriers. tom: that sounds great. to go after going that even though i just said 430,000 german cars move out of the u.s. every year.

i do not think the politicians know that. the you informed politicians of the complexity you have lived with? bernhard: absolutely. we have had talks with the german government, with the commission, we made clear what fair in free trade means for the supply chain, but also the chinese market and how important it is that we have not additional tariffs but no tariffs for the future. we made that clear and what the advantages of that is. they know that and they have all our good arguments when it comes to the negotiations with the u.s. government. francine: right, to put it simply, you went to the u.s. to state the case. does the u.s. listen and what of the chances they porsches

this world get slapped with a 25%? bernhard: i have been to the hearings, i have been in talks with the u.s. government as well as other representatives of the german car industry but also our politicians. that we haveclear invested heavily in the u.s. we are exporters from the u.s. we strengthen the u.s. economy. we made it clear. we hope they take this into account when it comes to decision-making about tariffs or no tariffs. tom: thank you so much. greatly appreciate it. the president of the german association of the automotive industry. convey enough the complexities of auto exports and imports and how you do not hear

that within politicians within the united states. 1962are in a time warp up -- of 1962. francine: it is the bourne automakers that have to deal with that reality. is the foreign automakers that have do with that reality. the conversation in europe is on those challenges. tom: fascinating. have to have him on again. u.s. data jpmorgan, a dump this morning. this jobs day, jpmorgan. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. david einhorn is trying to make up for a bad 2018. the main fund that greenlight capital rose more than 13% to post the best january in its history. last year was the worst ever for green light, the fund fell 34%. nissan and renault are stepping up the investigation following

the arrest of carlos ghosn. bloomberg has learned the automakers are looking at fees paid to the consultants at their alliance, up to $20 million a year was going to consultants. don't tell people in the midwest they are living in a winter wonderland. will fall quickly after the polar vortex send temperatures plummeting to 30 below or colder. a could be 50 in fahrenheit in illinois by monday. in the u.k., more than 100 people took refuge in a pub after snow left their cars stranded, snow and ice covering much of the southern part of the country. that is the business flash. tom: thank you. i want to show deutsche bank moving, this is live in europe. 2019.s through it goes up, it rolls over, 0reaking down here under 6.8

would be a big deal. i asked earlier about the regulation in the regulators to step in. looking atexperience continental europe crisis, it is the regulators that jumpstart this stuff, isn't it? james: it is. the german economy suffers from aging demographics, difficult export numbers. the capitalok at adequacy numbers, they will be saying this does not look healthy. we want to push on with a merger. tom: i am going to suggest, ,ased on 2007, lehman brothers the usa regulators are going to step in at some point and say, let's look at this now. is that feasible or is it germany and the united kingdom doing it themselves? james: i believe the u.s. will be involved.

if one was to look at the destination of credit from the u.s. system to europe, french ks played fast and loose. the u.s. has concerns. francine: what would make you own deutsche? james: i would need to see positive interest. the bundesbank has lent into the system administrator -- -- bystered by the euros the europeans. commercial banks have to watch the money -- have to launch the money and they get charge because of negative interest rates. that is a challenge for all german banks. tom: james bevan, thank you so much, a reset on a friday with

all the data. we have data coming out of the u.s. today, don't we? when you think of market participants, they are interested in the data. because the fed was so definitive on wednesday, i wonder if the data will be looked at in the past. tom: mr. kudlow joining jonathan ferro in the open in the 9:00 hour. a most interesting jobs report after that shutdown. to the markets, chairman powell moving the markets. with us, queen victoria street, london. this is "bloomberg." ♪ ♪ i'm a veteran

and the army taught me a lot about commitment. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit.

my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. tom: this morning, it is jobs day.

across 90 minutes this morning, the american jobs report. sentiment and the state of the auto industry. in this hour, bruce kasman of jpmorgan. italy in recession, a german slow down, inches of snow in oxford. ever, the british vortex, the brexit vortex staggers into the weekend. no word if the prime minister is noted. also, there is a football game this weekend. kevin cirilli reports on the percent of america that cannot stand tom brady. good morning, everyone, this is bloomberg surveillance live from new york, i'm tom keene. on your way tore italy this weekend for an important panel. italy is in recession. francine: they are in recession.

we will have to look at the forecast, why the bank of italy, why the government had gotten it so wrong. i have a great panel where you have someone from liga. to get out of it is do they have the same vision and how they deal with the banks? one of the distractions of the slowing europe, we will see that data this morning. stay with us. with our first word news, here is viviana hurtado. promising toa is expand is purchases of u.s. made goods. that announcement coming after two days of trade talks in washington. both sides plan more discussions to reach a breakthrough. if there is no deal a month from now, the trump administration is set to boost tariffs on products from china. the trump administration will take steps to pull out of an intermediate nuclear range missile treaty with russia. bloomberg has learned the u.s. will suspend its obligations

under the deal and eventually scrap it altogether. the agreement was seen as a pillar of international arms control. the administration argues russia has violated the treaty for years. the slump is getting worse at deutsche bank. germany's largest lender reported revenues shrank for the eighth quarter. that will complicate christian sewing's plan to turn the bank around through cost-cutting. bloomberg has learned executives have -- believe a government brokered merger is possible. bloomberg speaking with the cfo. >> we have talked and there is talk in the sector overall that over time, mergers, consolidation in the european banking sector would be sensible. we have tended to agree with that. what form it takes, how long it takes is anybody's guess. viviana: all of that interview with the cfo in a few minutes. the u.k. is beginning to lay the groundwork for a delay in brexit.

the government canceling a recess so lawmakers can make progress on key business. theresa may does not want a delayed exit from the union but she is trying to come up with proposals after parliament voted to scrap a part of her proposal. 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: thanks. equities, bonds, currencies, commodities, a flatness in the market, waiting for that u.s. data. oil does not play. the vix showing good equity markets, blows through 17. go to cash. i called up santa and said, go to cash. german ten-year,

positive, that is huge and a quiet story, bitcoin, cannot find a bid. atncine: stocks today lackluster following the best month of global equities. to roll are continuing in, investors continuing to watch the resumption of u.s.-china trade talks. i'm looking at the u.s. 10 year yield. euro-dollar unchanged. tom: your monday morning starts friday at about 6:30 p.m. your home with the children thinking about shoveling tomorrow and you have to stop and read the jpmorgan weekly no. robert mellman -- weekly no. note.kly robert mellman, he is retired, there is a new team. what are you guys going to put out tonight? focuses on the fed

because the fed made a shift. michael mckee with that question the fed did not answer. there is a regime change. this is the first independent step we have seen from the powell fed as it have been following the past with normalization. with ae they doing it traditional phillips curve model or are they own trying to figure out how to move on from a balance sheet adjustment? bruce: there is a piece of this which is traditional risk management. the new piece and the interesting piece is some ying of the of a bur phillips curve as well as perhaps a sense they are willing to tolerate a higher level of inflation as we go forward.

we have seen williams talk in those terms recently and there is a suggestion at the last meeting that the fed will tolerate a higher level of inflation. we have got a fed that has sold us that it is on hold -- that has told us it is on hold and it needs to see evidence of inflation before will consider tightening again. francine: what is the fed looking at, i know it is looking at financial conditions. isn't it embarrassing that the fed hikes after all they said it will be dated today give us a glimpse of what is to come? bruce: i think the data is going to be solid in terms of what it signals on growth. i do not think we are going to get much that tells us about where inflation is going. us ishe fed is telling that the next move is going to be driven by growth, if they're going to think about easing and

by inflation if they are thinking about tightening. that is a different message. they are no longer signaling they will forecast inflation of the changes in the unemployment rate as they have been. there was a banner in a press conference of asymmetry around 2%. i do no one know what textbook agrees with that. was screaming at me they are worried about the downside. they are not symmetric now, are they? bruce: they are symmetric, i think. a 2%u think you have inflation target and you think you're getting to the mature phase of the cycle, knowing what we know downturns do, you want to have inflation peak above 2%. i do not see any problem with that.

given the structure and how tight the labor markets are, given wages, if this is not going to be realize, do we end up with a bigger problem down the road? tom: this is important, this guy who works for you nailed it on the new terminal value, where is the terminal value run rate for the u.s. economy? of gdp, we are at 1.5%. tom: how could a politician of worn, thelyssa with president, how could any of them warren,with -- elizabeth the president, how could any of them put up with 1.5%? with that level of potential growth, with the high level of debt we are built up in the populace pressures building, that is uncomfortable -- that is

uncomfortable set of problems we're looking at. tom: jonathan ferro is going to beat larry kudlow over the head. larry kudlow is going to say supply side is working. on kudlow and his supply-side theory, is there a validity to it. bruce: when the tax cuts came in, we said we were not going to get much of a capital spending was going toit continue along the same lines. we have seen more workers come in as wage inflation has moved up. the productivity picture, the demographics have not changed. we do not see a supply-side miracle coming. we are going to drive forward through the economic data this morning. cannot emphasize enough the data dump.

ferro in conversation with the director of the national economic council. look for that. stay with us. me keen -- i'm tom keene in new york.

viviana: this is bloomberg surveillance. i'm viviana hurtado. shares of amazon are falling in premarket trading. the largest e-commerce company gave a lukewarm first-quarter sales forecast that has raised concerns about slowing retail growth and a murky outlook for amazon's business in india. apple is flexing its muscles as the operator of the most lucrative u.s. app store.

apple pulled development tools from google after deciding the company broke its rule. google developers had access restored last night. apple did the same to facebook after discovering the social network was using app development to collect user data. is the latest automaker to fall victim to the slow down. honda reported third-quarter earnings that missed estimates. profits fell 40%. honda says weaker sales outside japan are hurting growth. that is the business flash. tom: thank you. i mentioned in the opening they kevin cirilli on an important surveillance team coverage on the percentage of america they cannot stand tom brady. give us a super bowl update. rams or patriots? kevin: ram spirit i have got to be true to who i am -- rams. i have got to be true to who i

am. tom: it is a little cold but it will be warming up there for the super bowl. can you explain why all of america cannot stand the quarterback of the new england patriots? kevin: i'm trying to be impartial but it has to do with ate, he was working with a janitor to deflate footballs in order to throw that were my philadelphia eagles, they would be dragging them in on capitol hill, there would be hearings, subpoenas. brady, it is tom forgotten about. tom: we are going to medicate kevin cirilli by going to francine lacqua who does not give a whatever about mr. brady. francine: let's try and regain our international audience. tom: let's regain our american

audience. francine: how fired up her about politics in washington? kevin: there he. just -- very. president trump is going to deliver his state of the union address and he is going to have to make the case about the wall, ,bout the government shutdown national foreign policy, the situation in venezuela, and trade wars. we are going to be hearing a lot tuesday night and a lot from democrats in terms of how this gets recalibrated. tom: i want to go to an op-ed in the washington post and this goes to the class warfare we are setting up for the primary season. on a friday, it works. was not the first candidate to propose a wel alth tax.

right-wing wing pundits bemoan the appeal to class warfare. that candidate? donald trump. you could reconfigure the income tax to great something that operates like the wealth tax. does the wealth tax have traction in the democratic party? kevin: it does. whether it is bernie sanders or elizabeth warren, if you look at the populist wing of the democratic party, this is something they have wanted for some time. there is a new class of democratic lawmakers led by alexandria o cuss you cortez -- cortez who want that. tom: load up on the buffalo wings. kevin cirilli. we been here before,

the redistribution of income. can we do something as radical as a wealth tax? >> i do not see why not. what i would argue more than anything is i think the quality of income and wealth outcomes are important and do play a role. you cannot look at that separately from the issue we talked about before. we have issues on the supply side. we need to talk about -- we need to grow the pie as we talk about redistributing. francine: we will come back to see how we can grow the pie. coming up, citigroup global markets chief economist at 7:00 a.m. in new york. this is "bloomberg." ♪

bloombergthis is surveillance. tom and francine from london and new york. amazon,lk about earnings estimates growth dramatically during the holiday. first-quarterepid sales forecast and raise concerns for its business in india. bruce kasman is still with us. how worried should we be about india? >> india is going to be more of a challenge for amazon than the company thought and investors thought. it is untapped.

that are regulatory issues all of the e-commerce players are having to deal with. is dialingis amazon back some of the growth forecast for india and that impacted the revenue outlook for the first quarter. fourth-quarter numbers were strong, they beat on revenue, the revenue guidance which happens frequently with amazon was more cautious than investors were looking for. what are therall, chances of amazon been broken up? low, the odds are company continues to perform well. the regulatory pressure on amazon is less than it is on the .acebooks or googles businesses strong. jeff bezos has his issues with the washington post and so on. the company is in good stead.

up a chart ofng amazon, agony and worry and i should not have gone to cash in 2006. the trend is your amazon defines it. what we are about is a growth and you have to switch to a free cash flow. i would call that doing a comcast. utility, can amazon do a comcast? paul: it looks like they can. was doecade, the story not worry about profits, we are going to reinvesting grow the top line. as they grow there cloud business, they have lots of money, lots of profit, it is migrating to more of a profit story. tom: this goes to productivity, it is national.

it enhances productivity but it defines creative destruction, doesn't it? would arguebut i the problem is not because of creative destruction. it is because we have strong companies that are generating positive productivity but it is not diffusing. defusing. tom: does it develop monopolistic tendencies? bruce: it does but the problem from the supply side is it that the -- is that the technology ,een generated is two companies you could open the internet and you could expand your supply chains. we need to find a way to gray productivity growth in an economy where we have great technological change but it is not used in an effective way. francine: is that not through

three trading? how will that changed the economy? thee job is it to make sure workforce is adapting to new technology? bruce: the basic problem is there are not simple fixes to this. , if we wanted to give a boost to the world, opening up trade in services could do a pretty good positive. that is not happening and things like education investment, they take a wild. awhile. there's nothing that is going to change this dynamic over the next two or three years. tom: we see uber with a lift in wages in new york city. bezos has a labor arbitrage, right? think about the

employees at amazon, most of them are in warehouses and what they provide is a leverage on the top line of revenue and now he is able to start putting in profits. tom: paul sweeney with us on amazon. dialogue, wehis are enthused that mr. swinney has joined bloomberg surveillance. has joinedney bloomberg surveillance. radio, worldwide, new york, bay area, washington. it is a moon over new york city. it is a moon over long island. ♪ the latest innovation from xfinity

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u.k. a spokesperson for theresa may saying that the u.k. has not requested the extension of article 50 and that theresa may will continue talks with mps and companies on brexit. that is a relief. hopefully, we will know sooner rather than later what those will end up on. let's get to first word news in new york city. here is viviana hurtado. viviana: both the u.s. and china say there has been progress after trade talks in washington but they stopped short of calling it a breakthrough, beijing promising to substantially expand purchases of u.s. goods. the size planning more discussions. president trump is threatening -- the two sides planning more discussions. president trump is threatening to increase tariffs if there is no agreement a month from now. it is a sign president trump wants more progress in his upcoming summit with kim jong-un. the administration says north korea promised to destroy all its facilities for making nuclear bomb fuel. kim jong-un has made no comments

since agreeing to work toward the denuclearization of the peninsula last june. more speculation president trump may declare an emergency to get his wall built. the president says a committee's attempt to avert a government shutdown will be a waste of time if it does not include money for a wall. nancy pelosi said she is open to new fencing but not a wall. cory booker of new jersey is joining the crowded field of democrats running for president. booker started calling colleagues in congress to let them know. 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: very good. thanks. this is a benchmark, bloomberg intelligence looks at honeywell as a benchmark and they are 80.ing 7

we will see more on that, with more information on industrial america than the history of general election as well. the view forward is what matters as well. carl riccadonna with us, bloomberg economics, and bruce kasman. to go to a paper on involuntary, part-time employment. i get more mail from viewers on this unemployment rate, nobody and his when kasman team say it is a fully employed america. no one believes it. 4%l: the lesson is that sub employment does not mean what it used to. the shape of the folks curve has

changed -- the phillips curve has changed. we are going to see more evidence of rising wage pressure. we will have greater confidence we are close to full employment. you do not know full employment until you see it in the rearview window. tom: do you see full-time employment? involuntarybout part-time employment. these people want jobs and they are driving ubers. carl: full employment does not mean you do not have workers out there you can higher. toorder to get more workers come in, you need to incentivize them with higher wage gains and that is what we're seeing now, as we are seeing workers come in. workersrack how many are working full-time -- part time and want to work full-time. two or three years ago it was high and it is back to what we would call a tight labor market. you believe that

there is little doubt or little reason to believe that the labor ?arket is downshifting what does that mean in terms of fed policy and what we heard wednesday? they had to reverse what they said? carl: i think we have a case of winter driving, they under corrected in december and overcorrected in january. we are skidding all over the place in the fed has lost its swagger in terms of being collective about assessing the economy in terms of the outcome of the meeting statement this week where they are signaling we could be at the peak. i agree with bruce that we will -- that it will be inflation address drives them back into tightening mode. what we will see -- inflation that drives them back into tightening will. what we will see his moderation from the pace of job creation by no means a meaningful

down. if we are averaging growth of north of 2.4% this year, wage pressure is at the highest of the cycle we saw, we saw that we will see it in average hourly earnings today. , faster inflation above trend growth means this is a pause, not a peak for fed policy. francine: how quickly can we go back to the talk about a rate hike? to lethe fed is going the data do the talking, that is going to take time. the corporate earnings outlook is not all that great in the first half of the year. not is an economy that is on the brink of recession and still growing. ine we get through a wobble q1 which has been weak over the past decade and we see confidence that q2 is on track,

that might taken till may or june to push that discussion. we will get there by midyear. tom: macro economic advisers seconding that. look at retail, the amazon effect, where are the jobs being formed? bruce: it is broad-based. you have an impressive recovery having taken place in manufacturing and construction jobs. you are continuing to have the engine of those service sector jobs in health care, education, retail has been choppy, and the government drag which was big five or six years ago has gone away. it is a broad-based story. tom: bring up hr, second-best chart. -- bring up hr, second-best chart. it has -- bring up a chart.

chart.best it is a desire to get more participation of that core economy, this is the nostalgia thing, everyone else wants to look back at a labor economy of another time, that is true? bruce: absolutely. what we can see is the success of not only president trump but more importantly from janet yellen but the high-pressure is turningat notion this trend in that participation and we can see it among workers, if we let that run enough, we will see participation start to trend higher. when you starts to poll of these nonparticipants back into the labor force. stamps, all at food

of these things moving in a favorable direction. that the vector is entrenched in a participation rate? the waycy the cyclical he has described it and we are bringing -- i see the cyclical the way he has described it we are bringing workers in. we do not want to forget the other side of the story that the working pool is becoming smaller relative to the baby boomers leaving the workforce. it is offsetting the demographic forces which are working against us and that is our problem with the labor force, is that the aging of the population, the lack of new people coming in means you have got to continue to put that high-pressure into the system and you will need wages to go up to get more workers and. paul: so those in people could pay your social security benefits. bruce: if you retire.

francine: awkward. tom is speechless. that day will come some day. not anytime soon. tom: with bloomberg human resources. coming up, bloomberg markets, onathan ferro, holding court the open, with learns kudlow -- with larry kudlow. and blackrock, look for that today. stay with us. maybe i will be back. this is "bloomberg." ♪

francine: this is bloomberg surveillance. the power struggle in venezuela, the national assembly leader says a special police squad accused of killings was at his home thursday days after the regime restricted his travel. gathering been international support in his bid to unseat nicolas maduro. this week, john bolton said there will be serious consequences for those who attempt to subvert democracy. joining us now is a lecturer in politics at the university of oxford. thank you for joining us. what will happen in the future? th,have questions about 1 mon the line, what

are you looking out for? >> we do not know what will happen. we do know that the opposition has called for protests. there will be a march saturday. everyone is looking forward to that. in the meantime, the opposition is working to pressure the --ernment and working reaching out to the military to see if there will be defections. dealine: how will guaido with china and russia? >> that is crucial. he has sent positive messages to both countries, reassuring that deals will be negotiated under the due process of legal -- the legal framework of the country. it is essential these countries see the country is interested edition to democracy and have to choose a side. francine: can russia and china

given his u.s. backing? toi believe the question is understand that this regime will longer be holding on to power. it is difficult for them to sustain a regime that has lost its support. i believe that venezuela will have to relaunch its relationships with all countries, including china and russia. venezuela will continue to be a u.s. trading partner. that has not changed much. tom: what is important is you have got the distance to have a better judgment. is the munro doctrine in place? >> i believe what is in place is the support for democracy, if we want to look at it in that way. u.s. asas said that the

well as the european union as well as international actors are crucial. the country to move towards democracy and respect for human rights, that is what we are looking at. tom: how important is it, you have got a great chart on venezuelans that have left, how important is it if we can move onto a new government, that those people return? >> i think it is essential. i think the new government will have to ensure that the diaspora comes back end is a country full of talent. -- and is a country full of talent. venezuelans have been managing to cover aspects and other countries. the middle class and lower classes that have been forced to ane will have to return and

immediate action will be the humanitarian aid to ensure there are public goods in the country so that venezuelans can return safely to their home. with us as well is bruce kasman of jpmorgan. as jpmorgan thought about venezuela and the ability to bring capitalism back? bruce: we have. we have to realize that getting from here to a democratic venezuela is messy and complex and it may not happen quickly. we have got a way to go before we can see the next leg of this term positive. i think it is not just the u.s., china, russia, but it is other countries in the region promoting change. from a global point of view, what we're watching is how the u.s. places with sanctions -- plays this with sanctions.

so far, the energy market has been calm in this regard. will a regime change affect energy policy in venezuela? >> for now, the new government will have to invest a lot in rebuilding the oil industry. this is going to be a focus for the next months or years. there will be a commitment to more sustainable development, to recover the potential of the country to expand and other sectors. who are you watching in terms of the international community? is there anyone who is key who has not spoken up yet? >> we have all-important countries on board. the european union, the organization of american states. , itu.s. as well, canada would be crucial if so-called

left-leaning countries would speak out in the promotion of democracy so this means bolivia, ecuador, nicaragua. it is hard to expect this from them but this should not be ideological. this is about democracy. francine: great insight. tom: very good. out of the university of oxford here on venezuela. we are going to come back with a chart on bruce kasman on the future of your paycheck, that conversation driven forward. later this afternoon, the former chairman of the president's council of economic advisor on the american labor economy. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. honeywell forecast sales this year that missed estimates. it is forecasting earnings that are better than expected. the company reported fourth-quarter revenue and profit that eat estimates.

-- beat estimates. do not tell people in the midwest they are living in a winter wonderland. the midsection will fall quickly after the polar vortex send temperatures plummeting to 30 below or colder. it could be 50 in fahrenheit in illinois by in the u.k., more monday. than 100 people taking refuge in a pub after snow left their cars stranded, snow and ice covering much of the southern part of the country. the slump is getting worse at deutsche bank, germany's largest bank reporting revenue shrank for the eighth straight quarter. that will complicate christian sewing's plan to turn the bank around through cost-cutting. bloomberg has learned executives believe a government brokered merger with commerzbank is possible. bloomberg speaking with the cfo. >> we have talked and there is talk in the sector overall that over time, mergers, consolidation in the european banking sector would be sensible.

we have tended to agree with that. what form it takes, how long it takes is anybody's guess. viviana: that is the business flash. tom: thank you. greatly appreciate it. deutsche bank gets your attention on eight bidless morning. it is a single best chart. the importance of wage growth, mentioning productivity as well. this is my favorite number, the employment cost index which lumps in wages and benefits. i have adjusted for what every household has deal with, 3% inflation every year. we are on our way back from a decade of wage growth. i do not see any ability to get back to 2002, 2003. do we get back to decent wage

growth or can we improve? bruce: if we can keep the expansion going and keep markets where they are, there is opportunity to see wage inflation. tom: 4%? bruce: it is a possibility. economy that has got tight in the markets that we are getting bargaining power shifting to workers. can we keep that going given the risks around what is happening can we keep that balance? tom: where does the bargaining agreecome if jason furman that we have atomized mise the american labor force and unions have little clout? bruce: you are having the baby boomers leave the workforce, you have a relatively tight labor market, weak productivity and your bringing back workers that

have been out of the workforce because they have been discouraged, in order to do that , you have to incentivize them . it is a good thing. tom: let me bring back this chart quickly. this chart, i want to make clear the vector is in the right direction. there is no question. we have: the reality is had bruce kasman on and we have not asked him about his dollar call. what does the dollar do? bruce: the dollar is lower, if this is not an event that is going to bring us into recession or prolonged weakness, the fed is picking up a long pause. the global economy is not going to do badly and that is an environment in which risk appetite does shift assets away from the u.s. tom: appreciate it.

we have all sorts of stuff planned on the labor economy. it is a data dump starting at 8:30. we go on to auto data as well. illinois,shutdowns in what will be fresh, what will not. on the open, jonathan ferro in conversation with learns kudlow -- larry kudlow. i do not know if it will be from the lawn of the white house. stay with us. this is "bloomberg." go patriots. ♪

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worries over its business in india. hiring growth in january could slow to 165,000. china trade promises. chinatalks progress and bows to sustainably buy more to. goods -- vows sustainably by more u.s. goods. david: it is jobs day as well as earnings day. i will start with cigna. aey had a slight beat by penny on their earnings per share, a slight miss on the revenue. in thetock is down premarket almost 2.5%. that may be because of disappointing projections. the government will be changing to rules if it has its way