juliette: cloud cover. alphabet skips the market. powell and the president. trump athair met with the white house to talk about the economy over dinner but did not discuss policy expectations. big beat. their best quarter since 2014, sending shares higher. we will speak to the chief executive. good's been a date -- quarter, a good year. the company. some good financial results. runningumbers are across the company. some good financial results.

nejra: welcome to surveillance. i'm nejra cehic and for francine lacqua. let's get a chicken on the market. six they of gains for your -- european equities. a lot of it has to do with oil and gas stocks of outperforming -- stocks outperformed to the upside after bps big beat. oil and gas giving a lift to most industry groups on the front foot. coming inrvices pmi at 51.2. the preliminary was 50.8. that data coming through and ahead of that we see the euro getting a two week low. down 0.2%. the services pmi is coming through and we should begin the competent number in the moment which we will bring u.s. soon as it crosses the screen. global growth concerns still on investors minds. we talk a lot about the fed in

this hour as well. with all that mind, the 10 year yield gives us a good cease -- signal of risk. we are up one basis point. a look at australian assets today with that report on financials of banks. sticking with the u.s., make sure to catch our coverage of president trump state of the union. he will have all the latest from washington's big event. full coverage, we get any hot stock tips? infrastructure, we focus on the wall, or what he focus on the economy. let's get the first word news. >> the federal reserve says chairman jay powell net with president trump at the white house to discuss the outlook for the economy. the fed says powell's remarks are consistent with his most recent news conference. new,s when he talked up a quote, patients in rate decisions.

he also told the president policy will be based on incoming data and fomc's decisions are nonpolitical. it was said to have lasted 60 to 90 minutes. the fed numbernd two also attended. donald trump's inaugural committee under scrutiny this morning. spent $170 million on the curtain raising event back in january 2017. the committee had now been subpoenaed by federal prosecutors in new york. questions have been raised about how the money was spent and how tickets were distributed for the exquisite event. former chief jim young ken of -- world bank

countries have defended the existing order against trump's criticisms. coming up tonight, the president talks the state of the union. bloomberg will bring you the latest from the big event in washington. crisisvenezuela were the continues. the u.k., france, and germany leading a host of european cup -- countries in recognition -- recognizing the opposition as the leader. italy vetoing the decision. is reviewing venezuela status. droppingconsidering the country's sovereign notes from a number of benchmarks as the treasury department put trading restrictions on bonds. parliament's failure to agree on brexit is holding back investment according to business secretary greg clark. this coming after nissan abandoned plans to expand production in the u.k.. the carmaker will not have to reapply for government grants. theresa may have it until next week to secure changes that will

pacify enough lawmakers to win a majority of parliament. there are few signs of the eu will budge. the silicon big apple is now the best place for tech. new york has ranked first and index measuring tech cities with san francisco second in london third. the list was put together by a real estate broker. due to volumeead of capital, pool of talent, and opportunity. global news 24 hours a day on air and at tictoc on twitter. this is bloomberg. thank you so much, let's talk tech. google parent alphabet slid in extended trading after reporting slimmer profit margins after spending heavily to expand clout and you two businesses. the ceo addressed rising costs. drivers were first, content acquisition costs, primarily for youtube. mostly for advertising supported

content. it was a seasonally strong quarter for you to. it also for newer subscription businesses. youtube premium and youtube tv. they have higher cac as a percentage of revenues. nejra: join us now is bloomberg -- bloombergsenior intelligence a senior technology reporter. let's sucker the operating margins under pressure. this is a something that will continue? >> i think so. youtube is incredibly popular. historically a platform for user generated content but now a platform for professional content as well. that kind of constant cost money for google to bring to the platform as revenue grows and it costs more to build that revenue. that's a reason why they're getting the margin squeeze. the mix continues to shift towards mobile and in mobile there are more costs.

margin is down about 3% year on year. investorst are looking for from google to drive the next leg of growth? the big area focuses on the cloud. that's a huge opportunity for them. the scene amazon really drive amazing growth there. people looking for them to invest more and to reveal more about how that business is going. they have a multibillion dollar business there but really looking for more detail and possibly acquisitions. intelligence'sg senior technology reporter. and join us for the hour, pau morilla-giner and michael bell. welcome both. great to have you with me. we had a little bit of a mixed picture and reaction to this earnings season so far. let's look at that.

pau, are you more positive now? pau: short-term picture, yes. relief,s have a sigh of and an area which is so close to investor sentiment inevitably punished at the very last of 2018 and is set to do well. the story is one in which tech will be at the forefront of the potential steel trade war between china and the u.s. and of course also we should not forget the fact that cyclical toustries will be sensitive what we are already witnessing and the fed seems to have reacted to which is a significant slowdown in a timothy economically in the u.s. and outside the borders. nejra: you bring up chipmakers, we had updates.

missing estimates. 2019 growth of the lower end of the range. we have seen stocks decline in the equity trading section -- session meeting tech stocks have been an underperforming sector so far. when you look at the tech sector, are you making a big distinction between the faang and other parts of the sector? tech, wei think within see value at the moment. our broad view is we are late stage in the economic cycle we are trying to get her folios ready in just a bit more defensive. not preparing for anything dramatic just getting a bit more balanced. what you tend to see is the more expensive ip growth stocks, they often underperformed during a downturn. trending away from those towards more value orientated stocks. it doesn't mean not owning any tech but not owning the more expensive parts.

nejra: which parts would you be looking at more? the parts exposed to 5g for example? i will tell you so the parts we want to avoid. if you look at a lot of the content creation stories where they are paying huge marts -- amounts to bring in lots of content and then negative free cash flow as a result of those slightly those kind of lower quality stock stone screen very well for us at the moment. when you're looking at a business that has high-quality and strong balance sheets, high free cash flow generation, and isn't too expensive, they are the kind of stocks we like. michael bell and pau us.lla-giner stay with coming up, power the president. the fed says its top officials talked to president trump about the economy but did not discuss policy expectations.

we will discuss that next. this is bloomberg. ♪

nejra: economics, finance, politics, this is "bloomberg surveillance." let's get the bloomberg business flash. >> bp exceeded profit estimates and recorded better returns than its closest european rival, shell. it was more efficient than ever which helped offset the impact of slumping oil prices at the end of the year. the ceo says the couple's is clearly working. -- company's strategy is clearly working. >> projects are coming in under

time in a under budget which is good. it's really because of one transaction. we thought it was a great opportunity for bp. on the backside of that we've committed to divest over the next two years, $10 billion. i'm not concerned about being outside the range a little bit. the cryptocurrency world has a new problem, and exchange with the assets locked away because of the death of the chief executive. cannot the street about $145 million worth of digital tokens as a lost access to the digital wallet in december. his widow says his passwords and other records cannot be found. slack is platform thinking about going public in the u.s.. it is working on the share sale. they plan to forgo traditional ipo and will sell shares to bidders in a direct listing.

that's the bloomberg business flash. let's focus on the u.s. fed chair, jay powell met president trump at the white house last night and they discussed three can -- recent outlooks. meetings between the president and the fed chief are rare and unprecedented. cleveland fed president said need toy eventually revise a bit. still with this is pau morilla-giner and michael bell. me start by asking you whether we will see asymmetrical reaction in u.s. assets from qt that will be selling qe. pau: eventually, yes. what goes up must come down. significant decoupling between the real economy and the financial economy and the opposite should be expected.

what happened last week is a sudden change of track by the fed. at best, it covers the credibility of the institution and at worst we should take into account the reasons why the fed has decided to view this twitching handbrake stop. i guess it's because consumer confidence is continuing to hold. the fed is not releasing the kind of economic activity. we should look of the bond market. it's telling us because it is. maybe assets would do well in the short-term and everybody seems to be excited. but the big picture is one in which i'm quite worried about the reasons why the fed did what they did. you agree,nder if mike. you think u.s. treasuries look more attractive than they did a few years ago.

are you expecting the buyers to be more towards easing rather than receiving the hiking? michael: i think his person -- think it's possible they rate up again, another couple before the end of the cycle. at the fed could well pause least to the summer this year. i do think is more downside to interest rates than upside from here. likewise for yields. i think we are in the late stage of economic cycle. if you're going to more interest rate rises they're there probably knock on to be that many more of them. when begin to the end of the cycle, the fed will cut rates. asymmetry, there's a hedge to a riskier part of the portfolio. having owning some u.s. duration in the medium and long-term makes sense. this is giving us a long -- an opportunity to still run.

this is still a story of pretty significant deceleration. the economy could have a significant amount of leverage. companies will feel the burn of higher cost of capital. consumers are beginning also to feel the pain of higher rates, the housing market which begin to decelerate and the unemployment picture which can only get worse. i believe this is the time to begin to the wrist the portfolio , even if in the short-term everyone seems to be very happy and relieved that the fed did what they did. nejra: what about the outlook for the dollar? mike: it depends at what time you're looking. again sterling, if we get resolution on brexit, it's going to go higher. but during a recession you normally expect the dollar to go higher as you get a short squeeze in the emerging markets.

they borrow and dollars in new dollars to pay down their debts. i think that's probably going to win out and you expect the dollar to go up, especially against some emerging-market currencies. i think the yen will appreciate against the dollar if we go into a downturn in next couple of years and the yield differential comes down. the difficulty is you have a 5% fiscal deficit. that's unusual at this late stage in the cycle. while that look like? that's slightly tempers what would normally happen. the dollarup with not reacting exactly the same ways as the past. i'm going to inject a bit of excitement of volatility and ask if we are in a new volatility regime. you have said that we are in the stage of the policy tightening cycle but there's a high level of accidents and financial markets. libby the right kind of volatility? there are always

opportunities, even with these high volatility environments. the times of volatility and very stable markets is gone. even what happened last week, i don't think is necessarily an attempt to manage financial markets but rather to say maybe, we got rates too early and too abruptly. it will bring opportunities. particular, the msn's are beginning to look more and more attractive. isn areas like gold beginning to now look a little as thee interesting beginning of the end of the rate hiking cycle is nearby. nejra: is there anything in the speech that you could look out for that you may change the idea to look out for. just always on markets

before christmas is the fed activate. there's a conversation between donald trump and jay powell yesterday. will be anald trump lot happier with jay powell and he would've been a few months ago with the market having priced out anymore rate rises for this year. the next thing where looking for something on trade. oftrump can say something the next few months that makes the market more positive figure going to get a trade deal, i think that could boost equities higher. the one thing i could say is the way i view it, if you get a trade deal done, to me it's unlikely that the fed don't raise rates this year. why would the fed not put rates up? why is it on pause? it's worried about global growth which is partially down to trade. bunch the stock market quite strongly. the fed might hike. even though we had a

rally so far this year it's felt like a cautious rally. our guests stay with us. we will take a look at some of the biggest stock movers this morning including pandora, shares jump in the most since february 2016. this is bloomberg. ♪

nejra: welcome back, here's a look at some the movers this morning. bp to the upside nearly 4%.

revenue came in at $800 million more than expected. that's the best is the second quarter of 2014 with oil at a hundred dollars a barrel. downside, about 13.5%. they missed estimates, scrapping their dividend and ditching their year ahead guidance. critical that it's up to the upside given that there is say their static revenue could contract is what is 7%. markets pretty much used to these news from pandora. nejra: theresa may hansteen northern ireland to try to bolster her brexit deal. can she find an alternative to the backstop? that conversation next, this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." something up drinking for the u.k.. the eurozone pmi at the top of

the hour coming in better. waiting for the u.k. number to come through. cable has really been doing not a lot at all in this session, struggling for direction but holding onto the losses from the past three days. the ftse 100 up .9%. we do have the data hitting the tape right now, 50.1 is where we have u.k. services pmi. that is actually weaker than the survey. it is also a miss on the u.k. confidence pmi, 50.3 versus the survey of 51.4. let's go to bloomberg first word news now. viviana: jay powell net president trump at the white house to discuss the outlook for the economy. the fed says powell's remarked state consistent.he also said policy will be nonpolitical and based on incoming data. the treasury secretary and

richard clarida will also attended. donald trump innovaro committee is under scrutiny. sources say the committee has now been subpoenaed by federal prosecutors in new york. questions are being raised as to how the nine figure number was spent. president trump is reportedly nominating david lob pass to lead the world bank. malpass has portrayed opaque as being too big and too inefficient. the nomination provoking risk from countries that defendant the global order against trump's criticism. coming up tonight, president union. state of the

bloomberg will bring you the latest from the big event in washington, these the the venezuela crisis continues. the eu failed to issue joint support for the opposition chief. italy be telling the decision. jpmorgan is reportedly reviewing venezuela's status in its bond indexes.sources say the company is considering dropping the country's's sovereign notes from a number of its benchmarks after the u.s. treasury department put trading restrictions on the bond. 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. nejra: thank you so much. theresa may is heading to northern ireland to try to salvage her brexit deal. the prime minister is expected to underline the government's commitment to avoiding a hard border while finding an alternative to the backstop proposal.

she is also hoping to reopen talks with brussels to renegotiate the withdrawal deal. are you still clinging to your view that we are going to get a soft brexit at the end of all this? we know isnk what that we are not quick to get a notice brexit because there is no majority in parliament for it or the population for it. parliament has the right to revoke article 50 if need be. 29, wemagine it is march are about to crash out, all of us went to happen is they are going to ask -- if it is literally that late in the day, they will revoke to extend article 50. i can't see how that happens because the risk to the economy, we have rbc a slowdown in the business that is you just reported this morning. the uncertainty checking on is hurting the u.k. economy.

it is nothing compared to what a notice brexit were due to the u.k. economy. be significant economic shift for the intent and would put a hard border in ireland. i think there is no appetite in parliament for that. we saw that last week. that will be avoided. exactly what happens to avoid it is unclear. nejra: i completely take your with, but david was on set me yesterday saying there was a lot of complacency around markets. he almost feels like it is like what it was like that with the runup to the referendum. >> we'll have wishful thinking biases. an an emotional issue like brexit, which is divisive and gets people's excited up, i think we confuse what we want to

happen which is an quarterly brexit whether there is a delay or second referendum. everyone wants to avoid the no deal. a think the stupidity of politicians would never be underestimated. the fact that they're not necessarily doing what is best for the company but rather what is best for the party and best for their underlying contingencies, doesn't mix very well. i am that things will get more and more delete, and at the very last second, the default option is still a no deal. i hope that mike is right and i am wrong. itra: this agreement, i like -- disagreement, i like it. u.k., to my disappointment is still investable because it is an area -- the options are so binary

that it is just not worth it. just, it looks as if sterling could be an opportunity. if mike is right, one should buy sterling. say, it is catching a falling lie. at the moment, uninvestable. i'm sure we will give up gains if reality happens to be better than we expect it to be. the best thing you can do is grab the popcorn and watch what happens. nejra: you just watching what just -- are you mike: we are not taking big bets at the moment. i hear this a lot that the u.k. is uninvestable. that tells me there is a lot of bad news bit in already.

exactly how this plays out is very hard to predict. the likelihood of us leaving with a no deal brexit to me seems like a very low probability. this has been one of the more interesting brexit discussions i have had in a while. thank you guys. us. and pau stay with a lot more coming up. bp's ceo isw with next. this is bloomberg. ♪

nejra: this is "bloomberg surveillance."

let's get the bloomberg business flash now. viviana: google parent alphabet slid in late trading. the company reported thinner profit margins and higher spending. fourth-quarter capital expenditure jumped 80%. off of that is heavily reliant on its ad business as it develops new offering. youtube less profitable than the original google search service. >> the key factors were acquisition cost, primarily for advertising supported content and what is a seasonably strong quarter for you to, but also for our newer subscription services, youtube premium and youtube tv. viviana: the cryptocurrency world has a new problem, an exchange with assets locked away because of the death of its chief executive.

$105 million cannot be retrieved because of lost access. he was famously assessed with security.his what sss passwords can be found . -- his wife says his passwords can't be found. that is the bloomberg business flash. nejra: thank you. bp has given investors a positive surprise by exceeding profit estimates and earning better returns than its closest european rival, shell. worked fields and refineries more efficiently than ever, this helped offset the impact of a slump in crude. to ceo told anna edwards that opec's efforts helped stabilize will prices.

>> it does look to me that the opec plus countries is making a difference. they have announced reductions in production, the waivers for granted,anctions weren oil prices fell. those reductions are always kicking in in the first quarter now. when you combine that discipline that opec seems to have it has demonstrated for quite a while, and you look at factors like venezuela, human tragedy, there are things that can firm up the oil price. the bottleneck in the infrastructure will come. anna: how is the venezuelan human crisis impacting your business? i have read the gulf of mexico has turned into something of a parking lot for venezuelan crude. bob: it doesn't really affect our business. we don't do business in venezuela. it is a real human tragedy.

no one can predict what is going to happen. anna: let me ask you about carbon. you talk about the energy transition. promisingking for, more disclosure on how your business plan aligns with the paris climate accord. are you feeling pressure from shareholders to be more up front about that? bob: we're listening to society. this resolution we have spent some time with is really a transparency resolution. add to change what we what we report, we will link it to our strategy, it will help us internally with this framework we have to reduce emissions, increase our product qualities and then create new business models. i think this energy transition we are working on on all fronts. bpra: that was the ceo of

speaking to anna edwards a little earlier. still with us are pau and mike. this is the latest a of earnings out of the oil majors. are you positive on oil majors given what we have seen in the early season even though there were high expectations going into it? mike: i have been neutral. if you look at the outlook, it depends on the horizon. what has been driving the oil prices, predominately supply. on a two-year view, i would start to worry about the demand story as global growth slows. as it start to roll over, that the negative for oil prices.

on a two-year out of you, i would be more cautious. nejra: speaking of upside to the oil price, do you see that having further to run? we are up more than 20% year to date on wti. pau: i don't think so. seeink we will probably not up prices. the one thing i want to raise is how respectable the levels of oil price in the oil services one ofy, this is where the find attractive opportunities is. majors are showing there is nothing like adversity to get up to speed and try and focus your mind and bp has successfully done so. from a violation perspective, it is in the oil service industry all of these plethora of companies that are very correlated to the investment bio

majors into maintaining activity and all the. i think that is where one finds a great opportunity, was is uncorrelated from what the oil price is. i do agree that if you have a longer-term horizon, you should be bullish oil price. even accounting for that, i think there is a massive opportunity for taking advantage of valuation. this comes in oil services. when i sent to mike that we had high expectations going into earnings, what i meant was investors are asking a lot of the oil majors. they want capital to be returned to shareholders, but they also want the debt to be brought down. because there is a lot of opportunities to trip up, where as you say you like the oil services because you believe the oil majors are committed to investment. pau: yes. after what happened in 2014 with the oil price crash, there was a huge amount of underinvestment.

there hadn't been a huge amount of underinvestment in the industry. not, youou like it or still have to maintain a certain amount of investment to maintain the oil rigs in function. as a result of that, it is a slightly risky bet within the to tap intodustry oil services as opposed to -- or majors, which are more dependent on what the oil price ends up doing. nejra: you are neutral on oil parts, are there other where you have market conviction either to the upside or downside? mike: it is all driven by the global outlook. really, what i am saying is that near-term, it looks like global

demand is holding up ok, but it is clearly downside risk coming lookshe eurozone, china, like the u.s. may see up every slow down, but hold up ok given the fed looks like it is going to be on policy. --pause. against that backdrop, if global demand starts to weaken at some point over the horizon, that would be negative all cyclical commodity reducers. an stayike and -- mike with usd pau. pau stay with us. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." let's get some final thoughts with my guess for this hour. pau and mike. moret want to get a little into how you are allocating across the portfolio.

we talked about how you are producing equity exposure. what else is reflecting your risk off the? -- pau: this is an opportunity to focus on idiosyncratic risk. financials have become safer, unlike other areas of the corporate landscape which have become even more leveraged. stick to financial bonds. on the cash plus side, maybe look at gold. it is beginning to look more and more interesting. before you accuse me of being too gloomy, look into some areas where what has happened in the last few months gives us evaluation cushion. in particular, look at ian equity assets. assets.uity

everything that could have gone wrong, did go wrong, now they -- things need to does not get as bad as people believe so that these assets will value. it is a combination of being defensive on the developed market side, stay tight in credit, but look for opportunity in the long-term within a.m.. nejra: so taking your risk in em equities. do you agree that anything that could have gone wrong with emi assets has, wrong? ke: ultimately, i think that no market around the world is pricing in at the moment is a global recession. i'm not saying that is imminent, but i am saying the risks of a recession over the next couple of years are rising as we get later into the economic cycle. delay i think about it is it is all about balance. for most of the last nine years until september, you want to be

overweight risk as much as you allow into your business. you want it to have lots of credit and equities. now, it is about being more balanced, getting closer to neutral in equities and credit. you have to buy something to balance it off. what balances it? u.s. treasuries balance out quite well, i think global strategies. the kind of strategies that can balance out the risk in the portfolio. you are trying to build a portfolio you are happy with at this stage of the cycle. is equities rally another 15% from here or is growth to terry rates. -- deteriorates. one of the key things that concerns me at the moment is the level of corporate debt that has built up. we have seen him elaborating of the corporate balance sheet across the world, particularly in the u.s.

i think that is a potential risk over the next two or three years. pause,fed remain on perhaps it is less for a risk. to defend continues to tighten, i think it becomes more of a risk. what you are seeing at the moment is corporate are so uncertain about the outlook is of concerns around trade and brexit, that they are delaying decisions to extend the cycle much longer. when you pick up in business investment that leads to a pickup in productivity growth because we are running out of workers. nejra: very final thought? pau: worry. i worry about corporate debt, the fact that investors are becoming complacent about implications of low-cost capital. it is not a problem to have a lot of debt if your cost is low, but let us not forget that we are seeing corporate that will go into the market and will have to do so at much higher rates.

to the other thing that worries me is the fact that even if it is good news that the fed has , ited, it off -- paused also means that we have lower rates when and if we hit a recession. nejra: thank you so much for joining me today. we continue in the next hour. tom keene will join me out of new york. coming up tonight, president trump's state of the union. bloomberg will bring you the latest from the big event in washington with special coverage. this is bloomberg. ♪

tom: this morning, it is now and forever.

of the unitedster kingdom will travel to belfast, ireland under the discussion, where is the border between the two irish nations? the president will face a house democratic. the stock market under discussion. 7% of new record highs. this is "bloomberg surveillance." york, nejrae in new cehic and for -- in four francine today as well. what will we expect to see from prime minister? nejra: she is going to give some update on the situation with the backstop. this is the big question here as to how is she actually going to renegotiate anything new with the eu? might to guests in the last hour were very split on this.

you have saying there is no way we are going to have a no deal, the london and capital saying that is a likelihood. tom: the conversation we are trying to bring forward, richard will be with us with his special knowledge of northern ireland. right now, your first word news. new legalhis morning, problems for president trump. federal prosecutors have subpoenaed documents from the president's's inaugural committee. that groups raised a record $107 million to celebrate the inauguration, the contributions are drawing scrutiny. in antoday, a fire apartment building in paris killed at least eight people and injured 31 others. residents seeking safety on the roof or climbed out their windows to escape. the building is located in paris's high-handed 16th district. prosecutors suspect the fire was a criminal act.

japan's prime minister and angela merkel have something in common. they say they both want to prevent a note of brexit that could rattle their economies. president trump will nominate malpass tocial david have the world bank. he called the world bank to pick and to an efficient. bloomberg has learned the announcement will be made this week. 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. market. want to get the we have a lot going on in international . relations remarkable to see the january move continuing into february.

curve steepening going on, euro stable. in with a bull market of 15.65. there is the elevation now. it is the day after the day after the super bowl. 7% or so from a record high. weaker sterling is what we see. weaker sterling as the prime minister travels. nejra: we are seeking most of the g10 weakening against the dollar. the euro bounces off the lows from earlier. we got the eurozone confident and services coming in better than expected. i put the aussie and because it jobs initially on retail sales up in reversed the drop when an rba not as dovish as the fed. tom: the soap opera continuing

over in japan. nissan with their holders voting to name a new director.

significant implications for the interest rate outlook. market participants would be better off focusing on the economic outlook. why is the market in so much disagreement with mr. powell? with the european central bank, the bank of japan? gene: i would have to say i agree with bill dudley on this. the impact of quantitative easing or tightening on financial markets is very unclear. what you don't understand, you generally fear. from that perspective, i think people have naturally been worried about the impact of liquidity and the fed is responding to it. tom: in the spirit of ben bernanke, who has told me he is isn'tncerned about this, their advantage the x-axis and if they can bring the balance that down over a timeline market participants aren't focused on? gene: i think without question.

again, most fed watchers would tell you that the impact of this is equivalent to very marginal tightening in fed funds. isis really about signaling, the fed continuing to tighten or is it going to neutral? from that perspective, whether it is rates are the balance sheet -- i agree with bill dudley. if you look at the impact on the balance sheet estimates from an earlier and, a qualitative , it makes very little difference at all, but it is a messaging of, we feel like we are appropriate and don't need to tighten. in an environment where growth is weak everywhere, that is a really important message. nejra: so you are saying it is more important about whether the messaging is a dovish or hawkish affect, rather than the market focusing on the intricacies of the balance sheet.

have a locked into a place of complacency at the start of this year? we have had this pause from the fed. gene: our view is that there is still some complacency in the market. you have to take what the fed has said which is basically that its inflation is low. financial stability is low. we can manage to the left tail and focus on the left tail risks. inevitably, they will be discussion about a powell put in place. the fed has not elaborated or elucidated how they are changing their framework. if you are thinking word is volatility come from, it is that risk of communication error. tom: very good. will continue through the morning. we have a very important guest coming up on northern ireland with all of his work on the good friday agreement.

we continue. to stay with us. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." nissan has called an extraordinary shareholder meeting for april the eighth to and kelly from the board. gohn is still in a tokyo jail cell. off of that profit margins were squeezed. the key drivers were first content acquisition costs, primarily for you to, mostly for our advertising content in what

is a seasonably strong quarter for youtube, but also for our newer subscription businesses. q2 premiums and youtube tv, which have higher cap as a percentage of revenue. viviana: capital expenditures sort. -- soared. bp had its best quarter since 2017. it posted earnings that beat estimates. the impact of slump in oil prices, we spoke with the bp ceo. bob: it has been a good quarter, goodyear. operations are running all across the country. viviana: that is the bloomberg business flash. tom: thank you so much. it is the state of the union in the united states as prime minister may travels to belfast.

jacob and gene are with us. when article suggests that maybe president trump will be bold and make actual executive order announcements tonight. should we expect that? has beenthink what foretold here is that the president might attempt to declare a state of emergency along the southern border to build his border wall. that would create an immediate poor challenge. it would move the debate on word, which would allow congress to get on with its other business and move the issue into the ports. hand, it would perpetuate this extraordinary argument that led to the longest government shutdown on record. i think that is likely. i don't know that it is a guarantee.

is that there will be movement towards bipartisanship on prescription drug pricing. tom: we have seen a changed house. it is a house democratic. do they sit on their hands? the body language we are going ,o see tonight, the pageantry maybe even justice ginsburg will be there as ill as she is. did the democrats sit on their hands or do they are plot -- applau nicelyd? jacob i expect to see traditional applause:. then maybe one or two that calls for priorities and democrats can agree with. cable probably do some of his general referring to the chaos hoards ofess and immigrants coming across the border. nejra: how much of what the president says will actually be

feeding through to a political strategy? jacob: i think a lot of it will be statements and words. veryis a very responses, quick moving white house in a way, but also not one that tends to follow through with long-term strategies. the office of legislative affairs tends to follow from the president's instincts rather than following a main strategy to the extent that they have made major legislative progress. it has come from the house and senate, the criminal justice agreements between the democrats and republicans. last year, the republicans only tax bill before that. nejra: how much do you expect the president to focus on the economy in this speech given where he is in the polls at the moment? jacob: i expect it will be a fairly mainstream. -- main theme. the president can points to

300,000 something jobs created in january. the go to the markets of pimco expertise and how bonds come over to equities, this president is going to be able to do once again a victory lap on instability in october and december. all of a sudden now, we have ourselves on the edge of a bull market again. think we talked a little earlier about powell, did i think it is also important to notice the trump-put. perspective, i think we will be looking for signs that he is doing the victory lap on trade ahead of what is likely to be estimate with xi at the end of this month. similarly, that he is not starting another round to the shutdown. it would be great to see something on infrastructure, but

i think we have all given up on the. tom: have we given up on that? jacob: infrastructure has become almost a joke. tom: you need to go down 50 nine st in new york and then he will officially understand that it is a joke. jacob: the idea of infrastructure being something this congress and president can agree on has become a running joke because infrastructure has been something touted by the white house as something that will happen. in principle, it is something everyone agrees on, but in the reality of it in terms of private partnerships and how the democrats prefer to invest directly, i think there is still a lot of daylight. tom: thank you so much. we will have coverage of the state of the union, to uniquely

bloomberg doesn't, driving theard the conversation -- unique way bloomberg does it, driving forward the conversation. this is bloomberg. ♪

in london nejra cehic with tom keene in new york.

francine lacqua has the day off. heavily.spent here is the ceo on the alphabet call. >> being able to deliver gaming with a kind of real-time definitelys, it is an important computing advance. we think it will help us drive the newer computing platforms we are working on. let's welcome bloomberg opinion tech columnist, alex webb. it is the margins are gaining attention here.is pressure likely to continue the rest of the year given what we heard on this last earnings call? alex: it absolutely looks like it will. google has been on an an channel growth phase.

possible underlying weakness was covered up by things like cloud. now, we see the cloud business weakening a little bit. facebook has said their margins are getting weaker for different reasons.they are investing in more concept moderation. it is probably good opportunity for google to double down and invest in strengthening its profit while some of their competitors are also getting weakness. tom: we have seen this before. i feel terrible for google. people -- free cash flow has -- bloomberg's modeling $32 billion in free cash flow next year. life is tough. what are they spending the money on and what is the sweat about? that has been the theme

throughout the whole of the concern about the faang. all truth is relative. the concern is that the growth is not the same pace. these companies still drop huge amounts of cash. apple, despite taking a bit of a hit, is still the most profitable company in the world. it is wise for them to invest in things going forward. google remains a company that gets the lion share of its activity from ads. trying to diversify away from that is the sensible thing to do. tom: this is critical. can they make money on youtube? alex: i think so. given the huge pivot toward video that has been happening across the tech industry and the amount of eyeballs they get, there are so many ways in which they can start to monetize that, three more subscriptions, making

compelling. ads more tom: thank you so much. america, gets to enjoy pizza. pepperoni pizza. the newly minted chairman of papa john's will be with us. look for that later today. stay with us. this is bloomberg. good morning. ♪ 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: we welcome all of you streaming on twitter. nejra cehic and myself are out on twitter, trying to advance the conversation.

right now, our first word news. viviana: the u.s. and south korea have reached a cost deal for american forces there. saysth korean news agency it will pay about $1 billion a year, an increase. the trump administration had demanded a 50% hike. the republican-led senate rebuke president trump over plans to withdraw troops from syria and afghanistan. an amendment urged president trump not to exit the conflict. mcconnell pushing the measure after president trump declared victory against islamic state and begin peace talks in afghanistan. fell to a lowter last month. marketp brought the ihs close to the market separates expansion from contraction. companies are less likely to start new projects.

clients were more cautious because of brexit uncertainty. the slump in italy has spread to the service economy. business activity shrank in january. that forced employers to reduce headcount for the first time in more than two years. companies cited weaker domestic demand and a drop in domestic orders. 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." thank you. davos our high points at was a discussion about the future of the island nation. that comes forward as prime minister may will travel to belfast, an extraordinary moment, eileen foster out with comments throughout the morning and we will hear from prime minister may this afternoon. with us.da out wit

it is important, it is about the , can theon market european common market move forward without the united kingdom? it is going to have to get used to the idea, they can move on. it is going to be a worse outcome for both sides. , we think it does not change the growth outlook all that much unless you end up with a no deal brexit. from that perspective, they can move on. ts are important. from that perspective, it is not likely to be easy. him we will talk to the bassett are about this later but it harkens back to the good ambassadoro the

about this later but it harkens back to the good friday agreement. prerogative of continental europe to give way to some collegial solution? gene: what i would say is that this deal that has been negotiated by this government is pretty good from the european perspective, not such a great deal from the u.k. perspective. to lock that in, it makes sense to get compromise. both sides need to look over the abyss before they come to that willingness to compromise. it needs to be clear there is an alternative that is worse which is why you have to compromise. nejra: we are struggling to find this compromise. you have written extensively on this. we have got theresa may in northern ireland and time running out. gethere any chance we could

any changes at the margin to this backstop agreement? >> we keep hearing from european quarters, that people need to be creative and find solutions. i agree with tom when he says can't they find something? when you get down to the specifics of how do you push through due time limit the backstop, what good is an insurance policy that runs out? unilateralpt withdrawal? that is on acceptable from the irish perspective. onrun into difficulty specifying what needs to happen. one possibility is finding a solution in the political declaration, some kind of legalese that links the two. hardline brexiteers are adamant that would not be good enough and that leaves a question

whether she can peel off of enough mps to find support for whatever solution she does strike with the e.u. seems that is what markets are hoping for. if you look at cable volatility, that has been coming down. we just heard from gene frieda that a no deal is not the most likely scenario. a there more of a chance of no deal than markets are pricing for? therese: they are the experts. wondered whether markets are too optimistic because that is in the nature of markets to see opportunity. there is every possibility that no deal happens almost by accident. we had a piece on game theory and if you try to apply game three -- theory, you get this outcome that might be that each side is playing a different game.

it is too early to write that off and it is a scary place when you are saying at the last minute, they will do something but nobody can say what that is. chart, the to show a republic of ireland nominal gdp in green, moving up, normalized back to 2000 with northern ireland unperformed -- underperforming. it gives you a picture. deal by accident, what are the outcomes to the republic of ireland? consensus is that , that ireland suffers more than any other country. that maya report today be the downside is not so big as everyone is saying because the

u.k. may end up with a looser policy, the bank of england could end up lowering rates. the economists will say country is so intertwined with theu.k. economy, agriculture sector in particular, it would not be enough to offset the financial services and jobs going to ireland. irish are not budging on the backstop, they see this as bigger than the economic risk of a no deal exit. nejra: if we get past march 29 and we do not get that no deal scenario, is there going to be a gilticing in the markets? gene: we do think there would be some repricing. theink the reason why market does not price in a no deal is because it seems so

irrational, like the referendum result. you did not get the move in sterling and tilt you had the result. this would be similar -- until you had the result. this would be similar. the longer it takes to get there, the more upside we are taking out because uncertainty is leaving businesses to move away from the u.k. tom: gene frieda, thank you so much. up,ave got much more coming richard haass will join us and we will focus part of our our on ireland. we will focus on the state of the union, buddy carter, listening to the president and he will listen to ms. sab abrams. ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. to invest in russia's biggest drilling company. the company said it never received complete approval to take a stake in eurasia drilling. it will seek other ways to drill for oil in russia. the largest jewelry makers predicting the climbing sales. pandora plans to counter that by launching a program to ignite interest in its brand. the company dropped its target. pandora is suffering through a pronounced slowdown in retail. there is a sign that demand for super bowl ads may be peaking. million for ads during the game. nbc got 408 million last year.

the audience was slightly over 98 million, the lowest since 2008. that is the business flash. nejra: thank you. bp shares extending gains in london, the most since 2016, a positive surprise by exceeding estimates. new projects delivered an increase in oil and gas output and more efficiency in refineries helped offset a slump in crude. opec's efforts helped stabilize prices. >> it looks to me that the opec plus countries is making a difference. they announced reductions when the waivers for iran sanctions were granted. are onlyuctions kicking in in the first quarter. when you combine that discipline

that opec plus seems to have as demonstrated for quite a while and you look at factors like venezuela, there are things that could firm the price. later in the year, the t bottlenecking in the permanente -- in the permian will come. it feels tight. >> how is that impacting on your business? i read that the gulf of mexico have is turned into something of a parking lot for venezuelan crude. >> it does not affect our business. it changes flows. it is a human tragedy. i do not think it is going to be sorted for some time. >> let me ask you about carbon. you talked about the energy transition. you have a shareholder resolution promising more how this aligns with a paris climate accord. are you feeling pressure to be

more up front about that? ,> we are listening to society this message is coming from many directions. this resolution is a transparency resolution. it will change and add to what link it towe will our strategy, it will help us internally with this framework to reduce emissions, increase our product quality, and create new business models. we are on it on all fronts. the good of bob dudley, the chief executive officer of british petroleum. with us, gene frieda. to oilgive the trophy executives who are spinning the message. it is part of the culture. china, the reality in chevron out, conoco phillips

out, bp is the only one in their. .e can you do big oil drilling with countries like china or are those days over? gene: i think china is special. i think the mantra would be like this -- if you are an oil-producing country that needs money, you're going to open your market to foreign producers. otherwise, china does not need the money and it is not opening. china does not fit in that bucket. tom: i agree china is separate. energychina's independence? with your visits and study of china, are they going to be energy independent? gene: i think they are trying to be pioneers in terms of getting up the renewable curve and that

will reduce energy needs and it will make them more independent. ultimately, that is about how do we shift the growth model away from the old stuff, the infrastructure driven, property focused growth model. so far, i would be skeptical they make that shift seamlessly. i often makenk ,ith china and the oil market when we look at china and there is uncertainty about the growth trajectory, you have written about how this can cause a negative feedback loop. explain that and how we get out of it. gene: the first point is the tendency when the chinese economy slows is to ramp up infrastructure spending. there is a problem within the chinese financial sins of -- system where lending is based on

guarantees or collateral in the form of property. the people who have collateral tend to be the state. in slowdowns, the private sector is cut off from credit. the state comes in. the private sector gets more crowded out. theprivate sector is were most dynamic job creation happens and what you end up with is a more state dominated economy that does not give you the same benefits. you start to run out of projects. they have made metros and airports. it would make tom happy if he was traveling in beijing because the infrastructure is modern. you can only have so much of it. nejra: gene frieda stays with us. what have we got coming up? we will have an update on wall street and private equity

as well. looking for that in the 7:00 hour. richard haass with us in the next hour. this is "bloomberg." ♪

>> i look back on it and the performance in the past four years has been unsatisfactory but still positively normal in nominal terms. it has been almost half a century and waking up in the middle of the night to check asia and europe. i have got a few super bowl rings along the way to look at and it is time to enjoy myself and my family. we: bill gross retiring and were thrilled to bring an extended conversation. we lead the conversation with the underperformance of his fund. he alluded that the unconstrained fund was like a hedge fund where it was diversified. they did not work out.

he alluded to his work with pimco. nejra: it was described as a conversation that you had with him. column, billnto a gross is a cautionary tale. that was an important interview and a great one. season,rn to earnings the european banking sector gets into full swing this week, they face revenue slippage and bad debt. analysts expect a bumpy ride. dani burger has the details. >> the focus is on italian lenders and french lenders because we have had this buildup among analysts. bnp, we could see as much as a 20% decline and we had u.s. banks come out what those numbers. analysts do not seem as sure

that european counterparts are going to be able to survive that. reportingcgen thursday with 14 holds, 52% of analysts putting a hold rating on socgen. analyst do not like putting a cell on stocks. later in the week, we get the italian lenders, i mentioned investors paying close attention to these because of the italian credit story, the buildup on banks balance sheets. the word is contagion, it goes beyond the italian banks. i have a map that shows a bit of this. when we look at non-italian banks, they hold a lot of italian credit, the most from france, 285 billion, half of that is with bnp. tom: thank you so much.

gene frieda with us. this is a huge topic. it was a massive backstory. europe has got to fix their banking system. how do they do it? gene: i could not agree more, the thing to do is to consolidate. they have a profitability problem, there is low hanging fruit and it is not happening. theye end, we are worried end up becoming more zombified. it your recollection that the regulators drove in the the solution united states and that they regulation equivalent is not there in europe to drive forward consolidation towards profitability? gene: i think these systems were stressed in different ways.

i would not describe the u.s. system as having consolidated except at a point of extreme stress. in the eurozone, we've forestalled that through ecb liquidity facilities and the challenges whether you continue with those facilities or you try to turn the screws and force systems to consolidate. most regulators are afraid of rocking the boat. the ecb toou expect extend their program this year? gene: without question. one or a loterous of these banks are going to face funding stress. a deposit race increase a proposition? unlikely given the data we have. tom: thank you so much. .ery nice over here

we will drive forward that haass,ation with richard all sorts of good friday experience. we will talk about the state of the union as well. driving forward to the state of the union tonight, the most contentious. much more coming on. let us remind you that the backdrop for the president, somehow i think he will mention it, a better than good stock market.

tom: this morning, a state of the union address, under's discussion, immigration.

and dublin and belfast, it is the irish question. the prime minister will travel to belfast. under discussion, where is the border, on land or within the irish sea? in this hour, richard haass. the stock market is within 7% of new record highs. good morning, everyone, live from new york, i'm tom keene. nejra cehic in london. we are focused on the state of the union. the prime minister travels to belfast. how will she be greeted? going to have to get people onside for her state , no real answer on how she will get support. the backstop still be key issue. tom: let us get to first word news. viviana: this morning, new legal

problems for president trump. federal prosecutors in new york have subpoenaed documents from the president's inaugural committee. that group raising a record $107 million. donors and potential foreign contributions are drawing scrutiny. the committee says it plans to cooperate. in paris, a fire killed at least eight people and injured 31 others. residents seeking safety on the roof or climbing out of their windows to escape. the building is located in the 16th district. the prosecutors suspect it was a criminal act. one woman is in custody. shinzo abe and angela merkel say they both want to prevent a no deal brexit that could rattle their economies. the leaders meeting in tokyo. abe told merkel germany and japan must play a greater role if the u.k. leaves the european union.

nissan has called an extraordinary shareholder meeting for april the eighth to remove carlos ghosn and greg kelly from the board. both were arrested as part of an investigation into financial misconduct. ghosn is still in a tokyo jail cell. 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. let me do a data check right now. want to get through this quick, ur, the curve steepening. 25239. setting yesterday sterling weaker, not sure what that says about the prime minister's trip. that is a move over three days. nejra: we have also seen a move in the euro. we got better than expected data in services and composite pmi.

the stoxx 600 up. the aussie is gaining. brent on the front foot recovering from yesterday's losses in the oil. tom: thank you. we need to go to washington. he will be up late tonight. kevin cirilli, our chief washington correspondent. is the president going to propose and dispose with an executive order from the microphone? kevin: he is going to lay out the case he could do that. what i am hearing is he is going to be -- it is going to be inspirational. they will be talking about issues like the wall and foreign policy. this is an opportunity for the president to reset the stage as they head into final negotiations on the government shutdown.

opportunity for the president to make his case on form policy and look to see fore democrats applaud areas they would be willing to work together on. the president got a major does coming outisanship against maduro in venezuela. tom: i am sure we will play on that in form policy. does he stay on script? kevin: yes, tonight the , readsnt stays on script , readse teleprompter from the address being drafted by senior aides. this is a president trump on teleprompter. does that extend it to comments on trade and the u.s.-china relationship?

bloomberg has been reporting that hardliners have been fretting the trump is being outplayed by xi jinping. kevin: the speech will include a portion on trade. particularly on u.s.-china. you make a good point. the criticism of the administration from policy wonks has been that president xi is playing a longer game. trade,issue of supporters argue that president trump as an opportunity to unify folks. democrats and republicans, there is nonpartisanship on issues like cybersecurity for the president to work on. president will be reading from a teleprompter but it is

president trump. he could throw in a line or two. i was going to ask because kevin has insight -- what could be the off script moments we could get? be thei think it could dynamic between speaker pelosi and president trump. speaker pelosi will be directly behind the president. you will see her reactions in real time and seated next to vice president pence. there is a lot of political theater happening inside of washington in a few hours. tom: thank you so much. we are thrilled to bring you a perfect day to speak with richard haass. i cannot say enough about the website, it is the best international relations website in the world. he joins us. his book is a world in disarray,

coming up volume two, a state of the union in disarray. have you ever put in a sentence or the paragraph? richard: i worked on two. tom: how many people are in the room? after the gulf war, i wrote a lot of it myself. tom: is the trump process the same or is this different? richard: there is very little about this administration that is the same. nejra: so great to have you with us. we have talked up a lot ahead of this state of the union. could we get surprises or is president trump likely to stick to script? richard: it is rarely a place for surprises. the backdropainst

of the shutdown, the emphasis on the southern border. he will re-emphasize that, it will be his administration is successful. initiatives,small there will be something on promoting the status of girls and women around the world. i do not think you're going to see anything that will surprise anybody. nejra: is there anything that he can say that can improve the polls? richard: speeches like this do not change the polls, that is the economy, how the standoff works down the road, whether there is a crisis, it is the underlying issues. tom: what do you expect from the democrats? zeitgeist is the democratic party is in collegial disarray. richard: you're only guest is

not running for president. tom: the democrats have an opportunity to come up with some form of response. do you look for that? whoard: it is interesting they took, the unsuccessful candidate for governor of georgia. you will see populist themes. party, there is no consensus. theare seeing a movement to left, redistribution, talk about what taxes. tom: does it have a permanence or is it just talk before we get serious? richard: i think it represents where the center of gravity is in the party and i think we are on the verge of a debate about redistribution and the extent of social safety. i think people are underestimating how significant this conversation is. tom: this goes back to the heritage of the council on foreign relations.

there is a revolt of different persuasions against the gilded age. is that where we are going? richard: absolutely. writingsident trump's is a revolt from the right about identity, about immigration. we are going to see a revolt from the left, redistribution through taxes, we are going to see the progressive parallel to that. that is where we are. tom: interesting. we will try to keep it contained to one hour. on ireland as the prime minister travels to belfast, we will do that here in a bit. of the, our coverage state of america. david westin. please stay with us, with futures up five, dow futures up 80. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. the parent of google reported profit margins were squeeze. out for bet spent heavily to expand its cloud businesses. expenditures sort 80%. alphabet's operating margin split to 21%. bp had its best quarter since 2014. the british company joined its oil peers by posting earnings that beat estimates. refining offset the impact of slump in oil prices. we spoke with ceo bob dudley. >> it has been a good quarter, a good year. the numbers look well. operations are running all across the country, best year on safety, which means good financial results. viviana: president trump will

david malpass to head the world bank. he is a critic of the lender. he called it too big and too inefficient. the announcement will be made this week. that is your business flash. nejra: the venezuela crisis continues while the u.k. france and germany led a host of countries as recognizing guaido as the interim leader. italy vetoed the decision. let's turn back to richard haass. venezuelan debt came to a standstill after the trump administration updated its sanctions tied to nicolas maduro. threads to lot of tie together. let me start with a fractured approach from the e.u. to venezuela.

what kind of a message does that send to the rest of the world that the e.u. was unable to agree on something that was so clear-cut? kevin: it is a disappointment. there has been some movement to support the alternative to mr. maduro, the leader of the national assembly. it is a statement about the e.u. about how it underperforms on the world stage. it is not going to be critical. the real dynamic is the hearts and minds of the venezuelan security forces and that is in play. get a regimef we change, what is your outlook for how venezuela recovers? kevin: it is a long-term recovery because this has been a long-term deterioration. it is going to take a massive infusion of regional and international help. might behere the e.u.

more significant would be to provide resources. you have got to bring back people, rebuild and oil industry, rebuild a society. this ought to be a successful country. some of the raw material is there. it is almost as if it is an individual or family that has been abused. we are talking about a decade for venezuela to get back. you for shannon o'neill. a lot of talk about the monroe doctrine, maybe it is a new doctrine. is the monroe doctrine in place? borrow a phrase from barack obama, we are leading from behind and that is the right way. is pushingstates things but it is important -- tom: does president trump agree? kevin: we are not talking about

military force, we are working with local countries. tom: which countries? colombia,richard: brazil. theidea is to persuade military to move away from supporting the sky. supporting this guy. we question is, can incentivize them and that requires, they cannot worry about their legal situation and they have got to feel the country has no future with maduro and has a future after maduro. tom: we have project, david malpass projected to run the world bank, nominated by the president. richard: it is going to be hard, given the politics. a post maduro moment, the politics change. tom: are you optimistic on if? richard: first so long, this was

a logjam and now it has broken. and if iterous still becomes violent, this could still head south. i do not know which way it is going to head but it is in play. it has broken the slow race to the bottom. tom: very good. coming up, perspective with david westin, a good conversation on the state of the .nion the former senate majority leader will join in good conversation. buddy carter will join. this is "bloomberg." ♪

tom: bloomberg surveillance. nejra cehic in london. coming up on northern ireland. we look at disney, google, paul sweeney with us. where did alphabet come from? >> i have no idea. tom: it is google, right? it is a search engine. are they going to make google profitable? >> they beat revenue, beat earnings, they are spending a lot of money.

the stock is down. long-term investors are comfortable investing in youtube, the cloud. tom: what is the sustainability at the top line? that hasn't happened. they keep popping, 20%. >> they are sitting in a sweet of digital advertising. digital advertising is growing 20% and they are taking the lion share. nejra: what about acquisitions? >> historically, google has not been, they have been reinvesting in their business because that is where they can generate the highest returns. the cfo left the door open they may think about acquisitions. i do not expect they will do anything of size. media investors would like google to buy some of these traditional companies.

i think the odds are slim. tom: they used to have $64 billion and now they have 109 billion piled up. it is a terrible business. t.r.y. in paint a picture of how it could get better in paint a the -- try and picture of how cook a picture of how could get better in terms of the profit margin. it could get better in terms of the profit margin. paul: they have lower margins than advertising. margins will not rise, they will be under pressure. as long as they continue to grow the top line and absolute profits, that is what investors are in for. tom: disney, what are you going to look for? they are going to stream, is it for real? paul: it is. they are going to sacrifice profit growth to pivot the

company away from traditional distribution. tom: what is the confidence level they can pivot the streaming and not give up the margin they have got now? that is why the stock is treading water. investors are saying if anybody can compete against the netflix, it is going to be disney. do we know they can do it? no. they have the tools but can they make that pivot? we do not know. it is going to take a couple of years and money. nejra: we have had a mixed picture out of the fangs. who is going to win this year? paul: facebook had fantastic numbers, the strongest among that group. overall, investors feel most comfortable with amazon because amazon has the rising tide issue

of e-commerce sales as a percentage of total retail sales. the wind is at their back. it should drive their long-term growth rate for a long time. nejra: paul sweeney, great to have you with us. richard haass of the council of foreign relations sticking with us. late today, jeffrey smith and 1:30 intchie join us at new york. 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: good morning. nejra cehic in london, i'm tom keene in new york. let's get to first word news. viviana: the u.s. and south korea have reached a

cost-sharing deal for american forces there. a south korean news agency says it will pay about $1 billion a year, an increase of 18%. the trump administration had demanded a 50% hike. the republican-led senate rebuking president trump over plans to withdraw troops from syria and afghanistan. an amendment urged president trump not to exit the conflict. mitch mcconnell pushing the measure after president trump declared victory against islamic state and began peace talks in afghanistan. growth in the u k dominant services specter -- sector fell to a low last month. the drop brought the ihs market close to the mark that separates expansion from contraction. companies are less likely to start new projects. clients are more cautious because of brexit uncertainty. the slump in italy has spread to the service economy. business activity shrank in january. that forced employers to reduce headcount for the first time in more than two years.

companies cited weaker domestic demand and a drop in domestic -- drop to export orders. 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. a headline that had been widely anticipated, prime minister may announces she will visit with e.u. commission on thursday. she will be traveling to belfast this morning, all eyes on 10 downing street as we await the exit to move to belfast to speak to arlene foster. we will discuss this with ambassador haass in a moment. what you need to know is savannah, georgia is the most beautiful city in america. he stoppeds march, and negotiated a peace.

and her of savannah which gives which jewel -- he stopped gives us the jewel we have today. buddy carter joins us today. i want to talk to about pharmacies in a minute, you're the one pharmacist in congress. let's go to the state of the union. what do you need to hear tonight? buddy: we know this president loves america, he is going to talk about the greatness of america, border security, protecting american jobs. i suspect health care cost and lowering health care costs, all of those things will be on his agenda. tom: there is immigration and the wall, he threatens action, kevin cirilli say he may allude to that. announce an order tonight. is that too bold of a move?

buddy: i do think there is too bold of a move by this president. it would not surprise me. tom: within this will be domestic issues. .ou are a pharmacist the number one topic we learned in the last election was the price of drugs across america. you and the republicans going to lower the price of drugs to democrats and republicans alike? buddy: that is a great point. issue. a nonpartisan hydro prices impact everyone and that is why we have to address it and that is why i'm proud of this administration and ihs and the job they have done, announcing some initiatives and price initiatives dealing with third parties and pharmacy benefit managers that will lower the cost of drugs.

all of that is important because this impacts everyone, it is not discriminatory against any particular party. nejra: great to speak to you this morning. thank you for joining us. i want to talk about president trump's approach to the trade war with china. is the president being bold enough? buddy: i feel like he is. i applaud his efforts. china has been a bad actor when it comes to trading we have to call them out. it is causing some short-term pain but in the long run, it will be long-term gain. nejra: what does the president need to say to bring the voters on side who have made the polls drop in the way they have recently? the president is approaching this speech not necessarily am a position of strength.

buddy: i think a shutdown hurts everyone. compromiseent wants and cooperation and he has made every effort to do that. has been morey intent on not allowing him to deliver on the campaign promise. we have to focus on the issue in the issue is the security of our border. i have seen it. isnow what a situation it and a critical situation and it dates to be addressed. -- it needs to be addressed. tom: on the shoreline of georgia, does the president have support, has he lost the marginal support? buddy: i do not think so. congressional district of georgia is a strong area of support for the president and we

appreciate his efforts and he still enjoys the confidence and backing of the citizens. tom: congressman, thank you so much. buddy carter from georgia. haass, old-line republican, working for democrats. it is a different message than we heard from republicans. richard: this is not the party i joined. is a populist party now, focusing on issues like immigration. this is not the republican party of small government, that cares about fiscal responsibility. the debt is ballooning. american politics is ugly. 1856, they picked up the pieces of the disaster and made it the republican party. is it -- does it have elements

of the whigs? you're: after trump, going to have a serious battle for the soul of the republican party. tom: we saw an article, looking at 30 years out. richard: you are seeing powerful, populist trends on the right and left. people are so focused on donald trump because of his personality. trumpism is global. it is going to exist after him and that is the larger point. look at the democratic party. they agree with him on trade, on the issues of wealth transfer. what we are seeing is not going to go away. a lot of these things are in the body politic and we're seeing it throughout europe and we are going to see it last. nejra: as you brought up trumpism, i am wondering whether

you think this will be just as strong a force in 2020? richard: i could not hear that. nejra: the issue of trump, will that be just as strong a force in 2020? richard: it will be central to the campaign and elements are going to be here. when presidents leave, they do not take everything. the united states is not going to become pro-free-trade arid immigration -- trade. immigration, we're not going to have an agreement the next day. a lot of these divisions are going to linger. tom: this is wonderful. we are going to continue with richard haass as prime minister may notes her trip to brussels as she moves to belfast today. dean, it may be make an announcement with david westin.

former dnc chair. look for that. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. juanberge has dropped a second bid to invest in russia's biggest drilling company. the company said it never received complete approval to take a stake in eurasia drilling. it will seek other ways to drill for oil in russia. the world's largest jewelry maker is predicting declining sales. the danish company, pandora plans to counter that by , launching a program to ignite interest in its brand.

the company dropped its long-term growth and profit targets. pandora is suffering through a pronounced slowdown in retail. there is a sign that demand for super bowl ads may be peaking. cbs took in $382 million for ads during the game. last year, mbc got $408 million. got $408 million. the audience was slightly over 98 million, the lowest since 2008. meet: theresa may will with the e.u. commission president on thursday in brussels, according to a spokesman. first, the prime minister will head north to belfast. she is due to depart soon. still with us is richard haass of the council on foreign relations. is this issue that has a high risk of a no deal scenario? mean theif you

northern ireland dimension, it may well be. it is one of the many areas where this country, we have failed to look and this is one of the big consequences and at play is the accomplishment of these stability of northern ireland. reintroduce you with your work on northern ireland. when did you first go? richard: i was the first envoy from 2001 to 2003. tom: how fragile was that good friday agreement? ithard: it was an agreement, was a cease-fire but it was not -- here of nots a fear the drama of bringing back a tension. can prime minister may diffuse that this morning? richard: if anything, she has increased the tension. is her stunning

principal coalition party voted for brexit. brexit is likely to either risk the stability of northern ireland or set in motion a dynamic for northern ireland's unification with ireland. nejra: where does this end? richard: if you ask me, most likely in a hard brexit. i am skeptical the e.u. is going to give the prime minister enough of a change she is going to be able to return to parliament and say i have got a support it. please, i do not see enthusiasm for a second referendum because jeremy corbyn do not want to be forced to take a position on brexit. if you ask me, the most likely results is we are going to move toward a hard brexit. i hope i am wrong. that is my concern.

nejra: could we have another election? you said the prospect of a second referendum is not likely. richard: you could have a second general election. it is not obvious it resolves anything. you've got the prime minister and the head of the labour party who are pre-brexit. where does that leave us? we are back to where we were. after end up with a delay march 29. it is not obvious that you have any outcome that will solve the problem. tom: the great economic historian said there is no other topic than ireland. for is the best outcome prime minister may and the prime minister of ireland to get to the backstop, the front stop, what do you see as the best outcome to get to a new good friday brexit agreement? richard: you want to preserve the current one.

is she choosese the unity of country and peace in northern ireland over brexit. that is the only option. tom: you were knee-deep in this not once, but twice. bring up the article from 2013. this is his second sojourn to northern ireland and it is a lengthy title. we in northern ireland have come a long way from violence, we eace.built a p northern ireland has reached milestones. are those at risk? richard: somewhat. one of the great ironies of brexit is that this could change the dynamics in the north. the protestant majority party

could have said in motion a dynamic that would put irish unity on the agenda. tom: are you watching arlene foster and the dup to see if they can find a negotiation with northern ireland? richard: it will never happen. termre going to see the urgency of protestants in northern island who would rather be part of europe. tom: this is critical. we talk about a reunification of ireland. is there a fear that this is a precursor to reunification. richard: for some there is a joy, for some there is a fear. among the catholics, they have wanted it. you will see younger protestants and others who are going to be saying i would preferred the uncertainty of being in catholic ireland then to being in the u k that is no longer part of europe. what i am hearing through

this conversation is it comes intractable and you said the most likely scenario is a hard brexit. is there a chance we just go on and extended negotiations for decades and there never is a brexit? richard: you cannot extended forever. all sides would want to want that. we should not kid ourselves. extension and the uncertainty inherent in it is not a solution. at some point, people will say we do not care if you leave or not. there is going to have to be a decision. me unlikely you get some compromise deal. the e.u. does not want to set a precedent that squeaky wheels get the grease. you come back to the same

choices, a hard brexit without a referendum,, second and election. it is not one of those things that if you work it, you are going to come up with a new solution. ajra: for those who want second referendum, are they kidding themselves in terms of thinking the outcome would be different from the referendum in 2016? richard: it is likely you would get a majority for remaining. the first referendum was an exercise in political irresponsibility. people were voting for something fundamentally different for brexit as a concept. i think this idea of direct democracy was outrageous. i do not understand why this prime minister is so opposed to a second referendum now that it would be based upon a real choice rather than an imagined

one. i do none understand why so much of the establishment is against a second referendum except they are scared they are going to lose. getd cameron will historical criticism for setting this emotion. i think theresa may will get criticism for choosing the unity of her party over the unity of her country. should not kid ourselves. if there is a hard brexit, northern ireland will break off and join ireland. who knows what will happen with scotland. that is what is at stake. nejra: richard haass, thank you so much for your passion and wisdom. the council of foreign relations. just got some numbers coming , $1.26 on estee lauder $1.28.

it is declaring a quarterly dividend. this is "bloomberg." ♪

tom: single best chart. i am tom keene in new york. with us is richard haass. bring it up. the nominal gdp, the animals. of the republic of ireland normalized back 19 years with northern ireland. it is a growth differential between the two. how do drum start -- do you jumpstart the economy? richard: with the uncertainty about brexit, you would fail. tom: no deal kills them. richard: northern ireland is the largest welfare state in europe. you have got to create a modern economy. tom: what can president trump do ? what can the president of the united states due to assist prime minister may, the prime

minister of ireland? than probably george mitchell, we have never been that central. it would be helpful if the administration stop going after the e.u. and talked about the importance of working out a deal. that would be inconsistent with this administration. nejra: it is a big problem globally, a lack of progrowth policies that are continuing to fuel some of the popular sentiment. -- populist sentiment. if wed: it would be nice had more trade, that would help. i think the growth has been unevenly shared and what we are seeing is not just opposition to them at gratian -- to immigration but powerful calls for redistribution. we have had high growth. we are heading into lower growth

and that is going to reinforce this trend. tom: a world in disarray, a wonderful book. .e thank richard haass richard haass of the council of foreign relations. this morning, this historic day for all of ireland. we will continue this conversation forward on bloomberg radio. the state of the union address, david westin with our coverage. this is "bloomberg." ♪ the latest innovation from xfinity

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state of the union tight rope walk. u.s., france and germany all hit with lower services. the company with exploding cap x. david: welcome to "bloomberg daybreak." i'm david westin, right here with alix steel. a good steak dinner at the white house. alix: it was jay powell's birthday. he was turning 56 and he had dinner last night with president trump. it was the eve of his one-year anniversary. david: steve mnuchin made the invitation. they didn't say anything fromrent