stated walk -- 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 from what mr. powell has said publicly.

alix: it would be super dicey if you did that for days before the fed meeting -- four days before the fed meeting. here in the markets here, not as boring as yesterday's trade, but not that juicy, either. s&p futures up five. euro-dollar modestly weaker despite the fact that you had good earnings. the pmi and services up across the board. euro a bit lighter here. a bit of selling on the margin. yields up one basis point. crude also quite as well, down .1%. more governments in europe continue to add onto support for juan guaido. david: time for the morning brief. u.s.45, we will get 9:45, we will get

u.s. services. after the bell, snap and disney earnings. 8:30, the state of the union. we are all watching that closely. he will try to reach out and say we want to come together but we .lso want the wall whitelawmakers will wear in solidarity with the suffragettes. that's what we are told. we are joined by paul sweeney and marty schenker. let's come back to the state of the union address. let's talk about the substance. there important issues here we will be watching for. the usmca, trade, drug prices, immigration.

what is the president going to say to drive investors? >> it's interesting to me that he's promising some sort of news. there's talk about the new initiative on drug prices. what a lot of people who are watching the politics will look for is whether he uses the speech to declare an emergency to get his border wall, which would be extraordinarily divisive. which ishite house, pitching this as a unifying message, i don't see how these two are consistent. david: there's this divisive message -- people want quiet at the moment. >> the selloff we saw had a lot of components, one of which was the looming government shutdown. we all know the markets do not like uncertainty. the speech interjects even more uncertainty into the political realm. alix: we were talking about the

optics, some of the democratic women wearing white. who has the upper hand in this? >> i think the president is the center of this event tonight. he really does have the ability to shape the conversation. the democrats can only speak by not standing, not applauding. stern glances from nancy pelosi. donald trump is speaking to this joint session of congress in a completely different situation he's been in since being president. david: i can't remember a speech he went out to be nice during a speech. it's been pretty aggressive, pretty in your face. now, we are told he wants to make a turn, let's unify the country. >> stephen miller is crafting this speech.

it's hard to imagine him being particularly eloquent in terms of reaching out to the other side. alix: is he ad-libbing these things? david: we will see. the weakening economy in europe on a services basis -- the white line is the composite pmi. france and germany rolling over. italy getting hit hard in the service area. in the euro area composite, fell to new business the lowest rating since november of 2014. future stock data coming in a lot weaker. >> you have some of the major economies in the eu, germany, slowing growth, italy, contracting, france, political crimping ceos as they are thinking about

investing long-term capital. we are heading more and more of that on this quarter's earnings calls. and more of more that on this quarter -- we are hearing more o and more of that on this quarter's earnings calls. hasn't evenump addressed the european trade issue yet. there's looming tariffs on auto imports that are really a threat to germany specifically. that is still out there. we will have to wait and see. david: alphabet came out with earnings after the market yesterday. it disappointed them markets somewhat, saying we will have smaller margins because of the investments in the cloud and the youtube channel. the key drivers were content

acquisition costs, primarily for youtube, mostly for our advertiser supported content in what is a seasonably strong quarter for youtube, but also for our newer subscript and businesses, youtube premium and -- our newer , youtubeion businesses premium and youtube tv. >> the search business remains strong, more than 20% growth on . they are investing outside of the coursers business. they are ramping that up a bit, particularly youtube, which is a great long-term asset worthy of investment. the other is the cloud. where they are trailing, they are the number three player after microsoft and amazon.

ruth is the cfo who has won over the street by saying we will invest wisely. long-term bulls remain come double with the story. alix: $25 billion in new -- long-term bowls remain comfortable with the bulls-- long-term remain comfortable with the story. alix: $25 billion in new employees. >> they are hiring and spending. thank you, paul sweeney and marty schenker. >> i will be wearing all white. david: viacom came out with their earnings just a few moments ago. they beat on earnings-per-share and expectations -- a little

light on the revenue. had anentertainment operating loss of $90 million. filmed entertainment would start making money -- not yet. earnings miss and revenue miss for the fourth quarter -- the company citing a rapidly geopoliticale and conditions. revenue a miss for archer daniels. david: coming up, more on president trump's state of the union address. what investors will be listening for with blair ephron. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." nissan has called an extraordinary shareholder meeting for april 8. in november --ed this morning, ghosn is still in a tokyo jail cell. joining big oil peers by posting earnings that beat estimates. offsetting the the deepwater horizon

controversy cost $60 billion in penalties and compensation. altar you may sell bonds in europe to fund a push into canada. is speaking to investors -- in december, the company paid $13 billion for a 35% stake in juul. that's your bloomberg business flash. david: the stock market had its worst december since 1931. since that, and has bounced back. i spoke with kevin hassett. he says things are settling down and we should expect robust growth for seven quarters to come. >> they are nervous about growth. that 300 number suggests we are really going to count on three-five quarters of 3% growth or more. david: we welcome no blair effron -- we welcome now blair

effron. say we heard mr. hassett will have five more quarters of three o 3% plus growth. it as anthink ceos see environment that looks like 2017 and before. growth. at 2% 8% eps growth versus double digits last year. i would call it steady, a good base, valuations reflect that. to put this in a broader perspective, this chart goes back to 2004, annualized growth. over 3% last quarter, but the yellow line is 1.9%, that 2%

trend line. where do you see us? blair: at the trend line. every year until last year, imf and cbo would come out with estimates that in january were pretty robust, even 2017. estimates would come down throughout the year. senior executives were always a bit more cautious earlier in the air and they proved to be right -- earlier in the year and they proved to be right. they are generally 50 basis points or so below these numbers. a trendline growth is how they are putting into their own portfolios. alix: is that good enough for ceos? blair: it is fine for continued job growth. growth.00 months of

96 of those came in at trend line. the key thing is going to be other events -- europe is catching people's attention, china and the tone in the u.s. and what comes out of washington. david: the state of the union coming up tonight. he can address trade, immigration and the wall, drug prices. there are things that could affect that trendline growth. blair: sure. it starts with tone. the tone is what we've been reading the past few days, a bit more bipartisan, a bit more optimistic. perhaps no declaring of emergency on a wall. investors, companies will

breathe a sigh of relief and say there's enough certainty in the backdrop, that's positive. two, in terms of policy, you don't get a lot of policy at the state of the union that ends up being new and groundbreaking. i don't think we will hear something that hasn't already been said. we will be doing a big tax program. that is being talked about well in advance. aat is said about china, and positive comment whatsoever will be interpreted that by the end of march, we will have a deal and that will be a good effect. alix: what do you tell ceos about their strategy in china? soir: most ceos are sophisticated about china right now, it's hard to tell them anything.

the typical global company will have 15-25% of their business in china. it's really important. people are figuring out where else they should be beyond china. too many countries at risk. when it comes to supply chain, where they want to put facilities, other parts of asia are getting a lot of investor interest right now. david: southeast asia, like vietnam, or south asia, india? blair: india, absolutely. south east asia and asia. and back in the u.s. market seemsnsumer moderating. obviouslyo be there

important. people will be diversifying risk. david: blair effron will be staying with us. this evening, our special coverage of the state of the union address begins at 8:30 p.m. eastern time. spending heavily on their cloud business. more on that, next. this is bloomberg. ♪

alix: alphabet shares down 2% in the premarket. falling inres premarket trading as the pressures on the margins overshadowing the revenue beat. 20% inng margins down to the fourth quarter, the lowest fourth quarter since 2003.

it is all about the cloud. that has been key for margins and profitability. google doesn't report costs separately. issue thatisclosure analysts are worried about separately. 38%, that is lower. you have microsoft and amazon breaking out their cloud growth. those are growing higher. you have to spend in order to yield out that business. --re are some positive news the use of cash, $109 billion on the balance sheet, a record. some analysts speculating how you use that cash. alphabet could make a large acquisition to boost that cloud business. they could initiate a share buyback program of $15 billion. you're getting a lot of analyst reaction this morning.

piper jaffray is raising their price target -- barclays and jp morgan lowering that price target because of the higher spending. alix: you guys can spend, but not too much. david: how could $190 billion not burn a hole in your pocket? cfo spoke to bloomberg technology's emily chang. they discussed alphabet's fourth-quarter earnings results, cap expending, increasing threats from amazon and the acquisition strategy. cap x spending. we are very open to acquisitions. we want to make sure if we are doing a deal, it is the right deal. it could be an accelerant for the business.

still with us, blair effron. that's the sort of thing you do with ceos all the time. you have a lot of cash, you have a business with high margins. how do you make acquisitions that aren't dilutive? blair: great question. google reported 22% topline growth, 40% year-over-year investment in capex and r&d. remains an incredible juggernaut of growth. as a long-term investor, you would want to see that. a company like google, when it has so many things going right, you need to make sure anything hasare discussing with them to be portfolio creative. it is difficult to find an asset that can have those natural characteristics and also add a skill set to google where they might be lacking.

steve mentioned media, for example. they want more people on their site. amazon, apple and facebook, $70 billion in content spend last year. interesting. they would do a lot more with it than you would think. businesswe do to the that can't be done on its own to accelerate without skill set what we are doing well? david: nobody comes close to them -- there's some other players like netflix and disney. andanies have gone in gotten their head handed to them. blair: you will see google being careful about whatever it does. they are a disciplined company.

even when you think about where they invest in ancillary businesses, they do it in a way that doesn't hurt their core business, doesn't hurt perspectives among their investor base. alix: are there certain areas that will be rewarded for this boosting capex spend? blair: sure. everything they do to create competitive gaps is a great thing. they have 90% of share in search. that's all investment, all long-term. it may not show up in 2019. they fundamentally know how to get a good roi see on where they on where theyoic put their money. they bought a business, a big

acquisition, a motor oil business years ago. it wasn't a great experience. they learned. what impresses me is they won't make the same mistake twice. david: are they moving into the same business that netflix is in? they are more advertiser supported. blair: they are all moving in all directions. let's see where netflix is a few years from now. having wide release subscription base -- i don't believe you will who more than three players are subscription-based. who wants to do just the programming versus more open

sourced and have programming from everywhere? that's the debate for all these companies. will behe players competitive in this area. blair: how big can these -- alix: how big can these companies get? 250 billione had dollars of transactions over the past 18 months. warner, sky comcast -- $20 billion in market cap. when i was thinking about this business 10 years ago, that was large. you do need scale. when you have amazon spending $15 billion a year on content, smaller companies spending two thirds of their cash flow on capent, 50% of their market

going into content, it is very hard to be competitive. scale matters a lot. it allows you to make bets and be wrong sometimes. your point about the government -- very smart. at what point do they step in? i worry about it. david: does google have a different model? they don't have to spend a lot for acquisition of content. blair: correct. the google model is the envy of a lot of models. their goal is to keep you on the support, advertising which they are doing well. i don't think anything they do will be done in haste. they can do it defensively. my assumption is they will certainly do well. david: blair effron will be staying with us.

hours from thewo cash open in the u.s. it was very light and calm yesterday. we had some great earnings out of europe like bp blowing past estimates. that is helping sentiment in europe. the dax up over 1% despite the fact that services pmi in germany, france and italy disappointed to the downside, especially italy and the u.k. euro-dollar, may be it is a little softer, down .1%. the bond market in italy goes nowhere. you get the weaker services pmi in the market does nothing. touch,0 spread deepens a 18 basis points. don't look at the balance sheet. move on and look at the

underlying fundamental growth. considering week all the macro headlines we will get. david: they are waiting for some headlines. viviana: in paris, early today, this fire killed eight people and injured 31 others. safety --seeking residents seeking safety on the roof. thecity prosecutors suspect fire was a criminal act. japan's prime minister and germany's chancellor saying they want to prevent a note yield it.it -- a no deal brags brexit.deal brags

growth in the u.k.'s services sector falling to a 2.5 year low last month. -- companiesindex less likely to start new projects. more cautious with spending because of brexit uncertainty. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: still with us, blair effron of centerview partners. your view on brexit? blair: it is the issue, the question, the biggest factor in 2019. as much as everyone is focused on it, we have a continent with 600 million people, three germany, in france, italy, one in recession and the rest less than 1%.

have the u.k.you which could potentially if there was a no deal branch out -- it is such a bad thing for their economy. of already see the impact brexit discussion on pace of trade, days to market, inventory builds, companies making decisions, whether it is a car company -- it is going to have a dramatic impact. the question for somebody in the do you really want to be marketed 50 million people trying to negotiate a bilateral -- a market of 50

million people trying to negotiate a bilateral agreement or go with theresa may? don't talk to anybody. at all. there's too much uncertainty about what this will look like. we will have a better sense -- march 29 won't matter. in june, you will figure out where this plays out. isresa may status where she -- stays where she is. once you have that, companies will say where do we want people, where do we want assets, where do we want business? alix: what would you want to see to have deals in europe and a concrete resolution? blair: i would want clarity. time is just a prudent thing to do. there's too many ways this thank could go in -- this thing could

go in too many directions. will put up a chart that shows the level of activity -- not as high as 2015. we've had a lot of uncertainty here in december. where are we going into thousand 19 in terms of emerging assets? -- in 2019 in terms of emerging assets? blair: the market is just fine. better than fine. we had a slow fourth quarter, down 30% on volumes. .e had a high-yield market january starting off the same way. $250 billion in transactions so far. be below last

year's $4.5 trillion. we will end up in a market that reflects tailwind for the economy and the biggest trend, disruption in every single category, every single sector, that's what is driving m&a. david: is the balance of acquisition versus disposition shifting? we saw ab inbev spending in asia. is that balance shifting? blair: not yet. investors for more focus is encouraging more companies to do what you're talking about. it's really incumbent upon a company to step back and say are we doing something because it's the flavor of the month or do we think it's the right thing for our business? can we manage in three or four

sub industries? do i have the company i want for 10 years beyond duration and not just for next year? they will continue to be active this year. m&a will be muted. ofyou get towards the end 2019 and start to think about 2020 and the election and all heat thatic, all the comes, it will have an impact on people's thinking. alix: every core surprised every core. bank -- ever they blew past bank of america and citigroup. blair: they are phenomenal. we see what they are doing as a competitor. quality,iness model by

just stunning. our growth has been commensurate with their growth. every year, we have been up strongly. we continue to attract the best people at all levels. smaller have is not a firm versus bigger firm as opposed to six or seven firms that do 85% of what's going on with advisory m&a. goldman continues to be a juggernaut. it's where the intellectual capital is, not just financial capital. david: it's not so much an advantage. have: today, you have to financial capital and intellectual capital, firms like ours. companies have become sophisticated enough that they want the best of all of those.

alix: can you all play in different spaces? isir: by now, the market more rational than it's ever been. there's six or seven companies that do this every day really well. before 2008, you had 12-15. it's a much more condensed market. see with any transaction three or four firms involved with that transaction. experienceween your and your competitor's experience increases by the year. we will see. b of a, they are phenomenal right now with their balance sheet. david: they have made some changes there. what drives that? just the money or the critical

mass? blair: it is culture. will the firm support you to do what you do best? will the firm support mentoring and training of juniors? will it have enough good people ?t all levels bankersill have 1800 between here and europe. you need to have a stable of really strong bankers who have done this a long time who also collaborate with each other. it's hard to build a culture. the idea that they now want to go out and recruit a lot -- there balance sheet is phenomenal. -- their balance sheet is phenomenal. topline linenings, revenue 7% last quarter. they are great. in this area, it is a work in

progress. alix: blair effron will be sticking with us. president trump expected to nominate the new head of the world bank. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up, greg fleming, rockefeller capital ceo. this is your bloomberg business flash. the world's largest jewelry maker predicting a worl your of

declining sales. they are launching programs to spark interest -- predicting a year of declining sales. pandora suffering through a pronounced slowdown in u.k. markets. demand for super bowl ads may be peaking. taking in $382 million for ads during the big game. show the audience was the lowest since 2008. does the super bowl start at 8:00? david: she didn't know what time it starts. alix: time for the wall street beat. dutchr's buyback limits companies are spending too much on buybacks -- schumer's buyback

limits -- companies are spending too much on buybacks. amazon's india problems. amazon and walmart trying to protect small traders. a new world bank chief -- president trump sets nominate david malpass to lead the world bank. david: we welcome jason kelly. still with us, blair effron. saying you want to buy back your stock, you have to take care of your employees first. >> this has become a big issue. what are companies going to do with this extra cash? they are buying back stock in a meaningful way. this has been the talk of so many c-suite's over the last year or so.

many companies have bought back shares. blair: it's interesting. it has clearly been on everybody's mind. generally 32% of cash flow. the whole discussion goes back to the discussion we were having the last presidential election. how do you promote long-term growth and make investments benefits fivee years and beyond? what the argument misses is most companies are pretty good at applying capital to where they see opportunity. if they have a high producing opportunity, they would love to do it and will do it over a buyback. buyback let's do the and see what we have left over to invest. let's invest everything we can that we consider highly productive and then, with what is left, how do we take that

cash flow and reward shareholders? you are helping people's iras and pensions. you have to think about that. we should dois --icy that promotes growth how you think about long-term capital gains. goal -- my hope is, as we go through 2019 and you have 30 candidates in the democratic party running, we end up at a chosenhere the candidate can be as popular to as broad a group of americans as possible. that's a poll by pew 55% of americans want somebody who is electable.

as we said a year away from primaries, making positions that we may want to back away from down the road, we should be thinking twice about it. david: there is no coincidence that bernie sanders is on this. elizabeth warren with the tax on wealth -- you will have to persuade the have-nots that they can participate. >> they should. they need to. wealth in the country used to be for 90% of america. today, it is 25%. that is not acceptable. we spent $1 trillion on the wrong tax cut. corporate tax cut good. the other piece, bad. how do you reinvest in education? that's really important. the party is entirely correct.

however, you have to have a group of policies that work together. alix: there was a bloomberg opinion article called "it's raising the minimum wage." amazon and walmart betting big on india growth in terms of the next market and now, that seems to be in doubt. >> there was a big bloomberg that about the ambition walmart and amazon have for india. this is a massive, massive market. the government has done a lot to ensure the little guy doesn't get left out. what this story illustrates is is standing to benefit -- he may end up winning. it's been a tough slog for

amazon and flipchart. flipcart. david: that is interesting. how do you deal with that with ceos in a place like india? blair: they will take a longer term view. there is an election in may. they understand politics. it is a growing country. we talked about china having more risk today. an electable market -- >> another company that has talked about their ambitions, netflix. >> every media company worth its salt has a big business in india. look at the disney business now.

look at where sky goes. it is a phenomenal market. nobody will be abdicating the market because of an election. david: let's talk about the world bank. david malpass will be a candidate to be the next president of the world bank. becauseteresting move the world may reject this nomination. an u.s. will nominate american -- is this a moment where the world uses this as a proxy for we don't like the american worldview, the trump .dministration's worldview david malpass has been very critical of the world bank. echoes of rick perry here.

is a bit out of the trump playbook -- put the guy who doesn't like this thing and have them run it. seem the doesn't president is deeply committed to brett woods. >> if you have big hopes for the world bank -- they have some great names. real internationalists who know the mission of the world bank. i don't think having someone that would be greeted by most countries with disappointment is the right move. particularly on the day of the state of the union when we want to have an optimistic perspective. alix: thank you, jason kelly. and blair effron will be

sticking with us. this is bloomberg. ♪

david: still with us, blair effron. we want to get his final thoughts on 2019. blair: simple. 112 months of employment growth. 100 today. growth above the 1.9% trendline. i would love to see an eu that still looks like the eu. i would love to see a washington morehas modestly partisanship aside and really bipartisan on the big issues. it would be great if we were talking about an infrastructure bill. i don't think both sides are that far apart.

see dialogueto about health care. what are we going to do on medicare for all? do something that is appropriate to get the debate going. and we avoid mistakes of our own. alix: a long list. david: a good list. thank you for being with us. jacobsoning up, brian will be joining us as we head into the state of the union in just a few hours time. this is bloomberg. ♪ the latest innovation from xfinity

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like never before store. the xfinity store is here. and it's simple, easy, awesome. alix: trump state of the union tight rope walk. his speech bubbles with

underlying tension with nancy pelosi. senator schumer and sanders going after company buybacks. -- the ad conundrum giant versus the company with exploding capex. david: welcome to "bloomberg daybreak." i'm david westin, right here with alix steel. the president of the united states going over his speech. he does mark them up a lot. alix: how close does he stick to the teleprompter? you have a 3:00 p.m. train. david: at 3:00 p.m. shuttle. the speech starts a little after 9:00. he wants to try to bring people together and say i want that wall. i don't know how he's going to do those two things at the same time. alix: he had steak with jay

powell. rumor that -- remember that powerful january rally? s&p futures up 20%. euro-dollar with weaker pmi out of the u.k., france, germany and italy in terms of services. -- s&p futures up .2%. the bond market also quiet. .6%, percolating with oversupply in the u.s. versus supply issues in venezuela. 9:45, we will get u.s. market services and composite pmi for january. 1:00 this afternoon, the u.s. will sell three your notes. after the bell, snap and disney earnings. -- the u.s. will sell three year notes. alix: taylor riggs looking at

the reports moving the markets this morning. half beatingthan on the top line, about two thirds of the companies beating on the bottom line. one of those beating, estee lauder up 10%, lifting full-year profit guidance by five dollars a share. they are seeing asian demand that makes up a quarter of the revenue. estee lauder shrugging that off. the worst performer in the s&p 500 this morning revising their full-year profit guidance to lower than estimates -- organic revenue growth expected to fall 3.5%. ceo coming out and saying

productivity and pricing expected to offset increasing commodity costs and pressure from tariffs. analysts are not so sure. seagate the second worst performer in the s&p today, a big proxy for china. they get more than half of their revenue from china, about 56%. they are seeing demand weakness spread beyond the cloud. that is pressuring sales and margins. david: president trump addresses congress tonight in his state of the union address. with a lot of talk about the atmosphere in the divided concerns about what he has to say about trade, drug prices and infrastructure spending. joining us now, brian jacobsen,

jacobse wells fargo funds managt multi-asset strategist. it was tone, not substance. more than people give credit for -- tone. the tone is what we've been reading the past few days. a bit more bipartisan, a bit more optimistic. perhaps no declaring of an emergency around a wall. i think investors, companies and ceos will breathe a sigh of relief and say uncertainty as a backdrop, that is a positive. >> i couldn't agree more. tone is critical. the markets responded very positively to donald trump. last year, they responded fairly well. this year, he is facing his first divided congress, he will

have nancy pelosi sitting behind him after a 35 day shutdown. presidential? will the tone be confrontational or unified as bipartisan? i think he will go for unified and bipartisan. how do people digest that? can they take that from a president who's been tweeting things that don't seem particularly unifying? alix: do you think you will learn anything in terms of how much risk to take on? >> probably not. the market did react positively to the previous speeches he gave. this is a different environment. i will be listening to see whether or not there is any teaser about what the trade deal will look like. one of the big concerns is even

if he doesn't declare a national emergency to build the wall, what is it going to look like as far as future government shutdowns? the last one was a partial government shutdown. in 2013, the market didn't react favorably because of the debt drama. our be setting ourselves up for another situation where we will go through these rolling -- are we setting ourselves up for another situation where we will go through these rolling shutdowns defaulting on the debt? >> they are nervous about growth, is it going to continue? the headline number suggests we

more quartersfive of 3% growth before anything kicks in that looks slow. thed: isn't he right that president deserves some credit for a strong economy? >> he absolutely does. president can rightly say 4% unemployment, that's almost unheard of. the economy is strong, the markets have been strong. he's delivered on the economy and deregulation. there's a lot to celebrate. the criminal justice reform bill. an awful lot for him to celebrate over the past year. it's goingeel like to be six months of steady growth? that we are not going to feel a worldwide recession.

if you can say that and the democrats accept it, people may give him good kudos for the speech. does he stay on teleprompter and seem presidential? if you can do that, he may come out of this unscathed. you: is this enough for after the rally in january? do you want to put more capital to work? brian: yes, we always do. it is a question of where. portfolior global solutions meeting where we discussed the strategy for the next six months. we were overweight bonds. we didn't see the indicators of

recession that make us worry. we had a flattening of the yield curve. some of the other indicators weren't there. we've moved toward a neutral position. we still favor cyclicals over consensus. interest rates have moved lower. we are still favoring the shorter duration because the fed pivot helped push interest rates lower. the next move will be asymmetric to the upside. will berian jacobsen staying with us. tune into our special coverage of the state of the union address starting at 8:00 p.m. eastern time. viviana: new legal problems for president trump over concerns

federal prosecutors in new york have subpoenaed documents from the inaugural committee. and potential ford contributions drawing scrutiny -- foreign contributions drawing scrutiny. president trump will nominate david malpass to head the world bank. malpass is a critic of the internationalist principles. the announcement will be made this week. japan's prime minister and germany's chancellor say they both want to prevent a no deal brexit that could rattle their economies. japan must play a greater role on the global stage. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. alix: ralph lauren getting a big

boost in premarket. they beat on the bottom line. estimates, up- about 4%. digital group 20% over the past year. here in the u.s., overall sales of 3%. david: it's a company that's been looking for a turnaround for a while. it appears to be on the upswing now. they invested a lot in digital. david: coming up, the next target for top senate democrats -- corporate buybacks. that's coming up next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." viacom promising -- providing evidence a turnaround is taking hold. reporting first-quarter sales and profit that beat estimates. many investors believe viacom will once again try to merge with cbs. redstone family members have long favored joining the two together again. nissan called an extraordinary shareholder meeting for april 8. ghosn is still in a tokyo jail cell. goldman sachs says if you saw profit from the -- you may be out of luck. the rally they expected happen quickly. now up about 16%

from december lows. think david has a $3000 price target for the s&p. the next target for senate democrats -- corporate buybacks. chuck schumer and bernie sanders introducing legislation foreign companies from -- foreign companies from -- barring companies from incomeing buybacks -- disparities will continue to grow and productivity will suffer in the american worker will fall further behind -- and the american and were very will fall farther behind -- and the american worker will fall

further behind. >> surprised everybody with this op-ed on monday. this is a real reflection of where the democratic party is moving. are moving sanders to where the democratic party is putting down their marker. they will have real trouble getting this passed, but you do see some strong democrats lining up against it. it will continue to be an issue into the 2020 election. it does create a clear difference between republicans and democrats. david: how concerned should investors be about a populist race? we have proposals for taxing wealth and this.

one of the things that's been overhanging some foreign markets over the last few years. depression populism, of price-to-earnings ratio. if you do have a dramatic shift in policy, that can affect the outlook for how you should be pricing securities. we have two years of president trump's term. it is not an imminent threat about dramatic change in the tax code, but something to have on your radar. may be that buyback support gets disincentivize. alix: how important is that by back support to having the -- buyback support to having the s&p continue to rally? brian: not as much.

one of the indicators they like to look at is shareholder return. not just the dividends but then share buybacks, including all of that as return to capital to shareholders. it has been an underappreciated part of the discussion. when companies pay out dividends, it's not like the money goes into a black hole. itgoes into 401(k) plans, goes into people's pockets and they reinvest it. interconnections as far as what that can do for capital formation over the long-term. david: what happens with the fed -- the head of the fed having a steak dinner with the president of the united states. how concerned should we be about that relationship between the fed and the president? : it has been tense.

it has been a real source of concern and the fed has said that they will continue to hold the line here. people will be watching this closely. i don't think it's any surprise that they did this on monday. it sets up the president to have to fulfill a campaign promise that he will protect the american worker. is he going to do about this divide between main street and wall street? the president has staked his claim on appealing to the rust belt. here are the policies we are going to pursue in this regard. i'm sure the issue of interest feds in the fed -- and the will come up tonight as well.

should -- how does this wind up influencing the fed going forward? economic data continues to stay strong. will there be any influence? brian: i don't think this will influence it. i have a picture of president trump singing happy birthday to chairman powell. i don't think it affects the thinking of the fed officials. he isn't the only voice on the federal reserve. they are going to defend their independence. chair powell made it clear, the economic data is good, there are risks from an international perspective, but unless there's a clear and present danger, they are in no hurry to hike. zaino and brian

jacobsen, thanks. alphabet reports than our profit margins as it depends heavily on the cloud business -- thinner profit margins as it depends spends heavilyt on the cloud business. this is bloomberg. ♪

alix: time for the bottom line. first up, bp. they are making a lot of money. $40 when they haven't seen this kind of return since 2014. here's what bob dudley had to say about opec cuts. >> it looks to me when you combine that discipline that opec seems to have and has demonstrated for quite a while now and you look at factors like venezuela, human tragedy, there are things that could firm up

the oil price. then the bottlenecking of infrastructure in the permian will come. oil, interesting, $50 that's what they are basing this on. -- amount of debt they have it was supposed to be reduced to below 30 this year. that has been pushed back to next year. that is front and center of you are doing well, but what's the expense? david: no trouble. we will sell some stuff. -- joining us now, the oppenheimer & co. senior analyst. $1435.a price target of good to have you on the phone. the markets were a bit disappointed because of margins. were you disappointed? >> that is a fair assessment. you had two factors.

higher spending on content, cloud and hardware. they don't help you understand the breakdown. as a result, the gross profit was weaker than expected. secondly, there was a one-time increase in bands to equity related to other bets, there -- thatinvestments in weighed on the profit of the company. much: tease out how disappointment is on the clarity or transparency of how the cloud and youtube are working versus you are spending a lot of money on it. >> if you look at the revenue number, their website revenue net after they pay content partners was up 21% year-over-year. that is clean, even with

currency, same as the third quarter. you gave that back. while the street continues to be bullish on the company's ability to generate revenue and monetize the terrific information they have on users, what is the payback to shareholders? most of the street had to cut numbers this morning. when do you get the payback? the stock is cheap. if you give them credit for the cash. alix: thank you so much for joining us. a name you know from morgan stanley and merrill lynch. he is now running his own firm. this is bloomberg. ♪

alix: this is bloomberg daybreak. i'm alix steel. state of the union about 12 and a half hours away. in the markets a little bit of upside.

dow futures up by four point -- up by .4%. the dax also up 1% despite the fact that services pmi's in germany or france were week, particularly in italy. the sentiment going forward was at its lowest level for the entire euro zone since 2014. that is reflected in the currency market. staying lower high one to 2/10 of a percent. , bcb punch up the board wound up going nowhere. we have .2 spread in the market. oil flattening. still 18 basis points. crude off by 1%. that is interesting. coming into an inventory day

tomorrow as well as what is happening with venezuela as well. david: breaking news. sherbourne is proposing the ceo join the barclays board. of ark something the ceo lays is supposed to. that is not -- of barclays is closed -- as opposed to. we turn to bloomberg's erik schatzker who is joined by gregory fleming. ik: we know greg fleming's name from morgan stanley and merrill lynch. some of you know that greg fleming runs a marathon. great to see you. gregory: great to see you. erik: let's remind everybody what you're doing. rockefeller capital management. yet the legacy business of

rockefeller and company but you are doing more. the core of what we are doing his wealth management for ultra high net worth individuals and family. high end wealth management. we do it through rockefellers global family office. a privateat we have wealth management division and a multi family office. the private wealth management division leads with the investment focus and the multi family office is more planning led. we announced a new president, tim o'hara, who had a long career in that space. clients get the same products and services whether they are in the private wealth side of our family office or the multi family office line. the multi family office is little bit more planning, the other side is investment led. you get asset allocation, investment advice,

crossgenerational planning, a full set of services. erik: why is there an opportunity? jpmorgan does a good job offering these services. goldman sachs does a good job. morgan stanley is chasing the high net worth individuals. the list goes on. gregory: it is a very competed space. having said that, they confirm focus is not just on that. we also have an asset management business. we have an investment banking business. we have that capability because some of these high end families own businesses and they want the strategic advice. my point in terms of our competitive advantage, we are focused on the space. this is what we do. we are also focused on the wealthy clients who have generational planning, who have discussions with children about wealth, who might own a business or want advice on the business.

if you're exclusively focused on that, that provides a competitive advantage and nimbleness other firms cannot provide. we like our competitive position. erik: i suspect the majority of people watching this conversation think of a family office as the private investment operation of a former hedge fund robertson. a julian what is a better way of thinking about that term? no offense intended, those guys do not need your help. gregory: those guys may not need the help on the investment side but we are providing comprehensive advice, including generational advice and those guys are almost anybody who has created wealth in the first generation needs advice on how to talk to children about wealth. how to try to plan for multiple generations being part of the wealth. there's a lot you can do even if someone is investments every to provide advice to those clients.

a family office tends to be just the one family or focus on a constrained amount of wealth. we are trying to create the capability to provided vice to a network -- to provided fisa to a network of -- to provide advice to a network of high end families across the country. when we reached more scale in the private wealth side and the multi family office side, we could end up providing advice to a series of families in this country who want to preserve their wealth and transfer that well in key wealth centers. erik: a big focus for you is sustainability. is that a big deal for old money? gregory: it is a big deal for everybody. raising thee millennials and the next generation who care about it in such a way we think it is a secular trend. here and around the world.

institutions, individuals, people with money from older generations, and in particular newer generations care how that money is put to work. they care about the world in which we operate. say this is more about transgenerational wealth that it is about the old folks. gregory: money that has been around for a while is still focused on the space. this is where you see people like larry fink talking about how companies have a broader obligation to society than just generating shareholder value. the notion that the private sector should be operating within the society in which we live in a productive way, investing in a productive way, these are notions that are broadly followed today. as the millennials get older, my will be and yours standard fare in an organization like rockefeller capital management. described, iu have

can summarize with the term planning for the future. that is what you help your clients do. are you at the point where you are helping them prepare for the future that howard marks described in his memo, a future anti-capitalist sentiment, a future of progressive ideals and resentment of the elite? gregory: i remain an optimist on this country and where we are going. you and i were doing discussions like this during the credit crisis. coming out of that crisis we lost 700,000 jobs. look at the recovery over the 10 years and how will this economy is doing. analysis, the final americans will balance a focus on growth and the benefits of a strong economy for everybody. i think we need to focus on ,conomic and wealth imbalance and we have to make sure everybody is coming along for the ride they feel like they

have their chance. erik: you probably saw that andrew cuomo said the top 1% of new york state residents account for 46% of the tax revenue. an amazing figure. what you think your clients would do if new york state did what new jersey and connecticut have done, which is raise the top marginal tax rate? gregory: i think it has been shown in state after state that you get into this competition around higher income people becoming residents. states that do not have state income tax are trying to attract them. new jersey and connecticut are trying to figure out how to create allen's budgets at the same time -- create balanced budgets and at the same time not send these people away. in the final analysis, a vibrant private sector is critical for the country, for every state, and this is been proven again and again.

having said that, the things howard is talking about, and the imbalance from the wealth standpoint in our society, we do need to address that. you builterik: careers and investment banking. if you were trying to think of the right deal, what is the deal that balances the needs of the have-nots with the realities of the haves? gregory: the deal is we as a country invest in some of the things that enable the people who are less than well-off to develop the skill sets to compete and succeed and feel like if they were car they can get there. that is investments in education and community colleges and job training and making sure people do not get to the age of 18 or 20 and wonder how is this working for me? that is different than saying we're going to create a way for you to feel ok but not to know

you can strive and succeed. it is important that it gets down to the individual. the individual has opportunity to succeed in our society. that instinct, that belief that i can get there is what has driven the country all away to this point. i'm optimistic going forward. erik: we all want to share your optimism. thank you so much. it is greg fleming, ceo of rockefeller capital management. building a new titan in private wealth and family offices on wall street. david: time for an update on what is making headlines outside the business world. we turn to viviana hurtado. viviana: the republican-led senate rebuked president trump of her plans to withdraw troops from syria and afghanistan. an amendment urged the president not to exit the conflict. mitch mcconnell pushing the measure after president trump declared victory against the islamic state and begin peace talks in afghanistan. fire was deadly.

it was an apartment building and killed at least 10 people and her 31 others. residents seeking safety on the roof climbed out of their windows to escape. the building is located in paris is 16th district. the fire wasuspect a criminal act. one woman is in police custody. growth in the u.k. service sector falling to a 2.5 year low. the drop brings the ihs market district close to the mark. -- the mark that separates expansion from contraction. clients are more cautious with spending because of brexit uncertainty. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana her toddler. -- i'm viviana hurtado. this is bloomberg. alix: tensions remain in venezuela.

nicolas maduro clings to power despite pressure from the rest of the world. this is bloomberg. ♪

viviana: this is bloomberg daybreak. coming up later today on "balance of power" republican congressman matt gaetz of florida. alix: this is "bloomberg daybreak. it is the first earnings disappointment in five quarters for one of the biggest players in agro business. growth in soy boy business of archer daniels midland was off by a lower than estimated margin. china's assets from the ethanol

market is making a u.s. glut even worse. bp had its best quarter since 2014. the british company joined his peers by posting earnings that beat estimates. bb is still recovering from the 2010 deepwater horizon catastrophe that killed 11 people and cost more than $60 billion in penalties. jpmorgan may remove venezuelan government from its flagship emerging-market bond indexes. u.s. sanctions are wiping out trading in securities. some of the large holders of venezuela bonds could be forced to dump them based on their mandate to replicate the benchmark indexes. that is your bloomberg business flash. david: want to stay on the subject of venezuela. it is time for follow the lead. a deep dive into the stories making headlines and moving markets. today our focus is venezuela.

the united states is leading international push to replace nicolas maduro with one guy joe -- with juan guaido as interim president. germany and france have joined a host of european countries. joining us is the atlantic council senior follow and the consulting president from jacksonville florida and francisco rodriguez, reno economics chief economist. francisco, let's start with you. bring us up-to-date with where we are with you. a lot of countries are coming around to support juan guaido. >> 21 countries from the european union recognized juan guaido as president of venezuela. most of the important countries in the developed world and the western hemisphere are recognizing one wide-out. nicolas maduro appears to maintain the support of the venezuelan military.

you have to remember the military is centralized. venezuela is a police state. this has enabled maduro to maintain the support of the military and i think we may be headed toward a showdown and a confrontation. there's going to be an attempt to bring in humanitarian aid that has been promised by the u.s., canada, and other european countries. it is being -- it is being brought to the border of venezuela and colombia and venezuela and brazil. nicolas maduro has vowed to stop it from coming into the country. alix: allen -- ellen, how does this play out in terms of what venezuela can do to make that -- to make investors feel better when this gets resolved? potentially the president to be is going out there and he is making statements that are designed to say once this situation is resolved, and we

have a new government, venezuela is going to be open for business. he even said that after they take control the national oil company in venezuela will no longer insist on being a majority holder in any joint ventures with other oil companies. that is significant because venezuela's oil industry and its oil resources are a scene to begin how the country can climb back economically from the terrible destruction they have seen. they need to utilize this oil they have in order to bring cash in to reinvigorate other parts of their economy. to do that they will need to attract outside investments. companies will only be willing to take the risk into venezuela if they have assurances this can be a profitable venture. it does seem that the government to be is taking steps to try to reassure companies that if they

come into power venezuela will be open for business. alix: how do they want up securing that kind of investment will still filter down and not just get used for the big oil companies? .llen: that is the big question what we have seen as the current government has basically rated adb essay and used -- pdvs and used all of the profit for his own benefit. it is a kleptocracy. that will be a big part of the new government. they will have to show the people receiving these benefits immediately. people need to feel the immediate benefits of that oil money on their lives. david: to get a one quite go government -- to get a juan guido government you have to get nicolas maduro out. what you have to do to switch the military? francisco: it is possible they

will not switch. that is something we have to consider, maduro hanging on to power. the problem is the power in the military is centralized. venezuela is a police state. even so i think the majority want him out, they may not be able to coordinate on a coup. there are 100 military officers in prison because the government discovered they were participating in a conspiracy to overthrow maduro. a lot of the generals are also sanctioned by the u.s.. these are the guys that have the highest exit costs. you have to have a strategy in venezuela and juan guaido has a way to do this -- you have to have a way to lower the cost great if not, they will rally around maduro. what can international pressure due to help or hurt? francisco: it is a delicate game. factions are a double-edged --

sanctions -- shank -- are a double-edged short -- double-edged sword. this economy only produces oil. consumes food and medicines that are paid for with the oil exports. it is not like there's a private sector producing anything else. sanctions, on oil and maduro does not leave, then you have a problem in terms of the ability of the economy to fund food exports. one of the suggestions is the international community, and i made this recently with a co-author in the new york times, is that the international community should provide -- should define a food program that would allow under international and joint monitoring of the venezuelan government, the use of oil revenues to fund food and

medicine imports. david: are there any sources of foreign exchange for venezuela and given the sanction -- ellen: that has been the issue because one of the main sources of foreign cash for venezuela was its oil trade with the united states. other oil to chinese interest has been going to pay interest on its loans to these interests. now that the oil trade with the united states is essentially cut off, unless they do succeed in selling this gold and getting euros for it, there is not any source of cash for the maduro regime. alix: ellen wald of atlantic council and francisco rodriguez, thank you as well. it promises to be one of the most dramatic moments in recent memory for the president's annual address to congress. the state of the union is what

we are both watching next. you can interact with all of the charge and graphics we have used. go to gtb go on your terminal -- go to gtv go on your terminal. ♪

alix: what i am watching is the state of the union at 9:00. tune in to bloomberg at 8:30 p.m. i will be watching anything they say about energy and infrastructure. that will be key in terms of the pipeline. we have a new secretary of interior. timel be watching how much he will devote to that and if he will talk about energy independence and what he says about opec. david: besides the dynamic with nancy pelosi, which will be worth watching. he is a populist. now the democrats are coming up with populist proposals like the schumer proposal. how will he play that? what will he say about being for the worker? alix: he agrees with it.

why would he be into that? david: one we seem in wage? does he support that proposal to curtail stock buyback? alix: and i'm watching the tone. you can tell about the speech whether wind up getting you get tell it -- whether you get president trump on teleprompter or off teleprompter. says state of emergency, all bets are off. alix: tune in to david. david: 8:30 tonight eastern time. alix: coming up, jonathan ferro on bloomberg the open. that wraps it up for bloomberg daybreak: americas. this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide, i'm jonathan ferro. the countdown to the open starts right now. ♪ jonathan: coming up, the

president second state of the union address. aids promising a speech full of optimism. federal reserve chairman jay powell dining with trump at the white house. the fed's patience helping to fuel the s&p 500 rebound in a gain of almost 9% in 2019 already. in the markets, from new york, good morning. futures positive .2% on the s&p 500 following a full day of gains. can we make it five? some muted price action in fx with euro-dollar stable at 1.1432. investors willing to look past contentious politics in washington? >> it does not matter. it is noise. >> i'm not worried about politics. >> things like the trade taxes. >> theow