>> president trump uses a speech to call for the ball to be built, but stopped short of declaring an emergency. hitting the brakes, tell you that cuts income forecast after miss-quarter profits estimates. in a bleak outlook for banks. b.n.p. paribas cuts revenue and forecasts. nordea's results are not where they are wants to be. >> we need to calculate and make

sure we do not get hit on the revenue. ♪ nejra: welcome, i am in for francine lacqua in london. the stoxx 600 gain, largely lifted by oil and gas after those earnings from bp. . the stoxx 600 overall coming in a little soft, off by almost .2%. speaking of a turnaround take a look at the aussie. this as the rba governor takes a neutral stance say downside risks have increased. jumping aftern or the fourth measure was announced to the increasing concerns about tightness in the market. lots of dynamics, but coming up,

we have a special interview. a ceo joins us for an exclusive interview. let's get the first word news in new york. >> the u.k. governments could be planning to the late brexit, that is according to the telegraph, reporting cabinet ministers to secretly discussed plans. killing -- moving 32 billion euros of assets the germany. the goal is to keep operations going amiss uncertainty. kaplan says he is waiting for clarity on the u.s. economic outlook before supporting further rate moves, but he suggests the picture might start clear up. kaplan will next be a voting member in 2020. the pivoting declared they would be patient on deciding rate paths.

italy's populace government is selling $2 billion worth of state owned property to rein in debt. they city finance ministry identified addresses that can be offered. italy has fallen into recession, but the prime minister's sees a recovery in the second half of 2019. opec is reportedly seeking a formal partnership with the group led by russia. saudi arabia and their persian gulf allies are planning to debate an alliance with the 10 nation lock. in recent years, the groups have already worked closely together. a chi up with formalize the ongoing relationship. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. president trump deliver the state of the union address clocking in at 82 minutes, the third longest ever.

he laid out the agenda to a divided congress, focusing on immigration, but not declaring a national emergency. >> we must reject the politics of revenge, resistance, and retribution, and embrace the boundless potential of cooperation, compromise, and the common good. democratslicans and must join forces to confront an urgent, national crisis. we have a moral duty to create a system that protects the lives and jobs of our citizens. in the past, most of the people in this world -- room voted for a wall, but the proper wall never got built. i will get it built. nejra: and the official response , democratic rising star stacey abrams said the president has

left the nation will class adrift -- middle class adrift. country, many are striving for a middle-class reseller equals security. instead, hopes are being crushed by republican leadership that ignores real life or just does not understand it. nejra: joining us from new york is bloomberg's ramy inocencio. good to see you again. you have been up for hours and hours. run us through the highlights. >> sure thing. the things that will be remembered is the topic of immigration and the economy. to immigration, you just went through a little bit. the wall, $5.7 billion of funding. he will still be pushing for that, the words still ring in my years, "i will get it builds." he said there was no national emergency and he will not do a declaration. there were thought that maybe he

would do that to get around the blockade in congress. time thate a lot of did not take a lot of time during the speech, devoting a lot of time saying quote fear mongering, large organized caravans coming to the border. he called it a tremendous onslaught, and of course we know what is happening with the shutdown. will we be in the same place again? on the other side of things, the economy being the big thing. didn't tout the economy at the jobless rate, manufacturing jobs bouncing back from 2010. is whether then gdp growth in the u.s. has been seeing will continue to slow. bloomberg news and our intelligence report are saying that this is what will happen, possibly even slower. hegration and the economy,

did touch on foreign-policy issues. that is all steady as she goes. nejra: thank you so much for keeping us updated. joining us now is the chief of fx strategy at rob a bank -- rabobank. thanks for joining me, ladies. did trump not so much meet his opposition in the middle, but laid groundwork for even more hostilities? >> it was a funny speech, because it was a bit of both. he attempted a conciliatory line of bipartisanship, and he retreats right back into the same tropes we have seen for a couple of years. very strong line on immigration, calling out the democrats, really implicitly calling them out for not funding the wall. not giving any concrete policy steps on how to get there. conciliation and

his retreat into these aggressive lines, it simply failed. nejra: was there much to go on in a trading perspective? >> know, obviously, he will build a wall and the market fears another shutdown. policy,d, in terms of for the markets, not an awful lot to take away. it is clear that trump is going to focus his attention on the geopolitics, if you like. he has the summit coming up, and even on trade, if you have i given any indication, that would not be taken by the market. again, we're still looking at the same things in the market. ,e are just hopeful on trade perhaps as a little pessimistic, wondering how they will push through. that remains very much an issue. i don't think there is any strong direction markets will move.

nejra: fascinating. >> one interesting thing is that he did not take a strong line when it comes to europe. he talked about european contributions towards defense spending and nato. but he did not give us any more reasons to worry. at the same time, it was a ho-hum speech. not a lot of foreign-policy. some audacious claims that the united states would be at war with north korea, no evidence to back that up. quite the reverse. but nothing to worry, beyond what we are to have. let's just year he little bit more, because president trump did highlight the fact congress has more women than ever before. >> exactly one a century after congress passed the constitutional amendment giving women the right to vote, we also

have more women serving in congress the van at any time before. before.at any time [applause] [chanting usa] i mean, there were certainly a lot of aspects about the u.s. the president trump was speaking up. he also made comments about the economy, which many are saying are not backed up. he is going into this from quite a weak position. what is have changed anything? >> i don't think it will. does doingly, what he is recognize is that 30%, that base, and placed directly to -- directly to the. -- to them. but the flash to the women in white is quite remarkable.

up,hing nancy pelosi stand she takes her are, and she points towards the women in the house, and not towards the president very effectively handled by nancy pelosi. nejra: fascinating body which. thank you very much for joining us. jane foley stays with us for the hour. a ceo joins us for an exclusive interview, pushing on the cleanup after keeping their promise on dividends. it is reducing costs, it has got a target of paying at 85% of profits we discuss all of with carlo mussina -- messina. this is bloomberg. ♪

nejra: economics, finance, politics, this is "bloomberg: surveillance." yearning is earning -- to improve its lead over competitors hang out generous dividends. the bank cut 60 billion euros of nonperforming loans, reducing the overall stock by about a third and expects higher office. joining us for an inclusive interview is the bank's ceo. so much for joining me. let me start first on the fact you are expecting higher profits. have you expect to generate those? carlo: we are in a unique position because our net income grew. we will not issue some wholesale bonds that are aspiring.

it will grow into the loan book. those are on the repricing room toto have a lot of increase revenues. also, on commissions, we can have a rebound's we expect an increase in revenues. cost reduction is our best fraction -- practice. and we will have a significant reaction in the cost of resources, so the increase that result will be an increase in net income. you cut about 60 billion euros of nonperforming loans, reducing the stock by almost a third. what is the plan this year? can add come at no cost to shareholders. job,is the fantastic because it is easy to reduce being a prize to the bias of nonperforming loans.

we reduce it at no cost to shareholders. is toan for 2019 and 2020 accelerate a reduction. we want to increase our recoveries of these categories and our expectation is to meet our 2021 targets in 2020. so that we can accelerate the strength of reduction in order to advance our business plans. we will be back to being a normal, european banks looking at normalizing loans. nejra: so you are planning to dispose of those? carlo: we are planning to accelerate a reduction. we are putting a lot of people -- increaserupees recoveries. then, we are evaluating some

.orm of strategic alliances the target likely to pay is to perform them into performing loans. our target is to increase recovery. at no cost to shareholders, this can happen. but the main target is to accelerate recoveries. about i want to talk deposits, which fell more than 2% in the fourth quarter. that was largely because of declines in corporate client repurchase agreements. how do you expect to grow retail deposits with the backdrop of an economy in recession? remember, last year we increased of the deposit by 11,000 billion euros. next quarter, we had suggested a marginal production to institutional clients, but

the trend is there to increase deposits. we have a continuous trend of increasing retail deposits. our target is not to increase just for the sake of increasing, because our target is to have a retail deposits in order to convert into assets under management. and into wealth management. 100 and of these assets are under management, and we want to convert the remaining part as much as possible into assets under management. but we are the safe house in italy and we think we can increase retail deposits. --ra: i am glad you message mentioned assets under management and wealth management , as you said what is strategic

is to increase in 2019. the thing is, as of sure you know, it has been challenging in the fourth quarter. it is a competitive sector. how will you whether that environment? carlo: it is competitive mainly for the performance affect. nejra: right. carlo: so the main point has been the performance affect. if you are in an environment with negative performance or are in a market where it is clear you can have a reduction in stock coming from performance. not to enter into other wealth , but thet products strategic area of the banking sector is wealth management, by definition it is resilient. sanpaolo, intesa italian, we have a business model that is resilient and based on wealth management and we have a strong capital

position. , thank youo messina so much, you stay with us we will discuss more about the banking italian sector, politics, and the weakening economy. that continues next with our exclusive interview. this is bloomberg. ♪

nejra: this is "bloomberg: surveillance."

italy is seeking to sell real estate to rein in debt. and aggravating an already fragile economic situation. still with us is carlos messina -- carlo messina from intesa sanpaolo. from your point of view, what does the government need to do to get the government back on track? carlo: i would prefer to talk about a slowdown, because we are talking about a technical recession. are minus -- -0.2 or recession.re in a we are in a slowdown, and related to germany. a are in a situation in which strong relationship with germany attitude this kind of

of trying to make it work is creating problems in germany. in italy, we have a slowdown in the economy for sure. year, second part of the we can have a clear recovery. the measures for the government will bring momentum into the internal demands. and some expectation is that we can have a recovery in exports in the second part of the year. you seem to think the government will be part of a pickup in the economy, but the coalition government still plays by infighting. how long could the government actually last? is typical to italy to have fighting between parties in the coalition, but also like and all the other countries in the world, we have to consider that

this government started, in my view, with the negative attitudes towards the european commission. they made a mistake, and it is clear. the starting to say we will have a 1.6 deficit, to move it to 2.4 is a mistake, especially towards the reputation for international investors. but they understood, changed ,heir position, and in my view they can deliver good results in terms of attitudes for investors. messina, thank you so much for joining me for this interview. much more coming up on brexit and the markets. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance."

let's get the bloomberg first word news now. of the: in the state union address, president trump called for bipartisanship, but on his terms. he announced a second summit with kim jong-un and touted the u.s. economy as far and away the hottest in the world. >> an economic miracle is taking place in the united states, and the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations. if i had not been elected president of the united states, we would right now, in my opinion, be in a major war with north korea. much work remains to be done, but my relationship with kim jong-un is a good one. chairman kim and i will meet again on february 27 and 28th in vietnam. viviana: in the official stacey abrams says the

president is leaving the nation's middle-class adrift. >> in georgia and around the country, people are striving for a middle were salary truly equals economic security. instead, families hopes are being crushed by republican leadership that ignores real life or just doesn't understand it. robert kaplan says he is waiting on clarity about the u.s. economic outlook before supporting further rate hikes. kaplan becomes a voting member in 2020. the somc pivoting at the last meeting. isly's populist government reportedly selling $2 billion worth of state owned properties to rein in soaring debt.

italy has fallen into recession, but the prime minister sees of recovery in the second half of 2019. 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 meeting northern ireland's political leaders this morning to try and convince them to sign off on her brexit deal. counterpart is traveling to brussels to hold his own talks. may is due to meet the european commission president tomorrow. the head of fx borategy at probably -- ro bank. the think we could see any changes around the margins of the backstop that could satisfy u.k. lawmakers? that is difficult because

for many parliamentarians, they don't like that. that is something that won't necessarily be legally binding. it is difficult right now to see what the compromise could be. have 51 days until brexit comes into force. time is running out. there is talk again this week about there could be a delay. we have seen it before and out,inly with time running hopefully they will have a delay. nejra: talk about nerves being frayed. i know you early in the year, but we are here today. our sterling traders unprepared for a no deal brexit? jane: yes. thatme back to this view

investors are seen as somewhat different. you have to prepare now and put your last-minute preparations in place for a no deal. that is the road we are on. certainly, we have not always traded with this mindset that it happen.uick to the market consensus has never favored a very high probability of a hard brexit. it has always been that there will be a compromise. the consensus mindset has always been but a hard brexit will be avoided, meaning that if there is a hard brexit, sterling traders are definitely unprepared. nejra: have a chart of the guilt curve. it has been flattening amid the brexit woes. the bank of england in a brexit bind many times. what are you expecting to hear? jane: they have to come up with weew forecast, but i think can all understand that what happens to the u.k. economy is

extremely dependent on the sort of deal we get and whether or not we get a deal. it is a difficult position for the bank of england to be in. what we have seen is inflation coming down a little bit quicker than we expected. sterling on to march 29 is going to be really important as to the inflation forecast. if it falls a lot and we did a hard brexit, then we get more inflation. in my mind, they may have to hold onto a little bit of a hawkish rhetoric just to try to put a floor under the. -- them. whether or not they would pull the trigger on a rate hike if there is a hard brexit vote remains to be seen. some: we may hear you say hawkish rhetoric to put a floor under the pound. coming up, we speak to the cfo of general motors.

don't miss that interview at 3:30 p.m. london time. this is bloomberg. ♪

nejra: this is "bloomberg surveillance." but if the bloomberg business flash first. france's biggest lender is planning 600 million euros of additional cuts. the cfo says the bank is on track to meet its revised targets. >> if you look at our balance at 11.8%. are

all, the data does confirm that we are on track. viviana: softbank's vision fund selling all of its shares. the deal is worth around $3.6 billion. the u.s. company is the biggest maker of chips for computer graphic cards. the company cited weakness in china and a slowing global economy. disney embarking on a mission to become a streaming company challenging the likes of netflix, but for now, it is traditional tv that is holding up better than expected. tv stations helped the media giant beat expectations, but disney is warning this year will be tough. revenue, wensing estimate would be a decrease of about 150 million to oi year

after year.that will be more heavily weighted to the second half. to put that, some context on is theaptain marvel" first film that we will withhold from our output deals. viviana: tesla cutting the price of its model three sedan again. this is the second cut of the year. all models will now cost $1100 less. cut move from an enterprise announcement in january 2 partially offset the reduction in federal tax credits. that is your bloomberg business flash. much. thank you so let's focus in on central banks. robert kaplan says he is waiting on clarity for the u.s. economic outlook. he says the picture might start

to clear up in the coming months. kaplan will next be a voting member in 2020. us is jane foley .rom robert bank -- rabobank jane: our view is that this is it. obviously, it is good to become clearer as we move into the end of the year and beyond. certainly for us, we do to the risk of a technical recession in the u.s. next year. perhaps by the middle of the year, we may see that yield curve inverted.we think probably , they are done for now. nejra: these think that despite the strength we are seeing in the market? this is something which is really common throughout the g10. we are seeing undoubtedly tight labor markets. where is that wage inflation?

it was again on the inflation number. there isn't an awful lot of it. terry's reasons for this and this is something we have seen -- various reasons for this and this is something we have seen from japan. nejra: you did say we could see yield curve flattening. i'm wondering where you see that if you think this is the end of a hiking cycle. that surely would put a ceiling on front end rates on the two-year rate? jane: again, is a lack of inflation coming through. that is something we really suspected for quite a while. the 10 year part of the curve would carry on going higher, and that has been the case. really, a continuation of the trend we have seen more

recently. however, you do expect a stronger dollar to continue simply because you do not see other central banks catching up with a set in terms of being in terms offed being able to normalize. we don't to the dollar giving away an awful lot of grant. if you are going to sell the dollars, 80 to be buying something else. you look at the euro. we had another piece of week data from germany. scratching their heads asking where the ecb could carry on with hawkish rates. sterling is dominated by the whole brexit view. in order to sell dollars, what are you going to buy? had is a souring of the outlook really from around november into january. perhaps more recently that the market is looking at more soured currencies.

the outlook for the dollar is not as good as it was last spring. i think it is not going to be sold hugely because the outlook is soured elsewhere as well. nejra: we saw the aussie jump yesterday on what was seen as not really a dovish take from the rba. phillipe hear from seeing the interest rate more evenly balanced. do you really taken at his word and therefore see no reason to be buying the aussie from here? again, yesterday was a surprise. for a few months, we have had market debating whether or not the next move would be a hike or a cut. the us trillion dollar rallied. and the -- the u.s. dollar rallied. cut is back onte

the table of the possibility. rb segmentat the yesterdaya, he seemed to be saying we are going to get the wage inflation. if they go back a few months and look at previous speeches, he has been quite wary about the lack of wage inflation coming through in australia. eentralia has quite a k example of markets being extremely tight. .he low was in wage inflation it is now only about 2.4%. it has improved, but not an awful lot. that is something which the rba has been very wary about before. melbourne and sydney housing markets are slowing down. there is certainly headwinds there. nejra: it comes back to the global conundrum of where

inflation is. again, cano ask you the world escape the low rates trap that japan is stuck in? it has been 20 years since zero interest rates. what is your answer to this question? jane: i think the answer is no. japan is the most extreme example. if we look at labor there, extremely tight labor market. there is anecdotal evidence of coffee bars in tokyo shutting down. australia,ing this the u.s. it is surprising that you are not seeing this more wage inflation.you come up empty at k as another example . very tight labor market. the bank of england has been

wrongfooted by the fact that wage inflation has not come through. we are already in the cycle whereby we cannot create the wage inflation that we have seen in previous economic cycles. nejra: what about china? some people have said to me there is going to be an inflationary impulse. area where wethe do actually start to see some convergence with the fed? jane: there is always the possibility. i am really quite reluctant to brin that for -- nowg. we are seeing other stimulus coming through. they have an aging demographic in china which means there are commonalities with the developing world as well. until we begin to see that, i would be very reluctant to expect it is really going to happen. nejra: we are really going around the world.

europe.me back to yet talk to me before about the tug-of-war when it comes to the euro. how is it going to break out of that tug-of-war? is there any prospect of that happening in 2019? sparringhink this contest between the euro and dollar can carry on for quite a while. think perhaps today, the dollar has the upper hand and we have seen euro-dollar perhaps the lower. i think perhaps the euro has difficulties in store. we have the european parliamentary elections coming up in may. there are concerns that these could be really important collections, that we could see more populism -- elections, that we could see more populism coming through. whether or not that means populous are going to want to spend a lot more. there are lots of different political concerns layered on concerns. economic

i think you need to get through that and then it might be easier to answer that question. for now, i think there are difficulties facing both currencies in terms of the economics and politics. nejra: for now, the dollar remains king for you. rabobank. from up next, we take a look at some of the biggest movers in european trading. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." let's take a look at some of the stock movers this morning. one play when billion dollars worth is coming in the form of a buyback -- $1.1 billion worth is coming in the form of a buyback. part of this is russia where carlsberg is a market leader.

the country is stabilizing following a drop after the last world cup. point -- 3.6%.en buildings materials supply say they see significant value potential. he see the stock up by frequent 6% as well. and ocado slumping as the fire rages at its warehouses. it is great to cut its sales growth as a result. this is the biggest drop since november. plenty of international deals throughout the course of the year.it was the best performer throughout 2018 on the stoxx 600. much. thank you so let's keep the conversation on the earnings season. earlier this morning, i spoke to the ceo of ecuanor. >> our preferred way of

distributing capital has always been and will always be the cash dividend. we raise the cash dividend and that is standard now. that has increased by 30%. the intention is to grow the dividend from that level. that is the priority. oura: joining us now is european equities reporter. that was a response to a question i asked about share buybacks. we have the ceo of equinor emphasizing that is the way they --t to return investment to oil has been the standout outperform at this earnings season in europe. you have bp, shell flush with cash. their rewarding

shareholders with dividend and buybacks. of thespite the collapse oil price in the fourth quarter remain strong because they have been so disciplined in their capital. they have cut costs and are now flexible even when the oil retreats. nejra: that is the oil majors. also a lot of focus on banks. ksenia: especially in france, there have been problems throughout. we started out warning for their outlook this year. the main concern is surrounding the fourth quarter results.we have the market turmoil's and based on wall street and the rest of europe trading went down. results reflect that as well. nejra: how well compared to expectations going into season? analysts have been cutting expectations for european earnings since august.

that actually helps the companies we are reporting because even if they had a small beat, it looks really well because the expectations were already so low. that has been supporting european equities. nejra: i-91 a to talk about retailers. big difference -- i know you wanted to talk about retailers. thank you so much. we continue in the next hour. tom keene joins me out of new york. coming up later, the cfo of general motors. do not miss that interview after 3:30 p.m. london time. this is bloomberg. ♪

tom: this morning, the prime

minister of the united kingdom is in belfast. the irish prime minister is in brussels. brexit and the backstop and a point of decision and compromise. the president of the united states speaks. market has aock bid. yields a stay lower for longer. good morning, everyone. this is "bloomberg surveillance." an absolutely fabulous thing for our global audience of the irish prime minister going to belgium and the united kingdom prime minister in belfast. what would you look for today? nejra: i'm going to be looking for what theresa may really says to try to bridge this gap and find some kind of agreement that pleases both northern ireland and the u.k. tory party. suggested she is

setting the low bar for renegotiation. it all comes back to the tax.. what is the eu -- it all comes back to the backstop. it is hard to see what kind of resolution there is going to be. day.an extraordinary right now in new york city with your first word news, here's viviana. the president called for a bipartisanship, but he made it clear what he thinks is standing in the way of progress. >> an economic miracle is taking place in the united states and the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations. the president also announced plans for his second summit meeting with north korea's kim jong-un. >> if i had not been elected president of the united states, we would right now, in my

opinion, be in a major war with north korea. much work remains to be done, but my relationship with kim jong-un is a good one. chairman kim and i will meet again on february 27 and 28th in vietnam. viviana: and the democratic starnse, arising party recognized the republican party is leaving the nation's middle-class addressed. -- adrift. may's search for a brexit deal intensifies. may is on the second day of her trip to ireland. she is hoping to find a solution to the border between the u.k. and ireland that will be acceptable to the british parliament. this morning, the irish prime minister goes to brussels to hold his own talks with the

european union. the parent company of mercedes-benz looks to dime backs -- bounce back. is coming off a year in which it struggled with the u.s.-china trade war, production bottlenecks in europe. 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: the equity markets up in the opening. negative five right now. euro is weaker over the last 24 11389.down to vix right now at 15.70. the dow jones industrial average, this is really important. we talk about a grind lower yield. we never talk about a grind higher where the market finds a

paid. bid.is what -- that is what we have seen in the last few days keeping up on the dow. sterlingake note of was all that is going on in travel, british pound, 12959. nejra: interesting we are seeing that resilience in sterling. let me start with european equities. we're pretty much unchanged there. yesterday, we saw strong gains, but we are struggling for direction today. the aussie dollar has really caught my attention over the last 24 hours. iron ore catching a big bid. you pointed to cable, 12962. tom: so much to talk about with

brexit in the state of the union in the united states. we thought we would get perspective. for all of one and, there is no better -- london, there is no better perspective than their bayer. there -- mayor. we're thrilled that he joins us this morning. wonderful to speak with you. last time i saw you was in new york city. can you journey right now? -- can you hear me right now? what do you need from prime minister may as she travels to belfast? you are remain. you in london want to stay with the eu. what you need from a prime minister right now? the last ill to negotiated -- the last deal to negotiated -- tom: i going to go to nejra

cehic. let's get the mayor rewired correctly so we can get the sound going. i look at what prime minister may is doing in belfast, and i'm just as interested in the irish prime minister in brussels today. is going to be greeted friendly in brussels, right? nejra: absolutely. this comes to the key thing we talked about the eu standing together with ireland, which of course is part of the eu in terms of this backstop. what nobody wants is this hard border between northern ireland and ireland. this is the real difficulty coming through because you have the tories in the u.k. that don't want anything that ties the u.k. too far to the eu when brexit day comes. that is the distinction we need to make. the difficulty here, suggestions of from theresa may's comments is that she is setting a low bar

for renegotiation. the london mayor is with us in london. me.s sitting here next to tom was asking you what theresa may needs to do when she goes to brussels. is there anything she can do that is going to satisfy her party and the tory members back home? difficultg to be very because i do not sure her party knows what they want. the problem she has is she may when votes from one flick of her party, but she may lose votes from this flank of her party. she is trying to reach a deal that the eu find palatable, and it is really difficult. there are 51 days to go. she is playing a real risky day game of poker. what she is saying to her mp's the eu was noeave

deal whatsoever which will be catastrophic. many parliamentarians know, and i support them, saying just get avoids aion that panic of us leaving the eu with no deal whatsoever. to makeusinesses have the contingency plans for the scenario. we have heard from so many ceos talking about how they are preparing for that. are you concerned that there is quite a be an exit is of investment out of london in march 29 hit? >> i am trying to reassure them -- their concern is the uncertainty. they are making plans as we speak, as their shareholders with amanda to do so, to plan for the possibility of us -- demand them to do so, to plan for the possibility of us leaving with no deal. what the prime minister can do is say look, we need more time

to reach a deal with the eu, to get the vote through parliament. let's get more time before we have to leave. that will give us time to reach a deal that is palatable to our parliament, but also the eu. nejra: should we have a second referendum? think forget the parliament being divided. -- it wouldpublic mean them taking back control. brendan from london in else in and says please ask them about rent control. i can't afford to live anywhere. you really set up for the domestic london audience an arch issue for your next campaign, which is rent control. and effects new york, washington, san francisco and on and on. can you actually get to a

reasonable housing economy in greater london? sadiq: what we have seen is a massive urbanization with people moving toward cities. they have got to be genuinely affordable. that will take time. in the meantime, we need to make sure rent private tenants pay is affordable. i've asked a few experts to go to work on how to make sure the -- im that stabilizes rent appreciate there are some models that have led to landowners taking properties off the market. there are some that have left concerns around the world from the 1970's. what i'm after is a model that allows property to go upstream and allows tenants to secure tenure with rent they can afford. tom: we asked you what you need from the prime minister, what do you need from mr. corbyn?

it is amazing to see how he does in the united kingdom polls. what do you need from him right now? theq: anyone who followed american presidential elections like i did knows to ignore the polls. important poll that matters is the one that takes place on election day. one of the things jeremy corbyn is trying to do is to unite a divided country, to make sure 's forhe labour party regions as well and rural parts of our country. thealked about how divided government is, but our country is divided as well. i think great leaders build bridges and bring people together. that is one of the things jeremy is trying to do. the labour party has spent the last few years being out of office. we've got to demonstrate to the british public we are a government in waiting. that means not just eye-catching policies that appeal to voters,

but showing we can be pro-central justice as well. nejra: i have had some people tell me that what would be more worrying for financial markets is a jeremy corbyn in power and a labour government in power. would you be concerned that if we went to another general election, jeremy corbyn managed to win, that would drive business even further out of london? sadiq: that is the concern some businesses has said to you. that is what it is important that he is out talking to businesses, to give them the reassurance they need to make sure they realize the labour party is seen as a force of good. the key thing is to make sure more people across the country benefit from the fruits of globalization and is great businesses. we have seen many communities crying out for a greater share of the fruits of globalization, for a greater share of the profits they see a small number of people making.

one of the things he is trying to do with his team's reassure working withbout them to address some of the inequalities that exist in our city and our country. nejra: thank you so much. pleasure to have you with us today. we have got some news breaking. this is important, to do with the aston siemens proposed to deal. the eu rejecting the deal. basically, they unveiled their merger in 2017. they were former archrivals but they killed the deal as a have to take on an expansionist chinese competitor. ahead of this, we were given signals the eu commission might want to reject it. we are now getting information that the eu has rejected this.

this may actually start a push to loosen competition safeguards. there will likely be consequences to this rejection from the eu. tom: what i find interesting is the french speaking back. politicians heated on this. you have the french finance minister calling for an overhaul of policy to make it easier for the region's companies to grow. also angela merkel has talked about loosening those eu rules. tom: drive for the conversation here. -- forward the conversation here. what is the symbolism of the prime minister of the united kingdom in belfast? this is something we have seen many times before. time?s different this honest, ittally

feels a little bit like groundhog day. in belfast.arrives what we of substance, learned yesterday is that theresa may actually agrees that a backstop is needed for what binding are legally changes to the backstop. in some ways, that would have been reassuring for some people in northern ireland that she recognized the need for a backstop to keep the irish border open. her statement there creates problems elsewhere. back in london, hard-core react to her statement that she is prepared to stick by the backstop and immediately cry foul. we haven't really moved an inch from where we were before she visits. nejra: great to speak to you. what happened next if it is possible in any way to answer

that question right now? term,in the very short what we are seeing is the irish prime minister going to brussels today. i think what we will see there is a statement from eu leaders. we will hear stuff like we are all iris now i'm sticking by ireland. we want to see any real change now on the backstop in the short-term. you might see my new changes in the language, but essentially, i don't think theresa may will be given anything substantial. at some point you will have to go back to the houses of parliament. theresa may will tell brexiteers, it is my brexit or no brexit at all. obviously, no deal is still a possibility. tom: very good. thank you so much from our dublin news office this morning. right now, we go to the state of the union. alberto joins us.

stephanie baker from bloomberg news with us. we are thrilled to bring you this morning jeffrey howard was a very sharp comment. stephanie, let me start with you. what sticks out to you among all of the overanalysis? stephanie: he gave what was widely expected a call for unity and bipartisanship. he spent 15e, minutes painting a very dark picture of immigration, the crisis on the border and he did not offer any kind of compromise on his border wall or any hint that he might be open to comprehensive immigration reform. the thing that really stuck in my mind was how you heard from usa, usa asance of

if it was a truck rally in montana. although some democrats -- him, it was very short on details. how did he do on confronting delicately the issue of mueller? >> for the first 112 years of the republic, the state of the union was written and handed over to congress. life flight last night me wonder why we don't return to that arrangement. there was nothing particularly surprising about it. there was that one moment where the president did say that if we wanted legislation to happen in the country, if we wanted to bring the two countries together, we would need to put in and to partisan investigation.

given many of the people working in the special counsel's office happen lifelong republican. clearly, that was the one moment where the president wanted to take a job at the dollar probe -- mueller probe. otherwise, he was making a claim that we wanted to bring the together. nothing he has done over the past couple of years gives us any indication he is actually serious about moving on that promise. nejra: i am making a note that all of the various descriptions i've had. it's hard to see exactly who the president was speaking to in the speech. there were a lot of different threats to it. is his case still with him? -- base still with him? >> a recent poll still shows his base hovering with him. the fact that he painted such a

strong connection between illegal immigration and violence, illegal immigration and crime in the streets, i think was a message sent directly to his base. who are very keen to see him build the wall. that kind of strong rhetoric on immigration is extremely alienating towards democrats. i think it -- is the hopes of getting some kind of compromise legislation. i think it increases the likelihood that come a few days from now, trump will likely consider declaring a state of emergency or shutting down the government again in order to continue the fight over the border wall. nejra: would you agree in terms of the shutdown? stephanie: i think it looks likely that he will declare a state of emergency. i think he has to deliver that promise to his base. i feel like he thinks he cannot

go back on that otherwise he is destroying his chance at reelection. tom: alberta with us as well. we're thrilled that you are here to speak of the blunt reality of the gilded age, which is bonds are owned by rich people, price up, yields down. you live this every single day. the president gives a speech where he mentioned an economic miracle, which is actually an economic miracle of wealth building in a gilded time? alberto: the issue with the speech is that you have a chance of another shutdown or a state of emergency. this would slow growth down. it creates a goldilocks environment where growth is not too hot, not too cold. it's great for asset prices, but was still have a lot of people that are coming back to the job market. accelerating,s

but still, the majority of people in the u.s., but also in europe are not better off versus what they were 10 years ago. we have an environment which is goldilocks in market. not great in the real economy. for. rich, wait -- wage poor. tom: the monmouth poll was really extraordinary. it was really the first poll showing all the candidates. is the president advantage and 2020 by the liberal tilt, the liberal dialogue, liberal discourse of so many that we saw last night and what we have seen in the last couple weeks? by a ultimately advantaged shift to the left of the democratic party? stephanie: that is the row? remains to be seen and it really

depends on which candidate the democrats eventually settle on and how far to the left that candidate really is. i think it will be a real test of the democratic party. there is an incredibly crowded field. we have seen really strong contenders come out. i think it really depends. i think the lesson from the midterms show that the democrats have campaigned very focused on things like health care, which are incredibly important for a wide variety, a wide swathes of the electric. that has proved a winning strategy.if they focus on things like that that matter to will voters, that will likely help them win in two years time. nejra: thank you so much. to jeremy and alberto.

the danish company raised its dividends and lost a share buyback. the brewer is also doubling down and asia setting its sights on the amount and cambodia. great to have you with us this morning. let's start with talking about lifting the dividend and launching the share buyback. will shareholders from a measures such as this become the as companies in the consumer goods industry are increasingly coming under pressure from this -- activists? >> i think with these kind of will show our investors we are serious about our shared 22 program. as we grow our revenue by 6.5%, we grew our operating profits i 11.5%. journeyally have the efficiency program that ended up

around 3 billion danish crowns. by that, we have been a look to increase our dividends. we doubled it and now we have moved to the next step which is a share buyback. , weess that in retrospect are satisfying our shareholders. nejra: what is the plan to grow revenue? best positioned to actually grow the top line? s: the good think this moment in time is we can see a shift category, which really takes place in terms of growth. this is a in china, segment that is growing fast. we think that over the coming years, we are able to stick to our 2.4% topline growth. tom: i love the beer chat.

liverpool is in first place. you have the longest endorsement history.r league are you going to be at every liverpool game from now on until they take the premier league trophy? cees: we continue our support to liverpool, indeed. we are very happy to be part of that team. tom: very good. 1992,k it's back in consecutive support of a small football club in liver will as well. we need to think all of our team for an exciting half hour here. we will continue. please stay with us from london, from new york. this is bloomberg. ♪ this isn't just any moving day.

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cecic in london. viviana: the white house promised the spirit of unity in the state of the union address, but offered few all of branches. he called for an end to what he calls ridiculous, partisan investigation, and hammered away at china, pledging to get a fair trade deal. >> i have respect for president xi and we are working on a new trade deal with china that must include real structural change and and unfair practices. -- and protectic american jobs. viviana: the president called for more infrastructure development, that policy appealed to democrats. >> congress is eager to pass and

infrastructure bill and i am eager to work with you on legislation to deliver new and important infrastructure investment, including investments into cutting edge industries of the future. this is not an option. this is a necessity. viviana: the budget deficit approaching $1 trillion gives the infrastructure package a small chance of becoming law. in the response, stacey abrams argued president trump and the republican party are leaving others a draft. she is the former leader of the state house who lost a close race for governor. europe's largest economy is losing momentum, factory orders in germany slowly losing momentum. the decline is the biggest in six months.

deutsche bank is making the case the german economy is drifting towards recession. 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. hurtado.ana tom: thank you so much. the mayor of london for his attendance in the last hour. with your conversation of the day, if you care about allen's up, yelled lower -- bonds up, yield lower. golomb looks at that -- alberto gallo looks at that. investmentslgebra's . what part of the e.u. bond martin -- market introduced -- interests you most right now? alberto: there has been a rebound in bonds and particularly high-yield bonds in -- u.s., globally, and high

because during goldilocks you have a dovish fed and things are slightly above trend. in europe, the market is fearful because of brexit and the budget and the recent data showing germany and italy are in a technical recession. may have negative growth. moneyope, you can make from the pricing out of recession risks if europe gets out and there's a rebound, even not a strong one. we think this will happen because china is about to stimulate and we will have better news between china and the u.s., and europe is sensitive to asia. tom: i want to speak about my conversation with bill gross a few days ago. he was blunt about his unconstrained failures at janice

henderson about having a hedge versuske bond portfolio demonstrative success in total return at pimco. can he run a more narrow bond portfolio or do you just have to go more diversified come up more on prospectus and away from an ad hoc shop? alberto: we are very focused on credit. hedge a macro overlay to micra risks. -- macro risks. you have to have a directional bias. we believe you need to be either long or short the market. it is hard to perform if you are always long short in this environment. banks have reduced the volatility of assets across the world so there are sometimes very few moving parts.

we believe in a directional approach. nejra: we have talked about volatility coming back at the start of this year and the end of last. you talked about qe infinity which seems to be how we are setting off in 2019 with the fed on policy, no prospects for the ecb to normalize, and the 10 year jgb yields in negative territory today. do you really see a pickup and volatility this year or will it stay subdued with q8 infinity? alberto: we think there is no recession this year or next year. economies tend to predict nine out of the five next recessions. there is no recession in the next 18 months. this gives you an opportunity to bet on the pricing out of risk.

it is happening in the u.s. market and em. in europe, fears of a hard brexit are impacting the economy , and germany in a technical recession. the global cycle helps europe. europe is an open opportunity. nejra: where is opportunity the strongest? u.k. andtoday, in the spain and other periphery countries that have not rebounded. the u.k. is still growing even with fears of a hard brexit. yieldsre still very high in this instance. you have global banks in spain giving you a percent come at 9% riskym over bunds versus emerging-market countries that give you less. ris doing on algeb

the banks? is it the mother of all opportunities? alberto: we think your credit is interesting. premium foridest european high-yield companies and u.s. banks versus emerging markets. we look at the large-cap banks, systemic institutions. in credit, betting on the solvency of these banks, it is a safe bet. we have had good results across italian and spanish banks over the last quarter. tom: you did not mention german banks. everyone wants to know what you are going to do. alberto: we are not exposed because the german banking system is fragile and needs more profitability. the problem with deutsche bank is the local savings banks in germany lend at very cheap levels. they are supported by the government and therefore, the

retail home market is unprofitable. comingu have u.k. banks back to become more of a retail house, more of a private bank house like rbs, they have a profitable market to retreat to. it is a problem that can be solved, and the rest of the space is reasonably ok. compared to the risks that are priced in. tom: alberto did not really want to talk about the german banks, but we got it out of him. nejra: great job. i am going to crowbar something on italy because i spoke to the ceo of intel's a earlier -- inteza earlier. giving a big promise on dividends. our italian banks something you would look at as an opportunity? alberto: the national champions, like in spain, in italy you have

wide valuations. in credit especially. we have banks which are compared to the government, compared to the risks that the country has in reality, they are very diversified. only half an italian bank and as a european bank for the other half. nteza makes most of the money from management and not lending. you have a mispricing with the risk of the country but more diversification. from a capital level, they are robust. you could argue that maybe they quickly asbound as the u.s. or china, but for the credits to be ok, you need growth to be positive. the pricing out of recession risks in europe is a big opportunity.

we still like european credit. perhaps we were early in calling it long last year, but this year it is starting to perform. we think there is more to go. nejra: alberto gallo staying with us. in the next hour, we are joined by julia coronado. this is bloomberg. ♪

♪ i am viviana her to auto. -- her to auto. -- viviana hurtado. apple veteran deirdre know brian will -- deirdre o'brien will look place -- she is overhauling

the store but some complained. they want to find more revenue streams. profit at abc and local tv stations helped disney beat estimates as they want to be a major player in streaming tv. they warned this year will be tough as they take over 21st century fox. ofla is cutting the price its model three sedan for the second time this year. all versions will cost $1100 less. that brings the price to just under $43,000. it will offset the end of a customer referral program. it was a more costly incentive than the company realized. on isart of what is going how the e.u. will be like america.

the united states of europe has never existed. we see that today with siemens. thisone is involved in discussion, aren't they? nejra: absolutely. we are talking about what were formally arch rivals announcing they want to emerge in 2017. giant bedustrial competitive in places like china? the french finance minister and angela merkel have come out talking about the competition rules need to be loosened to allow europe to compete on a global scale with its big industrial companies. tom: we will touch on that in a moment. i want to point out a european and nato item, not confirmed by the white house that president

trump will find a way to get to london for the nato meeting scheduled in december of this year. this announced by mr. stoltenberg. -- and iteeting is in is presumed president trump will be there. back to the get siemens alston story. the year commission expected to deal a blow to cross-country m&a with a veto of a high profile planned merger between france's alston and german siemens. we were expecting this headline. i was looking forward on the bloomberg week as it coming through any moment. the siemens alston rail deal blocked by that e.u. on competition concerns. itn we broke this headline,

was a member of the e.u. parliament tweety. now we have a headline -- the cem -- siemens alston rail deal blocked by the e.u. on competition concerns. let's get to tony aaron's, great to have you. update us with where we are. tony: it came down just a few minutes ago. she blocked two deals today. this brings her total blocks to five for her five-year, 10 year, about the same as her predecessor. been more political pressure on this deal than any other deal i have seen in a decade. nejra: why so much political pressure specifically on this deal? tony: the governments wanted to put this through. they see china as an end dust real force -- as an industrial

force and they wanted to create a company that would be strong in the rail industry. unfortunately, the commissioner cannot change the antitrust analysis for political considerations. nejra: i want to ask about the concessions, the e.u. saying siemens and alstom did not offer confessions. tony: they wanted a clear split. say, we give up they wantedtones -- very clear concessions. ,he concessions that were made here are some parts of all stone -- all stone -- all stone -- that did not really happen. tom: every article i have read in paragraph three, they mention

china. you have the united states of america in an upper over china. maybe the united states of europe as well. do you buy the validity that they need to do this transaction to compete against china? the e.u. clearly disagrees. tony: i had a brief look at the documents before i came on and in the rail industry, the commission does not see china as a problem. they do not see on the signaling side, a problem with chinese competition at all in the near future. they had similar concerns of an eye -- high-speed rail, they did not see china being able to sell those products in europe. nejra: thank you for joining us with the update and context on this decision by the e.u. commission to block the siemens alstom deal on competition concerns.

david westin speaks with former senator joe lieberman of connecticut at 12:30 p.m. in new york. this is bloomberg. ♪

♪

cehic inam nejra london. .om keene is in new york the outlook is darkening for italian banks as economic valets aise weighsns -- mal on plans. carla mussina spoke to me exclusively after the results. cost action is our best practice and we will continue to reduce cost. nonprofessional -- nonperforming loans will have a risk. you cut about 16 billion euros of nonperforming loans last year, reducing the stock by almost one third. what is the plan this year? >> at no cost to the shareholders and increasing

coverage, that is a fantastic job that we did because it reduces numbers from the gross pain price to the buyers of nonperforming loans. this is not a -- no cost to shareholders. the plan for 2019 and 2020 is to accelerate action. we want to increase our recovery of these categories. we plan to meet our 2021 targets in 2020 so we can accelerate this trend reduction in order to be one way it -- one year in advance. 2021, we will come back to be a normal european bank looking at nonperforming loans. nejra: talk about the fact that italy slipped into recession. what does the government need to do to get the economy permanently on track with robust growth? >> i would prefer to talk about

a slowdown in the real economy. we are talking about a technical -02,sion as if you have -01, you are in a technical recession. it is mainly related to the slowdown in germany because italy is really in the situation to have a strong relation with germany and china. of tryingof attitude to make a war between italy and china is creating problems. in an ole, we have a slowdown in the real economy, but the second part of the year we can have an internal demand acceleration. o mussina.t was carl said not worried about a

technical recession in italy. are you? alberto: there is no recession. you guys have been too negative. last year, a lot of people were talking about recession in 2019 that just in europe, also in the u.s. we are seeing a benign slowdown. growth remains above trend in the u.s. and slightly below trend in europe. very importantly, this year we will have a stimulus from china announced next month with the national people's congress and in the u.s., we have potentially some steps towards agreeing on a framework with china. we have a lot of investment, business investment that was on .old for the last six months uncertainty created a drag on the economy. today if we have less uncertainty, that is a stimulus.

a temporaryven solution for brexit and china, this will bring pmi's back above 50 in q2 and q3. the european economy is one of the most open regions in the world, especially sensitive to asia. germany and italy would benefit. the italian government needs to have a wake-up call between their promises on fiscal spending and the reality, and we have seen that. tom: alberto gallo with us. more to talk about, all that is going on with prime minister may and the prime minister of ireland, the state of the union and the e.u. more competitive. ♪

♪ tom: this morning, the president speaks.

ms. abrams of georgia replies. gridlock will bring no decision or compromise. the prime minister of the u.k. in belfast, the irish prime minister in brussels, brexit tax stop, and point of -- backstop, and point of decision. will the yields stay lower for longer? we are live from our world headquarters in london. cehic inkeene, nejra london. it is like the last stand on italy. nejra: when i spoke to carla mussina, we are talking about they are returning 85% of their profits in dividends. in terms of the nonperforming loans, they are ahead of a lot of their years in italy -- peers in italy.

it is not a recession, it is a slowdown. tom: right now with the live first word news, the vienna hurtado. -- viviana hurtado. viviana: the president called for bipartisanship but made it clear what he thinks is standing in the way of progress. economic miracle is taking place in the united states and the only thing that can happen -- stop it are foolish wars, politics, or ridiculous partisan investigations. viviana: the president announced plans for his second summit meeting with north korea. >> if i had not been elected president of the united states, we would right now in my opinion be in a major war with north korea. much work remains to be done,

but my relationship with kim jong-un is a good one. chairman kim and i will meet again on february 27 and 28th in vietnam. and the democratic response, stacey abrams argued president trump and the republican party are leaving the nations middle-class adrift and accuse them of abandoning values. she lost a close race for governor. president trump will meet with leaders from nato countries when they hold an alliance in december in london. president trump has criticized nato and urged members to boost their military spending. european union antitrust regulators rejecting the siemens alstom him merger. french and german officials

argue the merger is needed to be competition from china. 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 hurtado. .om: thank you so much this has been widely expected in podcasts, we think spotify -- thank spotify for their use of bloomberg. spotify, thepated streaming giant, will buy again lit media and anchor media as they move into either areas. podcasts, you have to be 28 to discuss it so i cannot discuss it this morning. nejra: i would love to see your spotify playlist. maybe we can share. tom: it is just bradley all the time.

gaga gets to sing but it is mostly bradley. equities, bonds, currencies, commodities. negative five own futures. the euro, 1.14. it is a bull market, 15.45. i went to cash christmas eve. 25,400. nejra: let me save you with european equities, although i cannot because we are not seeing big gains. stoxx 600 gains more than 100 yesterday. a next picture when it comes -- mixed picture when it comes to earnings. the aussie dollar under pressure . i have put cable up there, holding up despite rod based dollar strength -- broad-based dollar strength.

concerns around tightness in that market. right now, he has never tried great coupon mustard, kevin cirilli, looking at the state of the union. an open question, with all the punditry and all that, what stood out among the dark grey suits and white dresses? kevin: i live for state of the union coverage. first and foremost, the nonpartisanship. there were brief moments of collective brevity among lawmakers, the most notable when kirsten gillibrand walked in with ted cruz. you do not see that often. he also had another moment where president trump went off message

-- off prompter, so to speak, and basically said to democrats, you are going to love this come and applauded them -- love this next line, and applauded them for having more women. a nice unifying moment. the president doubling down on the wall. i am not sure that does much to move the needle. he did not declare a national emergency. said thei spoke with moment where he criticized the investigations was "chilling." tom: david westin focusing on this in the 12:00 noon hour. is rememberto do there was a reply, a remarkable woman from georgia, stacey abrams is rising within the democratic party. it is an honor to see her give the reply.

ms. abrams: in georgia and around the country, people are striving for middle-class where salary equals economic security. instead, families' helps her crushed by republican leadership or justred by real-life do not understand it. tom: the president talking about his economic miracle, let's look at what john bernstein writes. we are thrilled mr. bernstein and our editors could get it done. the speech was far more focused on the folks in the gallery, some photos, some heroes. when he mentioned the democrat agenda rather than the democratic agenda, which injected a harsh partisan note, another wasted opportunity. i thought of you there, and every little nuance of the battle forward matters as well.

does he help his republican party when he goes fox tv? kevin: overall, i do not think president trump made the political situation for himself worse last night. i do not want to call it a wash, but by not declaring a national emergency he essentially said, leader mcconnell, senator schumer, come up with a deal. that i think will be in the immediate short-term where this moves forward. democrats are obviously not going to like it. republicans will like most of what they heard last night in terms of policy. if you are looking at where trade policy goes, the president double to down on his trade policy whether it be with china or mexico and canada and europe. he asked congress to pass

legislation to make it more difficult for countries to increase their tariffs. nejra: european investors were waking up wanting to hear more about what the president or had to say does president had to say on trade. european investors are always keeping an eye on the u.s. sensey and there was a that the u.s. inflated economic achievements if you compared against data. you could look at it in terms of where things are headed. the sources i talked with the white house say the economy is something they want to talk about and feel it is a story they want to continue on with. ,s we heard from stacey abrams it is not doing enough for the middle class. , snapshottakeaway 30,000 foot view is if you are looking at where this goes,

looking at the volatility, the president is set to negotiate with chinese leaders on march 1. the debt ceiling is coming up and they have to reach a deal to give the government open. in the end of february, the president negotiates with kim jong-un. i am not sure the state of the union changes the discourse entirely, but i do not think it did anything to put in jeopardy those major events i just alluded to. tom: kevin cirilli, thank you so much. coming up, an important conversation with mr. lieberman of connecticut, former senator. david westin will drive forward that conversation in the 12:00 noon hour. from london and new york, this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." the parent of mercedes-benz expects earnings to bounce back after profits slumped in 2018. off a year is coming in which it struggled with the u.s.-china trade war, bottlenecks in europe, and rising expenses to develop electric vehicles. spotify is making its first move buying gimletg by media. -- spotify is ready to pay more than $200 million. in australia, the central bank

chief shifted to a neutral outlook. year, thepast scenario is we are more likely than in a down scenario. today, the probabilities appear more evenly balanced. viviana: that is the bloomberg business flash. "surveillance" is about conversation. in ourto alberto gallo last hour on fractured european banking and european bonds. freedman's chief investment officer of u.s. bank wealth management, chief strategist. julia coronado tries to do towel. -- powell. us to some everything together.

we saw the president talk about an economic miracle. miracle-y is how our economic miracle? julia: miracle might be a strong term. we had an extremely solid year and we are heading into what is likely to be a more moderate growth year. pretty much everything points to somewhat of a slowdown. the question is how much? part of that depends not on the u.s. but on the global economy. the u.s.does stabilize? we are all in this. tom: i see the tesla price cut, auto inventory. it feels like the 1970's. are we slowing down? eric: we absolutely are. the trend is negative. i would not say sharply negative

but it is a slowdown. it is not just a european or chinese thing, it is a u.s. thing as well. the data is coming in a bit weaker which is modestly concerning. nejra: does that mean you do not trust the rally in risk assets this year? eric: we do not trusted this much -- much. environment where we have come off almost the elevator down and stair step back type of motif where we saw crescendodrop-off -- decemberrescendoing 27. u.s. assets have been quite strong, so we are somewhat cautious, maintaining a balanced outlook more than a risk on, progrowth outlook in 2017 in

2018. nejra: part of that is working out where the fed goes from here. said we of people have could get one more hike from the fed and others say it is done with the cycle. does it make much difference if we get no hikes or one? julia: it does not. we are hearing from the fed that they have a neutral policy stance because of all the headwinds they are seeing. it will be hike, because the economy is performing better than expected. they laid that down as a marker. growth to see stronger and people are expecting, and people are expecting, maybe more inflationary pressures in that environment. we would be seeing more of a risk on type of moment in markets, or mood and markets. i agree this is more what we are seeing, a relief that central

bankers will not kill us. tom: we will go all options with you. you got a powell put where you put something under the bottom and they call where you leave it up, and then a collar where you construct a trade from both sides. it is a coronado caller. hasa: we have seen the fed been calibrating off of financial conditions, so when they saw them get a little frothy they were worried and that made them more inclined to tight policy -- tighten policy. if we saw values come roaring not with values that could be justified -- tom: then you have a major problem. do you have any economic history you learned that shows a fed can r?nage the coronado colla

eric: i do not think it is touchable. it is very much an environment where in the short term, the fed has done a good job of job learning that we are behind you oning that we are behind you. weak german factory orders, this is the push-poll we are seeing across markets. things like afor sanguine state of the union as well as trade policy versus the data which is at the market weakening. tom: must be the political season. we will move forward with eric freedman and julia coronado. coming up later, an important conversation, carla hills, more than opinionated on trade.

the former ambassador on the debate of trade, as we heard last night, that in the 8:00 hour. this is bloomberg. ♪

♪ cehic with tomra keene. -- as disney works to become a major player in streaming tv, soaring sales at abc helped the company beat analyst estimates last quarter. his knee warned this year will

be tough -- disney warned this year will be tough. met blocks and of bloomberg intelligence joins us. easing the shift for disney? is surprising, but their number one priority is direct to consumer. yearplus and sometime this disney plus will bring in core disney content. once they completed the 21st century fox acquisition, more context -- more content as well. it will be the platform for disney plus so i think they are confident about the future. nejra: well investors be just as confident? buthew: i think they are

they are recognizing it will be a big year for them to adjust, a big acquisition, and to get disney plus off of the ground. questions on how that will affect their licensing revenue, so a transitional year. nejra: on snap, they are working out how to squeeze more revenue from a stagnant user base. matt: it should be a good business that they have had a few execution slipups. this is a company that should be able to make money on that kind of user base and that is what the management team needs to figure out. coreare a platform for the 13 to 34 age group. comments on spotify buying gimlet media? matt: i have not had a chance to look at that, but spotify is a great business.

there is a runway for that business, that is quite exciting. nejra: thank you so much. tom: thank you so much. spotify buying this podcast -- podcast for gimlet. for drivingm forward the bloomberg podcast. we have the entire bill gross interview on podcast. look for that on spotify and apple podcast. on the state of the union, it will be good to speak to someone who has lived in russia. the former white house press secretary will manage this. 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. ♪ nejra: i am narrative which in london with tom keene in the -- nejra cehic in london with tom keene in new york.

eli lilly is lowering its 2019 eps guidance to reflect the pending deal. results, it is the lowering of the guidance coming in. the fourth quarter of dps came in just in line. the fourth-quarter revenue, a strong beat at $6.44 billion. tom: something we have seen is very uneasy in earnings, i saw a chart yesterday from someone else. it was just a collapse in earnings expectations. let's go to first word news. viviana: the white house promising the spirit of unity and the state of the union, but offered few all of branches to the democrats -- olive branches to the democrats. he called for an end at -- of

ridiculous partisan investigations and hammered away at china. >> i have great respect for president xi and we are working on a trade deal but it must include real, structural change to and unfair practices, reduce our chronic trade deficit, and reduce -- produce american jobs. viviana: he called for more infrastructure development, which appealed to democrats. is eager to pass in infrastructure bill and i am eager to work with you for legislation to deliver new infrastructure investment, including investments into cutting edge industries of the future. this is not an option. this is a necessity. viviana: the budget deficit approaching $1 trillion which gives a big infrastructure

package a small chance. starg democratic party stacey abram arguing they are leading the middle class adrift, accusing them of abandoning the values of fairness and equality. she lost a close race for governor. more signs europe's largest economy is losing momentum, factory orders in germany unexpectedly falling for the second month in a row. deutsche bank is making the case the german economy is drifting toward recession. 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 hurtado. this is bloomberg. eric freedman for mentioning the german slowdown earlier. if you are a republican or democrat, this is the interview of the day.

rod shaw is a former white house deputy press secretary -- rod hah is a former whitehah is a former white house deputy press secretary. he joins us now. what do your parents think about president trump? they like his approach on a lot

ofthey like his approach on a lt of issues from trade, immigration. what and a private observer

calls socialist policies. bernie sanders was running on them and they have gone mainstream. they have the majority of the house and senators supporting them, and democratic candidates, this will become a litmus test. will the democratic party remain a capitalist party or socialist? the president highlighted the divide. night, was the president a bipartisan president or a combative president? the extended an important case he made on immigration was necessary. a lot of people here the issue

of border security and the wall. he made a forceful and persuasive case on that issue, but a lot of others he reached across the aisle. he created areas for potential common ground. infrastructure is one, trade is another that has been playing out. prescription drug pricing is another. there are a lot of areas looking forward and backward, he talked about the opioid crisis and legislation passed, and criminal justice reform. there are a lot of things democrats can praise. tom: you lived this and someone will say within the republican party the generals are not around to put a muzzle on the president. he went after schumer and admiral mccain yesterday. can this guy get reelected if he is messaging not the raj shah

message, going after people doing cheap shots time after time? raj: i do not think that is fair . the president was elected in large part because he is authentic and speaks his mind. it may ruffle a few feathers, but he has to maintain his brand and remain authentic. when he fakes it, it does not work. saw a president embrace a traditional aspect of the presidency and he took advantage of it. ,ou saw the overnight polls they are not scientific, but big bipartisan majorities approve of what he said. tom: the polls in 2016 were not scientific either. deputyou so much, former white house press secretary.

gridlocked, let's assume nothing gets done, and what we heard is an encapsulation of the next x number of quarters. what does that do to the economy? julia: it is a growing force of uncertainty. we are looking at the possibility of another government shutdown. i do not know how to score last night on that. he is insisting on the wall again. it is very unpredictable. we did not think we would get the first shutdown and another one, these layers of uncertainty keep piling on. tom: do we ignore the president and frankly the socialist on the other side? a backe think it will be and forth, news dependent environment. you have probably more of a sector set up -- tom: which sector works?

eric: health care and technology have a long-term demographic story, and productivity is what it is. cfos say they need to sell more and make their people more efficient, so we think there will be a bid for tech and health. nejra: if you are looking at relative value opportunities to make money, my chart as a link to the state of the union. the yellow line would mean the russell 2000 out performs the s&p 500. does this tell you anything about where you would take opportunity in small caps? argument toa good make, small-cap as well as mid-cap. they have become underresearched , and the fundamentals of where the dollar goes and where trade goes come at those will be back and forth type of push polls. --ulls.

mid-cap, small-cap will be a better place to be than large cap. tom: we have to bring up that chart again. i am being out charted in london. top and thene up we have the big fade too large caps as well. that is a brilliant chart. nejra: it is brilliant and i have got to give a shard out -- shout out to hillary clark, our queen of charts. glad you like it as well. us asreedman stays with does julia coronado as well. --ing up, general motors cfo all right. tom: that was phenomenal. nejra: i absolutely murdered that tease. that is how not to do a tease.

9:00 in new york, 2:00 p.m. in london. this is bloomberg. ♪

♪ farmers, fishermen, exporters, and businesses, all of us -- nejra: that is the irish prime minister speaking. we have been hearing from the e.u.'s donald tusk. what the e.u. has been saying is the most important task to theent a no deal brexit, pro-brexit stands of theresa may and jeremy corbyn rules out no

brexit. there are members of theresa may's party -- this is me talking -- that are opposing the deal. is saying he hoped theresa may says tomorrow how to end the brexit impasse and the irish border is the number one priority. donald tusk saying, we will not gamble with peace. tom: the former prime minister of poland and prime minister of island speaks volumes about the to easternreland europe and the nuances about the debate. i look at the bloomberg headlines and there is no nuance . mr. task is laying out -- tusk is laying out a specific down in support of ireland. nejra: to give us a lot more insight and nuance, the headlines do not seem to point

to nuance but nuance is what we need to move this forward. >> all sides are digging in, saying they are committed to their positions but alarm bells are increasingly ringing. we had the secretary greg clark say many businesses have to decide about no deal in the next couple of days, because if they are shipping to japan or the other side of the world, those can take a few weeks. nejra: what is the best we can expect from theresa may as she tries to negotiate this with drawl deal? it is hard to know what she will go to brussels with tomorrow. there is three options on the table, a malt house compromise that some tory party members are looking at. we do not know if she will go and say, we have three options on the table or will propose

just one. today is about the e.u. side getting their ducks in line and how they will approach the meeting tomorrow. tom: we just saw leaving the stage, the former prime minister. the prime minister of the united kingdom is in belfast. let us get another perspective before we come back. this is the london mayor sadiq khan. days and there are 51 she is playing a risky game of poker. support the negotiations or the amended deal, we could leave with no deal, which would be catastrophic. many parliamentarians are saying , get an extension that avoids a panic of us possibly leaving the e.u. without any deal. remainer,ain are, --

the mayor of london. , how arety of no deal they talking about no deal in brussels and belfast and london? , it: as sadiq khan said seems increasingly likely we will need an extension, just for the fact that there is so much legislation to get to that cannot get done before the 29th of march. happen byuld accident, the clock is ticking down and we could crash out of the e.u. tom: we have a brexit countdown clock, thank you for inventing that for us. there is 51 days to go. what are you looking at? what is the path to get through this week? is fairly quiet in the u.k. for parliamentary

reporters. theresa may is doing her tour of ireland and then she is going to brussels and maybe other european countries. next week, she has to bring back something for parliament to vote on or an amendable motion. parliamentarians decided not to propose a second referendum. it seems like those chances are diminishing. could we have a general election like jeremy corbyn wants? nejra: thank you so much. julia coronado and eric freedman are still with us. we talk about the challenges for the fed. talk about challenges for the bank of england in normalizing policy with all the uncertainty. julia: normalizing is a funny word to use, because what is normal for the u.k.? we do not know what the rules of the road will be.

they have to look at the world with a great deal of caution and be prepared for the worst. tom: this is important. let's go to the imf. we are in a floating rate environment. i want to go to you at u.s. bank to use currency adjustment around the political fodder, including the irish p.m. what does it do to sterling, and that is the release valve? eric: we think that is a non-compensated risk so for fixed income clients, we are full faith in credit in terms of what we are looking for. looking for opportunities not so much and the fixed income market, but really that are more full faith in credit. we will take risk elsewhere because this is an endless environment for investors in this sense of looking occurrences in particular. tom: you are killing me with

this graphic. i love this graphic. i my, july 2. nejra takes a day off. what is next for brexit? we will have to show that early whatever for the next it is for the countdown. julia coronado and eric freedman with us. daybreak, adam posen holding court at the peterson institute for their founder, a perfect morning to speak to fred burstyn. this is bloomberg. ♪

♪ tom: bloomberg "surveillance." chart, we do this with julia coronado and eric freedman. the statef the year, of the union, the summation of the fiscal deficit of -- to gdp

and trade deficit to gdp. president trump wants to be reagan. 1980's, uglyn the sum total under 6%. this vector is moving in the wrong direction. julia: that is unfortunately one of the side effects of the stimulus the president was not expecting. tom: an economic miracle. julia: when the u.s. is stronger, the deficit widens. that is what we are seeing, and that will probably continue. the u.s. has some stimulus in the pipeline and we will be a relative outperform or from a macro standpoint. that will keep pushing the deficit wider. tom: what are u.s. bank abouters, do they care the deficit and deficit to gdp? eric: not until it shows up in the 10 year. when the marginal owner says --

tom: is that a yield price up, bid down? eric: i would say it is. we have to get above three and a quarter for it to matter to the marginal borrower. not just home loans, but auto loans at all. three and a quarter to three and a half says we are in a different interest rate regime that we have not been in since 2011. we think that would be potentially a trigger to an ongoing credit concern. it has been difficult to get there. julia: that is what we saw last year. any we got close to three and a quarter, the risk markets would melt down. the housing market got hit. tom: jump in. nejra: what is the top opportunity and the bond markets? eric: structured credit is still a spot to add value.

you are not taking on a ton of credit risk. it provides downside buffer to one's portfolio, but you have to keep an eye on it. tom: this has been a superb show, extra credit, continuing education credit. llar onr the coronado co your next test. eeedmanoronado and mr. fr as well. david westin has a post state of the union set of interviews. i willonathan ferro and have to discuss liverpool football. this is bloomberg. ♪

alix: bipartisan reach,on trum''

trump's terms. debt ceiling debate and another shutdown. vows more cost cutting as trading revenue falls. german recession fears. europe'sues spread in largest economy. welcome to "bloomberg daybreak." it was quite an exciting night with lots of things to discuss. david: the president saying he wanted to be uplifting and reach across the aisle. noise --ade some nice at some point, the democrats stood up and applauded him. alix: a lot of the women on the democratic side wearing white.