merger in more than a decade. incredibly shrinking socgen. they announce cost cuts after trading revenue tumbled. boe rate decision. managing brexit with low unemployment and higher wages. that decision out right now. completely expected, no change when it comes to rates. however, the bank does cut its growth forecast, saying the brexit damage has increased. voting 9-0 to keep interest rates unchanged. they do see weaker growth because of brexit. david: what mark carney has been able to say that we have a deadline of next week. alix: the cuts are real. cutting growth to 1.2% from 1.7%. these are substantial cuts here. david: we may raise rates.

has economy ise, softening faster than he thought it would be. alix: you're going to buy sterling -- sell sterling and buy bonds. twitter coming out, first quarter sales missed estimates on the midpoint. about $775 million on the high end. the midpoint winds up missing. average monthly active users coming in below estimates. earnings seemed to be a beat, but we don't know if it's totally comparable at $.31. david: yum! also out with earnings. they missed on their earnings-per-share by a longshot, which makes me think there's some adjustment we don't know. the revenue was also a miss.

worldwide comp sales were up 3%. there's a mystery in there. something's going on with the earnings-per-share. we want to get back to the bank of england decision. we welcome in guy johnson. they didn't change their rate. we didn't expect them to. at the same time, we have the softening economy and brexit. what is mark carney going to say? guy: he will have to acknowledge the increasing risks for the u.k. economy. he has to deal with the brexit scenario as well, with the bank of england indicated in this statement, the damage done by brexit is greater than the bank had modeled. the price of sterling is falling. the bank of england throwing the gilt market a lifeline here.

the damage is being done from brexit. the bank had already forecast that that would be taking place, it's just at an accelerated rate. economy like the u.k. -- two factors coming together here. there was some suggestion before the statement was released that the bank may try to tee up the fact that if we get a soft economy may be. able to take rate hikes. that was already being priced out. the bank being front run by the market here, the market has already priced out rate hikes for 2019. david: mr. carney has been taking questions from the news media. how does he avoid becoming political at this sensitive time when theresa may is in brussels?

how does he explain what's going on without appearing political? guy: he has strayed into the political realm and has been chastised for it by both sides. he will say we are trying to plan for all scenarios here. we will see a smooth brexit, but risksy, the tea tail are increasing. to be honest, i'm not sure that there's much more contingency planning that can be done at this point. a no dealns with brexit is hard to determine. it is very hard to model from the bank's point of view. all they can do is try to get ready. governor carney would love to see a soft brexit at this point.

he may indicate that at the press conference. david: he has a tough brief today, without a doubt. we will be bringing you mark at 7:30 news conference eastern time. alix: joining us now, evan brown. your reaction to the boe. evan: i agree with david. for markicult job carney. i wouldn't put too much weight on these growth forecast revisions. there's so much uncertainty. we agree that we've seen some weight on the u.k. economy given the uncertainty so far. the story can change very quickly. if you get a smooth brexit, we still have a tight labor market, the lowest unemployment rate ever in the u.k. if you get a soft brexit, the bank of england could be switching to a hike later this

year. alix: is any u.k. asset appealing to buy? point, we are being very careful with u.k. assets. there's so many incentives. how can you have really strong conviction there? we have exposures where we need to, but we are not taking big tactical bets. david: what about europe more generally? taking growth numbers down -- italy was stunning, from 1.2% to 0.2%. >> i think we are approaching peak negativity in the european economy. yesterday, we got manufacturing out of germany. the bright spot from industrial production, the sharp rebound in auto orders. some of those transitory factors bouncing back.

europe is affected by the trade uncertainty. we are moving in the right direction on trade. spoke to the european commissioner. >> we still have solid growth in europe. we still have growth all over europe in each and every eu country. to march toward these situations. alix: break down the potential upside in that a lot of weakness is in part due to trade, particularly germany. if china is able to reflate, our markets prepared for europe to get drastically better? >> that is the key question. if you look at growth in europe, domestic demand is pretty solid. wages moving in the right

direction in general, most of the weakness in the external sector. if china is improving, stimulus. if the trade deal is coming through, europe could rebound quite quickly. area in's one key value the market, you get some of this improvement on the external environment and some improvement could be athat surprising outperform her in the second half of the year. david: or, president could impose tariffs. -- president trump could impose tariffs. at some point, germany might say i'm tired of waiting for beijing and d.c.. >> that is a great point. we are seeing fiscal stimulus mom italy and france, acron in response to the

protests. there's some commentary in that direction, but no strong movement just yet. they are keeping their powder dry. they don'tve rates, have that much power to ease further. it makes sense for germany to hold back in case things get worse. david: evan brown of ubs asset management will be stay with us. alix: in the markets, it is decidedly risk off. s&p futures off by 17. euro-dollar a bit weaker with weaker i.t. numbers and the downgrade for european growth. unless you buy bonds are in italy. sometimes the yield rose too much when it comes to italy. 2.66%, crude off by .7%. several companies like twitter

-- after theyres off 5% had a meeting on revenue guidance. their first quarter sales view missed estimates. they will start reporting monthly active users after that miss. most analysts have said this ranking full of active users has increased the focus on daily active users. twitter will continue to provide --ily active users you will see that shift as the oolthly active users p shrinks. missing estimates of 7.6 million see they arecan off about 9%. another company lowering their

full-year guidance, tapestry. 1%.e comp sales only rose they also missed on quarterly earnings. not good news for those shares off 11%. yum! brands had an earnings-per-share big mess at $.40 versus estimates of $.95 per share. worldwide comp sales up about 3%, beating estimates of 2.5%. those shares falling about 1%. pound coming up, the rallying against the u.s. dollar we will have more on downside risks to the u.k. economy because of brexit. megadeal,nd bb&t's all in today's first take. that's coming up next. this is bloomberg. ♪

alix: time for the first take. we are dealing with brexit damage. the bank and began cutting its growth forecast -- bank of england cutting its growth forecast. bb&t and suntrust megamerger. we got the boe rate decision talking about lower growth and a weaker productivity forecast. i spoke with kevin nolan earlier in the week. him what brexit means for his business. we've donehe things proactively is to make sure we've built some inventory on the mainland to make sure we don't disrupt our customers.

one of the value propositions we've had is having high rates of delivery, which has been a differentiator for us. david: when you take a look at where the risk is, is it at the company level or in the market? >> one thing to look at is keeping rates steady, giving reprieve for u.k. companies. you are seeing companies with financing costs and a lot of debt -- putting the airline business under review. dividendslashing its so it can conserve cash. we have the wording impact of companies like nissan pulling ofestment -- worrying impact companies like nissan pulling investment. that, when you look at how much of that do you feel is a brexit specific issue? it is still a global growth

story that appears to be slowing. evan: we see the bank of england not hiking today. many banks can't. it's extra hard for the u.k. given the brexit uncertainty. global growth as a whole is still moderating. that's making life difficult for central banks. -- some bigngs earnings out this morning. twitter had a miss, they got punished for that. they missed their midrange. yum had a big miss on earnings. how does the earnings season look right now? aggregate, i would say china is a big story. it is bad for the early supply-side of the business. caterpillar, all of these

companies are seeing hits because of their exposure to china. business seeing a pick on the consumer side. on the aggregate, there's a lot of china exposure. the u.s. looks good. that's what we saw with yum and mcdonald's. they are aggregating for the fact that going forward, it's not going to be so smooth. david: we will have a special interview with the twitter cfo. he will be joining "bloomberg markets" today at 2:00 this afternoon. a big issue with socgen in europe. we have an interview with the ceo. in global announced banking solutions a 500 million euro plan. what is going on with european banks?

this is not the only one that's fallen short. evan: it has been a difficult environment. negative rates with the ecb is not helping. we have another year or so of negative rates, and that is a tax essentially on the european banking sector. valuations really reflect this. asa certain point, as long these banks aren't going to somepse, you will find recent value their. -- yourecent value there will find some recent value there. alix: let's go to the big merger in the u.s., bb&t and suntrust merging. give us some context of how big this will be for the industry. >> the biggest deal in banking in a decade. part of that is driven by the fact that there's an expectation

regulation will ease, so you can get these deals through. they want to create regional champions. this is part one of what we are expecting to see a lot more of going forward. david: the sixth largest bank in the country. in what sense are they regional? evan: this is part of a broader trend. economies of scale matter in the u.s. banking industry. i think this will continue. alix: who is the bank going to compete with? >> bank of america sits in their backyard. that is one to consider. said this isn has the kind of activity we need to watch out for. thank you so much. ivan brown will be sticking with us. coming up, twitter shares

falling in the premarket after missing the midpoint on sales guidance. coming up later in the program, we will speak to david malpass. this is bloomberg. ♪

david: twitter shares falling in the premarket after the company's sales forecast missed. joining us is walter todd, greenwood capital chief investment officer. evan brown of ubs is still with us. what do you make of this? they missed in their forecast in the first quarter. how worried should we be? focused more on the beats in the fourth quarter, recognizing guidance is a bit light for the first quarter. folks are missing the longer-term picture here.

therly, some of the efforts company has undertaken to clean up the platform are starting to pay dividends. was 35%in at 44%, that in 2017, so a significant increase in profitability. they still have to spend money. i'm encouraged by what i'm seeing despite the near-term weakness from the guidance in the first quarter. david: the story has been don't worry so much about the growth in users. worry about being able to monetize it. that goes back to the profitability standpoint, the monthly active users, they will start focusing on the monetize bowl daily active user --

le daily active user pool. seeing balance in international and u.s. revenues, both growing in excess of 20%. we are encouraged by what we are seeing in the data. probably be adding to our position on this. alix: if you don't have monthly active users, doesn't that hurt your visibility? walter: i don't think so. it's not like apple and they are getting rid of iphone sales. they are giving you another metric to look at. that is the daily active user metric. they are focusing on a more profitable aspect of the business versus the monthly active user metric they reported in the past.

they've tried to clean up these robots on the system. that is putting downward pressure on that number. david: how much further can they go in cleaning this up for advertisers? you are happy with the extent to which they've increased their ability to monetize their traffic. they said expense growth will grow 20% in 2019. they are focused on doing more on the platform. we are seeing the benefits of what they've done already. incrementally, can they do as much as they've done? probably not. alix: do you like tech at all? evan: we think semiconductors are rebounding nicely. a lot of bad news was already in the price in q4. there's been negative guidance on tech, but a lot of this is based on what's happening

outside of the u.s., slowing china and the like. as china heals, that is the key question for 2019, as china's growth heals, these numbers for tech will improve. both very much. we will have more earnings today at 2:00 p.m. eastern time. coming up, we are moments away from mark carney's news conference. warning on global growth, productivity and brexit. later in the program, we will speak to david mall pass. -- david malpass. this is bloomberg. ♪

alix: this is "bloomberg daybreak." starting insk off, europe and spreading to the u.s. european stocks weaker. the decks getting hit hardest in

europe -- the dax getting hit hardest in europe. growth taken out to the woodshed. the company barely growing this year. definitely focusing on what's happening to the cable rate. we are moments away from governor mark carney giving his press conference. dovish, warning on growth and productivity. we want to go to governor mark carney, issuing their outlook for the economy. left, they: on my deputy governor for banking. on my far left, the deputy governor for monetary policy. on my immediate right, the governor, mark carney. gov. carney: good afternoon, everyone.

there's a story that the times , fog in thene channel, continent cut off. this is just a story. like much regarding the u.k. and europe, it is difficult to separate fact from fiction. that's not the intention of brexit. the u.k. is leaving the european leavingot livin europe. the exact form of the partnership, how it will be settled and when that settlement will take effect are still unclear. causingog of brexit short-term volatility in the economic data and creating a series of tensions in the economy, tensions for business. although many companies are stepping up their contingency planning, the economy as a whole is still not prepared for a no deal, no transition exit.

just one example, have to businesses in the latest survey were not ready for such a possibility. on balance, respondents expect output and employment to contract substantially if it were to occur. actual business investment is likely to have fallen 3% over the past year, despite the .ngoing domestic expansion go indicators suggest more of the same. there's increasing evidence that companies are building stocks as part of their contingency planning. it's likely that these have a strong import component, thereby limiting the net impact on aggregate demand. the news is not all glum. even though companies are currently investing, they are hiring with the employment rate now the highest since record began in 1971.

the fog of brexit is creating tension for households. despite that strong labor market, consumer confidence took another step down in january. is now extraordinarily wide. it's possible that such uncertainties holding back spending on durables like cars and housing. with house prices now flat nationwide and mortgage demand , that could be a short-term drag on growth. retail sales contracted by 1.2% in q4, suggesting spending growth has been modest since the start of the year. nonetheless, given the historic resilience of the u.k. consumer and the strong growth in household real incomes, which are likely to have risen by 2.5% in the year to 2019 q1, the

strongest rate since the referendum, household spending is not upside risk to our upside risk toan our forecast. those markets remain sensitive to brexit related news and a righty of risk premia are elevated -- a variety of risk premia are elevated. it would be remarkable if the current levels of sterling and u.k. financial asset prices were consistent with the outcome that finally emerges. how these tensions are reconciled once the fog lifts --h have on monetary policy will have consequences on monetary policy. given the dynamics of negotiations, we are assuming uncertainty remains elevated for

a while and that financial conditions stay tighter for longer. second, we have downgraded our .orecast for global gdp over the past year, the global economy has transitioned from robust, broad-based expansion to a widespread slowdown. nevertheless, with the easier paths of monetary policy in all major areas, the global growth will stabilize later this year at around potential rates. as usual, our projections incorporate in number of assumptions. oil prices and energy prices more broadly, which are expected to push inflation below target. the path for the sterling

exchange rate down 1% -- suggesting a rising path for banking rates. the auto budget raises gdp by .3% relative to previous plans. a smoothrtantly, transition to a brexit deal that is of various possibilities. the ecb recognizes these assumptions and judgments will be updated once greater clarity emerges. for now, these judgments and assumptions lead to a forecast in which business investment and economic growth soften further in the near term before picking up sharply as the fog clears. u.k. growth will rise to 2% by the end of the forecast. below target in

the near term before picking up and settling above the 2% target for the balance of the forecast. while much is uncertain at present, one certainty is the u.k. economy will not evolve exactly as described in this report. the range of outcomes is not the same as the specific deal. the timing of the agreement and the timing of its implementation for change -- the pace of rebound in investment could be different. theever form brexit takes, outlook will change. in the context of brexit, uncertainty itself is one of the factors driving the current outlook for growth and inflation. to illustrate these effects, we provided sensitivity to our projections on brexit uncertainties.

a consistent adjustment in sterling will likely have material consequences for inflation policy due to the slow speed of pass-through into consumer prices. of 5% wouldtion lead inflation higher or lower two years from now all else equal. the outlook for growth in inflation depends heavily on the extent to which brexit uncertainties evolve. that has intensified since november and is now weighing more heavily on activity. depending on how those negotiations progress, particularly regarding clarity of the ultimate form of the new economic partnership, brexit uncertainties could dissipate sooner or could intensify further than the mpc has assumed in its projection. a more rapid decline could boost

annual gdp by 9.5% on average over the forecast and raise inflation in the medium-term by 9.4%. rising uncertainty could push supplygrowth demand growth. while uncertainty is affecting the near-term performance of the economy, judging the appropriate path of monetary policy requires focusing on more persistent factors. the fundamentals of the u.k. economy are sound. the financial sector is resilient, corporate balance sheets are strong in the labor market is tight. -- and the labor market is tight. growth is expected to pick up to rates above the rate of growth of supply capacity, excess demand is likely to build and inflation is settled above the

2% target. if these circumstances come to pass, the committee judges that an ongoing tightening of monetary policy and a gradual pace would be appropriate to return inflation to the 2% target at a conventional horizon. the appropriate path of monetary policy will depend on the effects of brexit on supply and the exchange rate. the response could be in either direction. although it is unclear how long brexit will last, whatever the , we will act to achieve the 2% target. >> if you could give us your name, what organization you are representing, and please, one question each for this first round.

>> bbc news. last may, you said households terms. in real given the weaker profile you've unveiled due to uncertainty, could you update us on those figures? given the sensitivity and the suggests a big knock on growth this year. how does that affect households? news isney: the good that household real incomes have been growing. for the balance of this year extending into the first quarter of this year, household real income growth is the strongest it's been since the referendum.

part of that is inflation coming down and the tight labor market, we've seen wages pick up, whether it is our surveys of businesses, other surveys and actual reported data, we have seen a steady pickup and real wage growth -- in real wage growth in the private sector and costs -- newew age wage costs relative to productivity. if you look at what might have where they are not as well-off as they could have been , it is moving in the right direction. messages is a pretty obvious message, this is a time

of considerable uncertainty about one of the most important issues facing this economy, facing households, facing businesses, important that parliament gets it right and they are taking the time to do that. that uncertainty is affecting the economy at present. we see it across the board in businesses, we are seeing it in housel spending. -- household spending. that is a short-term effect that doesn't tell us a lot about where the economy is going. the key thing will be the nature and the time it takes to get there. what we have done in this forecast is recognized the bigger impact uncertainty is having on the spending decisions.

we have projected it to last a little longer than we previously had expected. recognition that not everything may be tied up in a nice package by the end of march. there may be some uncertainty about the ultimate direction or the perceptions of households and businesses about the ultimate direction, that is affecting the economy. that's why there's upside here. i would stress that. there's upside if there's clarity on the deal sooner. we know the direction we are headed sooner and there's a smooth transition to that destination. just to give an illustration of that, we've provided the sensitivity where uncertainty goes down, we would expect the economy to pick up even more than in this forecast.

and then we would adjust policy accordingly. chris giles from the financial times. in the forecast, there's a one in four chance of recession by this summer. how do you think those odds would change with no deal? are households taking sufficient note of the risk at the moment? households,, businesses increasingly taking into account the uncertainty around the deal and the timing of it and the path to it, that is affecting the economy today. world are theaker core reasons why we have taken down growth for 2019. gdpcore reason we think

report next week will be weaker than it was in the third quarter. we are tracking something similar for the first quarter of this year. when the economy is growing more slowly, the probability of it having a negative quarter or two goes up. you appreciate that. shock, which at least in terms of central expectations of businesses and household and financial markets, and no deal transition brexit would be a negative shock, that further increases the probability of negative quarters. four our core central expectation -- for our core central expectation, that will

have higher uncertainty and there will be path to some sort of arrangement. >> sky news. expect the brexit negotiations to go so much to the wire as they have? the that make you nervous, state they are in at the moment? can you give us a sense of how much this has taken off u.k. economic growth? how much of that will be retrieved if there's a smooth transition? gov. carney: looking at the other sides to the bank, there's reasons for the other sides to the bank with the fpc and pra. a lot of what those committees about whatg exactly

had appeared to be a low probability event, how to get paired for that well in advance -- prepared for that well in advance. the core of the financial system is ready for whatever form brexit takes. that is a good thing. that doesn't solve all the other issues related to brexit. theoesn't necessarily help half of companies think the country -- in the country that aren't ready for that scenario. the financial sector will cushion the blow, be part of the solution as opposed to amplified the shock and being part of the problem. that the would say dave that and ben and

sits on that committee, we don't assign probabilities to vent. we didn't think about the low probability at the time. we had a job to make sure things were ready. perspective, we've long had the view that the most likely scenario and the fairest representation would be some sort of transaction, some sort of deal, some sort of arrangement and a smooth transition to it. the best way to represent that was to have an average and not try to over specify jumping between the various options because we don't know. we arrive where we are sitting today and we don't know what form of arrangement could be struck. there's almost as wide a range

of possibilities that there were the morning after the referendum. economyhave seen in the is that that level of uncertainty and the proximity of the brexit date is having a much bigger effect on business decisions, which is cascading down to the economy. it is entirely logical and rational and we understand why business is doing this. if they think they will have greater clarity in a few months, that would be material to an investment decision, it would make sense to wait for that information. >> [inaudible] gov. carney: we are tracking today1.5% as we sit here

of gdp below where we had forecast the economy in may of 2016. organizations have done an analysis of this that take into account that the world has been stronger and other things have changed. they will get a slightly different range. you the forecast from may of 2016, where we thought we would be to where gdp is right now with 1.5%. just to follow up on that and focus on the difficulty, donald tusk said there might be a special place in hell for those who promoted brexit without a sketch of a plan. do you have sympathy for those sentiments? gov. carney: no.

i was surprised by those comments yesterday. theological, do not judge because you will be judged. we are all looking for the principles in these negotiations. of course, in the united kingdom, it is parliament, ultimately, to take their time and complete their work diligently and come to a conclusion of where we are headed and provide that clarity of the new arrangement. engagement and discussion is welcome. i'm reflecting back what we hear up and down the country, whether

it's individuals or businesses, people want to know where we are going. >> at the front here. a breakdown of social order. [laughter] >> a special place in hell for journalists who jump the queue. november, the bank published analysis which showed in the event of no deal, no transition, things would likely be tipped into recession. opinion polls have consistently showed 30% of the british population would like britain to leave in march without a deal. what would you tell those people who tell the british people taken leave without transition

-- they can leave without transition and it will be painless? gov. carney: it reminds me, you can look in our report, you can look at a variety of different surveys and you will hear this. in terms of our agent surveys, most recent surveys of businesses and their preparedness, half of them say they aren't ready. ready means we've done all that we can for the half that say they ready. huge respect for u.k. business in that they are working hard under difficult circumstances. many of the complications they see, we see. and no deal no transition arrangement, they are not able to sell salt, they are not able

to address. what we are focused on as an understanding the potential consequences of that uncertainty and how it's affecting the economy today. armhe fpc and supervisory , theking sure banks financial system as a whole is ready to operate in those socumstances, if necessary, they are part of the solution not part of the problem. it is a big country, a lot of businesses, not that hard to go out and talk to them and find out who is ready and who is not. the decision of where we are going will be made by those who .hould, made by parliament

this is artant, statement of the obvious, but it is important that the transition to that destination is as smooth as possible. i'm sure they will take that into account, how to have as smooth as possible a transition so that we get the best possible result for as many people. >> channel four news. today, the bank deliver the worst forecast for u.k. growth since the financial crisis. can you quantify how this uncertainty is taking its toll? in your forecast, you say four's a one and in chance of recession. should households prepare for this? took variousyou

things from the report and put them together in a package of things we didn't say. our central view of the mpc is ant in a transition toward average outcome, a form of soft brexit, this economy will pick up. firms will hire, they will invest, real wages will pick up, inflation will pick up and we will move forward. that is the core. that is the expectation. the monetary policy position to support that, the financial system is ready to support that, that is our best judgment of what would happen. at present, the economy has slowed because of a weaker world, including a weaker

europe, but also because of the uncertainty because we don't know exactly where we are headed and businesses are holding off on some decisions. in terms of the greater precision on the levels of that uncertainty and the implications, i will pass it over to ben. we have various ways of trying to measure uncertainty. we generally reduce a particular thing and we see that going up steadily over recent months. wouldn't needyou to compile these things to know that has happened. just talked to businesses -- just talk to businesses. we talked to a lot of them. you can see that those effects have been with us for months since the referendum.

point to whats happened to investment spending. one on the bottom of page 10 compares business investment relative to other economic recoveries in this country. there's another one which describes how it has behaved since the referendum. this has been with us for a while. it has just intensified in the last two months. we are seeing it heading up. >> [inaudible] >> it is clearly having an effect on our economy. having a deal and a transition, which we still think is the most likely outcome, growth got stronger, business investment precisely because it's being

,eld back by uncertainty now business investment recovers strongly in this forecast. things will get better conditional on a deal and a transition. helpedsaid the bank had mitigate the risks of a no deal -- we know that you said your hands are tied with regard to the interest rate. can do tonything you mitigate against the effects of no deal? there will be demand shuffling. people except that. -- accept that. gov. carney: thank you for the

question. it will clarify what we have said as a committee. we have said this before and reiterated it in this decision. not that our hands are tied. reaction is not automatic and in no deal scenario, we will have to determine if that comes to pass. rate --, the exchange obviously, the exchange rate decision -- alix: mark carney taking questions from reporters after a ovish report from the boe. half of businesses are not ready for brexit and business investment is still being held back. a weaker cable rate and a big

surge in the bond market. to live to continue watching mark carney. he's trying to stay negative but not too negative at the same time. david: you have to be a little sympathetic. the economy is slowing, there's a lot of uncertainty. at the same time, household are doing well and real wages are growing. we are not sure how long long-term as. we might go up or down. alix: a major lack of visibility. -- we are not sure how long long-term is. us -- definee for for us how much of the weakness

is global growth. >> the u.k. economy is surprisingly stronger than you would have expected. to the extent that there can be any kind of deal within the timeframe of march 29, you could see a pickup in growth. the question is why is the u.k. economy as strong as it is. we've seen a decline in business investment. that will continue until any resolution of the uncertainty. -- realousing prices estate is not going up. households are doing well, wages are up. is theunemployment rate lowest in 44 years. the consumer is doing well, the weaker pound is good for the ftse market. to that extent, it is a bit of a balancing act.

the bank of england is fortunate in that oil prices are much weaker. that is keeping headline cpi lower. they can afford to be patient with the uncertainty and wait to see how this plays out. abouton't have to worry running into higher inflation. alix: a lot of buying coming into the long end of the buying market. we've seen this in germany and japan, huge move into the long end. had two long subscribed issuances. is that justified or is it too much? >> there's risk of sentiment here. inflation is falling all over the world. the following global growth has been echoing the major problem going forward for these assets. david: we got some european commission numbers out -- italy falling off the table.

even germany was down in growth projections. is there a common theme there? and tradeization tensions with germany? >> the interesting thing about the european economy, europe gets the flow. the weakness you are seeing in europe and germany is in part related to the decline in trade volumes over the last 12 months. 47% of european gdp and german gdp is leveraged to international trade. david: is that because of geopolitics and tariffs or because china is slowing down? >> it is a double whammy. there's no way to tease it out necessarily, but global trade volumes have declined in the last 18 months. it in the numbers.

you cannot divorce the european economy from the. direction of trade growth -- from the direction of trade growth. alix: when you look at the european commission versus what the boe is saying, there's all the drama surrounding the u.k. based on that, when do you get interested in germany if china is able to reflate? >> the bad news is not all out in europe right now. riskoom loop is a silent which every once in a while is not so silent. i think that is not done yet. we know that italy is already in a recession. the sovereigns are in question. the european banks are now owning the debt. tradingou also have

disappointing -- there's very is problems you have over the european banks -- various problems you have over the european banks. >> it's very tempting to want to get in. in europe, we haven't yet seen what that inflection point is. you just have to have less worse growth. the estimates are still too high. markets always trade on the rate of change. you don't have to wait too long, but you have to wait until the growth stops falling, then you can get back in. alix: a lobar. -- a low bar. less bad. you have what's happening over at the bank of england and you have earnings coming in here in

the u.s. twitter and yum! brands and tapestry dragging down the markets. we were kissing the 200 day moving average. now climbing back from that level. domestic production coming in light. it was a stronger dollar story. see migration to safer havens like the yen. .1%.dollar down points.sis 1.35%.ff david: coming up, we are more than halfway through the u.s. earnings season. 33 more companies reporting today. we will look at beats and misses, coming up. this is bloomberg. ♪

david: we have some companies out with important earnings this morning. foods, they missed on the top line but beat on the bottom line. they are managing down the income statement there and reaffirming their full-year guidance to six dollars a share. not enough to impress investors, shares off 1.5%. 60% beating on the top line, 72% beating on the bottom line. on the top line, the best surprises our health care and energy. the bottom line, the best surprises are energy and tech. if you beat on the bottom line, you are rising to present.

-- 2%. --you beat on the top line we've talked about quarterly revisions coming down. average,38 a share on down from $40 a share on average. march will bottom out. in the third quarter of 2019, that top line in purple, earnings-per-share estimates will rise again to $44 on average. aliciatill with us, levine of bny mellon. what's the forecast for the rest of the year? >> if you look at the estimates, we don't get real earnings growth until the fourth quarter. that is a mass issue because fourth-quarter 2018 was not as high a growth quarter as the

previous quarter. the question you have to ask yourself is is it realistic to expect positive earnings growth in 2019 if it is all backend loaded? that's what the estimates are telling us right now. 40% of revenues come from overseas. we are downgrading china growth and european growth. the market has been focused on the u.s.-china trade complex and how it's going to affect earnings. there's europe. europe has had a huge downturn in growth estimates. today, earnings estimates for 2019 are 5.1% growth. that is down from 11%. growth,f we get that where is it going to come from? is it margin, topline or fx? >> it will depend on the strong

dollar. dollar is 7% stronger today than it was a year ago. that is a huge headwind for corporate earnings. to the extent the u.s. economy can power ahead, does the soccer dollar narrative change? is there a flight to safety into the dollar? that is a downside risk for earnings right now. alix: take a look at multinationals. first quarter earnings declined, 800 basis points steeper. is this a small cap mid-cap conversation? >> i think it is. the multinationals are very levered externally. valuations have come in so much that you are probably protected. is fully growth story

priced into the markets right now. the expectation is that china until thew at all middle half of the year. the fiscal stimulus cannot kick in until the summer. the markets have already taken the worst case scenario into valuations. the china complex is ok. it's europe that i'm worried about. david: what about the fiscal stimulus we had here in the tax cuts? will that have a bad effect on future earnings? on the net earnings line on the growth rate and the base effect. lawdetails in the tax should extend the cycle longer. there will be immediate expensing -- those kinds of things should encourage capex. capex happens when there's less uncertainty. if we have a more dovish

doesn't that support the argument to take on more risk? fed affectsdovish the earnings multiples. the discount rate is lower. this is supportive for markets. we are up 9% since the beginning of the year, off very low valuations. 16 times share earnings. are we fairly valued? david: how confident are you that the fed won't -- >> we think the fed stands pat for the first two quarters at least. there will be some --ects from the shut down

the real number comes in the third quarter. if there's some sort of piecemeal trade deal, you can stabilize investment in the economy here. david: alicia levine of bny mellon, thank you for being with us. coming up, the world's largest bank merger in more than a decade. bb&t and suntrust announce an all stock deal. we speak to a former bb&t chairman and ceo. that's coming up next. this is bloomberg. ♪

alix: time for bottom line. story --ere's only one bb&t buying suntrust for $28 billion. .oining us now, john allison

chris, great to hear from you. do you like the deal? chris: i do like the deal. most merger vehicles have one buyer and one seller. bb&t is the clear buyer. the merger will work. it is driven by technology. the cost of spending to build a banking is ridiculous. smarty, bb&t is being about the early investments they've made. they will integrate suntrust. formidablea f competitor. alix: what other companies will have to consider consolidation? chris: it is possible that you see additional combinations around the country if you consider the midsize banks, they could combine to become a $60 billion company.

horizon inee first the southeast. success.positioned for there are companies of that nature. first republic, frc, all well-run banks, but they could be twice their size and be more efficient and effective in the next five years. david: you've suggested the synergies -- is there a topline benefit as well? >> the case of suntrust and bb&t, is not necessarily anything new for them. it will allow the suntrust customer to have access to the insurance platform. both of those are excellent businesses. having more customers should be productive for both parties. david: thank you for joining us today.

now, our special guest, john allison, former bb&t chairman and ceo. thank you for joining us today. you had a few mergers and acquisitions when you were building bb&t. deal like this one? -- do you like this one? john: i do. suntrust,o convince but we could never get them to do it. the economics are phenomenal. there's no better economic deal for either company, but particularly bb&t. bb&t has the unique experience of having evolved through merger vehicles. and the executive management team went through that experience and that's a great background. it's hard because you are trying to be fair to every party,

trying to mitigate any of the necessary changes in terms of human morale. -- if you'vet well has -- well, which bb&t david: is there a culture flash potential here? such thing as true merger rules? john: there used to be a culture flash. veryust was a very proud, attached to atlanta -- the combination of the market and the regulatory environment, suntrust and bb&t's cultures have moved together. i think there won't be a culture clash. kelly king will be leaving the

process. -- leading the process. i think it will be handled well. when we did our merger with southern national, one of our wets was 10 years later, were going to ask ourselves what was the effect on employees. 10 years later, bb&t and southern national, almost the same number of employees were working for the combined company. if you treat the employees well, they take care of the clients and the process works. there are some revenue enhancements through the insurance business. bb&t is world-class. suntrust has a bigger capital markets operation. there's some revenue in addition to the cost sides. alix: we spoke to brian moynihan about consolidation in the

banking industry. >> the emergence will come out of consolidation. now at no 6000 banks -- 6000 banks. -- there is now 6000 banks. still athink there's fairly large amount to come. iss the nature of what happening in our general economy. the technological investment to compete with the jp morgan's and bank of america's is huge. even a business as big as bb&t or suntrust, it is tough. there is some overlap with the ends -- the bigger organizations. there's a lot of motivation to

merge. you would see a lot more if you had a healthier regulatory environment. the regulatory environment is not good but it is a lot better than it was. not all mergers are good. we have too many banks in the united states. alix: really great to talk to you. thank you very much. coming up, he is sharply critical of china and has called for a shakeup of the global economic order. we will speak to david malpass. that's coming up next. this is bloomberg. ♪

alix: this is bloomberg daybreak. a weaker european commission report out of europe and the bank of england governor sounding more dovish on u.k. growth. dow jones futures off by 1.40.

-- by 140. the european commission cut its growth forecast 1.2%. in other asset classes it was a stronger dollar, now it is more mixed. sterling now flat, resuming some of its upside. it was much lower, down .3%, euro-dollar down .2 percent. the jobless claim higher-than-expected. after last week, when we saw that big move upwards, you have to wait and see. it is not smooth sailing. david: it is actually lower than it was last month, what higher than was expected. with the government shutdown, we know with the actual government shutdown workers would be affected.

with the contractors it is a secondary effect. the risk off permeating. david: we will turn to the world bank. it has been one of the pillars of the international economic order since it was created in the wake of world war ii. president trump nominated david malpass as the next head of the world bank, a position traditionally filled by the united states. undersecretary of international affairs, having served under reagan and george herbert walker bush. we welcome him to bloomberg. it is good to see you could -- it is good to see you. david: assuming you take over this job, what you want to do with it? what you want to do with the world bank? what would you like your legacy to be? .: i want to make it more effective. i care about the mission of the

world bank and development. there is still a lot of poverty in the world. that is one part of the mission. in general, more growth for developing countries. that means higher living standards and that comes back and benefits the united states and europe and japan. all of the major shareholders of the world bank. engage internationally and try to have more growth and higher living standards and better practices across the world. since the days of mcnamara, the focus was on extreme policy. m.: i lost my audio. we are having technical issues without audio. we will do our best to get that back. as we wait, i want to get

your take on china. how do you view the country? there is a reset of u.s. china relations. when china joined the world trade organization 15 to 20 years ago it was only 6% the size of the u.s. economy. now it is two thirds the size. there are ongoing negotiations on trade, international property, patent protection. china will be 90% the size of the u.s. economy by 2030 and we have put up a special report taking a look at made in china 2025 and what the implications are for the global economy. we have audio reconnected with david malpass in our washington bureau. what i was asking his since the days of mcnamara, the focus of

the world bank has been extreme poverty. a lot of poverty has been alleviated. should there be a shift to investing in infrastructure? david m.: i was listening to joyce as well. to findinghould be ways that work in each individual country. part of development is it is different even within africa, each of the countries develops differently. that means the world bank engaged in those countries in different ways. that means the private sector, which joyce has been involved in, the private sector has the ability to get money off its capital allocation to people that can grow businesses, higher women and hire new people into the labor force. it should be a differentiated goal of the world bank. david: let's talk specifically about china. your "it that you have doubts --

you have been saying you have doubts about loans and rates. should we be treating china differently? david m.: we want to engage with china. china is the world's second-biggest economy. in thes happened is reforms that go along with the capital increase, one of the important ones is to begin to graduate to bigger countries, to countries with more income, out of the borrowing stage with the world bank and that leaves more resources for developing countries. it is not at all a disengagement from china, but more a shift in the relationship so that more money can be available for the -- for the lower income or developing countries. thed: i believe china is second largest recipient of

loans from the world bank, which may surprise some people. india is the first. would you expect that number to go down under your tenure? david m.: i do. that is already embedded in the reforms going on. a shift that was agreed to by the bank and shareholders over the last year. i spearheaded from the treasury side and the u.s. government interaction with the bank. the logic that you needed to reduce lending to the higher income countries as you expand the lending to the lower -- the countries that need the money more. it also has to do with capital market availability. in china and india they have deeper capital markets and that makes it available through the private sector. david: one of the things you said is you want to make it more effective. that has to do with efficiency. how could you make it more efficient? we have a question being passed on from somebody inside the world bank, saying can we do

something about our systems and our technology is antiquated. you've been studying that carefully curate is there room for improvement? david m.: there is room for improvement in lots of areas. i will be listening to the staff. i hope there will be suggestions for adding to the effectiveness of the bank. i think also having a core mission. sprawl,ook beyond the the idea that the bank should do thingsing, or do lots of for all different countries. you come back to the core mission of higher living standards for the poorer countries. i think that will help with the effectiveness and the efficiency of the organization. as i said in the introduction, traditionally the

united states has gotten to name the head of the world bank. that is coming to question and your nomination is somewhat controversial. what will you be saying to members of the executive board to make them more reassured you will be the right caretaker for this decision? ivid m.: one of the things will emphasize is my long career in development. i started in development in 1984 with the u.s. government. as you go through that, i was heavily involved in the reforms now being worked through the world bank. u.s. engagement in trying to make the institutions better. i will bring that and many years of experience. one of my first articles in the wall street journal was in 1989, talking about how to have more development in countries and growth around the world. i will bring that. it has been pretty well-received by the shareholders. i know a lot of the people in the other governments i've worked with for a lot of years,

i think this will work and i will be a strong leader for the world bank if i am selected. david: i appreciate your time today. it is good to talk to you again. that is david malpass, undersecretary for international affairs and nominee for world bank president. alix: still with us is joyce chang. we talk about your report on china. we have steve mnuchin and robert lighthizer going to china. what you think happens? how does this play out? are indications that progress has been made on some of the trade turf issues. issues are non-trade more difficult, the ones involving intellectual property and patent rejection. it is a broad agenda. the indication is that negotiations have been going smoothly. there are number of things we're talking about. the subsidies, the tariff rates, ip, better communication and government.

it is a broad agenda. alix: with all of the work you've done on china, what is the stomach for stimulus? how much more to we get. we have already seen stimulation for the private businesses. how much more can we get and is it enough? joyce: i do not see shock and all stimulus from china. markets wishing for the type of stimulus we saw during the financial crisis, that is not going to happen. we have been looking at some of the tax reform measures and the stimulus they are doing and there is some stimulus still to come. we have china's growth below six handles. they are doing a careful balance on the debt which is there achilles heel. balancing how they managed that burden and a fiscal deficit. their consolidated deficit is more than 10% of gdp. david: joyce chang of j.p.

morgan securities will be staying with us. now we have an update of what is making headlines outside the business world. viviana: the european union is slashing growth forecasts for the region's major economies. brexit and the slowdown in china could make the situation worse. expandinghe economy 1.3% this year, that is down from 1.9% in the november forecast. the eu shaped a percentage point off the forecast for italy, saying the company -- the economy will grow just .2%. the latest tax proposal from democrats targets wall street. senator from hawaii working on a plan that would tax trade. the idea is gaining popularity among some democrats to curb high frequency trading. to raise moneyy for liberal policies like liberal colleges. an independent campaign by

howard schultz would probably help president trump. findingence firm optima schulz is drawing 7.7% voters but he gets twice as much support from democrats as republicans. -- leading democratic poll bb&t has agreed to buy suntrust banks for $28 billion in an all stock deal. the transaction will create the sixth largest bank in the u.s.. bb&t shareholders 157% of the combined company. both banks have a big presence in the southeastern u.s.. 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'm viviana hurtado. this is bloomberg. alix: thank you so much. they are holding a conference call, bb t and suntrust right now. the bb&t ceo is speaking. taylor riggs is listing in. three important aspects

that drove this merger. it is economically attractive. both teams agree the world has changed and in order to do that you need to keep up, you need to merge, you need to be disruptive. highly synergetic is what we are hearing. both companies want to combine business costs. $1.6 billion in annual cost saving. we are going through the press release and the presentation right now. he is talking about in efficiency ratio of 51%. he says he dreamed of the days could get it, it looks like he can do that. the sixth largest bank by market value and assets, they are going to become a leader. they also talked about how they will maintain the risk management culture and their strong liquidity position. finally the ceo saying two plus

two equals five with his merger. david: i have heard that before in mergers. alix: synergy. david: sometimes it works. forget bitcoin. the technology is ready to impact supply trade and finance. we discussed the impact outside cryptocurrency next. this is bloomberg. ♪

viviana: this is bloomberg daybreak. coming up later on bloomberg markets, the christie's ceo. alix: time for follow the lead.

a deep dive into stories making headlines and moving markets. today, we are taking a look at blockchain, the technology used for verifying and recording transactions that could disrupt many injuries -- many industries. joyce chang, jpmorgan global security chair who just published a report saying blockchain adoption -- the big takeaway, progress has been made adoptionblockchain beyond payments. joyce, in your work, what industry can be used for institutionalized work? joyce: we think there will be progress in trade financial in particular. where theresegments is a lot of paperwork where you can get these efficiencies. at jpmorgan we have the interbank information network and we have 157 banks

participating. we have moved beyond experimentation. it is still -- we are seeing more adoption for the technology. spain is ahead. spain has adopted this and the australian stock exchange. compared to year ago, there has been greater extension of these cases, although it is still far from institutionalization. if you are trading a commodity, you're dealing with paper. it is so old school. you have to a lot of competitors come on one platform and work together. that is a hurdle for this to catch on. what changes to make that easier? joyce: there is the data privacy issues, their run the regulatory -- there are the regulatory issues, and how you get scale for something with the nature is decentralized? that is the catch 22. they are still working through a

number of these regulatory issues, also security issues. alix: do think it will be more like after trade is completed, that is when you will use the platform or is the financing heart of a trade that will comment to play? which has the better chance? have theght now you information sharing component and the efficiency component. i you make marginal improvements to the payment system. that is where the focus is rather than wholesale transformation. how many participants can you get. in our information network, it is 157. say exactly how it is going to be able to transform the way in which we settle. alix: in terms of the move conversation in commodities, even when it comes to ags you hear that quite a bit. is there an advantage to being the first mover? joyce: there is advantages to

having cases and seeing if they can be scale. the use case is we have seen they have gotten larger and we are trying to extend across more industries. in certain industries it has been harder. on the supply chain and transportation, that has been difficult. it is difficult to automate the imports. you're getting more success in the areas that is looking at the back end and the paperwork. running into some of the same roadblocks and a relay to the regulatory issues, the privacy issues, and the security issues. david: will there be one uniform approach? is this like beta versus vhs? joyce: i do not think there will be one uniform approach. finance, like trade this is something very happy and paperwork. that is why we think this is one area where it can be used on the banking side over a three to five-year.

-- over three to five-year period. there are other places that the nature of the industry does not lend itself to a way you can automate the input. the supply chain stands out to me. alix: you have all the paperwork. what is the barrier to entry for a new platform? to get the cost savings you want, you have to get through the privacy and security issues. some of those have been prohibitive. pures not just been technology, it has been that information sharing aspect and where you control the guidelines. alix: that is interesting. in commodities, it is a game changer. can you imagine making a trade with paperwork, sending a letter to the person buying your oil. joyce chang, j.p. morgan securities global research chair. using a look -- losing a license to operate a mine.

this is bloomberg. ♪

alix: what i am watching is what is happening with vale and iron ore, blowing up the commodity world. the bottom panel is iron ore prices at $90 a ton. an unbelievable move. the why is what is happening in brazil. there are three things that happened. shut production. then you have brazil revoking license to operate. , they canceled area andtion in one they also at the shutter production of 130 million tons.

it is the message that sends and their ability to operate in brazil. david: when you declare force majeure, it sends shivers down your spines. alix: it is not unusual in commodities. it happens in libya and nigeria. the journal had an interesting report yesterday that said there were people who went in in september and look at the minds and had structural issues with the dam. they say drainage and stability was a problem. they certify the dam is stable, that the idea that vale knew there were problems and did nothing about it. .his is a broader issue i was talking to a hedge fund manager who was going long everything that is not vale. if you have that kind of move in iron ore, that shows you how tight some of the metal markets are that of been totally obscured because of global growth fears. that is a serious play. david: does this last in the

marketplace? is is a one-month thing, a three-year thing or a five-year thing? for the tons of iron ore, it is nothing. it is the fact that inventories are so tight that even a small capacity coming off-line seems -- sees a price move. i'm talking about that on commodities edge. that wraps up bloomberg daybreak. coming up, bloomberg market the open. head of wells fargo equity strategy will be joining jonathan ferro. dovish sounds from mark carney. 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: chairman powell says the u.s. economy is in a good place. that officials underlined global risk. central banks responding to those risk. a cautious tone from the bank of england follows india cutting interest rates. the european commission unjust into a tough the reality, slashing growth forecast. in the markets, futures -.5%. risk aversion out there. the dollar stronger again. you up -- euro-dollar 1.13. federal reserve chairman jay powell says the u.s. is in a good place. >> strength of the labor market. >> it has been quite strong. >> strong. >> a string of strong economic data points. >> a high level indicating continued expans