francine: playing for time. theresa may except the offer of more time for talks with jeremy corbyn as she tries to renegotiate brexit. u.s. china trade negotiations resume in beijing. more than double tariffs next month. and we will talk -- and talks to fund the u.s. government broke down over the weekend. the deadline is friday. good morning everyone and welcome to bloomberg surveillance. i am francine lacqua in london.

a check on your markets. just getting some breaking news out of china. this is the end of year foreign-exchange reserves and they are pretty much in line with analyst estimates, just a tiny above. looking at european stocks, they are on the upside. there's a little bit of optimism that there can be something done on trade this week and that would give a little bit more of a lift and you can see the u.s. 10 year yield at 2.65%. also coming up, we speak to catherine mann, the global chief economist at citigroup. we will talk to her about europe and the u.s.. let's get straight to the bloomberg first word news in york city. the present of china's top economic aid will be part of this week's trade talks in aging. he will meet with steve mnuchin and trader presented robert lighthizer.

the u.s. and china are looking up a trade to avoid ramping of tariffs. present comes as the two sides are making progress but confirm his ready to impose heavier duties if necessary. talks to avoid a u.s. government shutdown has hit a snag. some lawmakers are skeptical the deal can be agreed to by the friday deadline. without agreement, nine federal departments and agencies would shut down again, only weeks after record 35 day closure. president trump donald trump -- president trump says the democrats are trying to create a distraction after a bad week of news. nobel prize-winning economist paul krugman same with increasing headwinds coming would be a bad idea for the federal reserve to raise rates. state of thethe u.s. economy at the world government summit in dubai. probably don't -- you probably don't have a crisis of the magnitude that we had but we are in much less shaped to deal

with shocks than 10 years ago. >> the lawyer for the national enquirer says they did not try to blackmail jeff bezos. they said it came from a reliable source. saudi arabia is denying any and all involvement in the row. >> we had nothing to do this. maybe some of our citizens read the national enquirer or watch the soap opera unfold on television but that's it. the biggest winner of the grammys wasn't even there. childish gambino claimed the song and record of the year. other winners included casey musgrave's. global news 20 president and at tictoc on twitter. but more than 2700 journalists and analysts in more than a hundred and 20 countries. let's get the latest

on brexit. theresa may is seeking to buy herself more time to renegotiate her deal with the eu. with just over six weeks to the departure day, may has written to jeremy corbyn after he proposed setting a new deadline of february 26 two when backing for a final exit deal. this meansnd with for the pound, joining us now is john hardy and max kettner. gentlemen, thank you for joining us. for pound andary u.k. assets? a deal regression out or is it more nuanced? max: i think it's a low bit more nuanced. if you look at u.k. assets of thatast couple of years, would betray way to sterling. since the referendum, trade tiny there'srling

uncertainty. that sort of uncertainty while subsiding time soon. if you run a global portfolio, you have to and you are faced with question of do i take an equities inion in the ftse. my answer is it's probably too uncertain. notice that uncertainty does not subside. either guild and the ftse. francine: the closer we get to the deadline, the more we should worry or should we? john: if you look at implied option volatilities, they've come down since the -- from the highs they were at in december of last year. but they're still very elevated relative to historic norms. there's a lot of interest in the state. in the asymmetric volatility assumption, that is a cliff edge no deal brexit, means a much larger move of a much quicker

nature. event we get some clarity on the soft brexit side. that price action on all indicative of how the market is anticipating this event. i'm surprised to the december spike. i guess the market is a little bit complacent in terms of coupling summing together. there is a bit of hedging. is there anything that needs to happen for the euro pound to move? john: need some indicates more specifically and something we can put more confidence in moving towards a deal. like the process will be taken almost -- almost all the way down to the buyer.

looking for this notice in that scenario, i could provide some relief of some magnitude. when you clarity that we are not getting. -- we need a clarity we are not getting. francine: this goes to your point, it has a really moved. is this on the european side or the #? you're asking what needs to happen that we need to go back. one is to happen to go back and u.k. equities. but the what's happening with oil prices. will get towards asia and to us commodity companies, there is butgoing to uncertainty really fundamentals behind it. if we do see growth slowing down further, not only in the u.k. but globally, those companies will continue to struggle from

lower-than-expected demand. that might even trump the uncertainty around what we have here domestically in the u.k.. the same thing goes with the sterling writing. basically done. had a pretty good rebound over the last couple of weeks. it's not only sterling, it's not only brexit. everything is about political uncertainty. let's not forget the fundamentals. i give a fundamental chart. looking at gdp. good to have a sense of labor willing to support theresa may with a tweak, what happens? specific to pound the day after. john: if are headed towards a no deal brexit? francine: if we are headed

towards a deal brexit. the's fundamentals are very important but the market is operating on expectations. as a pretty strong starting discount. also very ugly output in europe right now. the 10 year bond at or below 10 basis points of the start of the cycle. something andoing i wouldust pointed out, expect the repricing lower for heading towards a soft brexit. some the around the magnitude of 10%. , orshocks and revenue deal a softer deal looking down below, in stores 80 to start with. francine: thank you both. they both stay with us. coming up, u.s. try to change negotiations -- training

negotiations resume in beijing ahead of the u.s. turning to double tariffs next month. this is bloomberg. . this is bloomberg.

francine: economics, finance, politics, this is bloomberg surveillance. let's get straight to the bloomberg business flash. apple smartphone shipments to china plummeting an estimated 20% in the final quarter of last year. scale ofrscores the the iphone makers retreat from the world's largest mobile market. says huaweim idc cemented its number one position. euronet raising its offer. at $75the exchange offer

million. the franco dutch exchange aerates 168 norwegian krone share, up from 145. they say they see a better future with nasdaq. reportedly cutting its four-year your profit forecast by at least half. reporting the updated target will come out when it's reports on wednesday. they also report the target will be lowered from around five or $50 million to between 180 and 270 million. forrt blaming higher costs dragging down earnings. the shiva says it hasn't made a decision. the company scrapped individual variable bonuses and will instead pay people a percentage of their annual salary. a spokesman said the payout would amount to roughly half a month salary. employees could see -- employees

that see their total compensation fall would have their salary topped up. the present of china's top economic italy part of trade talks in china. with her -- was steve mnuchin. u.s. and china looking for a deal to avoid a ramping up of tariffs. present trump said the two sides is making progress but he prepared to impose heavier duties of necessary. max and john are both still with us. all, every have some kind of trade truce or agreement, or something that points to know tariffs on march the first, what is the main asset class? s&p 600? to me it feels like the market is a bit complacent and expecting something fairly

promising on that front. i wouldn't be surprised if we see a knee-jerk reaction to the upside. deal is confidence of them positive across the board, we talked about that. you expect the dollar bit lower. passivelyd maybe reflecting that. the dollar you on race has been a passive instrument looking at the broader dollar picture in many cases. thear rally has also seen pick up a bit. max: i would probably agree with that in only at one thing. bullishdn't get overly even if there's a trade deal. i think, look, even if we had a trade deal that is very reliable and that is never going to be questioned at all, basically we are faced with is the risk asset rally.

you see equities broadly rally. the problem then is, but you're actually faced with is a huge demko soared over the global economy. that serve trade tension. in effect, the market will have to do is price that rate hike again. then we are sort of back into the october and november environment. we are facing environment of higher treasury yields and hire we are units in particular but faced with a rate hike plus qt. roundrobably with another of the yield curve flattening. all that will really constrain the outside. francine: their civil slowing china. it hurts emerging markets and the rest of the world. it tells you not to get to bullish. we do expect is that we will

have a massive round of stimulus coming in both on the fiscal and monetary side. will probably take a little bit of time to work through into markets. you'll have the same sort of concerns that you have had a november and december. it will have this combination that will constrain the upside of risk assets in terms of real yields, fed rate hike writes, qt. all these things that make risk assets go through the roof. you really will have to have some sort of a logical right. why wouldll us, look, risk assets in general rise but we won't reprice the fed. that in the current juncture does not make sense. i wouldn't reprice the fed. a thing of the u.s. side of

things, you have to say with without a deal, it's important to highlight that i agree with the other guests. no deal plus a week deal odds probably outweigh the good deal odds. the good deal doesn't address on his underlying structural concerns. one of the fed is already overreached? basically the entire foundation and risk rally has not been but it's rotation of a trade deal but the fed softening that? that's my thinking here. maybe economy puts in just in the strength for expectations to had briefly back the other way. together with some positive trait headlines. i think the cycle has turned around with rates. as my operating assumption. francine: thank you so much. they both stay with us. up next, the shutdown.

talks break down in washington over funding for border security. raising the chances of another government closure. details next, this is bloomberg. ♪

>> he can anything they put in front of me cannot sign anything they put in front of

him. the government shutdown is still on the table. >> we have an obligation to protect our nation so as long as the goal post keep moving there's no way we can lock it in. >> i think the big problem is, this is a common ego negotiation. it's not over substance. >> negotiations are still going on. they're good people on this committee. >> i have confidence. >>50-50 we get a deal. >> weather gets one point $6 billion from congress, $2.5 billion or $5.7 billion, he would do whatever he legally can to secure the border. francine: those are some of the voices we heard in washington as talks to avert a new government shutdown broke down over the weekend. the short-term funding deal runs out on friday. a little in the shutdown actually mean for the u.s. dollar and other asset classes? max and john are still with us. those dollar move on it shutdown? maybe.- john:

i've had a hard time with the the wholengle with shutdown business. having the market was correct this time around. graded shutdown risky was around the time when the fed was supposed to start tapering so it was key policy angles to the situation. i don't see that policy angle as much. comes to shove, we seen when airports start to not be would you operate a full capacity. finds and thely president finds the seed is too hot to avoid doing to me about it. it's my thumbs on this but i suspect you will see something along those lines that we simply won't get to a real threat to a shutdown operations again on that level. think and i'm pretty glad we takewhat we can see,

a bit on a broader scale, two weeks ago, the market in general was playing goldilocks. everything's just great again. when from goldilocks back to gloom and doom and we're all the sudden talk about global recession. every so often the middle is probably the truth. probably we will be seen over the next couple of weeks and months, the market finding its decent point. we aren't able to gauge right now what the exact effect of the shutdown on the data. so for the data has held up relatively well. there's been a bit of the virgins between 10 year treasury yields and surprises in the u.s.. perhaps this little bit of tactical upside and a little bit of upside to the steepness. francine: did you take a view that even if you can't pinpoint what does exactly, it just means it's more likely of the fed stays put because they don't know how to read the clinical

situation? the short-term yes. we only envision another fed hike in september when all that has clear but it will need another three or four months until we actually know what the exact effect will be. the next three to six months will be flip-flopping around these scenarios. he scenarios with markets really play doom and gloom like last week. they flip around very quickly. francine: thank you. they stay with us. up next, political crises in france and italy continues. season did see more anti-european legislators. live in brussels, this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. ♪ >> economics, finance, and politics. this is "bloomberg surveillance." let's get a check on your markets. something out of the u.k. we are seeing a little bit of a

rebound in some of these 0.9%,an stocks, gaining although it doesn't look like it's an actual rally in the making. we have a mixed week when you look at asian stocks, european stocks are up, it could be a big week when it comes to global trade where investors are trying to position themselves for both possible outcomes. just remember, japan is also shut for a holiday. we are also looking at the u.k., andhe pound weekend, theresa may is seeking to buy time to negotiate her brexit agreement. 0.2%, a economy grew touch below estimates for the fourth quarter. the median economist estimate was 0.3% to growth. let's turn to the battle between jeff bezos at the publisher of the national enquirer. the lawyer for the national enquirer said it didn't try to

blackmail the founder and said the photos and other details about an extramarital affair came from a reliable source, not the president. to help us make sense, let's bring in stephanie baker, a senior writer for bloomberg news. always great to speak to you. smarter when everything is in a haze. the lawyer is saying that it wasn't blackmail. >> this is the central question. emailsly, a.mmi in its was saying as long as you come say that ourcitly coverage of you was not politically motivated, we promise not to publish these photos. to you and me that sounds like blackmail. you promise to do one thing in exchange for another stop some lawyers say it is borderline as to whether or not he would

derive a benefit from not publishing, so it really depends on how that benefit is defined. but in terms of normal journalistic practice, that is not something that most experts, in terms of how you handle sources and decisions on coverage, would proceed. it is certainly not a way we would proceed. were deemeds newsworthy, why not just publish? it should be a decision based on our they newsworthy. >> they are cooperating, right? there's a cooperation deal between ami and the southern district of new york? >> and this is where it gets interesting. they struck a nonprosecution deal, cooperating with the southern district of new york into his investigation over payments to these women who had extramarital affairs with trump. those payments were at the end

of the 2016 election. lawyer, isen, his part of the prosecution against him for campaign-finance violations and ami have protection from that, but only -- that protection is only valid if they don't commit any other crimes. if it is determined that this was a crime, that they tried to blackmail him, that cooperation deal could be no one void. -- null and void. saudi at the same time, arabia says they have nothing to do with it. paying u.s. tv shows to say they had nothing to do with it. what do you make of that? >> they are trying to distance themselves. jeff bezos intimated that he involvedi arabia was because of the "washington post" coverage.

the "post" has covered the killing of jamal kashoggi very aggressively, because he was a columnist for "the washington post," so he believes that this was somehow payback for the aggressive coverage of the saudi regime. >> stephanie, thank you so much. stephanie baker. let's get straight to the bloomberg first word news in new york city. >> theresa may is trying to buy herself more time to renegotiate , the british prime minister running a conciliatory letter to opposition leader jeremy corbyn after he proposed february 26 as a new deadline for winning support for her brexit deal. the imf managing director says britain's exit from the eu will be difficult. ends whether there is a smooth splits from the union, or if it's a result of the brutal accent on march 29 but it is not

going to be as good as it is now. >> there's a one in three chance the u.k. will fall into recession in the next 12 months. this survey was conducted before the bank of england said it saw the slowest economic growth in a decade. fourth-quarter gdp data is due at 9:30 a.m. monday. the u.s. is seeking support on a resolution condemning venezuela, citing the authoritarian regime blocking of humanitarian aid and is calling on nicolas maduro to hold new elections. a resolution would likely face vetoes from russia and china, but the u.s. may press ahead to help keep global attention focused on venezuela. and talks to avoid a new u.s. government shutdown have hit a snag. some lawmakers are now skeptical a deal can be agreed to by the friday deadline, and without an agreement, nine federal departments and agencies will shut down again. only weeks after the record 35 day closure.

president trump says the democrats are trying to create a distraction after a "bad week" of news. the biggest winner at the grammys, he wasn't even there. childish gambino claimed the awards for record and song of the year. this is the first for a hip-hop artist. but he wasn't in attendance. other winners of the night include casey musgrave and dua lipa. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana rotondaro. >> thank you so much. hoping that tom keene is a dua lipa fan. stay tuned. the european parliament will hold elections in may and they are expected to be significant in the legislative body history. this is according to a new study by the european council on foreign relations set to be published this week. joining us now from brussels, maria.

good morning to you. populists would make gains but with this translate, into policy changes for the eu? >> right, francine, and that is the question. what we see is that this study does show the european or eurosceptic parties would win up to a third of seats in the european parliament, that is no question the best result, building on a trend which started in 2014. that, that does not actually give you a majority in the european parliament. what they could do is block legislation and block the appointment of key european jobs. jean-claude juncker will leave the commission by the end of the year and mario draghi will lead the central bank by the end of the year and they could delay this. that would be a problem, we europeans and

slowdowns, a very slow eurozone rebound. >> a lot of this has been seen through the prism of the french diplomatic spat. emmanuel macron, often use the chief player. exactly and that will be pretty much it. he is loved by the european establishment and in a way he is the person who is calling for deeper integration, to foster and create a european identity. they areposite side, saying the country should go back to roots and should be a strong national identity and it is time for a big reshuffle. macron is now that very weak at home and has become a big target. what's interesting is that macron, who was quiet at the start, has gotten more aggressive, and thinks it may be they will campaign against me and i should do the same. >> thank you so much, maria.

our guest is still with us. then't know whether it is european bones that you look at to see all this political machination, whether it is euro or stock markets. >> i'm trying to look through the political boys. january,re looking in we had the best january in decades for stock markets and still there was a u.s. government shutdown. we really don't know what the effects of markets will be, but it doesn't matter that much in terms of investing. but my job is trying to look through the noise and gauge where things are going on a longer-term horizon. >> but europe is not doing great. leave the politics to one side. wedamentally, the trade -- just don't see the fundamentals being as strong as they were two years ago. >> and i think that's the point.

the point is that if we go back 12 months ago, where pmi across the globe was above 60, and now we see a european pmi beach in the u.k., we see them barely above 50. that's not something anyone was expecting 12 months ago. argue that when we look at what market pricing is doing we have seen a huge rebound encyclicals versus defensive in european equities. we still see longer expectations and short-term rates, elevated relative to the economic surprises in the eurozone. euro high-yield has tightened, so i wouldn't really say that markets have become overly needmistic on europe, we to push that further out toward the second half of the year. i would still sick just that

there is a little more downside for european asset classes. at least on a relative basis. >> all right, thank you so much. he says with us. the u.k. buckling under the strain of brexit uncertainty in the fourth quarter. the gdp just came out about 11 minutes ago, increasing the forecast of 2%. if you look at december, the economy shrank by .4%, the most since 2016. you can see the pound at 1.2905. coming up, as u.s.-china trade negotiations drag on, global growth slows, emerging-market equities begins to feel the pain. more on that next. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance." let's get straight to the bloomberg business flash in new york city with video or taught a. >> apple smartphone shipments plummeted an estimated 20% in the final quarter of last year, underscoring the sale of the iphone makers retreat from the world's largest mobile market. the research firm says huawei cemented its number one position after shipments soared over 23%. euronext raise its offer, valuing the exchange owner at $790 million. this is part of its attempt thwart a rival bid from nasdaq, the franco dutch exchange offering them a share from 145 to three at a rate that it sees a better future with nasdaq. toshiba is reportedly cutting its four-year profit forecast by at least half.

the nikkei is reporting that the updated target will come out when it reports earnings on wednesday. the paper reports that the target will be lowered from $550 million to between $180 million to $270 million. it hasn't made a decision on profit revision. ubs revamping the bonus system for 10,000 of its employees. it scrapped individual variable bonuses and will instead pay people a percentage of their annual salary. a spokesman says the payout would amount to roughly half a month's salary. employees would see total compensation fall and will have their salary talked up. >> thank you so much. last week, emerging-market stocks held a six-week rally on concerns over the outlook for chinese trade talks and the global economic slowdown. the of emerging market index retreated, ending its longest losing streak in a year. our guest is still with us.

this is a fed story right? there have been a number of money managers who said this is the emerging-market time -- what happens in 2019? ? >> i don't think 2019 will be the all clear for emerging-market assets. for the next three months, e.m. still make sense but let's be clear, we saw global equities fall, not only e.m.. we get uncertainty around trade tensions, even if we get that and even if we get a risk asset rally, the problem we will then have is that the fed gets repriced and on a relative basis the base market is kept. flows, we willt

look at fund flows and foreign investor flows, and both have recovered over the last couple weeks, particularly from foreign investors. they have recovered hugely over the last couple weeks. >> is it a fed story? this big winner out of the fed policy is probably emerging-market. >> yes. the overarching story is a fed story. acis,ularly on a relative what you can see if you look at e.m. equities over the last couple months, you put them together with treasury yields and you get a decent correlation. you how e.m.tells is getting priced. obviously there is the china story but if we get stimulus that might be a catalyst.

not only for china but for e.m. more broadly. that cautions the growth concerns. >> it could make a difference between latin america to india to china, but is india and a special place? >> on a relative perspective, we can make a difference. on an absolute basis from a directional's perspective, not really. 50% of theargue that e.m. markets -- korea or taiwan -- are struggling. the overarching story, the what gives us, is the direct shin and then we can play around with relative performance. where the direction comes from is really the fed and the dollar. >> this is the story we were asking on our mliv blog. what is the largest uncertainty for markets for the rest of the first quarter? >> i will give you a fairly

surprising answer -- for me, it's not politics, it is fundamentals. it's economic fundamentals, where are we in the cycle? we don't really know what kind of effect that will have, we don't really know where the european economy is in terms of bearing the political uncertainty. but from a fundamental perspective, we don't know how deep this slowdown will be over the next couple months, -- >> what are the chances of recession? >> for now, pretty low. rising more in 2020. it will be more a story for 2020. but i think the point right now is that markets will be flip-flopping around between a recession scenario and overly discounting the recession risks and on the other hand getting a bit too excited, the goldilocks

scenario that we saw up until last week. >> there's a story we are just breaking on the bloomberg terminal. two large chinese borrowers are set to miss bond payments. that kind of idiosyncratic story, is it symptomatic of a slowdown in china, too much debt? what do you do with things like that? >> i wouldn't be overly worried about china from the company perspective. what we do see right now is from a fifth stimulus first active chinese authorities are targeting the private sector with highly leveraged as so we banksnd also encouraging to lend toward the private sector than that has better gdp ratios falling. that is i think the right channel to go to. i wouldn't be overly worried. i would be worried when markets are questioning the ability of policymakers to act. i don't think we are there at all.

>> thanks so much. we will break down what stocks to watch throughout the trading session, and we will also look at the markets abroad. this is bloomberg. ♪

♪ he's now hank paulson. i think we are in much worse shape and we probably don't have a crisis of that magnitude about to hit us, but we are in much worse shape to deal with whatever shock comes along. >> that was the nobel prize-winning economist, paul krugman, giving his view on the u.s. economy. more from him throughout the program. let's get a check on what stocks to watch fo with annmarie hordern. >> let's kick it off with italian banking. they exceeded the ecb capital requirements in a recent review. they also posted to the upside more than 2%, increasing their

postage more than what was originally expected, originally supposed to be in april but delayed to the third. 3.5%, lagging the stoxx 600 all morning. a report last week said there were talks to buy asus company for more than $3 billion while investors in europe are putting pressure on the stock, up more than 25% in aftermarket trading on friday. >> thank you so much, annmarie hordern, with the stocks we are watching. let me recap the news we had over the last hour -- the u.k. gdp was egg and what i am looking at is the u.k. economy that seems to be working as brexit jitters are getting closer. gdp increased a smaller than forecast 0.2%, december alone saw the economy shrink by the

most since the 2016 vote to leave the european union. overall, this is what your markets are doing. looking at stocks in europe, they are higher. overall, they saw a mixed session in asia. it could be a pivotal week for the global trade outlook. "surveillance" continues in the next hour. tom keene joins me out of new york. we will also be speaking to the global chief economist at citigroup at 11:00 a.m. london time. this is bloomberg. ♪

francine: playing for time, theresa may accepts the offer of more talks with labour's jeremy corbin as she tries to

buy herself another two weeks to negotiate brexit. deadline for a deal, u.s.-china trade negotiations resume in beijing. can an accord be reached before the u.s. more than doubles tariffs next month? and another shutdown looms. talks to fund the u.s. government broke down over the weekend. the deadline for a deal is this friday. good morning, everyone. good afternoon if you're watching from asia. this is "bloomberg surveillance." m and francine from london and new york. we had a worse than expected u.k. g.d.p. figure. we also have to step away from the politics just to look at the fundamentals of the u.k. economy. tom: the fundamentals of the u.k. economy, you see it. i think the theme this morning in the markets is lower for longer on yields. you're seeing that across all as we enter the week. francine: tom, we'll have more on that, but first, straight to the news in new york city. >> talks on border security this morning to avoid a new

u.s. government shutdown have hit a snag. this morning, some lawmakers are skeptical a deal can be reached by the friday deadline without an agreement. nine federal departments and agencies would shut down again. this is just weeks after the record 35-day closure. democrats and republicans disagree over the number of immigration detention beds. president's top economic aide will be part of this week's trade talks in beijing. he'll meet with treasury secretary steven minimum children. the u.s. and china are looking for a deal to avoid a ramping up of tariffs begin on march 1. president trump says the two sides are making progress, but confirms he's ready to impose heavier duties if necessary. >> the pound is extending its drop after the u.k. economy grew less than expected in the fourth quarter. g.d.p. expanding only .2%, down from .6% in the previous three months. a survey of economists say

there's a one in three chance the u.k. could fall into recession in the next 12 months. this is further evidence of economic weakness as britain prepares to leave the e.u. theresa may is trying to buy herself more time to renegotiate with brussels. the british prime minister writing a conciliatory letter to jeremy corbin after he proposed february 26 as a new deadline for winning support for her brexit deal. i.m.f.'s managing director chris teen lagarde saying britain's exit from the e.u. will be difficult. >> whether it ends well, whether there's custom unions as predicated by some, or whether it's the result of a brutal exit on march 29 without extension of notice, it's not going to be as good as it is now. viviana: global news, powered y more than 270 journalists. this is bloomberg. tom: thanks so much.

yields set in today. futures up 11. curve steepening fractional. euro weaker. this is a big deal. 1.13 with a 112 handle really says the last 150 days, oil not in play. the equity markets, 15.86. turning it around, yen finally through 110, and weaker yen over the last week. and there's that sustained lower 30-year bond yield. gary schilling to join us in the 6:00 hour once again, a genius. francine, the german 10-year yield, .1. that's where it was friday. that should be green on the screen. higher two basis points yield, but nevertheless, to me that's the litmus paper to watch. francine: agree 100%. watch out for german bonds and stocks. u.s. equities futures also up. i think it's a big week for global trade. if you look at dollar strengthened for an eighth day, and i'm also looking at pound,

extending its decline after the u.k. unexpectedly shrank in december. tom: she's gasping k. we have a moment for fran seen lacqua who has toughed it out. she's got the plague. everybody's got it, fran seen. it's just the way it s. thank you for coming in and, of course, she's only working a shorter 12-hour day, not a usual 14-hour day. let me go to the bloomberg right now. this is a really, really, really important chart. it looks boring. i did this in honor of aria. it's a boring, boring chart, except it's not. all you need to know is slope matters. 2016, low inflation. europe, united states, united kingdom, look at this, flat sterling, roll over here, and then stability in the united states. and this says the single biggest thing right here. i'm sorry, this is a huge, huge

eal, disinflation in the five-year, five-year. fran seen, are you with us this morning? francine: i am. i didn't know? because i have a special magic box for the floor managers. it's called our special box hen you need your voice. tom: it's 15 or 18 yee scotch? i'd go with the 18. francine: 25-year scotch. no expense spared. this is what i'm looking at, basically weaker. you can see where it picked up after it left off, tracking lower after it was cut. so if you look at some of the things that we should be watching out for, it really only where the chinese authorities wanted it to be. that's the big question. markets, again, hinge on the progress of trade talks this week as we speed to the deadline. he chinese vice premier will join the trade treasury. he's warned a deal isn't certain.

joining us now for more, the international china mark row strategy. thank you so much for coming in. what actually moves? is this a litmus test for the trade talks, or is this really government -- i wouldn't say manipulate, but government incentivized? >> well, yes, they're trying to keep the markets stable. the key thing that you actually saw just over the last week in january was it was really the u.s. dollar weakness rather than the strength. there's no reason for a massive surge. you're seeing yields come down. you're seeing the economy weaken. there was even, in the state-run media, there was a 6% guidance for g.d.p. for q-1. so no one is saying either the the y is strong or the talks.

that could begin to reverse as we come into q-1. francine: i don't know what to do with this. we have a steer saying two large chinese bo others, missed ayment deadlines this month. >> there were more dwaults last year than any historic year in china. we saw a lot of private sector companies under stress, a lot of pressure. i mean, yields were rising particularly for this, lower rates of credit, lower quality bonds. and so we're going to see more of these dwaults coming through. because although they're getting more of the banks lending in, you're still seeing the shadow banking. we still expect shadow banking to contract this year after the three trillion contraction last year. that's unprecedented. there's a lot of tidying up still to do. you're going to see more of these things come through this year. tom: within these trade talks, there seems to be a complete

ignorance about the axis. i would suggest that america's general statement and this administration have a timeline that's completely at odds with china. can you describe, as a china expert, the difference in the timeline of the trump administration with the new president xi and the economy says the third revolution of china. miranda: well, i think there's many different timelines, because there's differences even with the u.s. in terms of getting a short-term deal on the trade tariffs, that's fine. that's what china can the u.s. can do. that's what trump seems to want. the real issue is the long term, the technology side of it. getting the i.p. protection. the u.s. wants guarantees. it needs precedent. it needs several years of cooperation. it needs a lot of changes to the legal practice. so this says not going to happen before the first of march. china is obviously trying to

keep things business as usual. it's saying, look, we can change the foreign investment. we can change the practice. we can do things really quickly. they want a result quickly. the dispute with the u.s. and china. but i think it's the u.s. which is actually going to need a longer time to really put assurances in place. tom: i think of jonathan spencer's classic book on the making of modern china, 912 pages. nowhere in there are the axis the same. where does the u.s. have to set its x axis to get an agreement? i would suggest five years just to begin. is that close? miranda: yeah, five years to get any kind of fundamental agreement. you've got a lack of trust really at a fundamental level. even with the new law that was rushed through, what they were wanting is some kind of guarantee, some kind of structure in place to actually make sure all of the things which are promised actually

happen. we've seen from practice before, where, yes, you get the opening up, but then it doesn't quite work out how people expect. and that's going back to the wto and the initial sort of opening up of china back 15, 20 years ago. francine: miranda, thank you so much, joining us today. look up on the open, we for an interview in new york at 7:30 p.m. in london. this is bloomberg. ♪

vaviana: let's get the bloomberg business flash.

apple's smartphone shipments to china plummeted an estimated 20% in the final quart irof last year. this underscores the scale of the iphone maker's retreat from the largest global marketed. they cemented its number one position after shipments soared more than 23%. toshiba is reportedly cutting its full-year profit forecast by at least half. nikki reporting the updated target will come out on wednesday. the paper also reports the target will be lowered from around $550 million to between $180 million and $270 million. the report blames higher costs for dragging down earnings. toshiba it says hasn't made a decision on profit revision. u.b.s. revamping the bonus system for 10,000 of its employees. it scrapped individual variable bonuses and will instead pay people a percentage of their annual salary. those workers include employees and human resources and i.t. departments. a spokesman for the lender says

the payout would amount to roughly half a month's salary. and that's the bloomberg business flash. tom, francine? francine: thank you so much. now let's gets the latest on brexit. prime minister theresa may is seeking to buy herself more time to renegotiate her deal with the e.u. with just over six weeks until the u.k.'s departure day, may has written to opposition labour leader jeremy corbin after he proposed setting a new deadline of february 26 for winning lawmakers' backing for a final exit deal. joining us now, our guests. thank you for joining us. nick, let me start with you. when you look at the comings and goings of brexit, is it time to say, well, the clock is still ticking, we don't have a deal, i need to take a position on the possibility of no deal xit? >> what's clearer than that, as this massesive dichotomy

between the domestic stocks and international stocks. at one point, the international stocks were outperformed, and that's narrowed in the last few weeks. i think investors are thinking that it's still very messy, there's not a clear picture, there's a lot of fog out there as they were referring to. but the risk of a no deal brexit seems to be getting smaller than it was maybe a couple of months ago. from that perspective, some of the u.k. domestics may be starting to look a bit more interesting. francine: at the same time, we look at g.d.p. growth in 2018, the weakest in six years. we're expecting it to slow a little bit more. euro sterling is still range bound. is that a euro story or a u.k. g.d.p. story? >> picture the two. when the numbers came out, in terms of the euro data, it's collapsed. it's now below trend. the u.k. data has done the same thing. they're following each other. so stripping out the growth data, what is brexit related? you can say the stockpiling we saw in manufacturing, that is brexit. but in general, it's a global thing.

that's where euro sterling, a relative trade between our closest partner in trade, that's why it's not moving so much. cable, pound against the dollar, that is going lower and moving this morning. that's because euro dollar is falling with it as well, mounting concerns after revisions see growth forecast by the commission last week. so there is definitely trade. what's quite interesting, there is a bit of a difference among u.k. asset classes. the pound is cheap, hasn't really gone anywhere for 2 1/2 years, where equities, as you point out, really hasn't fallen. but then there's the inflation market in the u.k. european inflation markets have collapsed in terms of their premium for inflation in the five years ahead. u.k. stayed really stable, so different parts of the markets are pricing different levels. tom: i want to bring back that chart then. nick nelson, i'm going with you with u.b.s. bring up this chart. we just showed it. what jordan is talking about is this move downward here in a true collapse of disinflation

in the e.u. versus the flatness here in london. nick nelson, you went from seven down to 4% earnings forecast. that's a really helped and miserable number. explain why i need to be in equities with low single digit earnings growth. nick: sure, it's a good question. i think the answer is the market has moved way ahead of that already, so if you look at the moves last year in 2018, we saw the biggest de-rating in terms of multiple contractions, eight years. we saw over 20% fall in multiples here in europe. and what we've seen in this reporting season has been very interesting, right? we've seen companies disappoint. we've seen companies miss. but actually, if you look at the performance of the shares on the day, it's been the best of the last five quarters. even if they've missed relative to the market, they've not done as badly as people might think. we think a lot is discounted in the price. but yes, it's weak growth in terms of earnings. tom: within the battle of the

united states, europe, and the u.k., where do i want to place assets to cash this morning? which market do i want to enjoy going into? nick: look, i think europe is certainly the one that has the most catch-up potential. it's round about 12%, in line with the average. in the u.s., it's far above the average, close to peaks. u.s. companies have taken on board a load of leverage in the last eight years. they've regehred their balance sheets up very aggressively through share buybacks and so on. european companies haven't. this is the same as it was just coming out of the crisis in 2009. so that is if you like more potential for europe. i think the u.k., as we were saying earlier, a two-speed market. you have the internationals, the defensives. if you're convinced that brexit is going pan out ok, some of the domestics are interesting. but remember, the ftse 100, 75% of the revenues come from overseas. that's not necessarily a buy.

i would say europe for potential. tom: the definitive multinational known as the united kingdom. jordan with us, nick nelson as well. it's real simple. when she opens her mouth, people stop and listen. we're thrilled to bring you katherine mann of citi group. this will be on trade, the dynamics of trade, on the american trade deficit. also on this era, this guilded age of rollouts. stay with us. ♪

tom: good morning, everyone. fran seen lacqua in london. i'm tom keene in new york. we need to bring you up to speed on the zeitgeist with a vengeance? washington. it shifted maybe 12 hours ago. there's no one better to speak to than the senior zeitgeist reporter, stephanie baker. we're going to be manafort and muller-free right now. steph, there it was, not one, but two stories. i'm going to say 4:00 p.m.-ish yesterday. one was a shutdown is upon us, and the other was the collapse of the nafta talks to come out in roughly the next 10 days. i'm sorry, steph, but these are related in that you've got a white house that really hasn't taken civics 101 on the new house majority. stephanie: right, and it does look like, you know, it's going to go down to the wire again as to whether or not we'll have

another shutdown. the talks collapsed yesterday. the democrats want basically a cap on the number of beds that immigration authorities have, so that they only detained criminals rather than undocumented immigrants with no criminal history. and that's what the current snag is over. the real question is, can they reach an agreement between now and saturday to avoid a shutdown, or does trump go ahead and declare a state of emergency and divert funding to build his wall? tom: is there anyone you observe of white house watchers, stephanie baker, that's advising the president on this dreaded n word, negotiation? i don't sense it. after the whitaker attorney general testimony friday, is there anybody there explaining to the president how politics works, given an opposition majority in the house? stephanie: well, there were

some people in that committee that said, look, if it were just up to us, we could reach a deal within a couple of hours, that the real issue is trump's intrance against on this. you have to think that mick mulvaney, his chief of staff, would be advising him on how to proceed with these negotiations. but as we know, trump doesn't always listen to his advisers and sticks to what he thinks is the best. and as we know, he's got a rally today, later today in el paso, which is all about his wall. we know that this wall is key to his re-election campaign in 2020. he has to deliver it in order to satisfy his base. francine: talk to me, stephanie, about the by os case with the "national enquirer." we were talking about it last hour. the lawyer for the "national enquirer" said this was not blackmail. are they right? stephanie: well, we know that prosecutors from the southern district of new york are looking at that very issue. it looks to and you me, to nonlawyers, that it looks like

blackmail. you know, you promised not to publish these photos if bezos comes out and says this was not a politically motivated hit job. legally, i think it's a little bit murkier. but i think the interesting thing is that a.m.i. signed a nonprosecution deal with federal prosecutors over these payments to two women that had affairs with donald trump. those payments were at the end of 2016, and whether or not this deal violates those cooperation deal is unclear. tom: stephanie baker, thank you so much. please stay with us. ♪ this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows.

this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. tom: bloomberg surveillance, quiet markets this morning. we are watching sterling. may to speak with corbyn. here is viviana hurtado.

viviana: the lawyer for the national enquirer owner says it did not try to blackmail jeff bezos. david pecker's attorneys said the photos came from a reliable source. saudi arabia denied any involvement in the dispute. >> we have nothing to do with this. we, maybe some of our citizens read the national enquirer, others watch this unfold on television. that is it. says withaul krugman increasing headwinds, it would be a bad idea for the federal reserve to raise rates. he discussed the economy at the world summit. >> we are in worse shape, we do not have a crisis of that magnitude about to hit us. we are in worse shape to deal with whatever shocks come along than we were. big night fors a

lady gaga in los angeles and london. she picked up three awards, rocking the house with a powerful rendition of shallow. earlier, she was honored for best original music from that movie. they are the british equivalent of the oscars. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thank you. tom is obsessed with "a star is born." tom: we should talk brexit. francine: or italy. tom: we should talk italy. francine: let's go to the latest on italy, they are facing off in a regional show of strength. matteo salvini has emerged at the head of the strongest region.

support for the five star movement, skeptics are poised for games in more than one third of assembly seats, according to reports said to be published this week. .oining us now, maria tadeo thank you for joining us. let's start off with you. if the european parliament turns populace, what kind of policies will we see? maria: good morning. , euro skepticse would win one third of seats. that is not a majority but they could block important legislation. is that that recovery, on paper, does not speak to the european working-class in real life. that is reflected in the decline we see and support for european social democrats, the guys they put in place pensions, health

care. they did not connect with their worker class the way they did in the past and what you see is they turn to more extreme options. me a sense of whether we are going to see fresh elections in italy and would it be before the european parliament elections given what happened in la bruzza, five-star tumbling. alessandra: that is a good point. may is close and italy has system for getting elections going. thesei has bet a lot on elections, he is hoping to get a boost from them. it is likely we will not see elections before them. this election shows that salvini might be able to win with the right.

this is making everybody nervous. the five-star was ahead in march elections when they came to power and now they are falling behind. shakespearean,is i cannot figure out if it is a drama or comedy, do these people have the support of the italian people? alessandra: they do. the thing is, together they have 60%. it is difficult for those who do not agree with everything they are implementing or saying. one of the main things they have been good at playing certain isnts, the immigration issue important in the north. south, they have played the citizen income, there is unemployment in the south. some people say the economy is slowing because of this government but they are playing the populist card well. day, italian people

still support this government and these parties and the left has not yet recovered. they do not have a charismatic leader and that is part of the problem. tom: very good. thank you for the briefing. maria tadeo as well. jordan rochester with us and nick nelson. how do you play this. i get the politics. do you remove it or can you play this in the market? jordan: it is on the forefront of all our minds. you cannot strip out the politics. you have to balance the credit risk, will italy default is what we were looking at in april of last year when we had that selloff, a flattening of the curve. that has been downplayed now. youmid to long and is where can have more fun in terms of putting on political trade.

translates to euro-swiss, we seeing safe haven flow back into the swiss. i think it will continue low. in terms of how to play it, we have to watch out elections play out. the polls underestimate the amount of support for eurosceptics. block,e: we have a swiss we built it for jordan rochester, coming up. we will talk about that more. if you look at italy and france, how bad can they get? we saw investments and tensions translate into the economy. politicsre are everywhere with the eurozone given how many countries you have got. what we're looking at an particular in italy is concerns over the credit markets and bond yields which read through to banks.

that is the sentiment. when you look at the situation eurozone, theyhe are correlated closely with where we are in terms of performance on credit spreads. if we can see credit spreads coming in, banks perform ok. tom: very good. i look at equity markets. i will ask you the same question i asked the foreign exchange guy. i want to know the tactical opportunity, is there an ability to buy italian banks? nick: they are high risk. if you look at banks across europe, they are trading on seenples that were last in the global financial crisis. since then, banks have raised equity. than theyess risky were in 2007, 2008, 2009. there is opportunity but you

need to see confidence you get less political noise in italy, france and the ecb. you have to get a feeling that somewhere you can search you see the ecb raising rates because that is killing bank net interest margins. tom: let me show you this chart. the cds for unicredit is beneath deutsche bank, this is unicredit here and more fear in deutsche bank in white. this is a remarkable lack of trust in the greater continental financial system, isn't it? nick: i think the individual banks, people look at individual banks, what we have seen is weak under performance by the sector and that is something that investors look at. it is almost 20% of the index. we need to see financials doing better to see the wider market

doing better. tom: nick nelson, thank you so much and jordan rochester. market conversation this morning, persistently lower rates. the call of the last ,wo decades, gary shilling formerly of merrill lynch. gary shilling on lower yields for longer. he is right. this is "bloomberg." ♪

tom: bloomberg surveillance, francine lacqua looking flashy this morning. crash,ime to talk flash swiss franc.

jordan rochester with us. let me show the photograph. this is one way to look at a given spike, this is two standard deviations on euro-swissie. notice well contained trading. look at this. here is this move, weaker swiss franc, stronger euro for a cup of coffee, not even that. i do believe this is a flash crash. if not, what is it? where: it is a fat finger it seems like during the overnight markets, that is when you have low liquidity but the markets are working and do have this sort of facade of liquidity. the amount of volume you can get done with those prices is little. you probably saw one big trade selling swissie, a normal trade

for london hours but outside of it tells you it was a fat finger trade. does it harm anyone? is there a so what? are trades stomped out? jordan: in essence, yes. the days when i see fat finger , ifes, this is a small one ,ou had three consecutive ticks that tends to trigger barriers. they trigger in, they trigger out. these moves on the back of little, it is frustrating and we need to somehow stop these. so far, we are seeing more of them than less. rememberof frequency,

2010, we did not see any for a while. now they seem to be happening every few months. upsidee: will the swiss be kept limited by the smb? in.an: it will step we never know what levels they will step in and they get stable. after the brexit vote, we saw stable swiss. they have not been ended the market -- not been in the market for quite some time because we have the ecb normalization trade. that would make it easier because there will be less frank appreciation. francine: will they raise rates? negative rates work well in switzerland. they willdo not think be raising rates for at least a year or two. is it next year? is going to follow the

ecb with a leg. .g what drive swiss is risk off. italy, the slowdown in europe is seeing renewed demand for this swissie. aboutne: they are worried upward pressure and they are worried about a deflationary environment, right? % ofan: they target cpr, 25 that is imported. a big component is what happens in europe and we are having deflation risk rise in europe. tom: we have talked about everything but. is switzerland the same? francine: nick is gone. tom: excuse me, i thought nick nelson was with us as well. the market is aligning

itself more towards asia. switzerland benefits from the growth in china. they have a free trade agreement with china. pharmaceuticals, services are growing in switzerland at a healthy pace but manufacturing is aligned to china so that is having an impact on switzerland. inflation was not too bad in switzerland. for me, it is about outflow rather than what is happening domestically. i have stopped following swiss data when i learned that lesson. good data, bed data does not drive the swiss franc. and the u.s.urope and asia. is president trump's trade policy advantageous for swiss companies jordan:? if it leads to a global -- companies? leads to a global slowdown, that will lead to a

risk off and that will not be advantageous for switzerland, that would be a negative. we're seeing it in terms of the global growth data factoring into windows tariffs came in -- factoring into when those tariffs came in. francine: thank you so much. coming up, the oecd secretary-general at 6:30 new york. italy andk him about france, german gdp, and brexit. this is "bloomberg." ♪

viviana: mrs. bloomberg surveillance. i'm viviana hurtado. -- this is bloomberg surveillance. i'm viviana hurtado. ourse ising for oslo b escalating. it is hoping to beat out a rival bid for nasdaq. it is recommended shareholders except nasdaq's offer.

rbs is shrinking its bonus pool. they will hand out 433 million pounds and bonuses, a 2% reduction from earlier. the broadcaster says the size of the payout will be disclosed friday. that is the business flash. francine: thank you. says that with increasing headwinds in the u.s., it would be a bad idea for the fed to raise interest rates. he also spoke about the chances of the world's largest economy entering a recession. .> it seems likely there seems to be an accumulation of smaller problems and the underlying backdrop is we have no good policy response. the fed cannot cut rates much, it is hard to see

that this current leadership is going to respond in any nimble way. better to even that we will have a recession. >> when you look back at the last recession, is the u.s. in better shape to withstand a recession? >> we are in worse shape. we came into the last prices with interest rates above zero and lots of room for interest rate cuts. we came into the last crisis with public debt lower than now which is not a big factor objectively but it is psychologically. we came into the last crisis , i doemarkable leadership enjoy them aligning government treasury, our current secretary is no hank paulson. we do not have a crisis of that magnitude about to hit us.

shape to deale with whatever shocks come along then we were 10 years ago. the imf has downgraded expectations for global economic growth. what is the biggest risk? >> icy two. -- i see two. one is china, i am in the camp overis predicting a crisis inadequate consumption. it seems to be getting closer to that point. the other is europe, the euro area is close to a slowdown, close to recessionary levels. paul krugman speaking to our team at the world government summit and many people pushing against the slowing economy. ofheard a theme last week resilient economic growth. let us turn to a great debate

for those of us who fly airplanes. the collapse, widely predicted of the a380 program. i would go over to the boeing -a. what did boeing get right that airbus got wrong? question and the one that people will be discussing over the next decades as we try to grasp whether there is space in the market for a superjumbo. there are a few reasons, one of the main ones is the 747 cargo. transferringor cargo back and forth across the atlantic. did not ever have space for that because it used all of its space to carrying

passengers. francine: what does the demise tell us about the state of aviation? >> as opposed to comparing it to the 747, it is interesting to 787, which isthe78 a smaller aircraft. airbus took a bet that you would see more people connecting airports and flying you to your next destination. boeing thought, you are going to want to fly direct. that is the case. francine: are we expecting news in the next couple of weeks and back in 2018, we had a deal. what happens to airbus now? in theill hear from them next couple of days, they have got their annual earnings. that deal last year never came to pass because emirates could

not reach a deal with the engine provider, rolls-royce holdings. essentially, rolls-royce was not prepared to do the deal on the same terms as before. francine: thank you so much. we need to bring our viewers up t, sayingwith euronex they are experiencing issues on all cash instruments. that is what it was saying, currently investigating the issue. mann.t, catherine 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. , it it seems like morning seems like there will be a

second shutdown of the federal government after talks collapse. it seems like there is a collapse of the new nafta talks. democratic socialists regroup. china will outweigh president trump. in this hour from london, catherine mann and yields move lower and they stay lower for longer. good monday morning, this is bloomberg surveillance live in new york, i'm tom keene. francine lacqua in london. may right, prime minister is going to speak with the leader of the labour party? francine: she has been speaking to him for quite some time. the labour party is saying she should delay the vote. i would point out to socouraging u.k. gdp figures we need to look at the fundamentals of the economy. tom: let's get to first word news. viviana: talks on border

security this morning to avoid a new shutdown have hit a snag. this morning, lawmakers are skeptical a deal can be reached by friday. without an agreement, nine federal departments and agencies would shut down again weeks after the record 35 day closure. democrats and republicans disagree over the number of immigration detention beds. president xi jinping's top economic aid will be part of this week's trade talks. he will meet with steven mnuchin and robert lighthizer. the u.s. and china are looking for a deal to avoid a ramping up of tariffs beginning march 1. president trump says the sides are making progress but confirms he is ready to impose heavier duties. the pound is extending its drop after the u.k. economy grew less than expected in the fourth quarter. gdp expanding .2%, down from .6% in the previous three months. a survey says there is a one in

three chance the u.k. could fall into recession in the next 12 months. this is further evidence of economic weakness as britain prepares to leave the e.u. theresa may is trying to buy herself more time to negotiate with brussels, writing a conciliatory letter to jeremy corbyn after he proposed february 26 as the new deadline for winning support for her brexit deal. christine lagarde saying britain's exit from the e.u. will be difficult. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: equities, bonds, currencies, commodities. jump to futures, the curve steepening. next screen. 15.89, yenets,

weaker. at 30 year bond persistent 2.98%. that is a higher yield over the weekend. francine: i am looking at stocks in europe, they are following a asia.session in we could see a week that is pivotal, dollar strengthening. the pound weakening. i will bring it up shortly. as the u.k. prime minister is seeking to buy time to renegotiate her agreement. iere likes tol publish early and often. there is so much confusion in washington, maybe we will hear from him by noon. right now, we hear from him by phone. beginot know where to

other than to ask you what the incentives are for the house democrats to core operate with 1600 pennsylvania avenue. --o -- toperating t cooperate with 1600 pennsylvania avenue. greg: this is a fiasco, it may being a nationaldeclare emergency. it is a plus for bonds. tom: what is a national emergency? defined what happens? greg: trump can cite that end he can go toround, the army corps of engineer and say because of this, i'm going to take money and build a wall. francine: he has not done that yet.

what is the president concerned about, is it backlash? if he does, a lot of republicans are going to say this is a bad precedent. years, thethree president says there is a national emergency over climate change and does radical things. theoes set a precedent republicans worry about. francine: do you know why the talks broke down? is there anything that can be done to avoid that shut down? mindnumbing, it is the number of beds available for immigrants. an agreement, there is no indication that trump would accept the deal because it is so stingy for the border wall. francine: thank you so much. joining us now for the hour is

research mann, citi global chief economist. thank you for joining us. here in london. when you look at the shutdown, what kind of implications does it have for the gdp? does it change fed policy? talk aboutwe have to the implications for growth in the economy. we have indications that the incoming data are going to be weaker. most people believe there will be an acceleration of the deterioration. things are going to get worse in a nonlinear way if there were a second shutdown. in addition, when people get paid, the rebound will not be as strong because people have to debts theyhose incurred during the shutdown. they might decide it is a good idea to save more.

all that means the rebound everyone is expecting to see in consumption to make up for the deterioration is not going to happen. tom: good morning from new york. i have memories of when you changed the language of economics with your analysis of china and our codependency. would you explain the codependency in washington now? take your research on dysfunction over to what our viewers see in washington? the codependency in the case of china and u.s. 10 years ago was that the u.s. spot a lot of goods and china wanted to sell a lot. both of those were advantageous at the time. it ended up being larger deficits for the u.s. and a dependency on exports for china. that,have been changes in

not sufficient for some people. the situation in the u.s., i would call dysfunctional in the sense that both sides would prefer to have an outcome that keeps the government open, that moves along with the business of the economy. they cannot get to that outcome. that is closer to dysfunctional. tom: do we have an ability to lose this dysfunction at the ballot box? catherine: i do not discuss politics in the book. there are always, that is how that the works is ballot box the place where people get to vote what they think is going to yield the right outcome for them. we have an election coming up. francine: what is your base case

for the fed? is that it for interest rate hikes for this year? catherine: we are data dependent, right? it is not all getting lost. there is high-frequency data , for example, credit card data is available to see what is happening to retail sales. the u.s. economy, the strength of the economy for the u.s., is the labor market and consumption, strong employment figures, strong sales. is, you have enough uncertainties and people start to worry about how long be job is going to last and if people worry that much, business is not going to invest and that we have a deterioration in the economy. the fed has to be worried about that. francine: catherine mann stays

with us. up, we speak with the chief investment officer of haman capital. he will be asked about treasuries. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. apple smartphone shipments to china plummeted 20% in the final quarter of last year. this underscores the scale of makers retreat from the largest mobile market. huawei cemented its number one position after shipments soared more than 23%. toshiba is cutting its full-year profit forecast by at least half.

nikkei reporting the updated target will come out when it reports earnings wednesday. the target will be lower from around $550 million to between $180 million and $270 million. the report blames higher cost for dragging down earnings. toshiba has not made a decision on profit revision. ubs revamping the bonus system for employees, it scrapped its individual variable bonuses and instead will pay people a percentage of their annual salary. those include employees in the human resources and i.t. departments. the payout would amount to roughly half a month's salary. that is the business flash. francine: thank you. brexit,t they latest on theresa may is seeking to buy herself more time to renegotiate her deal with e.u. weeks, mayver six has written to jeremy corbyn

after he proposed a new deadline of february 26 for winning lawmakers backing of a final exit deal. first of all, if we leave brexit to one side, we have worse than expected u.k. gdp figures. do we assume the trend is going to get worse until brexit is resolved? although there has been political discussion all along, businesses had to make decisions. we see that in the data. whether brexit is resolved or not, a lot of those are in train and they are not irrevocable but once they have decided to move locations, it is hard to do a u-turn. how much of it is

political end if you look at theresa may, she has five options left. which one is she going to take? catherine: i am not sure about five. the obvious option is to have a stopping of the clock and have an agreement to continue on with negotiations. that looks good from a political standpoint, better than a crashing out from an economic and political standpoint. of business attitude toward continuing to engage with the u.k. as part of the e.u., that continues. we see that in the data and we are going to continue to see that. crashing out would be worse because it would have a lot of implications. tom: one of the trends of the last six weeks is disinflation in germany. what is the character of that? things,e: a couple of

we do have wage inflation and that is a good thing because it is supportive of the european of growth in europe. it is a counterweight to what we see in terms of the industrial production in europe and that has been weakened dramatically because of china. they are offsetting each other. we have robust consumption, weak industrial production and the total of that is weakness on the ppi side, some of that is due to oil. if you put those together, you're looking at higher real wages. tom: can they clear markets after a 20 year experiment?

does catherine mann have an optimism they can clear markets given crisis? everybody seems to think that europe does best in a crisis. that is not great from an economic standpoint to wait for a crisis to undertake reforms that are necessary to move forward. if that is true, it would mean there would be a silver lining. but, you set out a range of issues that have been a feature of the euro area since its issues with regard to differential business cycles, differentials in their fiscal policies, differentials in the way the labor market works, the extent of fiscal union, banking union, services union. you set out a range of issues

that have been part of the area since inception. at this time, the external environment is making it challenging because it is this tension between the domestic and external. francine: thank you so much. staying with us. up, the institute of international finance chief economist, coming up later. this is bloomberg. this is "bloomberg." -- this is bloomberg. ♪

tom: -- francine: this is bloomberg surveillance. time is running out for a trade deal with china. willhinese vice premier join steven mnuchin and robert lighthizer in beijing for talks this week. still with us, catherine mann. thanking for sticking around. there is a question which is whether president trump looks at stocks and says, i want a deal because i want the market to go up or whether he sees this as an opportunity to reset the relationship with china. catherine: there are issues. in a interested longer-term strategic question but he is focused on the stock market.

we have done research that looks at the relationship between the shanghai and s&p and relates that to the tone of tweets and there is a leading and lagging relationship. stocks make a difference. not reaching an agreement on march 1 and moving forward with tariffs would be a damaging signal and the stock market would not react well. francine: let's say we have an agreement, what does it mean for the strength of the chinese economy? go backe: we have to six months, eight months and recognized the economy started toslow by policy design remove some of the fluff in the gnnancial markets and to rei in independent investment. there was damage to the household sector because there anda well-stocked -- shock

there were concerns about employment because private enterprises were getting the brunt of controls. we ended up with the trade war. even if we rectify the trade , therehich is important would still be problems with , problems of household insecurity, and problems of investment. the trade war is important for china, for the economy. it is not the only issue they need to address. me toot that you need sell another copy of your book, is the growing trade deficit sustainable? do you assume we see an ever larger trade deficit? catherine: it is smaller than it was when i wrote the book. it was 6% of gdp in the u.s..

now, it is closer to 3%. is it sustainable? we have to think about not just the deficit but the net external obligations. that is bigger than it used to be because we have been running deficits all along. the issue is the extent to which foreign investors continue to want to hold u.s. treasuries, u.s. securities and bonds. are the best game in town, advantage to the u.s. from the standpoint of investments. that can change. tom: catherine mann with us. we are thrilled she is with us. this is a joy, sometimes you wander along good fortune and we have a wonderful section coming up. angel gurria will join us. dr. mann has agreed to join us.

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viviana: the lawyer for the national enquirer owner says it did not try to blackmail jeff bezos. david pecker's attorneys said the photos came from a reliable source. saudi arabia denied any involvement in the dispute. >> we have nothing to do with this. we, maybe some of our citizens read the national enquirer, others watch this unfold on television. that is it. eskoma: south africa's implementing 4000 megawatts of rotational power cuts. utility says it has lost six additional generating units that is putting a strain on the system. the rand extending declines. initiating a split of the state owned company that is struggling under debt and

declining demand, those cuts until 10:00 local time tonight. a big night for lady gaga both in los angeles and london. she picked up three awards, rocking the house with a powerful rendition of "shallow." earlier, she was honored from baftas for best original music from that movie. they are the british equivalent of the oscars. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." thank you. this is without question our conversation today. catherine mann is with us with francine in london, the head of citigroup. , theng us from dubai secretary-general of the oecd, angel gurria. this is wonderful to have you with us.

i want to start with the state of the global economy, we see disinflation everywhere. that thehe measurement oecd has now of a move to recession,owdown, to or even to stagnation. i am not predicting there is going to be a recession. what i am predicting and what we are seeing and living is that we are slowing down the growth, we thought we were going to be closer to 4% growth and our latest production -- projection is 3.5%. what happened? are wede tension and why having the trade tension affect the prospects so much? toause when you invest

produce but if you do not know whether you can sell or at what price you can sell or what terrorists will be -- tariff will be applied, you do not have growth. this is the size of the impact in this is why this is serious. francine: good morning from london. paul krugman was talking to us earlier about interest rates and the recession. he put it bluntly, saying the world is worse off now than in 2007. do you agree with that? not.: no, i do we have learned a lot and the is more strongly capitalized, it is better regulated, it is better supervise. it is true that some of the , some of thewe had

ammunition we had before the to deal withoduced the crisis. tool,y cases, the fiscal the degrees of freedom are less, the monetary policy tool, we have used it for practically 10 years and therefore, you have less flexibility. is it likely we see a u.s. recession this year and if the fed does not have the tools, what does that mean to where we end up? angel: i do not see a recession in the united states. the united states is one of the economies that is doing better and that the same time, what the fed has done, is to be evidence-based which they said they would do and they are doing it.

in thesee a slowdown economy, then, of course, you go slower in terms of the increases in the interest rates. be 2 and you, may are having this healthy vigorous job creation. tom: angel gurria with us and in london, catherine mann. joining us in the conversation is mohamed el-erian who sends in the mail. an email. can any kind of global slowdown, disinflation, is that enough to drag down the u.s. economy? how does that work? the u.s. economy is a much more closed economy than any other one in the globe.

now, the domestic source of growth coming from the tight labor market and rising wages is providing momentum for the u.s. economy. in placealso government spending associated with the fiscal program that has not faded completely yet. the u.s. economy, it has a strong domestic sources of growth. that does not mean it is immune from the rest of the world, and immune from the trade tensions and consequences of the tensions. eighting, the u.s. economy is growing robustly because the domestic side is more resilient. is that ifognize there is an exacerbation of aade tensions if we get to rotter array of trade tensions, not just china, but potentially

232 issuese, section later in the month, you start to layer on top of each other these issues on top of the trade side and that feeds back to domestic investment, domestic investment pauses. there when im back was chief economist at the oecd. that drags down the economy. tom: this is important. with your team in paris, what is financialof the stability, our ability to withstand shocks or even one shock? before, today,d the banks are more strongly capitalized and they have been capitalized anywhere from seven

to 10 times than they were before the crisis and they are better regulated and supervise. isthe same time, the world better prepared to deal with the bad news. what we are bad at is dealing with surprises. what i see here is that some bad news in the offing, i do not see many out of the blue surprises happening in the economy that could cause a negative growth, a recession. i do not see a recession in the horizon. do you worry much about this war of words between france and italy? is it going to hurt investment and is it a difficult moment for europe? wars, and less they are

against hunger or against the and even, wars are bad wars of words are bad. i have to say, if there is going to be a war, it better be of words rather than alternatives. at this stage, there are issues that have to be addressed between italy and france. there is a new government in italy. .t is trying to find its place it is dealing with the european union and that the same time, now this confrontation with france is unfortunate for the atmosphere around europe. i am sure the wisdom of the countries is going to find a way out. tom: thank you so much.

a really special moment, wonderful to have you on. we will get this out later. there are headlines. i want you to jump in. i find these to be extraordinary. you can bring them up here. the united kingdom prime minister will make a brexit statement to parliament on tuesday. the government rules out the labour party proposal on a customs union. did they just tell labor no? francine: yes but they have been saying that for a while. theresa may started the negotiation with red lines. if she were to say yes to jeremy corbyn and his plan in staying in the customs union, that would

mean putting the red lines to one side. we were expecting a vote, the second vote. to be on the 14th and we understand the parliament vote will not be this week. that is the one headline. 101.i failed brexit the vote moves on. francine: i am here. , brexitncine lacqua expert. and gary shilling will join us, nails the low yield moment. gary shilling, we do that next. this is "bloomberg." ♪

tom: bloomberg surveillance. francine lacqua in london, i'm tom keene in new york. catherine mann and gary shilling joins us now. we will get into a long talk on low yields. fornd others have called lower rates. i want to talk about something you mentioned three years ago. you were out front, i know dr. shilling has written about this. scale. everybody wants scale which is french for mergers. gilded aget like a consolidation. have we gone too far? scale,ne: when you have we used to call it monopoly, you are looking for price increases. that is what we thought of being

the consequences of market power. the research now is saying it is not showing us in prices, it is showing up in wage compression, in the united states, it is job hopping that gives you your increase in wages. jobs because hop the companies are owned by the same shareholders, there is no room to do that. tom: brilliantly said. let's go to the single best chart. 1900.s back to up we go, a wonderful chart, above the trend. on scale, it is cyclical. we go through this every 30 or 40 years. gary: there is a new twist now. if you look at amazon, those are different scales.

they are oriented toward lower prices. aree is no evidence they trying to corner the market and raise prices. it is the opposite. are so easy entry that anybody on top has to fight hard to stay there. it is a different situation than the cartels. catherine mann, what are economists getting wrong? catherine: what are we getting wrong? francine: not you, your colleagues. catherine: with regard to pricing? francine: inflation and data. ,atherine: the puzzle we have people are looking for inflation in a lot of different places. they are looking for it in wages. we are seeing that. we are not seeing the price increases that might come from cost pushing up, wages

increasing. we are not seeing it at the top line. effect?e amazon last year, firms were able to protect margins because they had a tax windfall. there is question about whether they are going to start looking at the prospects for price increases, especially if we get another tariff increase. that is an opportunity for firms to say i need to pass it through. when we have been looking at different companies and the amazon effect is less apparent at the intermediates, those prices are passing through. it is just the top line we are not seeing it. strongu.s. economy stays , if we do not have escalating trade warfare to drag down the economy, firms are going to look at the prospects for price , look around and say,

maybe i can pass this through. francine: thank you so much. catherine mann in gary shilling stay with us. up, an important conversation with the uae energy minister. oil had his worst week since december on concerns about .lobal growth rate that interview, next. this is "bloomberg."

>> all of the numbers show that it is complying 100% with a number that we have committed to. million is the production compared to where we were. >> let me get your thoughts on the global demand picture. we talked about the supply picture. are we seeing shifts? the conversation is around global economic growth that is not where investors wanted. >> -- want it. >> the demand will not be

accepted. put the scenario for the cuts, we took into consideration the current demand situation of the world. we are prepared for it. there are other surprises that are going to come in this industry. it is not one factor that is going to affect the sector. i think the demand level will not be hugely different than what we planned for. optimistic that the year of 2019 is going to be a good year for us in the industry. uaecine: that was the energy minister. let's get back to gary shilling in new york with tom.

at global concerns about the economy, is it translated into a lower oil price? gary: yeah, i think so. oil is in its own world, not like copper where there is no cartel. it is determined by economics. you never know what is going to happen because you have opec with russia and so on. thatnk the bottom line is prices are in a range. when it gets below that, american for hackers cut back, above that, opec realizes if they get prices too high, they will bring the fractures back. andhave a range bound price unless something happens like a middle east were, i do not see it varying from that range. up thewant to bring

single greatest call in market economics. bring up the chart. yearsthis a couple of ago, showing the massive inflation over 40 years and down we go with the persistency that only you saw. still inertial force there for lower yields? gary: yes it is. we have globalization, we have uber, amazon, a number of things. we are shifting to an economy where there are more participants. we do not have the making of price increases. we have a shilling a technology overlay leading to new competition, can we see that nascent socialism people are talking about, even if it is not hard left democratic party, can

we see a push back? gary: you can. it boils down to real wages. real wages are barely growing. globalization shifted manufacturing from north america otherrope to china and asian countries and it has held them wages. grown a little bit more, about 1%, because inflation is low. lower inflation, you get more real wages. that is what is in prospect. we are in better shape for the average employee than five years ago. tom: i will go with that. we are going to continue with dr. shilling on radio coming up. we have lots to talk about. urria, catherine mann on

our podcast. a busy week. you just heard friends they look while with the latest on brexit -- just heard francine lacqua with the latest on brexit. stay with us. yieldsmarket side, low for longer, that is what we have seen. we will have interviews through the week on where we are. futures up 10. 2.98%.year, this is "bloomberg." ♪

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china. the u.s. has the upper hand in trade talks. talks break down between republicans and democrats over immigration as the u.s. heads towards fridays shutdown deadline. grows as the u.k. limps towards brexit. david: i'm david westin with x.i we have brexit, we have shut down. alix: it is like the third iteration. david: she is going to stand. alix: she is going to stay. we are seeing a little recovery. s&p futures are up six points. next dollar story. bondsory last week was everywhere. crude off