empty-handed -- u.k. negotiators return empty-handed. d.c. avoids a government shutdown. president trump says they are building the wall anyway. markets in the mood to rally. trade hopes rise. david: welcome to "bloomberg daybreak." i'm david westin, here with alix steel. revenuemour neal dunn -- nailed on revenue, but beat earnings per share adjusted. they've been going through a , trying to sell off their inventory. having to restate their 2017 2018 results on material weakness. they have to restate.

in theory, that is never a good sign. david: that would be a beat on net sales ofper $2.4 billion, a bit of a mess. -- a miss. alix: even if you have an issue, you have to restate earnings, down .5%. david: people don't like that. the markettheless, in the mood to rally. byr s&p futures, we are up 20 points here -- for s&p futures, we are up by 20 points here. the longest streak in seven years if it can make it through today. 10 year yield selling on the margin here. story -- a buy

the dollar story. time for bloomberg first take. andre joined by mark rosato lisa abramowicz. we will start with the shutdown story. theyhave a tentative deal, have to write it out and then get the president to sign it. they will give the president $1.4 billion for 55 miles of physical border. off thecrats pulled requirements to cut it. they're still a bit of uncertainty here. bit ofe is still a uncertainty here. this sets a positive tone heading into the debt ceiling negotiations coming up.

that has been the big concern. would be much more damaging because of these debt ceiling negotiations that start early next month or the deadline comes up early next month. alix: put on your former trader hat. you traded fixed income for a long time. would you be hedging the government shutdown, the potential debt ceiling debate? mark: at this point, there's a limited chance that you will get a kibosh on something like this. things have increased exponentially abroad. you have venezuela and the chinese trade talks. is 365 dayscus away. there's a lot of things people want to get a run-up for. there's a good chance you will get some sort of agreement, a fair assessment to say that you

should see this deal go through. alix: the other part of the story is what is happening in small caps. it would make sense if you had a better global economy that you wouldn't be buying small caps. biggestell 2000's outperformance versus the s&p in the month. fed, worriesvish about growth, small caps rally. growth,. industrials industrials rally. have 11.7 trillion dollars worth of u.s. denominated debt. based on that, you have a natural buyer. and natural buyer of dollars, you would have this underlying bid that continues to support it as countries worry about inflation.

fed helps support that underlying small-cap. at the end of the day, you have to worry about how you will finance your business. helps --e bish fed dovish fed helps the small caps. i thought i understood the way this works. lisa: all of your conceptions have been thrown out the window. i will call this a narrative because it could be something else at play. the fed being dovish gives other central banks around the world the opportunity to get even more dovish. ok, guys. this is a narrative people are following. all the other central banks are planning on tightening, you're off the hook. that's what people are saying.

if you consider that, the dollar looks good. that is a narrative that people are saying. there may be other issues at play like positioning. david: let's find a narrative for brexit. alix: there is no narrative to brexit. david: theresa may going back to brussels to get a new deal. this is what he had to say overnight. "we have agreed to convene new talks, but we won't do it by reopening the withdrawal ."reement that is a big but. go redo it. ." lisa: it is very hard to get a sense of whether brexit talks are progressing were not, whether they are heading toward a softer brexit because you have

labor backing this proposal to pave the way for a much softer brexit or a complete hard brexit because there are no agreements. really. economy is slowing down as a result of the uncertainty. we saw that with business investment rating we got yesterday. that isone thing concrete that people are hooking onto. alix: how do you hedge for geopolitical risk like that? point, i would be hedging very aggressively, especially on a hard exit. you have a lot of different pieces from immigration to the --en border to things being ireland the border to things being complicated by the italian recession. me, how many puts can you

buy without moving the market? alix: good point. thank you so much. on can find all these charts in your terminal. we were puzzled by the restating of earnings for 2016-2017. taylor: they are going to restate the full year 2016 and 2017 financial statements because they found errors. you can divert some of those taxes into future years. they found weakness in their internal controls. going to restate those. they went over there financial areements with price what cooper and determine some of their accounting errors -- price

water cooper and determine some of their accounting errors. -- determined some of their accounting errors. they are reiterating their dividend expectations. the headline, the restating of those financial statements. on thecoming up, more potential shutdown resolution and the boost it is giving the markets. this is bloomberg. ♪

>> this is "bloomberg daybreak."

the investment group has seen its $2 billion take in a pair of shanghai property firms frozen. the land seizure is adding to the private investment giant's funding load. it missed a bond payment last month. --t's one of the biggest among the nation's private sector companies. cut its investment call by 8% after a slump in equity offerings last quarter. were hardestctors hit. money gram reportedly adjusted earnings per share for the fourth quarter that missed the lowest analyst estimate. the lower numbers were worse than expected. the dallas-based money transfer company is planning strategy for

the future. >> we are down a little bit this year, but we are repositioning the company. we are going through a digital thinkingation, differently about the consumer interaction and how we go to market. we're are doing a lot of things intentionally. it will have a great effect for us over the long term. etf or lastm's quarter came in one cent -- for last quarter came in one cent. david: giving the president money for a physical barrier along the southern border, but not as much as he wanted. president trump said the shutdown was important to highlight border issues. >> if we didn't do that shutdown, we would not have been able to show this country, these

politicians, the world what the hell is happening with the border. that was a very important thing. now thee welcome federated investors senior equity strategist. york, martyh new schenker. point, isn't it going to be hard for him to back down off of this? marty: the democrats and , it'sicans reach a deal going to be up to the president to accept this. conventional wisdom is he would and move on to govern, but this president has never subscribe to conventional wisdom. david: the president doesn't want to be by himself. >> that is the real issue. will the president signal he

is going to sign this compromise? do theoesn't, republicans follow his lead? if mitch mcconnell calls for a republicans -- do the republicans override his veto? part of the story is that shutdown might be averted. do you have conviction in the rally? >> we are bullish for the year end. up around that 2700 s&p , you have to spend some time consolidating around that level. if weld be the best thing just spend some time consolidating and then making that push to our suggestion of 3100 to the bullish call. david: why are you bullish over

the course of the year? once we get past the shutdown business, we have a little thing called trade hanging out there. we have the china issue, the follow on nafta that still isn't resolved. linda: when we try to figure out whatresolved. it is based on earnings and the appropriate pe to pay for the earnings. the politics in general in my view is generally going to be noise. if it pulls the market back on any particular day, we could have a buying on the today as long as we don't see a recession and that the market isn't expensive on a pe basis. if i step back and say the fed is on pause, that is great. then i can be bullish and all the rest -- it is binary. we have some strong personalities on both sides,

particularly u.s. china to worry about. common sense says it ought to be good enough. alix: the next 72 hours, we will get good headlines. some decent headlines. marty: unless donald comes out and says this is no deal. alix: i mean for trade. marty: he really wants a deal, he doesn't want to harm china. all the atmospherics for a deal that he can claim as a victory are in place. david: if china is slowing down, we have the china trade uncertainties, europe also slowing down, can the u.s. but that trend and for how long -- buck that trend and for how long? linda: historically, you've never had a global recession

without the u.s. being in one. best fundamental worry right now is whether china can avoid a hard landing. they are doing lots of stimulus to avoid that. if china does go into a hard landing, it will drag us down with it. the u.s. doesn't want to be alone. we looked around and said the u.s. is the best game in town, but it can't be the only one. we are waiting for the u.s. to avoid a hard landing as well as china. alix: that brings us to what it means for earnings growth. he wound up cutting his 2019 forecast down to 1% from 4.3%. looking at more downward revisions, higher volatility and a drag on prices. what do you see that is materially different from this kind of call?

linda: we finished last year around 160 earnings s&p. ist we think is great here that the usa is the consumer for the world. unemployment is very low. we concern ourselves about wall street all the time but main street is in a good mood. retail sales up and down the income spectrum, it's very good. as long as we keep doing our shopping chores, it is hard to put together a scenario where we are heading into recession anytime soon and we could get 6-7% growth in earnings. david: the president came to office saying he wanted to be progrowth. what besides taking off the issue of trade can he do for the economy? marty: he can continue his deregulation push.

still this looming issue of an infrastructure bill. the people in congress can figure out how to pay for it -- can't figure out how to pay for it. there is impetus on both sides to actually take care of the infrastructure that is so needed in this country. if we can get past this shutdown, maybe you would get renewed push to do something like that. up, a small rally after all. small caps post their best performance against the s&p in a month. does it signal a rising risk of recession? this is bloomberg. ♪

alix: tictoc goes the recession clock. the probability of the session in the next six months has risen to 5050.

-- 50-50. >> i think economic activity will begin to wane in the back half of 2019. by the middle of 2020, we will most likely be in a recession. alix: joining us now, linda duessel of federated investors. what is going to change for you? ofda: 3100 s&p by the end the year indicates the market has agreed that there is not a recession on the horizon. if we make our way through august of this year, it will be the longest economic recovery in the history of this country. it is hard for market observers to believe it will go on and on. -- at federated believe federated believe that sets are bullish view -- our bullish view, it is a secular long-term market. capex the pmi's and

aren't that positive. is the consumer strong enough to pull us through? linda: yes, the capex is the big question. we are rooting for capex to pick up here as we make our way to the rest of this year after it got abbreviated with energy prices coming down hard and concerns from corporate ceos about what is going to happen. we forget the fact that we were at all-time record highs and confidence in both consumer and -- in confidence in both consumer and business. alix: what we have seen over the last few weeks, you have a dollar rally in, so the fed is -- you have the dollar

rallying, so the fed is dovish. linda: we believe we are in the back half of a cycle. than i ought to move upmarket market cap and focus on the u.s. -- then i ought to move up market cap and focus on the u.s. with regulations being cut dramatically, money is fairly easy and the economy is still growing, small-cap stocks look great, too. this one could go on and on and we like small caps a lot here. david: alix just referred to the strength of the dollar. given how much of the s&p 500 get their earnings from a rod -- from abroad, what do you need to happen with the dollar for your prediction to come true? linda: we really would like the

dollar to stabilize here. the dollar has been extremely strong. people have predicted it will start to weaken with the fed but youff the boil, have central banks around the globe printing away. want it to be too strong or too weak. if it could stabilize here, that would be just fine. alix: linda duessel stays with us. coming up, more time, please. theresa may about to speak, asking lawmakers for more renegotiation. this is bloomberg. ♪ this isn't just any moving day.

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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. 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. alix: this is "bloomberg daybreak." the risk on rally continues today. deal, dowa shutdown 2.9. futures up

european stocks no slouch, either. the dax had been beaten up in terms of china fears. the dax now one of the upper farmers. stronger risk on currencies story. the dollar still looking relatively for the seventh day of gains, the longest in three years. theresa may just about to speak in the u.k. parliament. -- another vote on thursday. 2-10 spreads in the u.s. that screwed up 2% -- crude up 2%. less demand for its own crew this year because of more supply coming online in the gulf of mexico. own crudemand for its

this year because of more supply coming online in the gulf of mexico. time to find out what's making headlines outside of the business world. tika: a bipartisan team of senators reached a deal on president trump remains a wildcard while both chambers of congress approved, the president will need to sign off before friday night to avoid a partial government shutdown. the pentagon inspector general -- to ensure the air force complied with regulations in 2015 when it approved the falcon nine and falcon heavy.

the evolution will begin this month, but they did not say what prompted the review. --. lawmakers criticizing the u.k. chancellor says brexit agreement could deliver a deal dividend for the british economy. they feel it is unreasonable to describe an amicable divorce from the block in such terms. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. alix: theresa may expected to speak anytime now. she will ask the house of commons to give her more time to renegotiate a brexit deal. pmq's and then

thursday, they will vote. what can she ask for today? >> there's not very much she's going to ask for. we've been talking for months about a meaningful vote. many think this is a meaningless vote. to will ask for more time get changes to her backstop deal . time, we'vee same time from michel barnier and time again that we will not renegotiate. will she go to jeremy corbyn to say let's go to a customs union? >> we haven't seen any firm signs of that. she did write a letter to him over the weekend saying she's more open to a customs union. she wants to get her deal over the line. what she needs to do to do that

is convince a number of mps to back her deal. alix: what to expect on thursday? >> this is a valentine's day .ote going to put forward a motion this afternoon, likely to be and amendable motion -- an amendable motion. we are stuck in a holding pattern at the moment. she goes back to brussels at the end of this month to get some kind of reassurance that she can bring back to parliament. david: we had to respect her tenacity. what will be different when she goes back to brussels again? >> great question. she's really hoping to charm the eu side.

friday. to dublin on sees hoping to make them that if they don't agree to what the u.k. parliament wants, we believe without a deal. alix: that has worked so well in the past. thank you very much. you're looking at a live shot of u.k. parliament again. we are waiting for theresa may to join her colleagues in the house of commons to update them about negotiations and ask for an extension yet again. ofll with us, linda duessel federated investors. you are bullish on the u.s.. what about the u.k. and europe more broadly? linda: europe on its own has been slowing down dramatically since last year. the brexit problem is a big piece of uncertainty and markets don't like that either. those that would invest in europe may invest for trade.

you would really need to think that that market was an expensive ridge the u.s. -- versus the u.s. if the markets get roiled in the great buying opportunity that would be for us . david: there's is been uncertainty surrounding italy, germany seems to be slowing down. what is it going to take for a turnaround -- we have theresa may addressing parliament. >> a brexit deal that honors our commitment to the people of northern ireland. january, this house gave me a clear mandate to send an unequivocal message to the european union. i took that message to brussels,

sk andwith president tu told them clearly what parliament wanted -- making legally binding changes to the backstop. be replaced would with alternative arrangements to avoid a hard border signal. yesterday, the secretary of state met with michel barnier to discuss the ideas put forward by the alternative arrangements working group. i'm grateful to that group for their work and we are continuing to explore their ideas. there could be a legally binding time limit to the backstop, a legally binding unit for an exit called to that backstop. we do not ever want to use the backstop. if we did, it would be temporary. it is reasonable to ask for

legally binding changes -- juncker maintains the position -- i said out the u.k. position that this house needs to see legally binding changes to the backstop. that can be achieved by changes to the withdrawal agreement. he and i will meet again before the end of february to take stock of those discussions. so, our work continues. week, the attorney general was in dublin to meet his irish counterpart. i welcomed the prime minister of malta to downing street yesterday and i will be speaking to other eu 27 leaders throughout the week. the leader of the opposition

shares the concerns -- i look forward to continuing our discussions. government ministers will be meeting with members of his team tomorrow. there are a number of areas where the house should be able to come together. i believe we have a sheer determination across the south not to allow the u.k. leaving the eu to mean lowering the standards in regards to environmental protections or worker safety. secretary's leading work to ensure we fully address all concerns about these vital issues. we've already made legally binding commitments to no aggression in these areas and we have prepared to consider legislation -- in the interest of building support across the house, we are also prepared to committing to asking parliament to follow suit whenever the eu

changes its standards in these areas. we don't need to automatically follow you standards to lead the way -- eu standards to lead the way. as we have done in the past. proud tradition of leading the way in workers rights. we've been listening to prime minister theresa may before parliament trying to explain why she does not yet have a deal with brussels. they have to redo the backstop. she's now working with the opposition leader, jeremy corbyn. she appreciates his cooperation. thus far, brussels has been reluctant to redo the deal. michel barnier has been emphatic about not doing it. we want to go back to linda duessel from federated. has this changed your mind at

all about the process for the u.k., brexit and europe? it is really hard -- the markets would like it if they kicked the can down the road. i'm so glad i'm not involved in that effort over there. it is such a big change. so many structural problems over indebted areaily of the world and they don't like each other, can't get along with each other. this is a major thing, these things take time. it brings uncertainty into markets. it is hard to be bullish on europe at this time. david: thank you so much for joining us today. coming up, we will continue on the subject of european growth. slowing growth in europe as the fears of a global economic slowdown -- we will hear from peter altemeyer, next.

this is bloomberg. ♪

." this is bloomberg.co "bloombk coming up, david haro. state power's utility is cutting supply to homes and businesses for a third the government is scrambling to prevent a total collapse of the country's grid. a potential political

congressthe national three months ahead of the elections. severe risks in abu dhabi -- >> latin america is also coming up. i think brazil, argentina -- hopefully venezuela. >> you would put money in venezuela? >> anytime after he leaves. he scrubbed the whole country. he ruined the country. he should leave. maduro. he's optimistic about investing in 2019. he feels geopolitical risk is at an all-time high. another sign that china's appetite for luxury goods remains healthy. gucci outpaced competitors in the fourth quarter. sales rose a

better-than-expected 28%, but feel they need to diversify through acquisitions. that is your bloomberg business flash. david: we turn now to wall street beat. street's newest stock exchange. a platform called the members exchange. off, nissan writes ghosn. suisse's commodity financing loss. wrong has them chiefs that they make it -- may get no bonus at all.

>> they are getting behind it. citadel and virtue, plus the big brokerages. ,hat we are starting to unpack what is this going to look like? can it work? we've got 13 already. these are pretty well consolidated among a small group , but the relevant that they got is the early backing of a couple of big players, they got the volume they needed from the people behind it. some pretty good odds for this. david: let's go to carlos ghosn. nissan came up with their earnings and said we will take an $83 million charge provisionally for some money we still owe him. >> what a tail this is turning le this is turning

into. the french have been behind him for a long time. now, they are backing away. what happens to the alliance going forward? no one knows. alix: he is still in jail. they're still the whole money thing with the versailles palace there, paying back that cash also. david: at the same time, the auto business not going that well. alix: credit suisse lost money on a commodity financing deal. the head of the swiss corporate investment bank called over the weekend and said may be no bonus. when it gets down to am i getting paid or not getting paid, that's when people start getting concerned. when the boss calls you over the weekend and says we need to have a real talk about your bonus,

it's not great. with whereis issue he is focusing on where he is this swiss -- and business had been a real stalwart for them. we go over to berlin, where matt miller is joined by germany's federal minister for economic affairs and energy, peter altmaier. matt: i'm here with minister ltmaier. germany narrowly avoided a recession. what are you planning on doing about that?

minister altmaier: the germany economy is in good condition. there will be more investment this year. -- this year,had we are spending more for families and for infrastructure and for defense measures and all of this will have a positive impact on our economy. we expect the german economy to grow by approximately 1% this year and 1.5% next year. this is lower than expected. for an advanced economy, it is still a good figure. matt: couldn't you just spend more money? wouldn't the eu like you to spend more money? minister altmaier: we have increased our public investment. we will continue to do so. we have increased our defense spending. we will continue to do so. at the same time, we have a

debate inside government about tax reform, about tax relief for companies. this is not yet decided. combine a we want to state of public finances, no sovereign debt that will increase over the foreseeable future, but at the same time, we are inspired by the tax reform, corporate tax reform that was implemented in the u.s. and france and belgium. matt: we just heard theresa may speaking in parliament. the u.k. and eu at loggerheads concerning reopening the agreement to debate. chancellor merkel said it would be a shame to look back and 50 years and not have done as much possible to compromise. do you think a compromise can be met?

minister altmaier: i'm optimistic. we can't have a note yield brexit. noa note yield brexit -- a deal brexit. the idea was not a european one. it was decided by the british government. there was a referendum. respecting it does not mean we don't recredit. matt: you have a couple issues huawei. we did see the deputy secretary walked by here. he seemed relieved at the compromise that you made last week concerning the pipeline -- the eu made last week concerning

the pipeline. is the u.s. backing off on this issue? minister altmaier: it was good news that the under secretary of -- we were both relieved by the decision. france and germany were united, we were able to table a compromise that will increase the competence -- the regulatory competence of the european aion, but it will not destroy particular pipeline project that is on the way. we are facing more weeks and months of important debates and decisions. i believe we should make a clear-cut distinction between on the onee project hand and the diversification of gas supply in europe and germany on the other hand.

germany will have to see an increase in gas demand for many years to come. that means we will have more interest in diversifying our supply. today, we have announced that we two contract one or brand-new terminals for lng coming from different regions, from the middle east, also from the u.s. this is good news for the american exporters. we had excellent constructive talks. i believe gas trade between the u.s. and europe will increase over the next 5-10 years. matt: thank you so much for your time. i know you had to rush off and sign some important papers before 2:00. , theis peter altmaier

federal minister for economic affairs and energy for germany. alix: there is debate about whether the weakness in europe is transitory. david: growth of 1.5% next year. the numbers don't seem to be suggesting that right now. very bullish on the german economy. alix: that is a huge indicator for the ecb as well. if it is transitory but it is a long-term transitory, what is the difference? wind upl have to supporting the economy. theresa may is begging for more time, still talking to the u.k. parliament, asking for more time for negotiation. what is that going to give you? david: the theory is you don't

get a deal until the 11th hour and 59th minute. that is a high-risk game to say we will come together at the last second. the: then what is last-minute deadline at the end of the day? the next meaningful vote coming on thursday. likes up, david herro carmakers in europe and certain banks as well. we will break that down and what brexit means for his portfolio. this is bloomberg. ♪

alix: may pleads for more time. theresa may says she needs more

time to negotiate with the eu, but she does believe they can reach a deal that house will support. d.c. avoids a government shutdown by giving the white house $1.3 billion in border security. global risk on sentiment drowns out recession fears as trade hope rises. david: welcome to "bloomberg daybreak." a lot to wait for. among them, what president trump has to say about this tentative deal. he said it looked like they had a deal. everyone is hoping he will agree to it. alix: what is the best political play for him? do thereject it, republicans have enough to over the right to veto -- override the veto? david: i would be surprised if

he wants to distance himself from mitch mcconnell. mitch mcconnell has backed him up. they've said this deal should be acceptable to donald trump. you never know. alix: in the markets, it is a risk on sentiment. you have the government shutdown avoided and the trade deal -- trade negotiations going more smoothly in beijing. 1%.o-dollar up 0. the best rally we've seen in three years. will that continue today as the risk on sentiment rains forth -- forth? crude really buoyed by the risk on rally. you had opec warnings for weaker demand, saying their market

share will be falling. david: doesn't look like the markets are believing it right now. let's get an update on what's making headlines outside the business world. ritika: trade talks between the u.s. and china back underway in beijing. the white house as president trump wants to meet with president xi jinping very soon. a reunion between the two leaders could help bring an official end to the trade war. president trump has threatened double tariffs on $200 billion in chinese imports if there is no deal by march 1. a congresswoman has come under fire for implying that u.s. policy on israel was influenced money from a lobbying group. that primereporting

minister theresa may confirms she needs more time to complete the process of negotiating a better deal. may added the only way to stop annual deal brexit was to reach a deal that parliament can support. -- only way to stop a no deal was to reach a deal that parliament can support. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. carneye also have mark speaking in london, talking about the global economy and the risks to the outlook. he's talking about the rising protectionism, he sees productivity weak. david: is global growth being

impaired by trade concerns? we are eager to hear from him because of brexit. this may be one of the last times we hear from them before that deadline. alix: he does a brexit is a test case. say brexit is a test case. david: it is part of a larger pattern of delocalization. alix: what do you do as an investor? joining us from chicago is david herro, harris associates cio. has biggest allocation is in the u.k. allocationto that with the uncertainty we see? david: the weakness and uncertainty means lower prices for businesses despite positive

business development, that becomes a reason for us to add to our positions. we have to make sure we have a good idea on what the intrinsic value of a business is despite what's happening in the macro environment. these are all inputs that go into our valuation process. if price drops significantly and value doesn't, this becomes an opportunity. david: how clear is the link between intrinsic value and the macro? did the intrinsic value of u.k. companies overall go down after the brexit vote? david: the share price certainly did. notost instances, you did see a major decline in intrinsic value. intrinsic value is a function of the cash flow stream of that business. today's, tomorrow's, discounted to present value. this is a big opportunity for the active investor.

mr. market trades on minute by minute noise in the geopolitical atmosphere. overnvestor measures value the medium to long-term prospects. something like a brexit or something like the italians fighting with europeans, any kind of political instability is often more noise than actual fundamental ability of a business to produce earnings. alix: what stock, what sector? david: you see a heavy towards european financials -- heavy weight towards european financials. everyis political noise, time it gets cranked up a couple decibels, people use this sector

as a way to play the noise by shorting it or selling these stocks. alix: justifiably. santander is in the hot seat today with its convertible bonds. there's a reason why it is a proxy. david: it is a poor proxy. hasnpl situation in italy significantly improved over the last 2-3 years. if you look at the quality of bnp -- those npl's have barely moved. whichare aspects to this impact the bank's fundamentals. this uncertainty means lower rates for longer. if you raise interest rate normalization, this is not good. the banks aren't going to be able to grow because of uncertainty, this is not good.

but npl's are down cost, these are up -- fees are up. they are not voting like we'd hoped, but they are still growing, albeit at a slower rate. david: if you have negative interest rates, that's not helping the banks over there. it was thought that the ecb may be moving toward normalization. what is your time horizon for when this has to turnaround to make it worth your while? david: there was the belief that there would be normalization starting sometime last year. it looks like it might not start this year. as it economy picks up holds together in europe and the european economy is muddled with -- theral problems

problem is growth. you cannot normalize interest rates until you get the former footing growing. countries, especially germany and even italy, are big exporters to places like china. as soon as growth picks up, you will see a resumption in the normalization process. there's been a little resumption in terms of quantitative easing. david: let's turn to another area where you have a heavy waiting -- automobiles. it doesn't appear there will be growth there in the u.s. or globally anytime soon. he had a warning about automobiles. it is easy to bring the -- blame the woes on

tariffs and the trade wars. there's some over purchase saturation in certain countries. we need to clear up the trade war's. david: there's a softness and demand -- in demand. at the same time, huge investment required for electrification and autonomy. why is that a long-term sensible investment? david: they've been investing for the past four years. we are getting towards the end of this r&d phase, this investment phase for electrification and autonomous. the automakers are starting to get wiser, instead of doing this on their own, they are starting to develop cooperations with each other to spread some of this investment pain around. the market is not booming, the market is not robust, but the market should still grow over the next 2-3 years.

we have some structural issues and cyclical issues. you have to look at the price you are able to buy these businesses at. when you see a company like daimler still learning good profits with $17 billion net cash on their balance sheet with a very strong brand name in mercedes-benz vehicles, i'm not saying this is a business you bute at 15 times earnings, 5.5, you have to look at the price you pay for what you're getting. reason to be excited over medium to long-term prospects, especially given that most of the leaders of these invested for the future. david: thank you very much. that is david herro of harris associates coming to us from

chicago. coming up,, shut down averted? deal, leadinges a the -- leaving the shutdown up to the president. this is bloomberg. ♪

ritika: nissan came up short in its first earnings report since ghosn's arrest last year.

morrison course -- coors cited mistakes in 2016 and 2017. the company said there had been a material weakness in internal controls for financial reporting. fourth-quarter results weaker than expected -- a plant in -- the anti-icing products are used for treating roads and other services. congressionalht, negotiators reached a tentative deal to avoid a government shutdown this friday, giving the president money for southern border. -- for a barrier along the southern border. last night in el paso, president

trump said the shutdown we had before was important to highlight border issues. >> if we didn't do that shutdown, we would not have been able to show this country, these politicians, the world what the hell is happening with the border. that was a very important thing. w sairawe welcome no malik and marty schenker. to the american people want this wall? show that theys support border security but not at the expense of shutting down the government. david: is the tentative deal actually hitting the sweet spot? --more money for security there's more money for security.

level there is a certain of flexibility that gives the trump administration the ability to ship money around to increase the tension. in a normal world, you would think president trump would take this deal and move on. david: you have a prediction? marty: not really a prediction. no one has lost money betting on the nonlogical thing. alix: the narrative in the market is we may get a deal. is that the correct narrative? saira: the market needs to digest a lot of the headwinds and tailwinds out there right now. the biggest tailwinds this year has been the fed. they have been more dovish. in the year after the fed pauses on interest rate hikes, the market does well. we had to digest these headwinds like earnings growth, the dollar, the international

geopolitical risk issue we have to digest. alix: the shutdown playing into that to some extent. they cut their forecast to 51% earnings growth. what do you see that is similar or different to that view? saira: earnings were better than expected. we need to work through the next three quarters of earnings and for the s&p to break out from here, we have to get to a level where earnings growth can surprise to the upside. we can do that with some sort of deal on tariffs, the dollar weakening, but we need something to lift earnings or we will stay in a trading range. david: where are we on tariffs? we forgot all about beijing. robert lighthizer will show up there tomorrow -- thursday, actually.

a solitaryp took -- he saidna talks he did not want to hurt them. he wants to be able to declare victory and get a deal with china. that's part of why the market is up-to-date. -- up today. positive vibes on china talks. alix: does that give you more conviction of the rally if we get some sort of trade resolution? saira: trade issues may not be resolved by march 1. we are more interested in those companies with defensive growth characteristics. growth will be slowing. some areas of consumer staples, e-commerce payments -- in our view, cyclicals probably won't work. david: how much of bloomberg

news is waiting for president trump's tweets? come first --ll the snow or president trump's tweets? not be functioning for a little while longer. alix: that's more sleep then david -- than david. david: that's true. saira malik will be sticking with us. activision blizzard syncs to its toest in two years -- sinks its lowest in two years. this is bloomberg. ♪

david: time for the bottom-line. first of all, i'm watching nissan. -- the headline was

more about the $83 million reserved for future earnings. that is an estimate. they disappointed in their earnings. they had projections that were not that positive. a lot of changes going on generally. auto sales are soft. at that point, you don't need to be distracted with this carlos ghosn thing. they are not spending as much time on their core business because they have to worry about carlos ghosn. alix: under armour seems to be getting its act together. the earnings fell -- inventory shrank 12% to $1 billion. they are really trying to de-clutter, eliminating products that aren't working. that seems to be paying for them right now. david: they had too much inventory. they are executing on their

plan. excellent. activision blizzard is the third company we are watching. alix: are you a gamer? >> i'm not really a videogame player. it's all about fortnite, isn't it? >> it is. activision blizzard reports earnings after the close today. the stock has been coming down over the past couple of days. you had those results from e.a. and take-two last week that disappointed. was surprised investors is the gaming industry has shifted to this new strategy where they titles and sell things within the games. we are seeing that maybe have some cracks in it.

the follow-ups to these key titles are not performing as well as expected. hearthstones like are not performing up to investor expectations. destiny 2 is coming up short. david: fortnite is the range. it's hard to be the second one to come in. they are seeing a big pickup and subscribers. -- in subscribers. the industry is shifting to these free to play games and then you buy things within the games. zynga operates on a similar business model. the idea of these marquis franchises protecting your business is not as strong as it once was.

arts is out with a but you follow-up, can't have multiple versions of that. david: take-two was the hot property for a long time with grand theft auto. when i was addicted to candy crush, i was like, "i will not pay." growth fears in europe escalate a bit. more economic slowdown, next. this is bloomberg ♪ -- this is bloomberg. ♪

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the big guns thursday, but it seems like the rhetoric is more positive. dow jones up, the s&p up. the dax up 1%. market, we had eight straight days of dollar gains. taking a break today. it would have, been the longest winning streak for the bloomberg dollar index in seven years. the dollar coming off as the risk on rally flows. the cable rate up .2%. theresa may spoke earlier with u.k. parliament saying she needs more time. she think she can get a deal everyone will like. points in the u.s.. crude up by 2%. talk about your risk on rallies. they of opec warning of a potential demand issues in the americas as well as europe and they are basically seating market shares in the gulf of

mexico. david: not sure traders are reading the open reports. alix: you also have the dollar coming off and the risk on. good for commodities. david: now is time to find out what is happening outside the business world. congressional negotiators have reached a tentative deal to avoid a new government shutdown. the agreement on border security is said to give president trump are less money than he wanted. it provides $1.4 billion. the president had sought as much as $5.7 billion. still he says the shutdown is important. not do that shutdown, we would not have been able to show this country, these politicians, what the hell is happening at the border. that was an important thing. agreement was announced about half an hour before the president held a political rally

in el paso, texas. just a no,s audience " we are building the wall anyway. " members of the european union are considering a joint response to cyberattacks. the u.k. reported evidence of both software and hardware infiltration. the hackers said to be behind the attack are known collectively as a bb10. that is the same group indicated by u.s. indictments. in madrid, the trial separatist leaders gets underway in the country's supreme court. 12 defendants are being tried for their roles in unilaterally declaring catalonia's independence from spain. the move was based on the result of a referendum that ignored a constitutional ban. 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.

this is bloomberg. union the european finance ministers meet in brussels today about getting their arms around the eu budget. that is at the top of their agenda. joining us is maria tadeo. explain to us what is the issue? is it that it is too big or is it is the process by which they reach it? maria: both. they cannot agree on the amount or who should be in charge. is it a question of countries that share the euro or should in -- should include the eu 27, everyone who is part of the european union. the french government pushed hard for this but is not managed to get the germans on their side, at least in an open way. this, the outlook for the eu has become more

challenging. you have germany now flirting with a recession. you also have italy back in a recession. today and ministers they are arguing we might be being a little bit to business to -- a little bit too pessimistic. the end of theby year, europe may outperform. david: it appears they're about to lose one of the biggest contributors to that budget, the united kingdom. there seems to been some payment in the deal so far, that it will go way up some point. paid into the eu budget, and both sides have agreed that for the u.k. to leave, they will have to pay for the divorce deal. you know if there is no deal, all of this could be called into question. that is another factor in the negotiations. when it comes to the eu, nothing

has changed. they will tell you the script is unchanged. we do not want to go back to the negotiating table when it comes to the withdrawal agreement. if anything we need to look into the political declaration. there is growing concern the prime minister does not have a strategy. all she can do is run the clock. that has increased the probability of a no deal. we get to march and there is no deal, the default scenario is if there is not a deal, you crash out. you leave the eu without an agreement. david: i'm not sure that is fair. i think her strategy is to keep asking. thanks a much to maria tadeo. bloomberg economics chief european economist joins us from london. if you're getting defensive in the u.s., what would you do in the u.k.? >> we think brexit happens in

some time of correlated fashion but the timing is unclear. in the u.k. we are looking for exporters who might benefit from a weaker pound. alix: we've not seen the export scenario play out. is there also domestic small caps? >> that could be a scenario that plays out. we think it is better to avoid that area and look to other non-us countries doing better internally. alix: yes theresa may will be asking for more time, but whether she gets it is a question. a negotiator has said we agreed to new talks, that we will not do it by reopening the withdrawal agreement. it is not open for any sort of renegotiation. how does this play out in an economic sense for the u.k.? >> i don't know about you but i

get the impression he means it when he says he will not open up a withdrawal agreement. what that means is it is up to the u.k. parliament to soften its line on what is acceptable. that could take time. it could take that choice between crashing out of the eu or the deal to get it through. i can see why theresa may is playing for time. it is a risky strategy. everyone except theresa may thinks it is a custom union gold -- shall barnier would along with that, jeremy corbyn would go along with that, it is only theresa may. the most likely path forward is some likely customs union arrangement. it does not include services.

costs will still be large for the u.k.. the longer this goes on, the uncertainty is elevated and we are starting to see this has an effect on the economy now. it is weighing on investors. growth is slowing. david: i want to break a little bit of news. an official at the white house is saying president trump has not decided on the proposed shutdown deal. he wants to review the full language. they are busy drafting that on capitol hill. not saying yes or saying no. alix: you cannot expect them to give in right away. you have to read it. not a lot of market reaction on that. a part of the conversation has to do with the u.k.. german growth is slowing. we spoke to the minister earlier in the program. here's what he had to say. >> we expect the german economy to grow by 1% this year and 1.5%

next year. it is lower than expected but for an advanced economy it is still quite encouraging figure. david: sounds different than the data we've been seeing. do like germany? saira: the bigger picture eu loss has valuation on its side but it looks more like a value trap. what europe needs as a catalyst. you may get that later in the year, it might happen is chinese demand picks up, but until we see some of that it is a neutral until we see a catalyst in place. david: we heard a lot of talk from mario draghi about the ltro. will it make a big difference? it would also show they have to do it because of the fragility. is there one area where you would want to be playing that? saira: we would be looking at

the european consumer. o and a delay in interest rates is generally positive. it is earnings growth that would finally drive that market higher. alix: if we do get something with china and china is able to reflate, is there something -- is there an upside. saira: generally it is positive for the eu and germany. alix: always good to catch up with you. we'll take a look at what the means for thepse president's reform plans. this is bloomberg. ♪

>> this is bloomberg daybreak. hour, up in the next mohamed el-erian, bloomberg opinion columnist. alix: time for follow the lead. a deep dive into the stories making headlines. today we will look at brazil. the central bank says faster economic growth depends on progress of the government's pro-business agenda. a wrinkle, in the aftermath of vale's dam collapse. taylor riggs is here with a deeper look at brazil's markets and economy. taylor: i want to touch on that central-bank decision. the key benchmark interest rate is 6.5%. we got the minutes from that meeting. the current level is stimulative and growth hinges on reforms on

the pro-business agenda on the fiscal side. when we take a look at the stock market, on october 7 you have the stock market up 16%. central bankers saying acceleration in the pace of the economic recovery will depend on reduced uncertainty and implementation around those reforms. i also want to take a look at vale. that is one stock not participating in that rally. it is the iron ore giant that is seen shares tank since the accident. off 25%, recovered by 10%. hedge funds circling around but looking at the global shortage of iron ore. those prices at a two year high on supply concerns. david: thanks so much. welcome jamie nassar, bloomberg markets chief intelligence strategist. oscar is heavily invested in brazil. damien is not heavily invested.

oscar, start with a brief report card update on where we are in brazil. after the election, there were high hopes but we do not know much about what would happen. how far along are we? do we have a better sense of whether they will be able to deliver. oscar: thank you for having me here. i think we are in about 40 days of the new government. we have seen the cleaning out of the house and this new social security reform going back and forth along the economists, along the government. what we have seen is positive news with regards to what we have seen from this specific social security reforms. we have seen positive with the senate and congress and the new president. that is something that was bringing volatility to the market and we saw two new presidents together with the government to make this reform pass. david: does he have the support

of the legislature he needs to get this done? side, on the people's this is a new president that is showing dedication. he is in the hospital's working a lot. we are seeing every single day opposed from him about an important point for the government. the population is definitely behind him. on the government side, there is a general support for this program but there are discussions about concessions here and there. we are positive about the scenario. alix: i am wondering, we brought up vale as the wrench thrown into it. it is all about how we get rid of mining waste. is the regulation leading to more transparency. does that throw a wrinkle into this? vale as relatively sustainable capital.

i do not think that is the real issue. the issue for brazil is the number you talked about, fdi. last year, brazil do not carry nearly as well from the perspective of u.s. credit. howell it attract that inflow? i am in the air about whether be successful. oscar: time will tell, but we have to judge what things are happening. what is happening are conch -- a newsitive steps to get senate president. the free market position that the government is bringing is a reality. however there were certain laws that were not being executed in the past. what we have seen with this dam issue is the laws are not being executed. the reaction the government had hasop of this specific dam

been much bigger than what happened in the last dam collapse. alix: that was in 2015. i've have talked to businessman before investing in brazil. they say the climate is so difficult. the permitting process is so difficult. it discourages foreign investment. oscar: when you look in regards to the list of countries doing business, brazil is 130th. it is close to sudan. when you look in terms of the the pricees, waterhouse report shows brazil be the fifth largest country in 2050. something needs to change dramatically. the opportunity is there. when we look at the amount of money that will come in, it is also relative to the other allocation we went through in the last 10 years. everybody is still under allocated to latin america in

general and brazil specifically. jamie: pmi's are running hot. that ip in september was week. we'll have weak growth. if your growth's of 3% and inflation running close to 4%, it is a bad cocktail. alix: if you're an investor in looking at latin america in general, where else would you go? region alike the andes lot because it is fundamentally cheap. if you expect negotiations between u.s. and china, copper --ducers like argentina brazil has its issues. structural form is key and the timeline is key. the verdict is still out whether he will be successful. oscar: at the end of the day it is about the fundamentals. we have to find these opportunities. dependent on the size of the government, the size of these

expenditures on social security reform that needs to be addressed. if they're able to do that with a stronger government showing positions,d new which is what they're trying to do now, i think they will do fine. david: you say he has the public support he needs now. there's a tendency for the support to wander away if you do not deliver. how much time does he have? oscar: i think the longer it takes to get approval, the more the social security impact will have on elections down the road. everyone elected wants to get this done as soon as possible so it does not affect their attempt on next election. alix: the is in the hospital, so maybe there is tiny leeway. what i find interesting with the conversation is you're talking about two kinds of investor bases. your private equity shop that does small to midsize deals based on the consumer and domestic conditions. you are looking at it from a u.s. investor where you want to

allocate point of view. can these continue to be separate? oscar: it is a point of segregation in regards to asset class of private equity. from the investor standpoint, we are also focused on the u.s. investors. that isnd of the day, the timeline you're looking for. volatility is a reality this year. latin america will not be different. -- need to be able to something that has a longer time horizon to generate that return. jamie: one small name we are not mentioning is petrobras. they are in a sweet spot right now. crude.ve heavy sweet with 2020 coming on, you know all about this. they are in a good position over the long-term. from a creditor perspective in the u.s., not a bad way.

they're means the crew producing in the pre-sell is exactly what we will need when we have to make certain products for january 2020. exxon is big on that. thank you very much. we have to leave it there. thank you both. a weaker demand for crude. opec sees softer demand for oil while u.s. supplies surge. more on what i am watching. remember bloomberg users, you can interact with the charts we use. gtv save them for your future reference. this is bloomberg. ♪

alix: what i am watching his oil prices. participating in a risk on rally, up over 2%. i'm watching in opec report out about an hour ago.

they see demand growth moderating from europe and the americas. more importantly, the pawn opec crude, how much the world will byd of opec crude is falling about 1.6 million barrels of oil. david: this is an opec report. opec has been good at cutting production when things like that happen. alix: they cut 797,000 barrels of oil a day. but the report brings an interesting question into play. what do they fight for? higher prices or market share? if they fight for market share they have to keep pumping and you have lower prices. if they go for price, -- the market does not know what they're going to do with that. david: is it opec or opec plus? the russianve energy minister saying were not ready to commit to a full deal with opec. russia may want up going on its own. there is another part of the

conversation that is pure volatility. if you're a producer, you're not going to like volatility if you cannot respond to short-term prices like u.s. producers can. you need stability and to provide that. ,avid: what i find interesting this discussion, no iran sanctions mentioned. there was a big issue for a moment. alix: nobody knows what to do with it. trump did a 180 and became super harsh. hands off for now. coming up, bloomberg markets, the open. joiningel-erian will be on this risk on rally day. 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: global equity markets rallying. u.s. futures pointing to a higher opening. democrats and republicans salvaging an agreement on border security that good avoid a shutdown and the white house saying the president still wants to negotiate the end the trade dispute. 30 minutes away from the opening bell with futures positive .7% on the s&p 500. the dollar giving up the winning streak. treasuries just a little bit softer. yields up two basis points. 2.68. a double dose of happy talk fueling investment optimism. >> it is good news. >> i am reasonably positive. >> the avoidance of government shutdown is positive. >> you should see this deal go through. >> from a global story, i think