march 1 deadline if the u.s. and beijing are close to a deal. brexit blowup. plan reportedly revealed in a local bar. between domestic issues and a weakening china. david: we had this news that came out a few moments ago. spain has rejected that budget proposed by prime minister sanchez. you need the catalan supportive -- some of them are under trial now. alix: there was an immediate reaction to the downside. we talked about domestic issues. is there going to be snap elections?

that's not going to help. david: they've had a lot of turmoil over there. alix: the bonds are underperforming, but barely. we are continuing to see some follow-through from yesterday's rally. the s&p closed right above the 200-day moving average. euro-dollar a tiny bit stronger, but it's a weaker dollar story, giving up gains yesterday, continuing to give up gains today. what kind of downside pressure will we see? 10 year yields go absolutely nowhere. goldman sachs reiterating its short-term call. definitely bullish, helped by that weaker dollar. david: time for the bloomberg first take. we are joined by michael mckee and christine harper. it's been a whole minute and a half and we haven't talked about china trade. we know we have this march 1 deadline. negotiators are over in beijing. yesterday, president trump said

maybe there would be a little bit of given that deadline. deal we are close to a where we could get a real deal, i could see myself letting that slide for a while. generally speaking, i'm not inclined to do it. david: this is the first time i've heard from the president himself say we may back off the march 1 deadline. michael: we have no idea at this point. robert lighthizer is over in beijing. they are supposed to start meeting tomorrow for two days of meetings. the idea of buying more american stuff, the chinese are pushing forward a law that would ban -- force technology transfer and intellectual piracy. and getting the chinese to give up something on that will be difficult before march 1. it will be interesting to see

what excuse donald trump would use to push that back. members of the negotiating team over in beijing have said we are not pushing back the deadline at all. alix: competing messages. that doesn't sound at all like our politicians. what is baked in? if we get a resolution and there some reflation in china, that is a whole new ballgame. >> investors are rising and falling, everything depends on this deal. we spoke with the head of norway's sovereign wealth fund. he said what they watch as the u.s. and china. everything in the markets ultimately comes down to those two huge economies. that willan resume, be four years an important element of how people invest -- for years an important element of how people invest.

alix: and brexit, kind of. we are waiting for prime minister questions in the u.k. the news of the night, a reporter got to break some news strategy theresa may's was because he overheard it at a bar. the issue is whether brussels is clear on the terms of extension. , they will probably give us an extension. that is basically a threat. backup plan or not. michael: the may government is pushing back against this story. her strategy seems to be run down the clock. then present the mp's with a choice, you either crash out of the eu or except the prime minister's plan. it is a dangerous game of chicken.

we have key votes coming up this week in parliament, including one that would bar in o'neill brexit. -- a no deal brexit. gets selected, the speaker of the house, if he selects that for a vote, that would complicate matters because if they don't have a deal, then they have to go for an extension. there's another deal sponsored by yvette cooper that would demand that they extend brexit for quite some time and take the pressure off. important votes this week in parliament. david: are we surprised? you look at what theresa may was doing, it looked like she was going down this path to take it to the last possible second. >> it was either a strategy or incompetence. there are people who thought both ways.

you have this gamesmanship in the u.s. and the u.k. with these march deadlines that may or may not be extended. what did they have to win or lose? the markets are dependent on these particular deals being reached. it should be march 15 for these deadlines. beware the ides of march. alix: listen to the other story. industrial production falling the fastest since the financial crisis in europe.. the conversation emerging that there is weakness in the global economy -- not europe, not china, not trade. >> there's data out there that shows it is weaker than the u.s. and china. the big question is whether the being able to

come off the stimulative policy will ever be realized. they are making it feel a little more tenuous. david: good thing you are here. s, these hybrid -- they shocked everybody by not calling them. that's howant as it? significant is it -- how significant is it? >> the reason they are not preventing them from exercising call -- theythis are making a marketing decision, which they are right to do so. at some level, investors should hope they do that. finance wheree in things are options and then suddenly become expectations. on wallit's bonuses

cocos, there's an option to call them. you see the bonds were covering today as people realize they may not be as traumatic as they were worried. alix: you can find all the charts we just used on gtv on your terminal. teva's earnings have disappointed people. they missed on earnings-per-share but be done revenue. their forecast for the full year was below the range. you can see they are getting punished in the premarket, down a little over 9%. teva pharmaceuticals disappointing the marketplace now. alix: it will be a tough 2019. david: certainly tougher than

everybody expected. later this morning, carrie schultz, the teva pharmaceuticals ceo will be speaking with us. alix: barrick gold their earnings as well. revenue coming in a touch like. -- a touch light. this is the first quarter they are going to be announcing their earnings. looking forward, with the new company is going to look like -- what that new company is going to look like. david: more on trump's let it slide trade mentality. this is bloomberg. ♪

david: president trump signaled a possible extension of the deadline for more china tariffs. if we are close to a deal where we think we can make a real deal and it's going to get done, i could see myself letting that slide for a little while. but generally speaking, i'm not inclined to do it. chemicals, steel and auto parts moved up. we welcome now ben mandel. good to have you back with us. are we overreacting to the president saying he might slide the deadline? ben: overreacting to the president? alix: weird. we never do that. ben: the contours of the deal

are coming into view. there are heavy caveats attached to it. one is that it will be a narrow deal. two is that a lot of good news is already priced in. that, there's a risk here we are slightly complacent about the narrowness of the trade conflict. we were thinking about nafta and europe and japan and china. now, it has collapsed down to u.s.-china. there's a misguided perception that we solve this and the trade war is done. it doesn't account for auto tariffs or ongoing negotiations with europe and japan. the risk is that there is a broadening out of this trade conflagration. david: that is trade. with ip numbers out that were discouraging, china slowing. >> you have the trade policy track, the fact that the global

industrial cycle has taken a turn for the worst. 2015-2016, but it has a flavor of it. global demand for goods has been weak. and it's bringing down the economies that are the most exposed to them. thinking about the asian manufacturing complex, europe, this is part of a broader malaise outside the u.s.. alix: i will go with the glass half-full outlook. if you see the underperformance of what's happened with companies that have sale exposure to china, those earning estimates have tended to come down. the stronger dollar has been benefiting from the safe haven flows. those things could have a material reversal for the markets. if the dollar weakens, you don't

have a safe haven flow, that is a boost. ben: we have to be aware of the symmetry of our experience with the negative trade announcements over the last two years. we look at the case study effect of each specific negative trade announcement on equity prices, there is a pretty knee-jerk reaction for a stock to go down. interestingly, especially in the u.s., there is a recovery thereafter. there's a noise and u.s. equity markets,

you get a knee-jerk reaction and it goes away, or will it be more relaxing? it should be more relaxing in the cases of china where you did see a persistent effect of the negative announcements last year. is emerging market equity the swing factor as we move through this process? global industrial cycle bottoms out at some point, you get some -- that is arade constellation that is generally favorable for markets. david: there seems to be flow into em. can em really recoup without china being strong? ben: i think it can. as we think about the long-term structural potential for em, that is a convergence story. let's abstract from politics, let's abstract from the cycle. what does em look like over the next 10-15 years? it is a source of growth because of convergence dynamics. convergence for total factor productivity, capital weakening, human capital, education attainment. at 10% for the past three decades. incomes of levels, the

per capita is still a small fraction of what it is in developed market economies. most divergence economies are still at play here with a bit of risk coming from the global slowing thing. bristow, barrick gold ceo, coming up next. this is bloomberg. ♪

alix: reporting earnings that beat estimates for the fourth quarter reportingrick gold earnings that beat estimates for the fourth quarter. joining us now, barrick gold ceo, ben mande mark bristow. i've covered randgold for quite a long time. when you're on the call and analysts will ask you what is

number one on your agenda for the new barrick gold, what's it going to be? mark: it is combining some of assetsld's best tier one with a really tier one management team to deliver real value as we did with randgold resources for the benefit of all stakeholders. david: is the game cost-cutting, ruthless cost-cutting? what's it going to be? mark: not at all. the key focus has been to get the team right. we really made exceptional program -- progress on that. it's a great team. if you look at the individuals that make up our team now, they are all in place, they are fantastic people. i don't believe there is another mining company that has that spread and experience.

alix: you start out with randgold resources, the way you ran that company, very different from other companies. now, what barrick kind of resistance are you meeting? mark: no resistance whatsoever. i think we work very hard with the two teams building up to the announcement, it was key to get all the teams behind what john and i were saying to do and really it has been a really exciting and rewarding period, it has been very buzzy, but you will see today when you read the have a, already, we focused team of people who know what they're going to do, the right people in the right places.

alix: what does that mean for your call in 2019? mark: cash costs will be up this year from last year. it is still a bit early because it's only been a few weeks. we have a plan for the year. it is a plan that will change through the year. we will have a five-year plan out during this year. 5.1 and 5.6ween million ounces, a combination of the two companies. -- sustainingup costs, something i will get used andsomewhere between 870 ounce.just above 650 an flow, youus on cash

will see that both barrick and randgold posted significant increases in dividends. i am a great believer in less that and more -- less that and more dividend -- less debt and more dividend. the key is to reposition this company for the long term based on geology, which is what drove randgold resources. headacher biggest ha will come from africa. that impacted earnings and you had lower throughput. worked in the drc for some time with randgold. what is the best clarity you can give investors? mark: it is a travesty that not one stakeholder has benefited by this situation.

i have no doubts that we will asolve it and we are engaged a very interested mediator between acacia and the government and other stakeholders as well. i have no doubt we will find a solution. i don't believe it's appropriate for me to put a specific deadline to that process. what do we want to get out of this? something that benefits everyone. alix: is it sooner rather than later? tanzania in negotiating and talking with you? mark: as soon as it is possible. we are engaged. engaged in a very constructive and positive way. david: the other part of your strategy this year will be the assets. have you received interest? at the right price? are you looking to expand your

portfolio in areas like copper, for example? mark: i have a very full inbox as people bargain hunter the opportunity. we will do it in a considered way, as i said when we made the announcement. this is about me making sure we don't take away from the value of the organization that we did the deal on. we needsell something, to be able to realize that value that is embedded in the current dna of the organization. alix: yes, there's interest, but not at the price you want it. is that true? mark: no that's putting words in my mouth. plenty of interest. we will get to the pricing enough.

forward.e a big step you will see that we've defined what we see as tier one and tier two assets and what we have agreed as a team will guide our investments, the particular criteria. strategic assets need to fit that to come into our portfolio. we will be very disciplined approaching our future in that way. alix: thank you so much. david: spain is in turmoil. they don't have a budget. do they have a government? we will find out, next. this is bloomberg. ♪

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we need to take a pause here. european markets on the upside with the exception of spanish equities, though only down 2%. failing.t wound up -- though only .2%. euro-dollar flat on the day. sterling up, reversing any losses we saw earlier. a thready, if there's about brexit or a prolonged brexit, that is a good thing for sterling. here in the u.s., the risk on continues. crude up .8%. goldman sachs doubling down on its bullish call. david: time to find out what's going on outside the business world.

he's open to extending a march 1 deadline to raise tariffs on chinese products. the u.s. and china near an agreement to settle the trade war. the south china morning post reports president xi jinping will meet the u.s. trade delegation in beijing on friday, raising hopes of a resolution. it appears the u.s. government would likely avoid another partial shutdown. republicans are reportedly pressuring the white house to agree to terms that would provide some funding for a border wall. still, the president insists the wall is getting built regardless. the u.s. food and drug administration on the verge of --roving a breakthrough drug the fda approvedjohnson & f-ketamine. it would be the first major advance for treating depression since prozac hit the market.

i a this is bloomberg. coco bonds are in the spotlight. come inside the bloomberg. the anticipation yesterday worse than the reality. bonds dropped $.97 a dollar. now, bloomberg's credit market reported. does reporter. -- bloomberg posco credit market reporter. marketmberg's credit reporter. >> the market has responded.

a number of people have expected this to be quite catastrophic, especially the part of the investor base expecting the first opportunity no matter what. the rebound shows people understand economics much better. they realize what santander did is confined to santander. they are wise to price the bonds particularly for the possibility that we could extend that the first call. felt ite rhetoric proves this is a bad asset class. david: a new asset class. people don't understand it. let's stay in spain. they don't have a budget this morning. they voted it down. it may lead to a snap election. is there going to be a new election? if so, who is going to win?

surprises, no spending bill for 2019. a very weak government, a very weak prime minister. that means political conventional wisdom would suggest they need to call for an election now. -- polls arelikely split. the relationship between barcelona and madrid has broken down following the independence trial. more political uncertainty for your. -- four europe. -- more political uncertainty for europe. parliamentn elections are in may. a lot of political uncertainty playing out in europe. yet, the markets

surprisingly calm. of jpwith us, ben mandel morgan asset management. the steepest declines since the financial crisis -- we talk about italy and greece and spain. or is that the global growth issue? ben: i think it is both. from the perspective of a global investor, it's possible to have your fatigue. there's different conventions of that fatigue on the economics front and politics front. the economic front, you have an idiosyncratic one-off shock -- german autos last year, other narrow effects on industrial production, you expect a rebound, and you haven't seen it. about then something underlying drivers of the european economy as we are disappointed in that rebound story, it does appear to be a

more general malaise. you layer on top of that the politics. there's an election every few months on average in the euro area. there's a sense in which you have a rolling blackout type of thing with uncertainty filtering around. it's not the sort of thing where you expect a sharp downturn in a recession. it makes you less confident in that rebound story. from an asset class perspective, with all the volatility in markets, i'm not sure it's time to take a big directional bet on equities. if you do and want some optionality elsewhere, europe is a sensible funding market for those. david: they are about to lose one of the largest economies. is there some pattern to this? is this saying something about the integration of europe overall? ben: at some point, you do have

to take a stand on his this anexed as central -- is this existential threat to the euro area. i don't think we have a general sense in which we are expecting a big hail event to occur. when you get from this series of political events is a political risk premium that is priced across the board. what about a tailwind as event? to a talil what will cause it? fiscal stimulus? ben: they would have to be some type of confluence of political events. you would have to see some broader evolution on that front. you would have to see a friendly external environment.

that is the upside case for growth. the problem is it is a narrow path. euro stocks has a huge financials component. interestt growth, rates rising, the euro is up to the race. a narrow path for european equities to outperform here. draghi,f you're mario you're not looking at normalization anytime soon. that puts more pressure on the banks. ben: absolutely. that is another element of that fatigue. we've been expecting a hawkish turn at the ecb, which has not materialized. david: if you are concerned about global growth, is it china or europe? ben: we have a better understanding of what's going on in china. which is a weird thing to say. david: actually striking.

ben: you have a little more confidence that there are tools at their disposal to stabilize growth. you have seen that happen this year. monetary easing, loosening of the pursestrings. europe, on the other hand, we have less of a bearing of what's going on under the surface. alix: year ago, we were talking -- europeit -- brexit will pick up to soften the blow of brexit. that didn't happen. a note yield brexit could be -- a noble deal brexit could be brexitophic -- a no deal could be catastrophic for the

german economy. you patch up a self-inflicted wound, it doesn't make you a great doctor. there's a sense that it will be difficult for that to be a positive catalyst. if you think about u.k. equities in particular, it is a play on the currency given that u.k. equities have 80% of revenues coming from outside of the u.k. there's a sense in which you do get a bit of resolution on brexit, sterling strengthens, you get a hit to u.k. equities, that might be a buying opportunity. just relieving us from the discount of uncertainty. ben: i would imagine. you're talking about patching one side of the boat.

-- i was mandel looking for a boat metaphor. david: stagnation coming. -- theeenspan warns growing chorus of voices calling for recession. this is bloomberg. ♪

ritika: this is "bloomberg daybreak." hour --p in the next the estimize founder and ceo hishead of t-mobile says company doesn't use huawei equipment. light ofe comes in testimony before the house subcommittee. sprint's parent has deep ties to huawei. so does deutsche telekom. teslall electric like a

and priced like a ford fiesta. company isn unveiling the solo. -seater looking one could provide a lifeline to the plant in ontario. >> we've had some discussion around that. nothing's been decided. nothing would make me happier than to rehire all of those people with a canadian designed and engineered vehicle moving forward. haslectromechanical already $2.4 million in preorders for the solo. bain capital and carlyle group have teamed up to be a potential offer for the german manufacturer of ram.

if they decide to take the firm that is your bloomberg business flash. alix: we turn now to wall street beat. first up, stagflation is coming yet again. alan greenspan warns an economic downturn is coming. the blackstone model. blackstone's real estate model proves lucrative and liquid. kevin newsom suggests big tex paysdividend -- big tech dividends to consumers. david: we start with alan greenspan. he said he's very concerned about the budget deficit. wadingwaiting into --

into stagflation. >> the tone of his interview was that he seemed to be thinking this was inevitable. he pointed strongly to the entitlement program, saying the ballooning costs will eventually come back to bite us. 's covered jeffrey gundlach outlook in january, he really pounded on the issue that investors are not paying enough attention to the mounting debt in the u.s. for a while, the tea party was a driving force in the political conversation. they seem to have quieted for the last couple of years as spending has mounted. david: we had paul krugman warning about recession, kyle bass warning about it. >> we've seen people have

changed their call. going into the end of last year, a lot of firms were saying we are not nervous about recession in 2019 or 2020, but that tone seems to have shifted already. day, thebillion a interest the u.s. is paying on that tha debt. >> it is a joy enormous number ginormous model. alix: they are the big landlord in the entire world -- other private equity firms are like, cool, let me go to that. in real estate assets. the real estate region is really interesting as well. it's hotels, retail properties,

homes, warehouses as well because of the amazon dynamic around the world. alix: it's more liquid. until when? david: the rates affect this a lot. >> investors really love real estate. because of the income they spin off. a lot of wealth managers love them for that, too. is a stronghold for them. they really are the front runner. david: the new governor, kevin newsom of california, has come out and said these digital companies are making a lot of money off of our personal data. why don't you share it? sounds like a text to me. -- a tax to meet.

to me.ds like a tax >> it is certainly a win from the public's perspective. alix: you get a free product. facebook is free. if they have to start paying you, will it stay free. paying teenagers to gather data from them and people flipped out. david: apple shut them down. >> could we get a dividend off this? david: i wouldn't bet on that money going to stockholders. there is talk about tax because of the use of the data. governmentkind of oversight/regulation is coming. coming as the not

high-speed rail from los angeles to san francisco. mr. newsom said we will do something, but only 120 miles of it. it is over budget and behind time. >> they are struggling to raise the money. this rail was approved by the voters 10 years ago for a bond 10 yearsugh a bond -- ago through a bond, but they haven't been able to do it. are is a ended states indebted states are is a theme. this is a big problem. >> going back to greenspan's

comments, today, the aging population, the entitlement somethingthat is everyone is dealing with at the state level and federal level. built china has high-speed rail between beijing up, 7 million americans are three months behind on their auto loans. that's next. this is bloomberg. ♪

david: this is what i'm watching. there's a record 7 million americans three weeks behind on their auto loans. it's really causing some consternation. every time i interview someone from gm or ford, they say we are ok. it has gone up a lot.

there's a big subprime auto problem. alix: how recent is the data? is that a slow or a shutdown thing? david: it was trending up even before the shutdown. there's a lot of subprime auto out there. it doesn't compare with the subprime mortgages we had. still, it is a big problem. alix: have the lenders shifted to more creditworthy borrowers or have the borrowers deteriorated? david: the car companies wanted encourageds, so they loans they made to people who shouldn't get loans. conversation of the fed raising rates, you will see more delinquency. or is this ange underlying fundamental risk to the u.s. economy?

david: auto sales are softening anyway. this is not going to help the situation if they have to tighten because of the credit delinquencies. alix: coming up, jim mccarron will be joining us along with julian emanuel. his 2019ed downgrading s&p call in december. in the markets, you are seeing a bit of follow-through on the rally here. what kind of buying what we see on a weaker dollar day? this is bloomberg. ♪

alix: trump says he's flexible.

the president could push back to march 1 deadline if the and beijing are close to ideal. brexit blowup. plans reportedly revealed in a local bar. the real weak link -- europe. industrial production falls the fastest since the financial crisis. david: welcome to "bloomberg daybreak." tempted to talk about going to bars in brussels late at night. that the has confirmed president is likely to go along and sign the deal that was negotiated. he said yesterday he does not like the deal. likely hee time, it's will build as much quality can wall as heas much can without the government.

we are waiting for c pi's to come in in 30 minutes. you will have to play for alpha right now because 3-6 you will not get that juice, the idiosyncratic moves. i'm just going to think goldilocks. the s&p rallying for four straight days, six points today, but off the highs of the session. euro-dollar a little weaker. overall, the dollar heading a bit weaker, taking a break of the last two days.

you did have that week industrial production out of europe. .6%. up the back half of the year -- david: time to find out what's going on in the business world. -- ritika: ining beijing, u.s. delegation in the midst of a critical trade talk. demand thatington's china scaled back their global technology ambitions have not been received well. the u.s. government would likely avoid another shutdown at week's end. republicans have pressured the white house to agree to terms that would only provide some of

the funding for a border wall that president trump is demanding. ran's supreme leader said negotiations with the u.s. can only hurt the islamic republic. of comments come just ahead an american-led summit in warsaw. the ayatollah added that any negotiation would be an unforgivable mistake. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. gupta.ika this is bloomberg. david: march when is the deadline for -- march 1 is the deadline for the u.s. to reach a trade deal with china. >> if we are close to a deal

where we think we can make a real deal and it's going to get done, i could see myself letting it slide for a little while. generally speaking, i'm not inclined to do it. david: stocks in u.s. companies that could be most affected moved up on the news yesterday. we welcome now jim caron and julian emanuel. good to have you back here. i will start with you, julian, as our equities guy. it is moderating a bit. the consensus has become that some sort of deal will be forged with china. the folly of closing the government is not likely to be repeated, which certainly explains the positive price action the last couple of weeks. there are a lot of obstacles out there. you have a debt ceiling that

will be at the beginning of march. you have brexit, et cetera. there's a lot of reasons for the markets to jump from minute to minute. more -- as we have more uncertainty. jim: there is and there's ambiguity. mentioning,ulian is this falls more into the camp of ambiguity. people don't know what to do, including the fed. the fed is keeping interest rates neutral for the extended period of time or the foreseeable future, as i see it, holding some duration is important. last year was a year you got page to put money into cash assets. startingfolios are from a short duration and

extending out. david: equities have been moving in response to these trade issues. the bonds have not. jim: to some degree, the fed will be more impactful to the bond market because it sets the interest rate, they are more directly connected to that. the fed is not hawkish anymore. what we know from other central , ratesround the world aren't going up. is creating a low volatility environment for bonds. equities may benefit from that. alix: except sweden. jim: in the second half of the year. alix: rapid into the global

growth story. you have this move in emerging markets, but growth is slowing, europe is terrible, china is not replacing. -- is not reflating. yield in the 10 year in the u.s. where it is now, we don't know whether the fear is that the growth slowdown is going to fall over into the u.s. or as we've seen time and function ofit's a the spread versus europe. our view is the linchpin with china. there's a lot of stimulus that has come into the pipeline. china is probably in a recession, however you call it, but in our view, the stimulus will start working the second half.

argument for a signal on the longer and -- alix: you want to short duration, you want to be buying europe, particularly germany. is that true? julian: when we see yields near zero, it makes us uncomfortable, it makes us think about the whole idea of tying up capital for 5-10 years and getting nothing in return. ultimately, this comes down to -- china has been the global growth story for the last 15 years. are they going to be able to relate or is this the implosion moment that people have been looking for for 10 years that hasn't happened? we think they will be able to reflate. jim: i do agree with what julian assange.

saying. -- julian is i do agree with what julian is saying. china is the linchpin. the best opportunities we see right now, emerging markets and emerging-market debt. environment to look at emerging-market debt. they are earning 6.3% yield, spreads at 360-370 points wide. a year ago, they were 280. the yields are attractive. alix: do you like emerging-market equities? julian: we do. alix: do you need a weaker dollar to go with that? julian: it helps. we think we will get a weaker

dollar, whether it's this whole perma-pause,fed on oe we think the dollar is modestly weaker and that will be good. em is now looked at as the most crowded trade in the bank of america survey. julian: it is the most crowded trade on a block that is still largely vacant. investors are profoundly nervous about equities. they have been since december. it was a reflex reaction. since the bottom at the end of december, investors have been chronically underinvested. we still think they are. int supports higher prices e.m. and the u.s. alix: cash allocation the highest in a decade, to your point. coming up, small caps continuing

to outperform despite disappointing earnings estimates. this is bloomberg. ♪

ritika: this is "bloomberg daybreak." -- world's second-largest heineken was helped by the fastest growth of its mainstay brand in a decade. investor -- says bitcoin will be digital gold despite its 80%

decline. he talked to bloomberg about where he sees cryptocurrencies heading. >> we have found an equilibrium in this 3400-3600 zone. it feels like we are just compromising on the bottom in the next move will go higher. ritika: he expects institutional money to start moving into cryptocurrencies in the next year, setting the stage for a rally. considering starting an online store that sells multiple opportunities see in an online marketplace that compromises between their brand and selling others -- that is your bloomberg business flash. alix: more ways for couples to

break up at ikea. it is the place for couples to go to fight. go to ikea, your relationship suffers. taking a look at the small-cap stamina here -- they are up on the s&p so far this year. take a look at earnings estimates. the white line is the russell 1000 -- the small-cap 600 index. forward earning estimates continue to come down. russelle, the large 1000 index holding up. coming down, but holding up. andl with us, jim caron julian emanuel. what do we believe? jim: we believe both. this is all about risk reward. small caps pounded because it was a liquidity play.

year, you hadlast hedge fund liquidation. when hedge funds liquidate, they get rid of their least liquid stocks. those are small caps. earnings are coming down. in our view, you are at a point where that may have been over discounted. when we talk to investors, there's this view that the whisper number is somewhere around 0-2%.

julian: first of all, what we are finding out, the economic data, despite the fact that you had the shock to the system at the end of last year, the economic data is looking firm, the economy is moving closer to 2% and we think the see through from china will work its way locally into the back half. jim: i think this is an interesting theme. the economic volatility is extremely low. the financial asset volatility is very high. it is supposed to be the opposite. that is the way the fed thinks about it. , withs different today the markets are doing, they are just measuring the downside risk , so the much higher left tail where prices selloff gets a lot fatter, so the probability gets higher that you can move lower. that increases risk premium and discounts prices. see are are starting to the markets discounting things that don't look like economic reality. they are readjusting for the risk that there's more downside than upside. david: why isn't there more

downside? we are taking a lot of fiscal stimulus out of the economy. next year, not so much. jim: that is part of it. you have china slowing, europe slowing as well. you put all that stuff together and you've got the ambiguity of brexit and china-u.s. trade relationships, this is all part of it. alix: earnings recession has particularly from morgan stanley -- limited earnings growth. you say this is over discounted. where? julian: we've seen energy earnings come in fantastic. alix: tough comps. within tough comps, but oil prices solidly north of $50,

that is a positive. when we think about it in general, a lot of these industrials are deeply cyclical places that are most likely to surprise to the upside because the economy is not as low as people had discounted, particularly in terms of the equity market valuations. david: how much of that was a simple had fake from the fed -- had fake from the fed -- head fake from the fed? jim: where you saw the biggest move and prices came from the misinterpretation of the fed to the markets. that created an outside shock. that implies high-yield spreads and everything else. they disproportionately moved to the fundamentals. alix: is easy comps for last are we going forward, doing deep value play here?

what is the conviction of your value play? julian: we are not saying cell growth to by value -- sell growth to buy value. this is alpha, alpha, alpha. that is typical when the value has.ome off as it in general, those are the kinds of stocks that have gotten so badly beaten up last year because they discounted this recession that we don't think is going to happen in 2019 and is not likely to happen in early 2020 that you have this opportunity. david: jim caron and julian emanuel staying with us. ber deliveries may soon coming from a self-driving electric truck, and amazon or gma ow may own it.

this is bloomberg. ♪

david: time now for the bottom line. heineken is making real inroads in emerging markets. it's been historically a strong spot for ab invev. now, heineken is moving in and they are having real success. when the ab inbev deal was done, part of the driving force was africa, places like that. heineken is going after them. they are spinning off their asian -- they have an ipo there. when they did the deal, they leveraged up so much. they have to get rid of that debt. alix: teva stock doing poorly,

bad earnings. they see the drop in earnings this year, but it looks ugly overall. revenue will drop 1.5-1.9 billion for the year. out 3 million. they still do see a stabilization of the u.s. industry, they see a trough later in 2019. that is rough. those are rough numbers, the stock getting hit. we will be talking to the teva pharmaceuticals ceo later on. david: the third company we are watching, and electric truck maker -- an electric truck maker. i hadn't heard of them. both amazon and gm looking at it. >> they don't exactly have these electric pickup trucks yet. they are still in production.

gm and amazon getting in here early on, making an investment in this company reportedly to $2 at $1 billion billion. you see amazon making real strides in terms of building up their delivery network. this was a way of reducing shipping costs, reducing its reliance on ups and fedex. as we've seen the company ramp up its investments, it looks like they have bigger aspirations for this, expanding their delivery networks. big acquisition with cruz. these newinterests in technology automotive companies. >> that's reflective of the challenges old-school manufacturers have.

he saw that with ge when it tried to become a digital company. investors got really frustrated. it's difficult for these traditional manufacturing companies to expand in areas they have to for growth, but it's expensive and investors want returns faster than you can deliver them. alix: you have to spend now and they don't have a choice, but investors don't like that sort of thing. much.you very coming up, united rentals up 30% since the start of the year. we will speak to matt flannery about the u.s. economy with cpi on deck. this is bloomberg. ♪

alix: this is "bloomberg daybreak." the rally continues. s&p futures up by six good the

optimism still coming through. cpi just moments away. other asset classes. a mixed dollar story but mostly weaker on the margin with the exception of euro-dollar. since -- theob weakest drop since the financial crisis. cpi is out. back in line with estimates. 2.2%. unchanged from december. a month by month basis, unchanged, up .2%. no drama there. basis, .2%.th year on year, 2.2%. david: you call this earlier. alix: i was not going to do a victory lap, but -- --id: no real inflation and no real inflation showing up in the cpi. earnings are going up but we do

not have real inflation showing up. alix: average hourly earnings did see a boost could -- did see a boost. details. more >> is goldilocks. -- it is goldilocks. how does the fed make a policy mistake? a policy mistake today would be tightening aggressively. we are not seeing that. i do not believe we have an inflation problem. i believe prices are stable. that tells me the fed stays out of the picture for the foreseeable

alix: margins. >> it is not so taxing it will cause more angst. the bigger picture is if you look at the stock market this reinforces the idea as jim alluded to that the fed is on the sidelines, which is exactly where they ought to be. it left the confidence which has come in, the cpi which has come in. let that work its way through the system and see where we are headed north of 2% growth. that is good for stocks. alix: how long can the s&p and companies sustain their margins? operating margins for cats are continuing to roll over. what is the tipping point? >> there will be a tipping point at some point. i think margins have been another one of those red herrings people have been extremely concerned about for the last several years.

you have seen fluctuations and yet overall when you look at the bigger picture, they are still near the high end. they have come in. that is part of tightening financial conditions and that is good. david: i wonder if there are two stories. the consumer seems to be doing quite well. at the same time, some of the numbers we are seeing are starting to soften. which way will it go? it has to go one way or the other? >> right now we are seeing moderate growth. decent earnings. the -- to the extent we stabilize, to the extent that rates stay low, to the extent asset prices stay reasonably buoyant, i think that sentiment will improve. that does not mean the fourth quarter dip in sentiment does not hurt us over the next quarter. it might.

that is more of a buying opportunity. i do not see this as a long-term trend toward something more devious. i see this as a stable environment and from a fixed income perspective, moderate growth, slow inflation is good for fixed income assets. extending duration out of cash becomes an important play for your portfolio. such a pleasure to get both of your perspectives. thank you very much. i want to recap the cpi. i called earlier. it is goldilocks. .2%. on year on year basis, 2.2%. as david pointed out you're getting average hourly earnings coming in higher than estimated as well as weekly earnings higher than estimated. for now companies weathering that storm are going through the question of whether that turns. on markets, yields moving higher, selling on the back end

but not too hot or too cold. david: going back to the dual ,andate of the federal reserve when you do not have inflation you have high employment. alix: they are there but not there enough. david: in the economy, which is what we're talking about, individual companies making individual decisions and the company at the intersection so much is united rentals, the largest equipment rental company in the world with over 18,000 employees and a remarkable pattern of growth. united matt flannery, rentals chairman and ceo. he will take over the job of cfo in may. are you seeing a lot of pressure on your marches because of wages? had standard merit

increases for our employees for the 20 years i've been with united rentals and we continue down that same track. we're not seeing wages increase and we think this is more of the same to 2018. similar margins and summer opportunities for growth. finding anyou difficulty getting the people you need with the training you need them to have? matt: no. we have a strong focus on people. it is part of our culture. we have industry leading turnover retention. we might be swimming upstream on this but we do not have that labor issue. there has been a large commitment to that from our organization to overcome any challenges that low unemployment may cause. david: the nature of your business keeps your finger on the pulse of the economy. you rent a lot. what are you seeing across the country in terms of demand for construction? matt: we are seeing brought

demand. as you may know, we operate in 49 of 50 states and i've a long line of people waiting to open a store in hawaii. withve 1200 locations managers and sales folks with their ear to the ground and outgrowth is brought. we had over 20% in 2018. we are projecting almost 16% growth in 2019 and we have that additional opportunity with those 1200 locations having ears to the ground and our customers. david: that phase of growth is extraordinary. 20% growth is unbelievable. how march is market share and how much is the overall pie growing? matt: our industry is undergoing consolidation so we had a few acquisitions. it is not all m&a. 11% of that was pro forma growth

. it is still significant and robust growth, even on a pro forma basis and growing up the new footprint we have created. alix: europe a lot of capital. free cash flow. what are your priorities? matt: always investing in the business. -- we are anh inquisitive company. we have historically used m&a. i would say that bar is raised for us. we acquired three of the top 10 companies in our space. we have a lot to absorb and leverage. i would say more towards organic and then it is a combination of returning money to shareholders, whether through the ring debt, share buybacks -- through lowering debt, share buybacks. we feel good. david: are investors happy with that order of business? there is a debate in the investing community of what company should do with their cash.

are we going to reward companies that spend on buybacks? matt: we do listen to our shareholders frequently and we review the capital deployment strategy with our board on an annual basis. the important thing is not to look at any of them in isolation . what is your leverage, what is your growth, what is your buyback. i do not think it is looking individually but the combination of what you are doing with the shareholders money. david: to what extent has your business improved because of people saying i want to outsource it. i do not want to own the equipment myself, i want someone else to own it. matt: we are one of the original sharing economies. the rental business is taking all of the aggregate demand individual job sites will have an sharing that demand, to the point where when we look at this, our assets have four times higher utilization than our customers assets they own. i have tracked this and this is part of the selling point for the industry. we think there is a great

opportunity there and that is what the rental business is all about. david: your suppliers have pricing power? are you seeing prices for the equipment go up? matt: we are fortunate to be the largest customer for all of our top 10 suppliers. we have good partnerships that we have had. we are not seeing any additional inflation over the normal 1.5% inflation for the last five years. alix: what area of the market/economy do you have the least visibility on and why? matt: there is no area i would say we have the least visibility . about 50% of our revenue is industrial. every industrial vertical we tracked in 2018 and forecast for 2019 have been positive. we are about 50% non-rest. there are some numbers, residential, single-family homes. we do not play much in residential, but where we do it is multi family. projecting the

same level of increase in revenues and earnings as you have in the past, and where will come from? matt: our growth opportunities will come in the sectors we serve. the industrial sectors. we have deep relationships, deep penetration. the growth has been brought. there is no hot pocket we relied on for that 11% pro forma growth. where the growth comes from his deepening the relationships and solving more problems for our customers, whether on job sites or plans. that is the rental model. we are bullish on 2019. we have a customer confidence index we track that for the past 12 quarters has remained strong at a very high level. david: thank you so much. matt flannery, united rentals incoming ceo. alix: we have companies on the s&p out with earnings. we bring you an earnings scorecard and what to look for

for the next 25%. this is bloomberg. ♪

>> this is "bloomberg daybreak." , aing up on balance of power democratic representative of new york. this is "bloomberg daybreak." alan greenspan is worried about the u.s. deficit. in a phone interview, the 92-year-old former federal reserve chairman said the country is in an extremely in balanced situation. green bit -- greenspan said the

consequential and of the federal shortfall approaching $1 trillion could spur inflation once growth slows down, creating stagflation. the activist fund is reporting a 25% return on its investment so far in 2019. that is a big turnaround after pershing square posted losses of close to 11% in december. an overall decline of 0.7% for all of last year. executives from t-mobile and sprint are on capitol hill to defend their $26.5 billion merger. they are likely to face a skeptical audience at the house subcommittee hearing. critics argue the deal will hurt competition and lead to higher prices for wireless service. that is your bloomberg business flash. david: thanks. time for follow the lead. a deep dive into the stories

making headlines in moving markets with the insides from industry veterans and insiders. today we are looking at where we stand with corporate earnings. 72% of s&p 500 companies having reported. joining us is bloomberg's taylor riggs. taylor: so far the news has not been good. i want to start with tape of pharmaceuticals. -- with teva pharmaceuticals. sales guidance is missing estimates. their largest drop by revenue will fall this year, down from $2.4 million in 2018. the company is saying 2019 should be a trough for the business and they're expecting to return to growth in 2020. they are looking for the generics business to stabilize. that is not helping them or their competitors. we are for those results to cross any minutes. i want to take a look at dish, the worst performer in the s&p 500, off

declines. if there is hope, it is about 5g. we have heard a lot of these tech companies talk about the rollout of 5g to boost profits in the second half of this year. finally i want to talk about margins. you are speaking with leigh drogan about that. you are talking about slowing revenue growth not translating into high earnings-per-share growth because you are not seeing the type of market expansion you normally would. it is not tariffs. problem, asending you have operating margins pulling 100 basis points from their peak. that is now in blue. well below the three-year average. i want to bring in full circle about teva pharmaceuticals. we will have more on that and the earnings when the ceo joins

bloomberg at 10:00 a.m. in new york. wilson of morgan stanley says we are heading towards an earnings recession. other say those worries are overdone. investors,talked to there is this view that the whisper number for earnings for this year is somewhere around 022%. to 2%.nd zero we think that has the potential for upside surprise. joining us, leigh drogan, estimize ceo. we've been saying this since late last year on the show. yes, we're going to have an earnings recession very likely. no, it probably will not matter that much in the sense that we are done -- we were done with the boost from the tax plan. last year the market has gone nowhere. pe has gone down. now we're going to start looking forward.

that back half of 2019, the first half of 2020. david: that is the question, how long does that recession last? leigh: it looks like two quarters. it will not dry gone past that unless we get a serious macro economic issue out of china or something else goes wrong. wrecks it happens and we get a blowup in europe. those are hard to call and when we look at our numbers, stick our next out and say because of this super anecdotal factor, all the earnings numbers are going to come down. we think it will be mid-negative numbers for two quarters and then we should clear up. alix: this goes to julian's point of what is baked in. if you look at some of the names that have missed, they have not gone destroyed. the destruction happened a year ago. what is baked in? phil: if you look at the book -- leigh: if you look at the market we have gone nowhere on the s&p. if you're saying the market will

discount a year forward and we've gone nowhere, over the next quarter we will start looking at 2020. i think most of it is baked in. it is always important to look, even in hindsight at what happened late last year and given the way the market has reacted to earnings, it looks like this was completely a credit shock. the high yield spread shock. it is important to look back at that and say was a real macro economic shock? no, it was probably just the credit markets. david: you find patterns. what are the patterns we are seeing? leigh: we talked about the consumer numbers. i think that was the pivotal thing for 2019. consumer discretionary numbers were high, they have come down. that was our full from four will we have an earnings recession. energy numbers are hard to call. the industrial numbers will be impacted by china. we think they will be worse than people expect but not crazy bad and the other one is tech.

coming in we had low expectations for tech. mid-single digits. google put up crazy good numbers. apple will be poor but not super variable. number butheadline it will not move around a lot. names,erprise tech mid-cap numbers have been great. that speaks to what is going on in the core domestic economy. capx is still this big cycle. question, ones the earnings when you hear this free cash flow, what do investors want them to do? is a good question when you say investors. to remain the average investor or the big fund who is investing systematically? all the managers will say

buybacks are fine. capital allocations should believes andompany we will not impose our view. i think the google thing is interesting. and r&dw out the capx numbers. it might be representative of the front end of the been -- of a bigger spending cycle. so far most companies of just bought back stock. they have not invested. google has gone all in. alix: goldman sachs had a note saying we will see more out players complaining about idiosyncratic factors. do you agree? leigh: people always say that. in some sense. i think as we've been flat on the s&p, some sectors have performed well, others have not. it feels like we will continue to be in that kind of environment unless we get another credit shock. hard to call those.

right now, we still like enterprise tech because it is not exposed to china. not exposed to huge macro economic factors. we still like places in consumer discretionary. overall we think we are on the back half of that. , we talked about this earlier in the season. we do like the financials and they have performed well. unless we get another one of these credit shocks. --igh drogan, invest estimize. coming up, more on pershing square's strong start for the year. this is bloomberg. ♪

alix: here is what i am watching. something totally different from the rhetoric in 2018. bill ackman is doing well. pershing square.

overall hedge funds returns of 2.9% in january. the market went up and all of a sudden the hedge fund guys are doing well. david: a lot of it is chipotle. up 37.5%. alix: all of the fast food place as well. interesting if the consumer can wind up holding it up. chip oled has been doing -- chipotle has been doing a big restructuring. they are thinking about being more of a fast food, drive-through, etc.. david: it has come back a long way. alix: that does it for bloomberg daybreak. coming up, bloomberg market -- the open. this is bloomberg. ♪

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alix: coming up, -- jonathan: global equity markets edging higher after the president signals a conciliatory start. the president says he is open to extending the march 1 deadline with china at the sides near agreement and eying a path to avoiding another government shutdown. 30 minutes away from the opening bell. good morning on a three day winning streak on the s&p 500. futures positive, up .33% on the s&p 500. the euro dollar down at 1.1292. cpi risk coming in harder than expected, taking treasury yields up two basis points to 2.71%. sentiment seeming at the mercy of the president next statement. >> that is good news for the economy. >> constructive message. >>