alix: the doves versus that of plus. u.s. and china inched toward specifics of the trade deal. barclays promises buybacks. giving ammunition for the ceo to edwardctivist investor, bramson. david: we will get right to markets. alix: an interesting headline day. still, markets continue to be quite. s&p futures flat. despite theup .1% fact that euro area pmi rose barely over that 50 level. it's about selling anywhere on the curve. .4%.ork crude up

the fed and geopolitics dominating the center of the debate. we are joined by michael mckee and christine harper. let's get right to the top story. that's what we learned yesterday in the fed minutes. argued rateicipants increases might prove necessary if inflation outcomes were higher than the baseline outlook. if the economy evolves as they expected, they would view it as appropriate to raise later this year. what was your biggest take away from that? that the fedcally, is about where it has always been. be tighterwe need to and others say let it run. the minutes showed what we thought we knew was correct. the trade wars, the government

shutdown, the outlook is uncertain, we don't have to raise rates. we areell the markets pausing and see what happens. david: you can do this in a vacuum. how much is this because the fed had been relatively hawkish? >> powell had said the balance sheet runoff was on automatic pilot. the market did not like that. they want the fed to be sensitive to every data development. month-to-month, week to week, thinking about what to do. the fed is ready to react to what the situation on the ground is. alix: when powell came out and sounded more dovish, it seemed like you could infer the rest of the committee was behind him. they are divided on the rate hike. has significant might that be going forward? michael: they will look at the

data and the inflation numbers. they would have been more significant if you had people saying there might be rate cuts necessary. there was no description of that. powell said we don't know which way we are going to go. there was no discussion of cutting rates in the minutes. they are still looking at raising rates. it's a question of timing. balance sheet is a separate question for the fed. they change the emphasis of the wording. that seemed to satisfy people on wall street who were giving the impression they didn't understand balance sheet policy. david: really? that is shocking. michael: a lot of people on wall street who do understand it are blaming -- david: u.s.-china trade relations, that is our second story. the u.s. is moving forward with some memorandums of understanding.

agriculture exports, nontariff barriers, services -- any surprises here? , the are the subjects things president trump has had he wants agreement on -- said he wants agreement on. michael: that may be enough to postpone the additional tariffs that are supposed to come on march 1. that is the goal right now. let's get to march 1 and push the deadline back and keep moving. alix: we don't know what's priced in. >> it is all wait and see. theyow they are talking, are talking about the things we ,oped they were talking about reaching some potential understanding. i don't know if anyone in the market knows that's leading somewhere concrete.

take that with a grain of salt. spoke with usley overnight and said he thinks barclays is on the right course. >> what i do think barclays needs is consistency. we need to have a stable strategy that people can get behind and drive revenue growth. david: this is consistent with what jes staley has had from the beginning. is he succeeding? >> he is succeeding in staying consistent. he talked about the story of the it is one ofnk, managed decline. this is a business that is still making a negative return on tangible equity. he can tout the fact that they have gained some market share, they will try to return capital to shareholders.

that underlying story of the strategy is still very in question. david: how much of it is him in that business as long as i can stay in it and not lose my shirt? basically weighing the option, it is an expensive one. people like bramson are saying, "why?" it's a way to say hang on with me and give me a chance and let's get through this. shareholders are giving him a bit of credit today. david: michael mckee and christine harper, thank you both very much. you can find all the traits we just used by running gtv on you can find -- all the charts we just used by running gtv on your terminal.

largest gold mining company in the world looking at 6-7000,000 ounces -- million ounces. pretty significant. i will be talking about this on commodities edge. i will speaking with lorenzo simonelli of baker hughes. we will be talking dirty stuff about drilling. david: you love it. great to see you happy. coming up, between the donald trump presidency and britain's messy exit from the eu, is this the end of the anglosphere as we know it? ♪

david: 2016 a change in world that had been moving toward closer integration. we are now working on a new trade deal with china. it must include real structural change to end unfair trade practices. china is ripping us off. japan is ripping us off. mexico is ripping us off. canada is ripping us off. the whole world is ripping us off. >> all of us see that we are affected indirectly when chinese-american economic relations are not as

frictionless as the world order wanted. >> it is something we are thinking about and we are negotiating with them. thatm still of the opinion may is fighting hard and bravely but we have not seen results. >> we will continue at pace. timing is of the essence. it's in both our interests that e eu,the u.k. leaves that it does so in an orderly way. david: we may have seen the end of the anglosphere. americaly four decades, and britain have touted the benefits of open markets, globalization and personal freedom. now, that voice has either shrunk to a murmur or is singing a different tune.

everyone who cares about liberty or the rule of law should pray for them to be heard. how do we distinguish between the inevitable ups and downs of international relations and a fundamental change? britain and america always had a special relationship. this is different. you had a succession of british and american leaders who walked the world singing a song of globalization, leading by example to some extent. the reason america's miles -- you had britain more than one country saying it, making a big difference around the world. even if you were in brussels or beijing, you thought the world was going to become a little more anglo. since 2016, that has gone upside

down. all, ithas no voice at is completely chaotic. and the u.s. is singing a different song with donald trump. david: go back to 1979 when jimmy carter was president. you could have made a similar argument. >> things were not going at all well. britain was much less successful, there was little success to point to in britain. america, you had watergate and the carter , the u.s., vietnam wasn't feeling emblematic either. world --ple wanted the there's all sorts of reasons why many people would say good, we are fed up with you.

, liberal on the whole ideas, freedom, globalization, those things generally enrich the world. ,hen you look around the world you probably say washington and london are a stagnating thing. david: globalization, things like that, how much have they changed the rules? john: there's an element whereby these things build up in a way against themselves. nothing can stop an idea whose time has come. in this case, what's interesting is the very ideas british and american leaders one of the world-- wandered to the

-- wandered the world saying this is what you should do. the main debate is how we keep non-english speakers out of our country. role?who takes the xit struck me as president in 2018, what he had to say about trade. protectionism is just like locking oneself in a dark room. wind and rain may be kept outside. so are light and air. no one will emerge as a winner in a trade war. alix: what's different this time is that china is there. john: that's the interesting

thing. you go to continental europe in particular -- paris was never a great fan of the anglosphere. what happened is now, britain and america are being pushed off the stage or have withdrawn from it. it's more china and russia. shows theys, that anglosphere is still quite a useful idea. the idea that people are prepared to come back and preach these things will make a difference. when i look at the chinese leadership, they do have a message that is attractive in many parts of the emerging world, but i'm much more suspicious about whether people will embrace something that is more authoritarian. gone, that is a

sad thing. alix: thank you very much. tom keene quote some ancient rome thing. policy marking the end of their balance sheet runoff. this is bloomberg. ♪

david: the federal reserve released the minutes of hi its most recent meeting yesterday. there was less consensus on when rate hikes would come. "severales read participants argued rate increases might prove necessary only if inflation outcomes were higher than the baseline outlook. if the economy evolved as they expected, they would view it as

appropriate to raise the target range for the federal funds rate later this year." andelcome nick bendenbrook linda bolynda. how does this change your view on the dollar going forward? i would say the federal changes its stance relatively slowly. they are becoming less hawkish and arguably more dovish over time. what did you make of it? we thought everyone was in consensus. now, it seems like if you dig beneath the headlines, there is thatide over inflation

could affect the next 18 months. lynda: for us, not a lot changed. the fed is more data dependent. they are sensing risk in the underlying economy. the consensus out there is still about the fed is going to remain patient. potentially no rate hikes this year. maybe one or two next year. be prudent for them to be a little more flexible if the u.s. economy does pick up. giving themselves that flexibility is really important. not a lot actually changed in the actual minutes. david: suppose the inflation data keeps going the way it is, doesn't go up significantly. there seems to be division in the fed over whether there's another rate hike or not. linda: there is a little bit of division. we've heard from other fed

members that they will be patient with inflation. they would want inflation to shoot a bit higher. there is that divide, but the consensus seems to be developing patient withmore inflation. we have not hit that 2% target -- working towards or may be overshooting gives the market confidence that there's more inflation out there. part wherether people did agree -- the balance sheet. as it grows, the s&p rallied as well. now, it seems the balance sheet runoff will end by the end of 2019. nick: equity markets have stabilized. that is arguably in dovish thing. thing.arguably a dovish

that is arguably a dovish thing. reserve is driving the supertanker. they have to be gradual so their message becomes consistent over time. the minutes going from very hawkish to less hawkish -- david: are we actually increasing the uncertainty and volatility here? we are getting less forward guidance moving forward. may be inevitably as we approach normal. nick: i think it's probably fair to say that there is a bit of confusion on the part of the markets. that's possibly partly due to how the markets are interpreting it and how the federal reserve is communicating it. alix: the separate dots, completely ignore them. david: misinterpreting the dots,

that is not the consensus. that is our individual use. support fromer vol the fed -- what does that mean? perspective, the morece sheet, giving information about when the balance sheet tightening will there's one rate hike being taken off the table because balance sheet tightening is a way of tightening interest rates as well. that means the cyclical value sector could do a bit better. think of the financial side of things. materials, if you add a bit more of their global factors as well -- other global factors as well, you could

see these risky factors doing well by the end of the. -- by the and of the year. nick: i would argue that the dollar has some support in 2018. tensions,, trade brexit -- we hope there's going to be less uncertainty in 2019. david: you hope there will be less uncertainty. hope is not a plan. with your view on the dollar becoming more softer must depend on the fact that there's less geopolitical uncertainty. nick: hope is not a plan. there's a bit of evidence to support it, perhaps. in terms of the u.s.-china discussions, they are moving in a more constructive direction.

brexit remains the wildcard. some of these risks will fade away. be helpful for some of these foreign currencies. alix: nick bendenbrook and linda ahkshian sticking with us. pmi, servicesite held up, but manufacturing was weaker. this is bloomberg. ♪ the latest innovation from xfinity

isn't just a store. it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. alix: this is "bloomberg daybreak." a calm equity market on this thursday. s&p futures pretty much flat. despite the fact

that you have mixed euro zone data. overall pmi staying above 50. services a bit stronger. overall resilience of the u.s. dollar despite a more dovish fed has been very interesting. outperforming. the exciting mover, the aussie dollar getting hammered. there is the coal embargo into china, weakness in services and manufacturing. some risk off sentiment there. now.cb accounts are out they say they plan a swift analysis -- they warned against , wanting theision ecb and mario draghi to come clean on whether they will provide another round of bank funding for low interest rates.

it seems like they do want to analyze it but don't want to rush into anything. they concerned about weakness affecting inflation expectations. actual inflation and inflation expectations. david: mario draghi said that they are taking a look at it. sort of like the fed yesterday saying we need more data to assess their medium-term effect of the slowdown. alix: especially when the bundesbank said the weakness would be temporary for one quarter. now, we are getting all the soft data suggesting that may not be the case. david: too quick to decide if sport.st quarter was alix: we did get the euro zone pmi for february. butices were a bright spot,

manufacturing dropped to a level under 50, which is contraction. still with us, nick bendenbrook of wells fargo and linda bakhshian of federated investors. what do you do about europe? they can't seem to shake the overhang of the slowdown. linda: that is correct. the combination of weaker pmi's, we got some data from the u.k. that the hiring was weaker as well. there's some data around lending practices as well and the banks around europe -- in the banks around europe. does point toat the euro zone slowing down. brexit,additional risk, piling onto that is the section 232 from the united states. there's a lot of risks out there with europe.

spotss also some bright if you consider more globally that china could have more andtive re-shoots germany does have strong trading ties with china. we are a bit more cautious at this point in europe. david: i want to take a look at a chart that compares manufacturing versus services pmi's. it shows the overall trend down. the services are holding up quite well. the manufacturing in germany is driving up. do we feel better because services are growing or worse because europe is so dependent on manufacturing and exports? there is a tinge of green. it is glass half full. pmi.ews is the services

we already knew the manufacturing sector was in trouble. growth arounddp for 2-4 quarters in a row in the pmi goes below the levelel -- end of the 50 pmi goes below the 50 level, that is recession. we are stabilizing around the 50 level. the ecb policy makers have become rather dovish. they are concerned about the european data just like we are. i think the federal reserve is slowly but surely moving towards a dovish hike.

the fed is moving towards rate cuts and ecb is moving towards rate hikes. david: what about brexit specifically? we talked to jes staley, the head of barclays, overnight. they have a substantial reserve against the uncertainty of brexit. >> whether it is consumer or small business or corporate, we are not seeing yet any signs of stress in terms of credit quality. of 150take a provision million in the fourth quarter just to be cautious and prudent. what we are seeing right now are increases in cash levels. our deposit base is growing more than one might expect. right now, the economy itself is in correcting for problems brexit. people are being

increasingly cautious as we come to the final weeks of uncertainty around brexit. right now, the economy and credit is in relatively good shape. it's wise to be prudent in terms of extending credit and how we manage credit. you heard how much uncertainty there is around brexit. as a portfolio manager, how do you take that into account? linda: that is a very difficult thing to do. this really does become binary. you have to follow the information as it comes through. bit more seems to be a positive with may and brussels may be having more agreement. we all know a hard brexit is negative for the u.k. and the and global markets as well.

politicians know that as well. at the end of the day, they will come together. either we will get a new referendum in the u.k. or an agreement. alix: we pair that with the data europe and trade uncertainty. do you feel the rush in to global bonds has been justified? is that right? it really doesn't show that investors are concerned about global risk -- it really are show that investors concerned about global risk. that translates to u.s. 10 year as well. you have interesting positive data in terms of higher cover prices, higher energy prices. theu.s. is stuck between

265-275 range. the global treasury markets are indicating that there are risks out there. it's not all positive. david: we are coming down to it in terms of this deadline with brexit. what's going on with the pound? volatility,und implied volatility is elevated to 1-2 months. the market remains very sensitive. my assessment is we will still headlines,fortunate bad headlines. that a deal will be agreed to by june or march. there is the possibility of extension. stuck between a u.k. rock and a european hard place. she's been accused of running the clock out.

it's important debate they are having in the u.k., a difficult debate. they will stumble into brexit by happenstance. david: if there is deal by march or june, is there upside to the pound? is the market overreacting? nick: i don't think the market is overreacting. i come back to 2016. a lot of people were wrong, including myself. when we do get the confirmation of good news, there's a lot of upside to the pound. when therenot just is brexit and the binary risk but also trade. this complacency in the market when it comes to u.s.-china trade. there's a deal and you get 10% upside. what do you think? linda: i think the basic trade

you is essentially one that will not increase tariffs on 10% to 25%. that is, for the most part, priced and. -- priced in. the recession is off the table somewhat. the fed is on the sidelines. if you do get a better trade deal, some kind of a plan to roll those 10% tariffs back, that will give you some upside to the markets. alix: nick bendenbrook and linda bakhshian, thank you very much. david: time to find out what's going on outside the business world. says thee francis catholic faithful around the world one more than just condemnation. they want concrete action to put an end to clergy sex abuse.

there was a warning at the vatican. the pope calling the summit after botching a high profile cover-up case of clergy sex abuse in chile. sebastian meeting with the president at the white house. he says mr. trump seems to have it in for germany. he's the youngest head of government in europe. germany is about to make it easier for major banks to fire their top earners. lawmakers are about to pass legislation designed to shield the finance industry from shock waves caused by brexit. the law would loosen protections for the bank's so-called risktakers who earn $250,000 a year or more. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

i'm viviana hurtado. this is bloomberg. david: i talked to a lot of banks around the referendum. the legislature is ahead of them. they are not going to change all the labor laws, but specifically the risktakers that we will let you find them. -- fire them. makes it impossible for an american company to want to go work there. it is smart. david: it is a big factor. germany is moving forward today. that's a lot of cost. coming up, jes staley takes on edward bramson. we take a look at the activist investor's battle for a seat on the board at barclays.

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." inserra.inda ke and more china set to propose tariffs on u.s. imports like soybeans. intought i could turn this

$30 billion in soybeans -- david: if alix had 15 more seconds, she would have. memoranda of understanding. china saying we will buy more soybeans. when you see $5 billion from the u.s., that is a drop in the bucket. it's also corn and wheat. david: you think about it in terms of the overall soybean market. president trump sees that in terms of the trade deficit. base?s off of what --has come down some sensing since he announced the tariffs. alix: good point.

60% of that is soybeans -- $30 billion total. we don't know the timing, over how many years, what the u.s. would have to do in response to that. david: the president said he would take care of the farmers. this is a step in that direction. i'm sure the soybean farmers are feeling good about this news. news, chinaget the extra $30pose an billion a year of u.s. agriculture imports. watching that headline as well. now, we turn to wall street beat. first up, jes staley takes on

bramson, urging shareholders to vote against the activist investor's bid for a board seat. it was firm dismisses a bond manager at the center of a scandal that sent shares plunging. u.s. regulators targeting danske bank. david: we are joined now by peggy collins. jes staley.with we talked with jes staley overnight about edward bramson's request for a board seat. >> the board unanimously is going to recommend that the shareholders do not bode that mr. bramson get on the board. that mr. bramson get on the board. to have that engagement between shareholders and management and the board, we don't believe a

board seat is necessary to do that. recommend board will unanimously we don't add mr. bramson. peggy: bramson wrote a letter to his investors and saying he needed a board seat to get barclays to make more cuts. the bank was out with earnings today that look stronger than some people expected. that is helping relieve some of the stress on barclays. they are due to meet next week here in new york. alix: let's see how gam goes. the firm wound up dismissing tim haywood, the bond manager at the center of all this drama. when i read the article, i was like, wait, they just dismissed him? peggy: it was a bit surprising

because it's been going on since july of last year. today, it looks like they did oust him. he may appeal. as the saga goes on, the story continues to weigh on the investment firm. sinceillion in outflows november -- when you have this kind of outflows on the asset management side, this will be a tough climb to get back up for them. david: the stock this morning in europe went down significantly on this news. and then it came back up. people thought, didn't it already happened? peggy: to the extent that there were some disclosures that he didn't make around the bond itd, you would have thought happened last year. has had that bank

problem with money laundering going through estonia. --, the sec peggy: the nordic banks are taking a hit in terms of money laundering allegations. david: they say this is a smaller amount. they are being wrapped up in the investigation. peggy: investors didn't seem confident today in terms of what they heard from the ceo today. david: this comes on the heels of a french ruling with ubs. money laundering scandals hitting a lot of european banks are not going away anytime soon. duke's starg up, a nikeis injured when

sendingits during play, nike shares plummeting. ♪

david: this is what i'm watching. college basketball. a big game last night, duke against north carolina. the star player, zion williamson, a freshman, early in the game, he sprained his knee, he turns and doesn't make it. a lot of important people are watching zion williamson. he comes around and pivots there and his put goes out from under him. -- foot goes out from under him. this is it right here. with his right foot, watch him

-- with his left foot, he plants. look at the shoe. it is a nike shoe. president obama reacting, saying, "his shoe broke." this is very concerning for poor mr. williamson. he may be ok. nike in the premarket down almost 2%. alix: twitter blew up. nba playere is an who plays for the celtics, terry rozier, who tweeted out, "come on over to puma." this will be a headache for nike. alix: i've never seen a shoe do that. you wouldnk nike -- think nike would come out and be like "we are looking into it.

that doesn't happen." he's like the superstar. we will definitely be watching that. stoicalp, marks will be joining us. $30 billiono pledge a year to buy agricultural products from the u.s. as the toward achina inched tow trade deal with memoranda of understanding. this is bloomberg. ♪ the latest innovation from xfinity

isn't just a store. it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life

like never before store. the xfinity store is here. and it's simple, easy, awesome. 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: china offers a $30 billion olive branch, saying they will

buy $30 billion of agricultural goods a year. morgan stanley warns of complacency. the bank says the volatility assets -- the doves versus the dove plus. the fed divided on the hurdles for the next rate hike. david: welcome to "bloomberg daybreak." soybeans.ews, the alix: soybean prices up 1% on the news. news, youe headline are still seeing weakness in the equity market. euro-dollar up .1%. a stronger dollar resilient story. services stronger, manufacturing weaker, that theme playing out in europe.

yields on the back end up three basis points after the fed came out kind of dovish but not as much as the market participants thought. anye up .1%, reversing earlier losses. starting at 8:30, we will get a series of economic data, starting with jobless claims and durable goods. 9:00, u.s. manufacturing pmi's. 10:00 this morning, u.s. home sales. then, the treasury will be auctioning 30 year tips. headline, china pledges $30 billion a year to buy ag imports from the u.s. joining us now, michael mckee. that's a lot, double what we saw in 2017. michael: it's not double.

it continues the path we were on. $24 billion,t growing on a regular basis -- the last time we had cleaned it up before the sanctions -- clean data before the sanctions. that is notbigger, a bad target to hit. it suggests they will get back to normal. the headline seems to imply its $30 billion more. -- it is $30 billion more. buying $23 they were ago, $60orth two years billion would be a lot. whatow $30 billion is would be in normal path for agriculture.

part of the one negotiations. the real sticking point is what they do about industrial policy economy and the fact that the government to do thingsforts that are unfair in the world rules. goodg soybeans, that is for us but it doesn't solve the problem. david: the reports from bloomberg today saying they will have memoranda of understanding. if they do come up with these and they are enforceable, we would have a deal with china that would be better than it was. michael: it would be if they do that and those memorandums result -- memoranda result in a deal.

we are pushing the goal post back, pushing the timing back, the march 1 deadline. if you can get these memoranda in place, maybe that's enough for the president to extend the deadline. that is a win for both sides in the short run. have: many companies cited trade issues. ahead of that march 1 deadline, we wanted to get a sense of what ceos were saying. of 500ducted a survey firms. 60% of companies and sing tariffs might help increase -- saying tariffs might help increase their profits. is 75% of companies surveyed say they've taken at

least one action to help prepare for the tariffs. some of those actions include raising prices. raising prices means growth margins are holding steady. there revenue and costs of goods sold are rising. that's pressuring operating margins. trade hasn't quite hit them yet, except for the one sector we are focusing on today, agriculture. deere said agriculture is starting to affect them. farmers are cautious about making major purchases. the headline this morning about $30 billion ofg additional ag imports should give farmers some relief. alix: great round up for that.

trade really the dominant theme across corporate earnings, but analysts can agree on what's priced into the market -- can't agree on what's priced into the market. morgan stanley worried about lower volatility in that certain asset classes aren't pricing in that certain asset classes aren't pricing in enough violol. joining us now, mark stoeckle and bonnie wongtrakool. mark: i think the upside is hard to get to. if you look at what's happening with trade, it would be hard to get a big upside surprise. the market is pricing in what you were talking about earlier. if they get everything you mentioned, there would be some upside there. that has to be upside surprise to keep this moving. is thiso what extent

priced into the fixed income market? do bonds reflect the uncertainty over trade? bonnie: we've seen that yields generally globally have declined. some of the risk has been priced in. that makes a lot of sense. i would agree with mark that in terms of having a very clear and clean deal and imminent resolution, that's not in the cards. there's a lot of details that need to be worked out. what does that $30 billion mean? how do we get there? as that uncertainty drags on and these talks evolve, it makes sense that global yields stay at the level. david: if there were a resolution, would there be substantial upside? would it affect yields?

bonnie: i don't think it would that much. go back to what the ecb said today in their minutes. it's not so much about trade. that is a headwind they are looking at closely. it's more about the longer-term growth and the inflation prospects. central banks everywhere have been concerned about inflation. inflation has not gone anywhere for a number of years. the next fed action is about inflation above their target. they said emphatically in the minutes that they now view the upside risks to inflation is more than the downside risks. interest rates can stay at lower levels even if we do get some progress on trade talks. alix: i will dive deeper into the fed minutes. there's been a conversation as to how much juice is left in the

rally. the s&p is the blue line, keeps getting higher. the white line is cyclicals versus defensive. how do you view that when you look at that and put it in a lens of trade? mark: industrials had a big move off the bottom. eere, cat, issues is d 3m, they are all calling out china. it has to take a break. we are annualized at 109%. that is not going to happen. as it relates to trade, there is more downside built in. i also don't see a lot of upside. sideways, but it could go up a little bit, but i don't see big moves up. david: do you see any shift from

large-cap to small caps? let's get domestic. mark: not really. are a being unto themselves. been generally moving because even though the , theeconomy has been good rhetoric around small-cap has not been as strong. we have not seen a lot of people going down the market cap range to try to grab that. alix: you don't agree that you see that kind of upside. do you agree with morgan stanley seeing a lack of volatility? they said to the probability of price changes across soybeans and semis at multi-month lows. markets have kept too much optimism -- you seem to agree

with that. does that mean we are under pricing vol? mark: i don't know if we are under pricing vol. semis have gotten hit hard because of china. could we be at a level with semis that provides more upside? sure. that's not the whole market. there are discrete areas that could provide more upside than the whole general market going up as much as the street is expecting. david: mark stoeckle and bonnie wongtrakool will be staying with us. policymakers fed as the end of the rate hikes? this is bloomberg. ♪

mark: thi viviana: this is "bloomberg daybreak." the company will target a lyfttion of $25 billion -- could start marketing shares at their roadshow. standard chartered bank will take you $900 million change -- a $900 million charge. covered financial controls -- the charge will at the bank.gs that earn less expects to money this year than analysts predicted.

the shipper is facing headwinds from several places. >> we see a world economy that is growing less this year than last year. we see a lot of trade tensions. of course, negotiations ongoing between the u.s. and china. viviana: that is your bloomberg business flash. david: fed minutes yesterday afternoon give us more clarity on quantitative tightening. they did not give us so much clarity on rate hikes, sang several participants argued rate increases might prove necessary if inflation outcomes were higher than in their baseline outlook. if the economy evolved as they expected, they would view it as appropriate to raise the target range later this year. still with us, mark stoeckle of adams funds and bonnie wongtrakool of western asset management.

you were saying let's pay attention to what's going on with the central banks. what did you learn yesterday from these minutes? did they change your view? bonnie: our view is the fed is going to be very patient. they want to try to extend the length of this recovery as long as they can. for them, their next move does hinge on inflation. even if we see the ha headwinds fall away, they will still be very cautious. if inflation does not reach their target or surpass it -- remember, they referred to the symmetric target in the past -- they probably won't do anything. they will be on hold for the entire year. it depends on how the inflation data comes in. david: there seemed to be division within the fed on balance. if we don't have that, we stay

packed. bonnie: that was our interpretation. there were references to several wanting to do more hikes and several wanting to stay put. it seemsn balance, like the group is concerned about market expectations for inflation. alix: one of the big takeaways is that the balance sheet year.ion may end this they see $1.3 trillion. is that a risk on signal for the longer-term? mark: i don't think so. we have to remember that that has been something people have been expecting for a couple of months. what the fed said yesterday is what everybody expected they would say. there's a bit of a disagreement, maybe, on inflation.

as it relates to the balance sheet, that's what everybody was expecting. i don't think that is a risk on signal. because whenthat we had chair powell say it was on autopilot, the markets reacted substantially, and he was apparently reacting to that? are we in danger of never being able to get the balance sheet back down to where it ought to be because the fed is afraid of the markets? bonnie: i would say this about-face or pivot on the balance sheet is a reflection of how much the fed is looking at financial conditions. previously, that was not part of their calculus. they had seen that it had this inect investors -- in investors' minds.

much: i also wonder how when they talk about autopilot is really autopilot or is that a term he shouldn't have used? bonnie: it's a term he probably should not have used. in some senses, it did not affect the market. there were in fundamental reasons to be concerned about it -- weren't fundamental reasons to be concerned about it. it did not change valuations that much. it was onment was autopilot because they had communicated it so clearly in the past. there's some value to be more clear. -- thereing more clear some value to being more clear. they want to get that information out to the market as soon as possible. once they also mentioned

they wind down there mortgage-backed securities, they will put that money into treasury. what does that do for the longer-term structure of the treasury market? bonnie: we haven't gotten the details on what types of treasuries they will buy, whether it will be t-bills or how they distribute it. that is positive for the treasury market, the fact that they would be net buyers again. alix: mark stoeckle and bonnie wongtrakool will be sticking with us. sneakeroming up, nike's fail. during -- a nike ukee splits during a do game. ♪

david: time for the bottom line. i'm watching samsung.

they had this big announcement yesterday of a phone that's $1980. it is a phone that turns into a tablet. you unfold it. i don't quite understand how it works. phone,like a regular then you open it up and it's a tablet. oh, myart of me is like, god, it's $2000. if i bought a new phone and a moret, that would cost than $2000. that's kind of big. that would freak me out. i'm looking at bunge. lost 125 million dollars

--er the trade war caused $125 billion after the trade war caused the brazilian soybeans crop to get more expensive. that call underway now. they will exit some businesses. this year will be a transitional year for the business. now.theme for bunge right david: how does this read against the reported possible agreement between the u.s. and china? it would help their business? alix: in theory. it also depends on what's happening in brazil. it will be tough. the readthrough is not happening immediately. david: we are watching nike.

we've been watching it all morning. we will have to play this video once again. this duke-north carolina game, the star freshman player comes foot,, pivots on his left comes down and the shoe broke on him. brooke: you have president obama broke.""look, his shoe only theirn to lose, third loss of the. -- of the year. zion williamson will go into the nba this year, probably. you think back a couple years ago when steph curry was coming let him nba and nike slip through their fingers. david: nike trading down 1.7%

right now. we haven't heard much from nike. brooke: they said they are investigating the issue. it is sort of a fluke, freak thing. at the same time, you don't want your shoe falling apart in the middle of a game like this. david: players make moves like that all the time. tooke: the shoe is supposed hold up in all sorts of circumstances. it is a basketball to. -- basketball shoe. alix: durable goods of next. this is bloomberg. -- durable goods up next. ♪

alix: this is "bloomberg daybreak." let's take a look at how markets are performing. weaker stock in equity markets. the dax still holding on to gain

despite the next eurozone pmi. services sector, manufacturing not so much. euro-dollar managing to eke out again. the aussie dollar tumbling. the data dropping. durable goods in december, that preliminary read was 1.2%. missing estimates by quite a lot. if you backup transportation you are looking at a gain of .01%. a big mess for december. the jobless claims moving lower. 216,000. the fed business index negative. those surveys tend to come in strong. you have to say these are disappointing numbers. alix: except for the jobless claims.

.his looks pretty ugly to me the dollar rolling into negative territory and less selling. not even could barely. still 15 basis points. still this is mark from adams fund and bonnie from western asset management. as we sit through the numbers, the philly business index down -.4, what is your estimate of u.s. economics? bonnie: we think the u.s. will still eke out 2% to 2.25% growth. where therest year was the effective fiscal stimulus highest and now you're seeing that fate off. headwind from uncertainty around trade. that is consistent and against that you're a strong job market and that is what is keeping the economy going.

a healthy consumer, a good job market, good spending by the consumer. it is all fairly consistent with what we are seeing and the fact that treasuries are at these levels make sense in light of this type of growth. david: mark, it is not a big surprise the economy is slowing. it was a breakneck pace in 2018. how much is will it slow and was that mean for companies and their earnings? mark: it is hard to call how much it will slow. i think bonnie's expectation for growth is consensus. importantat is most is you get into the stocks and understand what is driving their revenue, their margin opportunities, their earnings. we spent a lot more time at the company level than we do at the macro level. i do think there are opportunities for growth, even with slowing from 2018 to 2019.

you mention margins and bonnie talked about the robust job market. they can be at odds. have been talking about wages being a drag on margins for years. i think the most important part is let us give credit to company management. this is no surprise to them. they saw this coming. this has been years in the making. where they adjust the parts of the businesses they have control over, it can offset that. that is what is happening. that is why you've not seen more pressure on margins. by factoriesplaced for business equipment fell in december. the idea is you are seeing a loss of momentum because of the uncertainty over the trade war. financial conditions have eased some, and if we do get a snap

back, what is on your shopping list? mark: we are sector neutral. we run our funds to the s&p 500. inthere's 14% in health-care the s&p 500 we will be 14%. we invested all sectors. there are a couple areas we like a lot. , it is adiscretionary $12 billion company but advance auto parts has been a terrific company. we -- our analyst to a lot of work on it and we found the market, the age of vehicles is about 11 years. you also have the complexity of vehicles. what has happened over time is the do it for me as opposed to the do-it-yourself has been rising. that is a better margin for them. when you look at the auto-parts business, o'reilly and autozone

are the ones that are the good ones. we went fishing in advance auto parts, which underperformed significantly. we saw a new management team, and activist on the board, which sometimes can be a good thing, and an opportunity for a different strategy to be able to call better and begin to show more in margins. 2018. a terrific stock in the guide wasrted conservative for 2019. we think they have a long road to go. it is looking at what is going on in macro with cars and opportunity and funding a stock. we took a different route with advance. it has paid off incredibly well. bonnie, what about

balance sheets at these companies? where is business in terms of how much they have leveraged up? are there any areas in the economy where you think there is cause for concern about leverage? there's been a lot of discussion about leverage and a lot of people think leverage is high. if you look at leverage ratios, they are not that high. comparable to the mid-90's. interest coverage is pretty high. if you want to look at where that is going forward, corporate profits remain strong. this quarter we have seen 11% growth. the idea that companies will not be able to cover their interest is not too much in question. like,espect to sectors we we look for industries as second

-- and sectors where the management is committed to maintaining or deleveraging. ,e like sectors like energy sectors like banks. all of those management has shown a lot of discipline and we think there is value there. alix: the philly fed index, that is sort of a new indication versus the durable good, highlights i want to point out. the shipments fell. u.s. inventories rise and unfulfilled orders rose as well. you are seeing indices moving to the lows on sessions. .he dollar coming up where was less selling in the bond market. i asked what is on your shopping list of things get better. now the reverse question. if you get surveys like this,

where do you go for safety? safety think you go to in the companies where you have the highest confidence they are going to deliver earnings. you can find those in every sector. we like managed care and health care. if you look at the landscape of biotech and pharma and med tech and tools, managed care has been consistent. has been like cigna compounding earnings by 50% since 2009. there he consisted earnings returns. to us, in an environment where pressure on pharma because of prices, pressure on biotech for some of the same reasons, med tech is expensive. we think managed care within health care is particularly nice. david: you cannot fight demographics in the wrong -- in the long run. mark: guys are getting older.

thank you so much, bonnie for being with us. mark will be staying with us. now we turn to first word news. the company is offering to ramp up desk china is offering to ramp up the amount of u.s. agricultural -- china is offering to ramp up the amount of u.s. agricultural goods it buys. the sides are apparently discussing memos of understanding. they cover major points in an agreement. i u.s. coast guard officer has been accused in a terrorist plot aimed at high-profile democrats and journalist. he stockpiled weapons in a washington, d.c. suburb and plotted to kill nancy pelosi and a handful of democratic senators. news anchors were also on the list. a warning from pope france's for bishops and religious leaders

intending -- attending a summit on abuse. he says catholics want more than condemnation. they want concrete action. the pope calling the summit at the vatican after botching a high-profile sex abuse cover-up case in chile. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. david: coming up, innovation strategies from inside embassy suite. -- that is next in today's follow the lead. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." later today on "balance of power,", the former u.s. ambassador to saudi arabia. this is "bloomberg daybreak." samsung is leading a dramatic said -- a dramatic shift into mass-market for phones. revealing a smart phone with a foldable screen that will cost almost $2000. it can be unfolded into a tablet with a 7.3 inch screen. samsung will start selling it in april. to settle thet u.s. court case has in a robot. -- has hit a roadblock.

both sides are trying to reach a settlement before a judge rules whether qualcomm is abusing its market dominance. to the story about college basketball -- a bad night for one of the game's best players. player spraining his right knee after a nike sneaker blew out. he left the game. duke losing to north carolina. nike says it is trying to identify the problem. u.s. college sports is lucrative business. nike has three of the top 10 deals. they are valued at hundreds of millions of dollars. that is your bloomberg business flash. david: time for follow the lead. a deep dive into stories making headlines with the insides from industry veterans. today our focus is on innovation and what ceos think about how their companies are doing in innovating. according to an eu wide survey

survey,ding to an ey 42% site a limited budget as their biggest barrier to activation. sarah -- wee in offer mike inserra. mike: it is an amazing survey. people are investing in innovation. no matter what they are investing in, it seems like there is not enough investigation. than 5%e spending more in average on their budget and feeling like they are not getting returns. we are not sure does about the level of investment. we think it is about assets getting trapped within innovation. it has an unbridled element. you have to add discipline to

make sure the assets are getting put together. david: it sounds like you are saying centralization facilitates innovation. i'm: i am not set -- mike: not saying that. we feel like using innovation caulks within is a key way to stimulate it, but at the same time bring it forward. what is often happening is you have great people in the field serving products and customers. they do not have all of the ingredients to add enabling technologies. often they reached stopping points within the organization. this is not an attempt to create a big center. alix: this is a big scheme in the market so how do you play it? mark: let's take energy is an example. energy is one of the sectors where there is an amazing amount of data. using machine learning can help you find places in rocks you can drill better, drill longer

because of what you have done. trying to understand which companies are using that data most efficiently. i think energy is doing a good job. there are a variety of sectors where it is being used. at the end of the day, i think it is machines can do a better job of taking vast amount of data and analyzing it. at some level there is a simple part of that that is important. alix: it is not just when the companies see return on investment. some of the issues in oilfield service, they put a lot of money and that technology we need and there is no return on capital for years. how do you deal with that? >> that is one of the challenges. how do you monitor those investments? some of that is around failing faster. nobody likes to have a project

that says this did not work. we think as you are using the technology, and i agree that data is the most critical asset of the future. technologies are enablers but the power of the data -- some of this is cutting your losses. cutting them sooner. having a more disciplined approach. energy and health care are probably two of the most powerful places those returns will happen. it will take a discipline level different from the past. david: we saw it in health care. years ago you would see r&d budgets that would take it too long. failing at the second as opposed to the third level. they have done a lot better in rationalizing. the way you said it is perfect. you need to get out faster. that gets down to good management and the willingness to do that. we tried and we failed. let's move on. david: mike, one of the things

that came out of your survey was a big influence of ai. do you build it or do you buy it? to what extent do you do acquisitions. there was an interview the head of citi gave recently. -- we know when we can digitize processes, we not only ,mprove the customers process it costs less to provide. he is moving into ai because it will cost less. is truth tok there all of the above but what gets people nervous is the jobs will go away. i think that is true. what people do not think about is the jobs created. we were not talking about data scientists before. we were not talking about analytics. in terms of buying it versus building it, this is where you get into the notion of ecosystems.

that goes to speed and agility. i see more partnering with organizations. you might buy elements, but you're more likely to plaque -- to partner. that is the way i see some of this happening. david: when is it going to show up? all this innovation investment. i will show a longtime chart of productivity. obviously it has gone up overall, but the lower chart is the rate of growth. it has not gone up fast at all. you would think with all of this investment in innovation, whether it is the cloud or ai to get more productivity, why isn't it showing up? mike: i'm not sure i know the answer. i would talk to about productivity. that is one of the things extending the economic cycle and softening the anticipation of continued recession. that innovation is continuing to

prolong cycles. we are in one of the longest cycles ever. you may not be seeing a much bigger bump up in the growth rate but maybe what you're seeing is smoothing in the productivity and how that is softening out some of what would have otherwise been a much wider volatility. i think there are shadow parts of productivity. jpmorgan spends less than google does on technology and they are using it for credit. they are using it to crunch the data and figure out to extend credit to you or you and how i do that and to what extent. i think there is more there already. it is showing up in margins. i also think that ai and some of these machine things, they are so powerful that to expected to be right now, today, is overzealous. you need to expected down the road. alix: patience.

just to this up for us, what is the biggest risk for businesses going forward in this arena? mike: attracting talent, retaining talent, getting the benefit of the talent. we talk about energy companies, health care companies. financial services was a sexy industry. everybody wants to going to technology. i think the sleeper industries are these industries you were talking about that have to attract and retain the talent. i'm seeing industries changing their workforce and now they attract those people and how they create an environment where those people see a line of sight for the future. mark: one of the biggest risks is you do not jump on board for companies. and mark ofnserra adams fund. a great conversation. soybeans getting a boost on reports china is buying $20 billion more in u.s. add products. this is bloomberg. ♪

alix: no shocker. i am watching soybeans and corn getting a boost from reports china is offering to buy $30 products.re in ag joining us is sterling smith. what you make of these headlines? sterling: i do think this will be beneficial. it should tight up the been space in the united states. -- is the most important aspect it is that will benefit the beenol producers that a struggling with a depressed market in the ethanol space. alix: did you get the impression we are looking at $30 billion or just up to $30 billion, in which case it is not that much of a mover?

sterling: right now they are showing $30 billion more, which to me seems like an awfully big number. that might be an extension. billion or see $45 up to $30 billion. it'll will depend on what the demand situation is. looking at corn, looking at soy. we will discussing this later on commodities. and speaking with the baker hughes ge company ceo on drilling in the u.s. coming up on bloomberg markets -- the open, the pimco cio of global credit. 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: coming up, high-level trade talks resuming. china said to propose $30 billion more in agricultural imports. the federal reserve weighting the latest economic data validating that approach and a manufacturing trump in europe feeding anxiety. the ecb using options. from new york city, good morning. futures -.2% after a three-day winning streak on the s&p 500. a little bit softer. the euro a little bit cirque -- a little bit firmer at 1.1362. treasury yields grinding higher. we speak with our -- we begin with our top story. high-level trade talks resuming in washington. >> a lot of unknowns out there. >> so much relying on what happens with the trade decision. >> the trade talks will be better over the next six months. >> there