♪ nejra: president trump meets with china's top initiator as they tried forge a deal. a $15heinz records billion rush down on the most iconic brands. shares sink towards a record low. warren buffett takes a substantial hit. the eu expects britain to ask for extension, but is it just a delaying the inevitable?

welcome to "bloomberg: surveillance." let's get a quick check on the markets, but let me get you data from germany right now on the bloomberg. we are getting a number on expectations of 93.8, the estimate was 94.3, so it is a miss. the priorline from reading clear terms of the business climate, it is slightly softer than expected. at 103.4,t assessment again a miss. coming up, let's look at the markets before we get to what is coming up. it is hard to see whether there is a proclivity to risk today. .1%, a bit of a slow start. a lackluster session in asia

edging towards gains. the u.s. saw the first decline in four sessions. u.s., european, and even global growth, even if there is trade optimism. the euro going nowhere, a fairly steady dollar overall. wti on the front foot, headed for a second weekly gain. interestingly, the 10-year gilts -- yield moved higher yesterday, now it is down one basis point at 2.68. coming up, we speak to the chairman of bmw and daimler later today. let's get first word news in new york. isthe european union expecting theresa may to request a three-month delay to brexit. the prime minister will ask for an extension if the parliament baxter deal, but it is not signed off until an eu summit. may has repeatedly rejected the idea of an extension, though never ruled out.

both sides deny a major court band. -- coal ban. the treasurer of australia said the two sides remain strong and dismisses the idea any potential been to the retribution of australian banning of huawei. is driving up plans to cut hundreds, or even thousands of jobs. it would include support roles. management is reportedly weighing which parts of the business would bear the brunt of the reduction. societe generale has declined to comment. a federal judge tightened the gag order on roger stone, telling stone he will find himself in a federal lockup unless he stays off social media and stops communicating with the press. the judge calling a court order after stones instagram post, including her photo alongside rifle scope crosshairs. spacex is launching its second cargo mission of the year.

three payloads were taken into orbit, including an airport research craft and an internet satellite and an israeli lunar lander. the falcon nine rocket blasted off at 8:45 p.m. local time. spacex setting a company record last year with 21 customer launches. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. back to you, they rough -- to you, nejra. nejra: president trump will meet with china's top trade negotiator as the u.s. tries to forge a preliminary deal on chinese imports. joining us from beijing is tom mackenzie, bloomberg's china correspondent. great to have you with us. how much progress has been made this week? tom: certainly, the mood music is still positive as besides

continue conversations, expected to wrap up by today. we know that they are building out some and low use -- some mou's about things like intellectual property, but also nontariff barriers and services. it is understood that these conform the basics of a deal. what we are looking for at of these conversations is any signal that the u.s. is ready to extend the deadline. as you say, the clock is ticking. there have been suggestions they may relax the deadline. , we are increasing our china coverage, tell us about your new show. what a great time to be expanding our coverage one hour, 9:00 a.m.-10:00, beijing time, monday to friday. we are going to leverage the amazing recordings deals of the

60 or so journalists we have here. there across the country, getting under the skin. and looking back in modern chinese history, it is difficult to put your finger on it and say this is an on interesting time, but right now is a pivotal moment in chinese history. pivotal for the relationship with the united states, but also in terms of the reform agenda. the capital markets have started to open up, the msci index, bond market connections, that is all happening. but the role of the state, increasingly strong, all of those tensions that play, we want to cut through that, give our viewers the insights they need to take advantage of the opportunities and avoid the risks. that show kicking off with the yvonne man. next, we will be speaking to the am-cham president and major investors. nejra: looking forward to it. tom mackenzie, soon to be

co-anchor of "bloomberg markets: china open." joining us for the hour is the global cio at ubs. welcome, great to have you here. let's talk trade. what are markets pricing in when it comes to trade in terms of whether there is much further upside the market on any good outcome? it would take a significant change in the relationship, and some believe they have reached a long-term solution to move above the highs in the markets we saw in the fall. but there is also a sense that the president of united states and china wants to get to a deal . there are a lot of people who used to be in the trump administration who are no longer there, but still talk to the president, and when you take that information and public

statements, you do get a sense that the white house wants to work towards a deal. will see some we sort of extension of march 1, perhaps an avoidance of more tariffs. but bloomberg has been a survey of a number of chinese economists, and most of them think that what you will see is not a halt on tariffs, but simply a's -- a pause. what does that mean for markets? the friction will continue, and certainly, we should not ignore military and technological and cyber security issues. yes, that makes the world differently. byare positioning for that looking at how these supply chains around china and theare expanding to other countries in asia and how there will be investment in creating the supply chains. nejra: in terms of positioning for that, does it mean you would

put protection in certain parts of the portfolio, specifically around trade risks? us, we recognize that this world is going to be more volatile in the markets for a variety of reasons. period or we a are late in the economic cycle. lower volatility, so we are taking advantage to have that optionality. while we like global equities and think the markets can go higher, we have a put on the s&p 500 to help us when we get some sharp selloff. nejra: is the s&p 500 vulnerable to what happens to trade? more vulnerable, say, then asian indices -- than some asian indicies? mark: what we saw was that asia

bore the brunt of a lot of the trade noise, now it is more balanced. now we see better valuations in emerging markets, so we are overweight in emerging-market equities. nejra: will talk more in just a moment, mark from ubs stays with us. coming up, delaying the inevitable, the e.u. expects theresa may to ask for a delay, will the extra time matter? we discuss, this is bloomberg. ♪

nejra: this is "bloomberg: surveillance." let's get the business flash. >> for revealing omissions theyng could be flawed, have since hired an outside firm kolkata conduct an investigation -- to help conduct an investigation. regulators are pleased they are taking proactive measures heard the world's second largest gold producer is looking for ways to boost production. bloomberg has learned that the company has been looking at a possibility for a tie up with newmont. they were close to a merger before talks broke down over terms of the deal. shares drop as the model three lost a coveted recommendation from consumer art -- report. it cited owners complaining about issues including loosefitting exterior parts and

effective glass. it fell to number 19, down 11 spots from last year. that is the bloomberg business flash, nejra. nejra: thank you, that he on a -- viviana. some are suggesting that the premise will ask the e.u. for an extension, but it is not signed off until an eu summit. may has rejected the idea of an extension, though never rolled it out. this as the clock ticks, just 35 days until the divorce. -- the cious is cio at ubs wealth management, mark. it looks like they are pricing in an extension, so it begs the question whether there is much upside to sterling if we do get an extension. mark: well, i think you are absolutely right that the market

has come around to that you. -- that view. for us and asset allocated to around the world, it is very difficult to price in what the politics are going to do and we don't want to take a director that -- direct bet. where we have shifted is to say it will asset allocator is wire that they have an allocation the u.k. equities? it is a relatively small part of the world market and has gone from a defensive market to a less defensive market. we are taking our strategic exposure down a little bit, because let's face it, just because you have a brexit deal does not mean trade negotiations and other things are done. that is interesting you say it has become less defensive. explain to me what you mean by that. of course, there are quite a

number of stocks in the ftse 100 but you could classify as defensive. so do you just mean based on the macro fundamentals? yeah, macro fundamentals and increased volatility and uncertainty. for investors, what that volatility does means that there are opportunities around stocks with strong dividends and cash flow yields. certainly, the valuation placed not necessarily that appealing. showing the chart aussie dollar against the pound. not much of a surprise that it has been more volatile than the sterling, in terms of you'd beany way

looking to not play that, but to jump a lot higher? it has been fairly suppressed until now. mark: [laughter] it is really beyond economic analysis. it is pure politics of at this point. while it may job, it is already priced in. market stays with us, cio at ubs wealth management. coming up, all about autos. we speak to the chairman of bmw and daimler. don't miss that conversation later today, this is bloomberg. ♪

nejra: economics, finance, politics, this is "bloomberg: surveillance.". let's talk about the rebound and risk assets among global stocks in high yield that have soared following the fed's dovish turn, but how further can do -- can't go? investors have shunned conditions, the well, market saw global credit saying that now is the time to do you risk portfolios -- to de-risk portfolios. let me start by asking you about credit. is that something you think has

a lot further to run beyond the first quarter? mark: no. rally has been very strong and is not something we want to get in front of. at this point in the cycle, adding to our credit exposure is less likely. we are more interested in equities. nejra: you are overweight global in equity markets, how much are people getting their heads around the fact we could the fed turned more hawkish? i know we are on's, but some are interpreting the latest minutes. mark: i don't think the market has gotten its head around that, the markets aren't pricing it in. think that also influences the capacity for the fed to take action in the near future, unless they prepare the market things are getting

better and we may hike in the second half of the year. the inflation picture remains very low. now hard for them to act meansow inflation picture that equities typically trade at higher multiples in times like this. nejra: and how much of that is down to how suppressed the premium is? does circle back to what you're saying about the low inflation picture. mark: certainly, there are many factors here. me the most was talking to clients around the world, how here in europe they are more pessimistic, much more .essimistic than the u.s. they are feeling optimistic and investing. you're getting this in europe

and the u.s., asia is in the middle. nejra: a little bit more pessimistic in europe. is that justified by the data we have been getting? mark: there is a variety of factors. european data has not been strong, the son of the higher frequency data is suggestive that we will get something of a rebound. we don't see a recession in europe, but there is no question that it is not the engine of growth. that is why we would play it europe more through the stocks with high dividends and good free cash flow yields. nejra: makes sense. let me ask you the mliv question of the day, i know you talk about relative value trade. what is your answer to metals versus miners, which one has more upside? mark: i would say metals. the slowdown we saw last year

caused a reduction in inventories, particularly base metals. at this later point in the cycle, you would expect commodities would do better. nejra: what are some of your relative value trades? we talked about the weakness in europe, and the way we are playing that is with an underweight in swiss equities versus overweight in e.m. and canadian equities. nejra: that is specifically em, whereas you are reducing your exposure in emi dollar bonds, correct? mark: we have done that in the past, yes. nejra: in terms of where we go here from the bond market perspective, do you like treasuries at all? mark: this is an interesting thing. in the fall, we were saying with treasuries at three and a quarter, there is an alternative to equities. a real alternative.

but now we are back to this tina, there is no alternative and we think that can help equities at this point. have: all right, great to you with us. mark, global cio at ubs wealth management. up next, we will bring you the latest from paris as socgen is weighing thousands of job cuts at the investment bank. we will bring you the story and talk more about risk and markets, this is bloomberg. ♪ this isn't just any moving day.

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show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. francine: -- nejra: economics, finance, politics. this is "bloomberg surveillance." viviana: today, president trump

is set to meet with china's top trade negotiator. the u.s. is trying to forge a preliminary deal before tariffs are set to more than double much first. would cap the latest round of trade talks in washington. when company announced it missed profit estimates. it also revealed it has received a subpoena. downnounced a write on assets including some of its most well-known brands. spacex launched its second cargo mission of the year. orbit. three loads into rocket blasted

off from cape canaveral at 8:45 p.m. local time. it's up a company record last year with 21 customer launches. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. socgen is gearing up plans to cut jobs at its investment bank. shares are trading higher, more than 3%. great to have you with us on the show. let's start by getting our heads around why this has happened. : there is pressure that shows that the bank has to deliver on soft cuts.

last year was a very hard urine trading. management took action to weeks ago by announcing a very big cut $500 million. nejra: yes. i would went to see it seems that the reasoning behind it is cost records and also to do with regulation. reasonsto us how those are feeding into the types of job cuts we're likely to see in terms of what roles and where. bio: it mostly relates to the business trading.

it, too that is heavy for the equity trading. what we understand now is that socgen is also looking at options for its cash equity business. that will be another way to alleviate pressure. say, shares are a little bit higher today, maybe the market rewarding perhaps some action being taken there that could be necessary. thank you so much. great to have you with us on the show. let's take a broader look at europe. gdp remains unchanged in the fourth quarter, this contributes to the slowdown in europe. mario draghi is expected to address this weakness. investors will be looking for

any indication on the ecb's direction. the great too happy with us on the show. take on the eurozone economy right now. is it as bad as a lot of people are saying? >> is definitely slowing, but we don't expect a recession. margin,is a very slim the 0.0% in the fourth quarter. for me, it is important to acknowledge a negative growth. it is for sure a drop there are some, external factors coming in, especially for germany, which is massively impacted by issues on the car side. of some shipsher are going into the right reverend -- rhine river.

obviously, the eurozone is not the biggest growth we see globally. it is probably one of the weakest areas at this point in time. nejra: i have heard a number of people refer to the eurozone as the weak link in the economy at the moment. how does that impact your asset allocation, especially if you take into account your expectations of how the ecb is way to handle this? let me take the second question first. we don't expect a rise in interest rates over the next 12 months. also maybe if you look at sentiment from the u.s. and asia towards europe, i would say it is at this point in time. you also see this reflected in money flows. from an allocation perspective, that means europe at this point in time is underweight, so they

prefer the u.s. and asia, especially china, but europe is pretty underway at this point in time. nejra: if you are overweight the u.s., what specifically? is a equities or are you preferring to the risk? christian: it is on the equities first. if you look at your today performance, it has done quite well. china has even done better on the equity side. also on the fixed income side, treasuries we find quite attractive at these levels as we don't expect a massive increase. from that perspective to get some decent returns that make sense. two-year treasuries, we don't expect a massive change in currency between euro-dollar. 1.15.recast is it is quite a lot on the u.s. side at this point in time. nejra: to me, you saying that you like u.s. equities, but at

the same time your liking treasuries suggests perhaps the a fedat you see listing. christian: we are probably a different view than the markets. if the trade negotiations between the u.s. and china are going well, i don't expect a complete solution, but maybe a compromise. the unemployment rate is still quite low levels at 4%. we don't expect a massive moves upward from the unemployment rate. i could well imagine that the fed is hiking one more time as the market is pricing in one more cut. if it is well communicated by the fed, that could be well digested by the market. there would be some compromise china, butwards i wouldn't rule out a break in hike in therate

u.s. nejra: if we did get that one hike and at the same time we get a halt to the rolloff of the balance sheet in 2019, which many officials seem to support in the latest minutes, does that just gives another lift to risk assets in the second half of 2019? i would say if there is a massive floods equities and doesn't hurt if the fed if it is wellike, telegraphed and well communicated, i think the market this and see it as a partisan -- positive sign. if you look to earnings per share in earnings growth of say 5%-6%, that could be quite nice for markets. nevertheless, we don't expect markets to go through the roof this year.

at the from a portfolio perspective, we want to plant a bit different this year, no longer buying index, but also in the rallies. when you to do this a little bit also selling the rallies. nejra: you got to be nimble. christian stays with us. coming up on monday, the 5g era. the battle for control of the network comes to barcelona. on monday, i will be speaking with several ceos. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." let's get the bloomberg business flash. once disney completes it $71 billion takeover of 21st century fox, billionaire rupert murdoch's family is expected to be one of the biggest voices there. they may not be much of a force at disney. the family does not have -- on the board. shareholders and the u.s. environmental protection agency also appeared to be pleased by the company's proactive measures. pinterest reportedly confidentially filed for an ipo.

they are seeking a valuation of at least $12 billion. last year, the company raised private funding that valued it around that level. it could list towards the end of june. that is the bloomberg business flash. nejra: thank you so much. let's turn to the presidential election in nigeria. officials are now scrambling to a short that the vote goes ahead tomorrow. rival parties are already questioning the vote. international crisis group's have said the rescheduling has imposed great costs on the country. paul whos now is covers africa for bloomberg news. give us a bit of color. paul: the delay was very dramatic. it happened in the middle of the just hoursturday

before the voting was meant to start. that cost a lot of disruption this week for businesses and the political parties who had to rethink and decide whether or not to continue its rallies this week. a lotor nigerian voters, traveled to their hometowns to vote and have to decide whether to go back this weekend or not. at the moment, things are pretty calm, campaigning has officially stopped in the government has it working to allow -- has a workday to allow more people to go back to their hometowns and people to vote tomorrow. nejra: thank you so much for joining us. still with us is christian from deutsche bank wealth management. around.or sticking i want to your broader view on emerging markets at the moment. earlier when we were talking, he

said he preferred the u.s. versus europe. where do emerging markets fit into that picture for you? christian: at this point in time, we do like emerging markets, especially asia. however, we discussed the earnings from our perspective are still going down and are not stabilizing at this point in time. i think it is also consensus in the markets. if you look at valuations and potential growth, a very interesting region. luster, it certainly suffered from a stronger dollar. that is not our forecast for this year. they should do quite well. we want to see some underlying stabilizing in earnings, but at this point time, it is not overweight. we have seen quite a decent performance already this year and i am sure some volatility could be local elections and global issues and going back into the market. overall, i would say it is the u.s. and emerging-market.

we like china where we had our favorite positions. nejra: the fact that you like asia and china, which you just mentioned, how much of that is down to the low valuations relative to history and how much of it is down to a belief that the stimulus measures that china is putting forth are going to be effective? if you look at chinese growth, it is probably to the lower side compared to recent years. our forecast of 6%. from that perspective, we do expect stimulus measures. we have seen how this year already took basis points. to can probably argue the effectiveness and see them coming through the second half of the year because there is always a little bit of delay. there is always more to come. vat could be quite

effective. could be bringing growth of gdp at 5%. looking at markets development last year, if you look at equities for example, lower growth rates are stimulus measures from the chinese government and chinese central bank, that could enhance our call on china. nejra: just to get a sense of how exactly you are allocating around this, do you look at potential sectors that would benefit from stimulus measures and that is how you look at it, or are you looking at it regionally in specific countries within asia including china, or is it a bit of both? christian: it is a bit of both. we like china. like ireland as well if you look at smaller countries. we can look into india. but we wanted to wait for the elections. that will take some weeks. to talkook at china,

about a potential vat cut. that would certainly be positive for the manufacturing sector. given all the trade negotiations we see, china is also looking to diversify the economy and move little bit away from exports. to manufacturing sector is quite a low-margin. side, we think there is still room in the consumer discretionary sector as well. the caselobally because we think the consumer is quite the winner of the situation we are in. it is also the case in china. nejra: very interesting. i'm hearing that from a lot of people that they have a lot of faith in the chinese consumer. thank you so much for joining us today. great to catch up with you today. coming up, we speak exclusively to the chairman of both bmw and daimler. don't miss that conversation later today. this is bloomberg.

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nejra: economics, finance, politics.

this is "bloomberg surveillance." scherzer plummeting down 20% in trading. the food giant wrote down the value of some of its most iconic brands. kraft brands also wrote down a securities -- us.ly great too happy with let's kick it off with the bad day that happened yesterday. -- let's outlined some of what happened there. truly awful day for kraft heinz right down to the tune of $15.4 billion. that led to a massive loss. also north of $10 billion. the company cut its dividends. to top it off, they said they

are under investigation by the sec for some procurement practices. that seems a slightly smaller point. what resonated with people with the right down because it goes to the heart of kraft heinz's portfolio. there are a couple of brands and products in there that are less attractive to the consumer. the company took a hard look at that and decided to take this right down. nejra: let's talk a little bit downs and the wrtite tell us exactly what they are doing. what we are noticing is a change in consumer. something we have been writing about for a couple of years. from the european perspective, we have seen the likes of nestle and unilever. they have all tried to home that portfolio, out with processed food and in with healthier yogurt andlthier

coffee. all of these kinds of things that people now look for more. kraft heinz has been behind in the. somewhat ironic because you remember two years ago, almost three years ago at this point, they made a bid, trying to make a bid for unilever. that didn't work out.some of the accusations at the time were , this is a company that really needs to clean up and shape up. unilever has arguably done this. kraft heinz is sort of getting the wrong medicine now. nejra: great to have you with us. thank you so much. let's take a look at what other stocks there are two watch today. sebastian: let's start with our corporate story of the day. the reason for all of this, regulations, increasing

oversight and that is increasing cost, which is what the company is seeking to solve. investors taking it pretty well but our biggest mover today is -- of 17%. at is a french i.t. service company. analyst saying they are slightly above forecasts. finally, have a look at alexa, they have cut their margin forecast 18%, down from 20%. think it is around their unity product. this is a radio therapy machine. we are seeing the stock dropped the most about 9.5%.

this is the biggest father in europe today. nejra: thank you so much. we continue in the next hour with guy johnson and tom keene. later, we talk to the -- ceo. we are two hours into the cash equity trading session here in europe. not a lot going on on a headline level. not a huge proclivity for risk in these markets. euro goes nowhere. this is bloomberg. ♪ the latest innovation from xfinity

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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. tom: this morning, insurrection within prime minister may's

party. into the weekend, in such a disinflation data, all are watching the german ten-year yield. it is friday, could it be mueller time in washington? good morning, this is "bloomberg surveillance." give me a brexit update. already seen one labour party mp defect surrounding the question of if we are going to see fresh tories defecting as well. in flesh and coming through on a month by month basis, a little weaker than anticipated. tom: andrew sheets with us this hour.

right now in new york city with our first word news, here is viviana. viviana: president trump will meet today with china's top negotiator. the two sides are trying to strike a preliminary deal. they are now working of memos of understanding. the u.s. will lease 200 troops in syria after president trump issued a withdrawal. the u.s. deployed about 2000 troops in syria to fight the islamic state. european union officials telling bloomberg they expect resurvey to be forced to request a three-month delay to the divorce. to eu seek that is a typical extension. that would give parliament had to pass necessary relation -- legislation necessary for the departure. of ugly fourth quarter may lead

frenchjob cuts at a bank. thousands of jobs at socgen may be in jeopardy. managers are still deciding which parts of the business with brenda -- bear the brunt. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. data check right now. seven. up the euro not doing much. i would note the vix is a bull market. what do you have? guy: let's talk about what has been going on around the world. with i strongly day rally in china. morning sessions, nothing happening. the afternoon, things going on.

the margin trade is now back on in china. authorities are allowing chinese equities to get into gear. european stocks going nowhere in a hurry. report.ising bloomberg tom: tough call on the bloomberg today. wanted a reduction. this goes into the inflation news. is the idea of a lower inflation rate. let's go to andrew sheets of morgan stanley who is in charge of your december, january and february. on how torsation reset in the equity market as well. let's do the inflation now. later in the hour as well. is this disinflation here to stay? andrew: i'm not sure that it is. a think the first thing that is important here is

some level setting. the inflation rates have moderated and core numbers. they have come down on the headline basis, but a lot of that headline decline is due to energy crisis. if you look across major economies, it's hard to find economy were inflation is below the 25 euros rich. with moderate -- 25 year average. we have moderated. i'm not sure this is one rate can bloat blow the all clear and say we have had a couple of months to drop inflation data. tom: morgan stanley look like geniuses in december. have is morgan stanley reset into march? i think weandrew: need to take a look at where is there still outside were a lack of upside? there is a pretty clear difference between the u.s.

story and u.s. asset story than what we see in overseas markets. we still have upside toward emerging markets and fixed income. we are above for the s&p is expected to finish in 2019. i really do think that this is a market where investors should use this strength to rotate assets. guy: in that scenario, what is a in emergingeight markets? andrew: obviously, it relates to -- i do think that you are seeing a

five-year period where emerging-market assets have come up well in the last few months. i think this is a trend that has quite a bit of legs behind it. i think we are seeing market pricing expectations further on fed tightening start to five now. you're seeing the rest of the world -- we saw some tweets from the president yesterday hinting the huawei issue could open the door for a wider trade deal to take place. requirement that the u.s. and china reach some sort of agreement on trade? injure: i think -- andrew: i think it is.

i'm not sure any to be the most ambitious agreement. we don't think it will be terribly ambitious. with think a lot of the tariffs in place now will probably still remain in effect. but i think it's about drawing a line under growth in china and making the market more comfortable, that now is probably the leader of that growth output. the narrative around emerging-market assets and china assess -- i think that is a lot easier to take. we go to any balance sheet and look at the goodwill and that will, one of the hallmarks things is cbs saying the aetna transaction really hasn't been that good. now we are hearing that the kraft heinz transaction really hasn't been good.

is that something we're going to see in 2019? a lot of rightsizing over balance sheets in recent years? andrew: i think it is a part of a broader question for the u.s. market, which is i think a question that affects both u.s. credit and equity. there has been a lot of debt growth in the u.s. as there has been debt-financed m&a. also, the u.s. equity market has been a beneficiary as companies become more levered and experience more unusual levels of market efficiency. in the u.s., isn't as good as it gets when it relates to margin? i think that is one of the issues that are strategy team point out is that margin in the u.s. arsenal elevated, the incremental improvement becomes easier. i think you do have a dynamic where companies that have taken

on a lot of debt are more challenging. tom: a look at the goodwill on craft and that is a row oftistic of -- wow statistic $15 billion. we will have a little more on kraft heinz through the morning. andrew sheets will stay with us. , mr. advani -- arvani speaking right now. very important, he does not want to gamble with shareholders capital. let's go from banking to the auto sector. daimler andr ago, bmw inability push together. they effectively merged their operations. they are holding a press conference right now. what they are announcing if they are going to put an extra $1.1

billion into this mobility push. khalili -- clearly this is aimed at the likes of uber and lyft. lyft seeking an ipo as it seeks to raise funds. this is a very competitive space right now. togetherler already. coming up, we are going to explicitly to the chairman of both of these companies. looking forward to that conversation. this is bloomberg. ♪ >> in terms of that, we're looking at some strange.

viviana: this is "bloomberg surveillance." shares of kraft heinz plunging in the free market. the packaged food giant taking a $15.4 billion charge to write down assets. consumeracknowledgment tastes have distorted the value of some of the most iconic products. a canadianas learned company is making a bid for newmont mining. to has a market value of almost $19 million. to almost merged before talks broke down. guy: thank you very much. socgen is throwing out plans to cut jobs at its investment bank. bloomberg also says the bank

could cut hundreds or even thousands of jobs, including roles in support functions, back, middle, front office jobs could go here. shares are trading higher. ed robinson joins us now to discuss this. how much do we know about the cost? they employ roughly 20,000 in this business. how many of them could be at risk? ed: we don't know the precise number of jobs, but socgen has said they want to cut 500 million euros in expenses out of the division. guy: is likely to be enough to make this business profitable, enough to get the jaws positive? to the point at which investors are going to be comfortable? ed: that remains to be seen, we don't know what the markets are going to do. so much has been writing on the -- riding on the performance of these markets.

not only was it trading unit really hit by this, but all the positions they were holding for clients as well. tom: i get the trading at heritage of the french and socgen excellence and derivatives that have been part of the legacy for years. are they just too many banks in europe? it is story after story of the rationalization of what appears to be a flat 2019. when this executives finally act like executives and actually do something? ed: the european central bank, mario draghi has long wanted to spur consolidation in the eu, but the problem are the barriers that even they have 20 countries in the block, they're still run better national regulators, there is still a lot of national responsibility. without true banking union, that

has been this barrier to bringing about consolidation. deutsche bank keeps talking about that as a potential require were, but every time they talk about across the deal, lots of banking union comes up. tom: on the investment side is andrew sheets of morgan stanley. where is the james gorman, and robinson in europe? ed: that is a related question. there doesn't seem to be any ceo of a major bank who is doing any kind of saber rattling when it comes to m&a. the chairman of ubs have endorsed the idea of, yes, we need consolidation in banking, that would someone asked him, this ubs is going to do something? he was like no, no. sky.ed nails the

-- this guy. i'm fascinated on where the executives in banking in the eu are about actually getting going. to go. to observe one single bank with that seems to be the case guy: does it need mergers to make this happen or debates simply need to go out of business? the other one is, is the ecb exacerbating this by potentially providing more supercheap liquidity in the form of another -- andrew: i think if we were talking about an industrial industry, we could take we are consolidating the industry either through some companies owing out of his us or through

consolidation. banking is very different. we rely so much more on confidence, so much more closely linked to function in the economy. the consolidation route is the significantly preferable option there. secondly, with result to tilt rose in central bank liquidity, think if you asked european bank investors, you could have one of two scenarios. you can have very easy ecb liquidity, more funding for banks or you can have a better economic environment that would mean less liquidity. i'm sure the vast majority of them would take the second one. i think it is the economic backdrop that is really the key for the sector. more confident that growth in europe is bottoming, more confident that at some point the ecb will be able to exit these extraordinary measures. i think been profitability is key for the broader sector. guy: i appreciate what you say

about the fact that you don't want banks to go out of business. but nevertheless, just putting two banks together that are weak souls a problem. a problem intog bigger units sold anything? -- solve anything? physically, you are talking about the same thing. europe needs a different banking sector. how do we reach that point where they they got going -- don't go into business? andrew: i think you need to focus on actions that reduce capacity and refocus activity on higher margin lending. there are lots of parts of the european banking and ecosystem that have good roe. it is not the all of the parts

of the european banking system are all challenged. there are many parts that are in are not. think it is about trying to find ways to reshape. guy: the european banking sector provides the wrong function. europe doesn't have capital markets in the same way the united states does. europe depends more on banks than bonds. if you think that the ecb's problem here, is that the banking system is broken. what we need are capital markets. andrew: i think that is a very good longer-term goal. that has been the dream in europe for a long time and there are a lot of very specific blockages to that, but i do think this broader issue of focusing on areas where the banks have real competitive advantages, focus on real high-margin businesses, that is the key. tom: there a get. andrew, thank you for being

delicate on those matters. it is an arab summit, in egypt summit for the european union. look for that february 24 and 25th. there won't be a brexit session at the egypt summit. coming up on the debt and deficit of the united states of america, our authority, martin feldstein of harvard university. stay with us. this is bloomberg. ♪

>> ultimately, -- guy: 11:25 in berlin. bmw and daimler are currently holding a press conference in the german capital about the nobility business. business.y still with us is andrew sheets of morgan stanley. andrew: it is part of a broader theme that it is cyclical cyclicals in europe are usually cheap versus more quality, more defensive industrial names. you have a very large diversions there which we think is just not justified.

signs that data in china is happening, signs that stimulus measures are intensifying. i think if that is right or even just partially right, the best risk reward is on the more cyclical end of the industrial scale. guy: let's get a brief view of the tariffs. in 20 seconds, do you expect them? andrew: there is a risk that they u.s. pivots towards europe, but what is important is that u.s. automakers are not supportive of increased tariffs on european autos. guy: andrew sheets is going to stay with us. where going to be talking a little later to the chairman of both he and w and daimler. this is bloomberg. ♪ i'm a veteran

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york. am tom keene in new much to talk about. much to get ready for the end of february and beginning of march. close president has a face-to-face meeting with the vice premier, seen as a sign toward a trade deal talks are making progress. they're hoping to meet a march 1 deadline will stop that is when tariffs are set to more than double on some chinese imports. the president is indicating he may be willing to stop the clock and let talks continue. a federal judge tightening the order on job -- roger stone. the judge calling before

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guy coat the european union is expected to recent major request three-month delay to brexit. discussions between the two sides suggest this would come if parliament backs her deal. but is not signed off until the eu summit late in march. , david.us now andrew sheets is to with us. are we going to get a delay? >> this is a good knowledge met of how close things are getting to the wire. even if mrs. may get something through parliament, the expectation there is not enough time to complete all of the legislation needed to have that orderly exit on march 29. the european side is sort of expecting that now. it just means mrs. may -- they are calling it a technical extension, just a few months. we have an adequate location, european parliamentary elections in may -- we have an additional complication, european parliamentary elections in may. guy: technical delay rather than a delay?

i wonder whether that language will end up being important because there is some suggestion from the hard-line brexitiers theresa may decides to accept delay, they effectively will not back her government anymore. to 20th -- 15 to 20 mps could be aligned to do that. >> and that is enough to bring down her government. this idea is toxic to the brexitiers. risks is slipping away and perhaps not happening at all. they are adamant. they want this to happen. she says, you have to vote for this deal because there is no other option on the table. we are seeing at the moment parliament flexing its muscle about no deal, trying to exclude that possibility. we may see more moves on from parliament next week. the what is important in official surveillance countdown clock -- let's bring up the clock right now. this,s, 16 whatever, 26

and we have the seconds as well. david, it has become a parlor game, yet it is about a nation. what is the body language of the elites in the new united kingdom to get this fixed -- in the united kingdom to get this fixed? are we just going to a political shell game? >> worried, panic even in some cases. you are seeing these defections from the major parties. this has not happened in british mainstream politics for 40 years. people leaving the labor party setting up a new group in parliament. people want to find out a way to 29ththis cliff edge of the of no deal happening. these are seismic shifts in british politics and it is coming to a head, that doomsday clock you talk about, countdown. tom: let me ask you the

question, what do the lib-dems do? is there a new middle ground and we all go home happy? >> the independent group has as many mps as the liberal democrats. tom: thank you. >> the liberal democrats, it is extraordinary. one of the amazing things is they are the one party that has campaigned to stop brexit, yet their share of the vote or their attention with the public does not seem to be shifting. the focus is not so much on them . it is on his other body emerging. we are watching closely in the next few days how many more mps -- in the last hour or so, another labour mp has resigned. is there more to come? is there more to come to the conservative party? does an independent group really become a force for change in british politics? delayndrew sheets, is the price? >> i think the market is expecting a no deal exit to be

avoided. i think that is consistent with market pricing. i think in terms of what markets are looking for an looking for over the next couple of weeks, i do think it is this issue of how firmly does parliament stand i'm taking a no deal option office table. i think that is the one crucial thing for markets. a clear signere's that parliamentary majority against a no don't brexit is willing to state that, to flex its muscle to do that, that i think the investment case a run you the assets becomes clearer because you remove one serious scenario. look, i think the market is waiting like everybody else's. if there is a lack of information, like of uncertainty, keeping people -- guy: how late can she leave taking no deal off the table? >> it can pretty much be the last few minutes of this process because she will have to ask for a delay from the european union. she has pointed out repeatedly,

you can't is that we want no deal because it is baked into british law that we leave on the 29th of march. it are the acceptance of the deal needs to happen or kicking the process into the long grass. that is what she will be faced with a choice of whether to do that or not. this is going to go right down to the wire. tom: andrew sheets, can i allocate and u.k. multinationals? >> look, i do think there are a number of stocks in the u.k. traded pretty cheap valuations. like anything, there are risks but also the question of what is in the price. if you look across a lot of global equity markets, the u.k. is arguably the cheapest relative to global equities, relative to the last 20 or relationship. there is a lot of uncertainty. it really is going out of the

wire, but i don't think you can say the u.k. equity market is running into that with low risk premiums or a lot of confidence. the valuation picture still looks pretty discounted. tom: david merritt, thank you for a good friday briefing and andrew sheets from morgan stanley. coming up, a price change on inflation. weston, balance of power. .an bremmer this is "bloomberg." ♪

the fed is going

to present a new platform where they will say they're going to allow inflation to run over 2% because, as your chart shows, a really never is above 2%. so why would they tighten immediately if it gets to 2% yak up at the moment, it is about 1.8%. they are not even close. it might not get to 2% in the for simple future. this is one of the critical issues. every day there are examples of headwinds to inflation. tom: important words there, lead story on inflation. we aren't finished that with us andrew sheets. -- we are advantaged to have andrew sheets. let's go to a chart i know you know well. let's look at personal consumption inflation and the 2%

mark back 20 years. let me do that again. 2%. andrew, the regression is the need that 2% for a long sustained time in mr. hyman is saying chairman powell and mario draghi and mark carney and the rest need to over shirt -- overshoot well above the line. do you agree? >> i think about this in two ways. the first is if we look at that chart on a core basis, look at core pce back the last 20 years, you are above the 20 year average. the first question the fed needs to phases if there were in a structurally lower environment, does that mean one should use the same sort of standards that were there before? issue -- again, it does not the just on that 20-year view there are so

inflation out there. you are at the higher end of the 20-year range. the other issue is this opposes the u.s. economy is still fine, the growth continues to hum along for the rest of the year. our chief u.s. economist, that is not her forecast. she sees the celebrating growth over the course of the year. i think that also presents other challenges to the market background into how the fed will address this. i think the market is busy and bracing this goldilocks narrative that we're going to get low inflation and good growth. and actually, our view is i think they are a little bit more wedged in, that you have environments challenging because inflation will pick up again or if growth slows down and those both present challenges to the u.s. market. guy: there is an argument the ,endin particular expansions too early for labor to take advantage of it. we have spent the last few years

debating why labor has not taken a bigger piece of the pie. is the fed thinking about this now in terms of the way it is planning? if we let flesh and run a little bit hotter, if we don't jump on this, if we don't try to crash this expansion, maybe they were does get a little piece of the pie. kind of conflates some of the politics. >> there is an argument to say the fed could look at headline inflation and say, look, we have been missing low for a while and now we miss a little high. wage inflation picks up, but that is ok. let's allow workers to enjoy more of this recovery because workers have seen real wages go flat in the u.s. for the last 30 years. but i think there are challenges also to how the market will interpret that. let say the fed does indicate it is fine letting things run a little hot. that probably steepen the yield curve. that probably causes premiums to go up. that probably raises questions just how long they would like

that running hot or wage inflation go. these are all things that initially can be fine and very digestible, but over time -- guy: how quickly does that get out of hand? at the moment, there is no evidence of that happening. in fact, the exact opposite. >> exactly. i think it partly has been the opposite because the shift in the fed third of has been so recent and because -- in the fed's narrative has been so recent. and for the curve to steepen, you need the data to improve the u.s., which it has not done. i think these are really kind of key challenges that the market faces, and they are very complex. i do think the one thing we should keep in mind for markets is the market has already priced for the fed not to hike rates at all for the next two years. as we are debating what we expect them to do, i think we need to be very aware the markets expectation is already going on hold for very long

period of time. tom: andrew sheets with us. this is an important topic. it has been front and center for six to eight weeks. i can look at the german .en-year yield at .114% the good news is, that is off the map. that is a little bit better yield than monday, but a stunning measurement of disinflation out of that european benchmark as well. andrew sheets, thank you so much. greatly appreciate it. we have much more coming up. i am really looking for to this discussion list of howard dean has been a wonderful supporter of "bloomberg surveillance." most truly one of the interesting people in american politics. my conversation in the 6:00 hour. ♪

co let's get the bloomberg business flash. interest filing confidential for initial public offering in the u.s. postal bloomberg learned it is expected to seek evaluation of at least $12 billion. shares could list for the end of june. they were working with goldman sachs and j.p. morgan chase. shares of same stock, are

plummeting and pre-trading, down by almost half. the company forecast full-year profit that was well short of estimates. this after ending a crucial partnership with u.s. postal services. the arrangement allowed the subscribers to buy postage at a discount. band for two windows. guilty of breaking rules regarding foreign players and of age of 18. that is the bloomberg business flash. tom: this is terrible, guy. i knew this would never happen to the tots. this is chelsea, not the tots, right? guy: yeah. it makes me smile. it makes us all smile. tom: i'm trying to get up to speed. is it six or seven nations? guy: six nations this weekend. critical game coming up against

wales. we are already beaten the irish and the french. the grandson could be -- tom: is this the 17th century or what? guy: it is like the 100 years war. it never ends. it rolls run year after year. let's turn our attention to what is happening in the also sector. a little news from volkswagen. court case has been ongoing, basically volkswagen saying it is going to settle a diesel case ahead of a court ruling. effectively they're trying to get out in front of this. scandalthe emissions that volkswagen has been through. we will speak to the ceo coming time.10:30 a.m. new york that will be an interesting conversation that will be worth spending a little time on. andrew sheets,'s is this reinforce the european auto

sector is going to be worth investing in? the trickle through of news, we're going to settle this case. does this just reinforce the case? how much bad news is in the price? >> it is clearly a sector with a number of fundamental challenges. car production data is weak .nough ongoing trade data sold off significantly in light of that will stop we think the valuations are cheap enough to warn a more positive -- guy: a lot of people talk about the fact the german data is weak right now because the auto sector is going to a structural diesel, pivot away from diesel. once that is result, the german auto sector will bounce back. you also hear the argument toward the chinese economy gets into gear, the german economy will be bouncing back. what is going to cause it to bounce back? there is some services data, but the factoring pmi looks weak.

>> weaker than we expected. if you asked a this and question a couple of months ago, i think we would've thought this production data is weak in the auto sector but it will recover quite quickly. it a state weaker than expected which is a sign of the overall european economy being weaker for longer than we initially expected but i do think yes some tangible catalyst on the horizon. the fact of china data out of ming -- bottoming would be hopeful. the fact you potentially can draw someone under the production-related issues. and we do think you will move to somewhat easier fiscal policy this year. guy: germany? >> even in germany we think the total shipped toward less austere policies -- shift for less austere policies. guy: how does the ecb deal with this? we find ourselves, everyone getting increasingly of the view -- when you talk about the fact

putting on hold for two years, of the view the next move by the ecb will be become more easy rather than to hike. is a hike off the table for the ecb? >> i think it does go to the point that the ecb has limited tools and is a little bit dependent on what other central banks do, particularly what the fed does. the ecb can keep rates low. it can provide additional financing. i think you could argue that cutting rates could do more harm in the sense of hurting bank profitability further and the banking sector further, then a rate rise would. tom: where are you on consumer stocks? one of the things for our audience in the next hour is craft, monfils, heinz. known as conagra. the signsumer stocks, of the debt industry or is there an opportunity there? >> i think it will be

company-dependent. given where a lot of the u.s. data is -- historically, consumer, this has been as high, the fed has caused. that is been more consistent with where consumer staples have done well. and been a good thing. i think with a consumer cyclicals, do you have signs housingsing -- the u.s. has been weak recently. that is a huge part of the consumer spending story. i don't think that is the area where we are currently taking the biggest portfolio on the u.s. side, but i do think it is a pretty important story to follow. tom: let me show you this chart quickly. guy johnson, have you ever had valve eat a cheese? guy: no. tom: it is one of the food groups in america. let's look at the valve eat a cheese chart. cheese chart.

monti leaves, not bad. that is oreos. it is snacks. white, yellow, kraft train wreck up the 2015 -- off the 2015 deal. i don't know if i can get it on the gulfstream. i'm going to bring you a bar of gold, and that would be ve lveeta cheese. guy: we will have a tasting session. it is so good. tom: this is "bloomberg." ♪

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and that means in washington, it is mueller time. "wrapping some things up." it is february. that means it is not december. going to cash is not an option. beware big mergers, kraft wrightstown $15.4 billion -- rights down $15.4 billion in vel veeta cheese. we are on the disinflation watch. guy: european inflation, core inflation in particular, shows absolutely no sign of ticking higher. best oneas a single mandate, and that is inflation. goingflation ain't nowhere. tom: and we have soc gen.

right now in new york city with your first word news from here is the be on a. viviana: president trump meet with top negotiator vice premier . the two sides are tried to deske up a luminary deal luminary deal. they are working on memos of understanding covering key issues including intellectual property. 200 troopsll leave in syria after president trump ordered a withdrawal. the white house calls it a small peacekeeping group. the u.s. employed about 2000 troops to certified islamic state. to fight islamic state. european union's tell bloomberg that expect u.k. prime minister theresa may to be forced to request this. the e.u. sees that as a technical extension. it would give the british parliament time to pass necessary legislation. the two sides still disagree over the irish backstop. in of the fourth quarter maybe two big job cuts at the french

bank which is drawn up plans to eliminate jobs at its investment bank and find a partner for its equity business. thousands of jobs at socgen may be in jeopardy. managers are deciding which parts of the business would bear the reduction. the philippines is looking to issue bonds on the first half of beer. the finance secretary tells bloomberg it is a missed opportunity to not be in those markets. he says the philippines will not exceed its borrowing plan. >> so we are managing our debt very carefully and making sure , asre not going to be people like to predict, drowning in debt. viviana: global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. tom: equities, bonds, currencies, commodities. i want to mention the vix.

futures right now up. you're not doing much. the german ten-year yield. what do you see? little lower this morning. we have seen continuation of the week data that has been coming out of the eurozone. i want to talk a little bit about china. the back end of the session is really strong for the chinese equity markets. the regulators are making it easier to invest. lasthinese market the couple of hours, up 2.25%. europe really not following through on that. and there the socgen story. jump, is it? huge tom: we're going to rebound the script. we have marty schenker with us. and gina martin adams with us. we will speak to her about that will. let's do politics first.

your graft -- garrett graft. he has seven outcomes for mr. mueller. for our global audience, it is that complex wrapping up this investigation? >> it is complex and completely opaque. bob mueller has done an extra ordinary job of keeping everything close to the vest. anybody he says this is going to happen is just guessing. tom: i want to go to what he , one of his options is to hand this off in perpetuity to other prosecutors. ,> that is one of the theories that he could leave certain investigations open instead of pursuing them himself, he could farm them out to federal attorneys who could then pursue those cases.

translate it. what is it about friday mr. mueller? >> the grand jury that has been impaneled by mr. mueller generally meets on fridays. a number of indictments have come down on fridays. the theory goes, if he is going to announce additional indictments along with presenting his report, it is logical that would happen on a friday. but that is anybody's guess. guy: can i ask you about the tweets yesterday on the telecommuting sector? tom: thank you, guy. guy: he talked about 6g. dooris this him open the to approach it with huawei? with the chiefg chinese negotiator this

afternoon. he clearly wants to cut a deal with china. therefore, china wants to cut a deal with him. this may be part of the mix. dumb likesomeone out me. is there 6g? 7g? guy: the president clearly is ahead of his time. tom: i guess so. marty, please jump in here with gina martin adams. ime on, once again you and see the mother of all mega stupid mergers, suzanne ties -- suits and ties. bring up the chart. down in flames. billion.e down $15 explained that will in stupid megamergers. >> a lot of this is about accounting. there is one really clear trend among investors. they do not like financial engineering will stop they do

not like financial engineering and will not pay for buybacks. if you are proceeding with the merger and it is. ultimately created to earnings, you're not going to get paid for it. perfect example of that. goodwill is obviously a huge part of this merger. they've not been able to prove this is going to provide great economies of scale, provide improvement in the long-term outgrowth -- outlook for growth. tom: i will give you financial engineering. let's engineer the bloomberg. this, marty schenker. the white line is oreo cookies. the yellow line is velveeta cheese. that is all you need to know. it is snacks and groceries. once again, these fancy brazilians, they don't know what they're doing, do they? >> i think they have a track record that extends beyond this deal, but it is true the

synergies they thought they were going to get by this -- tom: synergy. guy, financial engineering. synergy. the reason to watch "bloomberg surveillance." jump in here. tom raises an interesting question about 3g out of brazil. is this a classic case of private equity trying to push too hard and actually undermined it brand? >> it is a good there he. i don't know a ton about the dell specifically. what i can say is there is a history of private equity trying to rationalize cost and potentially too extremely. however, what we find broadly, there is a pretty strong me to rationalize cost across the index. you see a tremendous amount of pressure over the last six to 12 months. the reason for that pressure is largely companies are spending

too much. they got a little bit of rationally exuberance. it allowed them to spend a lot of money. i think globally that has spread . generally, companies were pretty optimistic that the cycle will continue indefinitely. input a lot of cost that we now need to rationalize. can i circle back to the issue of the telecom tweet and the fact it may portend a some sort of trade to a coming out? we have the meeting with the president and the chinese top negotiator a little bit later on. gina, i am wondering whether the markets is at the point where he will be better to travel than a ride on trade? if we get a trade deal, is that a reason to save the rally? >> a lot of this is about timing. i think we must adjust, yeah, just suggest, yeah, the reason why the market is potentially topping out is because it is simply exhausted.

we have gone from less than 2% on the s&p 500 trading on their 50 day moving average back in december to now 92% of names on the index trading above the 50 day moving average. on swings like this, we tend to top out at 95%. from a timing perspective, this trade to is coming at a time when the market is probably getting exhausted in the near it excusey the an for consolidation. so: people say, tom, it is gloomy. it is like gloomberg. rbc. guy, this is how you run a european bank. 16.7%.on equity, capital ratio is 11.4%. once again, the canadian banks website, the formula works. their ceo says we continue to deliver solid results just like

the toronto maple leafs. when we come back, martin feldstein is with us which means we need to speak about your growing debt and your growing american deficit. martin feldstein with us next. this is "bloomberg." ♪

tom: good morning. guy johnson in london and i am tom keene in new york. up in the the wrap food industry. ,artin feldstein joins us professor at harvard university .nd that barely describes

youessor, wonderful to have back with us. what is different this time? if we have a burgeoning debt, and we all know a burgeoning deficit, what is different this eras like to, 2, 3 ronald reagan? >> just much, much bigger. $1 deficit this year, about trillion in a single year. that means the debt is going to theh almost 100% of gdp by end of the decade. tom: what does it do to the reaction functions? if you're doing physics at harvard and talking about the notional force of mass -- we all agree the mass of debt is frightening. what does that do to the gases of the functions forward 10 years out? >> it does not seem to do much. the market should be pushing up

long-term interest rate. instead, they are down a little bit from where they were six months ago. but i think that is just temporary. at some point, the market is going to say, who is going to buy all of this? in the past, the rest of the world was going to buy half of it, but that is not happening now. tom: let me bring in guy johnson. guy: good morning. does the level of u.s. debt have any impact on the cyclicality of the u.s. economy? >> if it does, it should be working through the interest rate. that is, large debt should be pushing up long-term interest rates. and that should be affecting investment and other things. guy: do you think we're going to see the debt story changing the nature of the relationship the rest of the world has with the dollar? it is already

happening. half of our debt has been held abroad. if you look at the last year, that is not been true. in the last year, there has not been any net buying by the rest of the world. tom: can you see a person between republicans and democrats? one of your charms of years ago, you had a discussion across the aisle on debt and deficit. i would suggest that is not happening now. how do we get back to a conversation of the world of martin feldstein? >> there is no conversation. there is just an attempt to ignore the debt and deficit, and i think we are waiting for the bond vigilantes. tom: the bond vigilantes. but disagreeagree, with the fear of higher interest rates. what does professor krugman get wrong? >> the long-term rates are not

moving, but i think in time, we will see that happening. thisgina, how does translate into the equity market ultimately? if the u.s. is going to have 100% debt to gdp, it should drive up long-term rates, which then affects the discount rate you apply back and of the equity markets. is there any evidence for that being the case at this point? >> not yet. rates have not gone higher yet. i think if we do go into a situation in which rates move significantly higher, you of a number of things that happen in the equity market. valuations are impacted because your base is the long-term or even short-term interest rates. if they are higher, yet more suppression in violation potential. you also have the environment or utilization for debt for 30 years companies have been not only utilizing that because the rates are going down, but they have been incentivized through

the tax code. we started to disincentivize through the tax code with the tax package passed in 2017. if rates continue to go higher, companies will have a bigger choice between utilizing equity and utilizing debt. less supply of equity in the market, naturally. if you have to consider how to fund your capital structure and utilize equity more often because the cost of debt is higher, it changes that dynamic be significantly. tom: the lecture years ago, a november lecture at harvard. there is no such thing as a free lunch. let's look at the acceleration in the free lunch right now. the deficit to gdp back zillion years. , marty, we're rolling over a second derivative that is increasing right now. do you blame that on the tax act we saw over the last 18 months? >> no, the real problem is a

long-term deficit. and that is the entitlement. there is nothing that we can do spending.iscretionary it really is a question -- tom: why can't we get back to 1986 and do something like grown-ups? >> 1983 is when we tackle social security and said we have to postpone the age for full benefits by a couple of years. and since 1983, life expectancy for people in their mid-60's has gone up by three years. it seems to me of follows that we ought to raise that age for full benefits by another three years. tom: guy, you're going to have to put up with me for another three years. guy: i look forward to those three years. it will be a great pleasure. , just want to mention briefly

headlines relating to brexit, first of all, this is a briefing coming from a u.k. official to reporters. a vote on a new brexit deal is unlikely next week. there was some suggestion theresa may make it a breakthrough on the hours backstop. that is looking increasingly unlikely. it is interesting as well, the pay government said to have its no deal terrorists shorted. s shorted. more in this shortly. this is "bloomberg." ♪

viviana: let's get the bloomberg business flash. will invest more than $1.1 billion to take on uber and lyft. they want to expand emerged card writing -- car right sharing. interest filing confidentially for ipo. expected to seek valuation of at least $12 billion. shares good list for the end of june. pinterest is working with goldman sachs and j.p. morgan chase. tom: thank you. we're going to rip of the script. we're 14 thanks to talk about but let's do the ipo dance right now. ipos are ipo's, but it is

different have, isn't it, because of all of the private market action. >> it is different and then it is not different. if you think about ipos and how little ipos we have had over the last two decades, it is sort of been a new issue. on one hand, the natural catch .p in the market can absorb on the other hand, it does hearken back and a lot of minds to the late 1990's when ipos were very concentrated in one segment, that was technology. you think about where the issuances are coming from, a lot of this is about the tech story. that gives investors some degree of nervousness at a time when tech stocks have come under tremendous amount of pressure. haveyft and you uber and pinterest, they are all coming fast right now. is there indication these guys

feel they have to go now? >> i think some of this is about interest rates, which appear to be turning the corner. some of this is just timing. now is the right time. they have had a number of years to develop to the point where they need to raise more capital to go to the next stage. some of this is about tech specifically, a boom in technology, a boom in new development that occurred over the last decade and now it is coming to fruition. marketwise, ipos peek at peak, so it is something to be concerned about but -- tom: gina martin adams, thank you so much. we continue with martin feldstein. this is "bloomberg." ♪

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complete denuclearization. tom: "bloomberg surveillance." good morning. .t is mueller time friday, everyone on watch for action by the special counsel. part of our coverage this morning. right now in new york, here is viviana:. viviana: president trump has a face-to-face meeting with china's top trading negotiate or dish negotiator. in two sides meeting washington this week. they're hoping to meet a march 1 deadline when tariffs are set to more than double on some chinese imports. the president indicating he may be willing to stop the clock. -- on musk spacex lifted off, three

payloads occluding indonesian satellite and israeli lunar later. these really craft will travel to the moon after deployment using its own power. in a jury, officials are scrambling to make sure to late general elections go ahead as planned tomorrow. rival parties are questioning the credibility of the results just hours before it was set to begin last saturday. and his main challenger accusing each other of trying to rig the vote. in venezuela, president nicolas maduro is tried to prevent opposition supporters from bringing humanitarian aid across the border. maduro started closing entry points. soldiers blocking national salute leader juan gaido. concerts -- julian concerts planned on both sides. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more

than 120 countries. tom: thank you. the most original pattern out of the browning school in rhode island, howard dean had been advantaged childhood and then changed all of the american discourse in politics in 2003. how are doing single-handedly -- howard dean single-handedly changing how we do politics. governor dean joins us now. up to, wonderful to catch you today. you did not support mr. sanders of vermont the last time around. i'm going to make the assumption you're not this time around. is bernie sanders in the way of a successful democratic campaign to defeat the president? >> not necessarily. i am neutral this time because i theunning the dnc data -- data the democrats are going to use. has put some ideas

out there that have been helpful. i do not think we will do them the way he would like to do them necessarily, but medicare for good idea.mple is a probably not a good idea we're going to take americans we're going to take their insurance away from them, but a good idea to get it done. we would not be talking about that if it were not for bernie sanders. i think he has a shot. who knows who will win? there will be 15 or 20 candidates and about five or six of them will get past the first four or five primaries, then we will find out. tom: i would suggest you are not a socialist a democratic-socialist. as we saw on "time" magazine last week or is it a new democratic party, socialism? does it have legs? >> no. i mean, yes and no. socialism, it means something different to people my age who grew up with soviet union a major threat and all this then

it is the young people. we ought to have universal health care system as the europeans and canadians do. i do not consider those countries -- mostly they are not socialists and their economies are doing just fine. have some things that other countries have that we should have as the premier industrialized country in the world. but i don't consider that to be embracing socialism. ,he other point i want to make but don't want to use too much of your time, there is a not -- there is not a significant left versus right problem in the democratic already. there are for some people. the major change is young versus old. guy: picking up on that, governor, i would be curious if there is room for a centrist democratic candidate in this race? >> it depends on what a centrist democratic candidate is. the answer is, yes, of course

there is, and there will be more than one. his amy klobuchar centrist? i don't know. bernie sanders is clearly not a centrist. these are all labels and names we talked about in the media all of the time. i think you have to look under the put. everyone is going to be or some form of medicare for all, but how are you going to get there? guy: is winning an ideology? >> absolutely. i think this country is in a very bad way. i think we are losing our strength as a premier industrialized power in the world. i think we're losing democracies. i think the russians are making huge gains at our expense. yes, i think we need a change in a hurry. tom: light years ago, peggy noonan said you were very different. you grew up with a lot of advantages, fancy childhood in east canton in all that. great. but you did not go up with a gilded age tone.

everyone watching this understands we are in an arch gilded age now. some would say the president represents that. how does the democratic party take advantage of the elites' weal but not do a gilded age messageth? aget is a bit of a gilded so it will be a gilded age message. i believe in capitalism and i think it can work, but no system works when it does not benefit the vast majority of people in the system. and it is not right now. we need to retool capitalism if we are going to save it. i think we are smart enough to do that after the close calls during the depression and even the recession. we have got to make sure all of those people who voted for jobld trump have opportunities at have educational opportunities. that is just plain common sense. it democracy, everybody should be benefiting from the system. tom: governor dean, we are happy to have you here with mark feldstein.

fiscalnt clinton new responsibility is somewhat suggest that obama did at times better than the republicans. do you see a fiscally responsible message from the liberals of the democratic party? >> that is a very interesting question. i would love to know, and i suspect i know with the answers, what dr. feldstein thinks of moderate theory, which i'm interested in. i was very conservative about money when i was governor. i throw that one out there. i suspect i know with the response is going to be, but it is pretty interesting. inflation is the bigger problem than the deficits. tom: there we are, howard dean. we send it over to martin feldstein. governor dean mentioning inflation. you agree with him? it is a serious problem. the fed so far has been trying to get the inflation rate up. but the day will come when the

inflation rate is higher than any of us want. up: governor dean, picking on the issue of inflation and people's wages, can the democratic party fix the phillips curve? can they produce wage growth for the average u.s. governor -- u.s. earner? >> i think so. here's what i think we should be doing -- and i'm not speaking -- instead ofate advantage in things like collateral mortgage and derivatives, we ought to let people get really rich investing in places like west virginia and kentucky and arkansas, which have suffered under -- it is not so much the trade is causing them to suffer. i think trade has lifted a billion people at a poverty of the last 20 years. but automation is going to be enormous challenges, ai, for our

children's future. we have to start investing so createdth that will be will be shared across the country, not just on the coast. need a you think you younger candidate to get that across to the younger demographic? a aj barrier here -- is age barrier here? >> now that i have to be neutral, i have to be careful, but i have been on record as saying that in the past. dean, a look at what professor feldstein has said about inflation and about monetary policy. and so much of this is the idea of getting back to a responsible financial system of real rates in real interest rates and wealth. how much does your democratic party function with the corporate wall street people? what is the new relationship you see their? >> i think elizabeth warren as right about some of that stuff.

these institutions are so enormous that they really have sort of sucked all the money out of and directed it in this particular direction, and it is not ordinary working people and ordinary wage earners. i do think big banks are too big. they argue they need to be that size so that they can compete on the world market with other very large banks. i think the community banks are really important. i think some of the stuff that was done in the first year of trump's of administration to relax regulations on community banks is a good idea, but i do not think it is a good idea to relax regulations on the very large institutions that are too big to fail or we will have another 2008. tom: whited secretary clinton lose and what does the democratic party need to do this time to not repeat that evening of november 2016? why hillaryeculate -- tom: you know exactly, howard. >> actually, i don't.

tom: do you want to make an announcement? >> yes, i'm not running. and howt happen in 2016 does your democratic party avoid the mistake secretary clinton made? >> one, there was a pretty bitter division in the democratic party. --, i think the democrats our base is women, young people, and people of color. the 2017 and 2018 elections, that is who won the elections. now our base looks like the people who worsening them to washington in the state legislature. we picked up 300 50 state legislative seats. they look like our base. that is what we have to do. i don't believe the democratic party will ever win again if we have two white men at the top of our ticket. we have to go younger and of color and we have to go female. tom: what do you say to vice president biden this morning? >> i say vice president biden

should do whatever he thinks is right. stayoing to do my best to out of picking people now that i have a responsibility to whoever wins. am said and iat i won't back away from it. guy: governor, you talk about the candidates, you talk about what message needs to be put out there, but talk about the effects the data is going to have on the election. >> the data? guy: yeah. >> it is enormous and the republicans are ahead of us. when we look at their innovations, we copy them. when we do well, they copy our innovations. that is how it always works. they have a database set up that is much better than ours, much better to get able -- to get out the vote. it will take a lot of work and some money. at least we have the format set up and we have to proceed to go ahead and do that. the good news is, 69% of young

people basically voted democratic. for a centrist of accredited virginia. that was an extraordinary number. this is a generation not enamored of donald trump's rhetoric on the environment, on race, on immigration, on diversity come on gay rights. this is a generation that will end up -- they don't consider themselves democrats, but they will vote democrats most likely for the rest of their lives because of trump's damage, bringing the republican party. governor howard dean of vermont and the democratic party. we will continue. martin feldstein with us. we have a very important chart to discuss with professor feldstein about some of the responsibilities of the next president of the united states, democrat or republican. ian bremmer will be joining david westin in the 12:00 hour. stay with us. this is "bloomberg." ♪

viviana: let's get the bloomberg business flash. the world's second-largest gold producer is considering whether to buy a rival. for newmontg a bid mining in colorado and has a market value of almost $19 billion. in 2014ost merged before talks broke down. in the u.k., deciding not to prosecute after conducting separate investigations involving rolls-royce and glaxosmithkline. the jet engine maker was investigated for allegations of bribery and corruption overseas. rolls-royce ended up with a different prosecution agreement that glaxo focused on commercial

of the company and its subsidiaries. tom: thank you so much. single best chart. after speaking to governor dean, speaking with martin feldstein. as governor dean knows, we can go back to the reagan years with the younger marty feldstein. my chart of the year, anticipating 2019 and 20, the twin deficit. folks, i got this right. a leg down in the twin deficit over the last two quarters. martin feldstein, we talk about fiscalcal deficit of the trade deficit, but now let's talk about the trade deficit in china. the president, is his economics worthy? >> it is not clear what his economics are on trade, but i fear he is focused on the bilateral trade deficit with china. and that is why the chinese won't say, well, what we will do

is i more soybeans, more natural gas. that is not the real issue. the real issue is about the chinese stealing u.s. technology . and the chinese are trying to duck that by saying let's talk about buying -- tom: this is critical now. you mentioned the bilateral or adversarial nature from president trump will stop the chinese, do they come back using wto multilateral institutions or do they set up regional trade agreements to outfox president trump? >> the wto is clear. it is against the rules of the wto to require a company to share its technology in order to do business. and yet the chinese are doing that. so that is how they are stealing u.s. technology and using it to compete against us in china and around the world. that ought to be the key issue. and some of the administration understand that -- not clear

whether the president is so eager to get a deal that he will take the deal that the chinese are talking about. "the washington post" today goes after the president on this saying he solely focused on the deficit dynamics and not the technology. guy: if you think about it, think about the spectrum and war and diplomacy and trade, everything seems to be in the same bucket now, professor. i am curious to know whether we should think of trade in the same way we think as military spending? are we competitive on every single one of these areas now? these are very different issues. i think the key issue with china is the technology stealing by the chinese. the premier will talk to the president and say, we can give you a big win, buy enough stuff to make the u.s.-china trade of

cigarette half, but who cares? that is not going to change our global trade deficit and it is not going to do with the technology theft. guy: professor, so great to see you. thank you for sharing some of your time with us here on "surveillance." little later on, we will be speaking to the volkswagen ceo at 10:30 a.m. in london., 330 p.m. in this is "bloomberg." ♪

guy johnson and london and tom keene in new york. we have been talking about it, shares plunging premarket. opening at a record low. we're joined now by consumer reporter craig. what is this down to? i have read a number of pieces that seem to suggest basically if you take a look at what is

happening with this company, 3g came in, warren buffett came in behind them, and they just cut, cut, cut. as a result of which, these critical brands, these crown jewel companies, have been undermined. >> that is the narrative. there was a troika of that news yesterday. they had an sec investigation, dish an sec subpoena missed on profit, these guys are cost cutters. the write-down was massive. a lot of people are taking this as an indictment of the 3g model. we are two years after the leverage of fell apart when they tried to buy unilever. i guess this is what it looks like when the 3g guys are running brands. guy: there seems to be some concern around the narrative that this is also down to a discount rate story. does that hold water, that argument that effectively they

are saying this is down for the rate environment? i have never heard this before. >> i think there was a little frustration on the call yesterday about the answers that were being given. these guys are not the most open in the world. i think they would admit that. they go about their business. they let the results do the talking. that is all well and good when things are going good, but when you put out the results you put out an shares are down, trading --er $40 today in the u.s. this thing peaked at $96. there's going to be frustration with this. tom: i just did a common size analysis of the goodwill of pepsi and craft. it is a song and dance of financial engineering. the common size goodwill of pepsi is 70%. it sounds normal. is 37 percent. they have a long way to go to be nonfinancial engineering, don't

they? >> that is not for me to decide, but i think though i had heard from investors that thought kraft heinz before this was high before the write-down. you might not be too far off as far as the mighty father to go. tom: let's leave it there. kim goldman at jpmorgan clobbers heinz this morning. he makes free clear in his research note this is about the business strategy and less about the financial engineering. his target from 52 down to 37. guy johnson, thank you so much for joining us this morning. we drive for the conversation on bloomberg radio. ♪

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>> the big trade talks. premierese vice warrants a face-to-face. and cutting jobs to bring in a partner for the tax equity business. and silver lining for germany grows. theth hit high investors in fourth quarter while consumer spending and public spending rose. sentiment takes a big hit. >> welcome. i'm david westin with alix steel. the big news came over, kraft heinz. alix: they had to take a huge write-down. it is on basic stuff. like hot dogs, their basic products. that: some of the brands they invested so much and are not worth much at all given what has changed in global consumption. also, accounting issues

involving their acquisitions. alix: