>> good morning from bloomberg's european headquarters in london. i'm nejra cehic. this is matt:" -- this is "bloomberg daybreak: europe." china's pmi data surprises on the upside as u.s. officials are said to prepare a trade deal that could be signed in weeks. jay powell and richard clarida stick with the message of a patient approach on rates. grossr from retiring bill on the role of the central bank today. >> if this battle between central banks and the continues,y forces the question becomes can central banks inflate? nejra: double-edged sword. elon musk delivers on the

promise of a new model three, but tesla shares dip as he warns of a loss in the fourth quarter. welcome to "bloomberg daybreak: europe." six a clock a.m. in london, two hours from the start of cash trading in europe. in equities yesterday. some concerns around geopolitical risks and trade. they seem to have gone away today in the asian session and u.s. session, up 4% on s&p. the 10 year yield has risen seven basis points in the past two days. the u.s. gdp print for the fourth quarter yesterday. a slowdown from the previous quarter, but not as much as expected. 2.6%, the 10 year yield holds

handle --on a 272 2.72 handle. dollar-yen, 111.72. the dollar is heading for its first monthly gain since october. emerging-market equities having the best start since 20 fault -- 2012. the dollar come a little firmer and wti with a fourth day of gains and a weekly gain. juliette saly is in singapore with more. on wes through the risk are seeing today. [inaudible] nejra: we are having difficulties with juliette. let's carry on talking about the markets. these are some of juliette's

markets. the other thing i should mention about china is that the msci, the inclusion in its benchmark indexes, that could increase to 3.3% in percentages by the end of the year. that is something, perhaps giving a little lift to the risk on sentiment. lots of interesting things to talk about. i showed you the ten-year treasury yield, not moving much today. that has been a tight range over the quarter. i talked about the yen, some interesting things happening in japan, as well but talking about what is happening in the markets. ae trade seems to be giving lift to the risk on sentiment. the fact we could see a deal within weeks. the question gets back to the fact of whether that will be a meaningful deal and one that can be enforced. let's get the first word news with debra mao in hong kong. jong-un has vowed to

continue nick -- nuclear negotiations with president trump after their two-day summit collapsed due to disagreements over sanctions. the pledge was released through north korea's state-run news agency. kim called the summit "productive." israel's prosecutor plans to netanyahume minister for bribery, fraud, and breach of trust. the draft indictment sent tremors through israel's political landscape, 40 days before a closely fought election and could usher in the end of netanyahu's political career. veteran bond investor bill gross retires today, but after one of the most storied careers in finance, he still has some surprises left. diagnosedd he was with asperger's syndrome, which could explain why he rubs people the wrong way but why he has been such a successful investor. >> it helps you to focus on

longer-term things without getting mixed up in the details. thellowed me to take secular approach, a long-term view. don't miss the full special, a conversation with bill gross on bloomberg tv tonight and over the weekend. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong. juliette saly, standing by in singapore with the markets. let's get back to her on the markets. juliette? juliette: we do have a pretty positive start to the first trading day of march after a bumper february. we have a number out of china better than expected. also seeing positivity through indian markets on rate cut bets

after we saw lower than expected gdp signals. the nikkei, closing out the session today higher by 1%. that is on yen weakness and we had south korea closed today, but yesterday on the news the summit had been abruptly halted in hanoi. south korean markets were down 1.8%. it is a public holiday in south korea today. stocks we are watching in detail, macau casino revenue came in weaker than expected in the month of february, 4.4% year on year versus estimates of 4.8%. galaxy came through with its numbers yesterday under pressure. chinese telco stocks up by 2%. morgan stanley, pretty bullish on the sector. they say fourth-quarter results should come in line and they favor china telecom with china united. we are watching sugar stocks in india. there has been a hurdle cleared by the government in terms of a $1.5 billion subsidized loan

plan to a lot of these sugar farmers who have seen a boost coming through in these stocks ahead of the elections. nejra: juliette saly in singapore. welcome back and thank you. the u.s. and china are on the cusp of a historic trade deal, according to white house economic adviser larry kudlow. he says it would cut subsidies for state owned companies and disclose when the central bank intervenes and currency markets. another trump economic advisor also talked up the chances of a deal. >> i can't get into the negotiations right now, but i think that we've made an enormous amount of progress. the ambassador testified about that progress. nejra: let's bring in my guest, the head of u.k. rate strategy and a macro strategist. great to have you both with me on set. lots to talk about on china. and thethe trade deal comments we got from larry kudlow, is it realistic to

expect china to do what the u.s. is asking for in terms of disclosing the intervention in currency markets? i'm talking about the enforcement mechanisms. miranda: yes, it is interesting they have gotten this far because one of the key problems has always been how do they enforce this? how do they follow up on a lot of the things that could be agreed with trump and xi. an ask.not too much of au can already second-guess lot of the intervention anyway. if that is part of the trade deal, that could solve a lot of problems on the currency, but there is still questions over a lot of elements of the deal in terms of subsidies and interventions and ip protection and the technology side. gotten aheadarkets of themselves in terms of optimism over what we get from the trade deal? >> they've become more

optimistic, but there was that increase in pessimism last year, which turned up in assets, as well. to the mood music coming out of beijing and washington, i think you can see why people are more hopeful this is leading to a benign resolution. it needs to because in the beenime, the tariffs have placed on exports from the u.s. into china and that is a reason slow in growth last year. there are headwinds because the tradewinds haven't been resolved. if they are in a beneficial way, that would turn into a tailwinds. nejra: for the economy, it is a crucial 11 days next week with the working report, setting out the goal for 2019. china to advise down its growth target to something like 6%. if that were to happen, how much of a concern is that for markets as well as the context we have seen chinese markets outperform so far this year looking at equities? growth target is so

well baked in to expectation, i think everyone expects six to 6.5 and revising down expectations. in h shouldrecover -- h2. that is what we expect out of the conference is next week, but the big question is what more do they do? is taxthe big things cuts because we've had the consumer tax cuts and that is helping the consumer side in terms of purchasing on the it iser stable side but going to be the corporate tax cuts which potentially increase profitability and investment, and that is one of the big debates of next week. nejra: what does that mean for the equity market, because we've seen the shanghai composite go into a bull market, that is relative to underperformance last year. does that bull market have further to run and if it doesn't, what do you see ending get abruptly? miranda: we think the moment is not necessarily based on

improving equity fundamentals. it is a combination -- you have liquidity. folk -- social financing numbers, liquidity health markets, the regulation, deregulatulation -- ion. then, you've got top level government support and that is key. that is such an important element. the fact president xi once capital markets to revive the economy, investment into small caps and the technology sectors. you've got that top level support and the combination of those three is a powerful signal, particularly for retail investors. you've got msci inclusion, which means foreigners potentially buying a and then the domestic investors think if the foreigners can buy in, i can. it is almost a snowball effect. this is why you are seeing a

very strong increase, but the risk is they have to tone it down slightly and that is where you could see a correction. inclusionh the msci you mentioned, it is expanding the weighting of the china listed shares in the benchmark indices. you talked about what that could do to the sentiment of retail investors. we know this means index tracking investors might have to add more chinese shares, but the you expect foreign it did you shall investors to have -- institutional investors to have the appetite to keep lifting the benchmarks from where they are? .7 and: when it was at .1 in the global index, you could ignore it. we had some clients who said it is ok. we don't have to do a-shares, we can cope with it and not actively invest. once you get a 3%, it is looking like we have to get involved. toot of the problem is going

be not so much which stocks you buy, but getting the expertise. you've got a shortage of expertise in the global markets investing in a-shares, understanding the chinese companies, understanding mandarin. you've got a lot of people who don't have the experience of investing in the a-shares, which will be one of the biggest headaches people have, not inclusion. nejra: let's talk about missed bond payments. in 2018, the near deflationary ppi feeds directly into industrial profit, so you could see more defaults. in terms of the government response to that, when do they need to do to manage that, but without storing up problem's for the future? john: it is all about reassuring investors. whenever there is any risk around bond payments or talk of default or actual missed payments, it can snowball quickly and be taken as a serious signal something is wrong.

that has to be avoided in the future and they have to do what they can to make sure bond payments remain orderly, investors retained their confidence and perhaps as maranda says, in the equity market, learning about new markets, news ways -- new ways of doing things. they need that insurance in place. miranda: i think that will be a big factor investors coming in. inra: with the deleveraging general, do you see that slowing off in 19 and does that store up more problems? miranda: the deleveraging has changed dramatically. in october, we are not deleveraging so much anymore. credit to you had the gdp ratio leveling off for the first time. the interesting thing is how they shift the financing away from shadow banking. that is still contracting, and they are trying to shift it to the more transparent, more open equity market, bond markets and the banking sector.

that shift -- and you are causing dislocation, so that is hitting things like online financing and that is hitting the auto market. one of the big reasons for that being weak, and you are seeing problems in small companies in the property market were you at that overreliance on shadow banking still contracting and they haven't shifted to the new forms yet. nejra: great conversations. john wraith at ubs stays with me for the hour and miranda carr at haitaong international. coming up, the bonds king is bowing out. we bring you our interview with billionaire cofounder of pimco. debt, globalon inflation and white u.s. government borrowing could go higher. bloomberg radio live on your mobile device or dab digital in the london area. i'll be joining marcus there from 8:00 a.m. london time. ♪

nejra: this is "bloomberg daybreak: europe." i nejra cehic in london. the bond king is bowing out. bill gross was the biggest name in fixed-income. as he retires, the cofounder of pimco has a few more surprises. in an interview, he gave his thoughts on debt, global deflation, and why u.s. government borrowing could go higher. builds up, it becomes a burden and deflationary ultimately. if interest rates rise or even if they don't. demographics are deflationary. andr people like myself don'tn their 60's --

spend as much as, they don't need another house, they don't need another car. they need more health care, but that is it. technology is very deflationary. as we know, computers but also amazon. amazon is deflationary. boom, the prices are -- well. those are three substantial structural situations which aren't changing. debt is not going to change. demographics, we know the globe is getting older and technology will continue. that is deflation. the central banks are fighting it. the central banks with their quantitative easing, their low interest rate. we cannot deflate because the burden of debt is too large and if we deflate, then companies will go under and the great recession will look like a fun little ride as opposed to, you

the world's largest roller coaster. it is this battle between central banks and low interest rates and the deflationary forces that continue to exist. the question becomes can central banks inflate? it is a tossup. it is a coin flip. throw fiscal policy into the mix and let me ask you about modern monetary theory. think, in terms of monetary and fiscal policy, that they are co-joined. they are becoming more and more the same. one in the same. it used to be that the fed and central banks were their own as we haveng and

seen in japan, basically the boj buys everything that the government issues. they are the same. europe, in the last five years, it has been 30% or 40% and the united states is 20% or so for a while. no longer. they are almost one in the same. thethis is almost like bubble in a way. policy isy and fiscal together, then why can't the government have a $2 trillion deficit if the fed is going to buy it like they do in japan? jim would say it would be inflationary, but it hasn't been

because of these deflationary forces. trump or the say next president, whoever he or she is, could go to true trillion dollars -- 2 trillion as long as the fed was willing to accommodate. nejra: that was the cofounder of pimco, bill gross speaking to erik schatzker. conversation the with bill gross tonight on bloomberg television at 2:00 a.m. in london. not one to be missed if you can get up early. john wraith head of rate strategy at ubs still with us. it brings me to the idea of modern monetary theory, which jerome powell poured cold water on. mmt?take on john: you clearly have to be careful about these deficits. the old adage they don't matter mightthey do and they

have a big impact on your currency, your interest rates and the global situation is when grows oversense that mismanagement of the economy and that is when investors lose faith. as long as the fed contains inflation and inflation expectations, trust remains of the size economy and scale of the u.s. can run very large deficits without any significant impact on interest rates for the currency. nejra: is the fed's policy credible in terms of where we are on pause. >> i think so and the markets are telling you that. there was concern into the end of last year that the fed was at risk of going a little too far a little too quickly in terms of interest rates. we saw a correction in assets, they concern over tightening into slowing growth. the way they rapidly have gone to a neutral bias this year and

are you sure do markets they are not just going to go on tightening and potentially overdo it has clearly been taken well by markets. the facts they are much more relaxed and patient is clearly a good thing. nejra: if you look at the chart showing february's 10 year treasury yield rate is as small showing as that market that understands what the fed will do from here or one that is complacent? path we would say that the that the fed seems to be on now is the appropriate one and getting stabilization in treasury yields at these levels is healthy. it shows you the market thinks they are going onto a path where they get rates right. they are neither over tightening and risking serious correction, nor will they slowly and risk pickup in inflation. i think yields here are at a

healthy level. we think they stay around these levels and that is partly because the fed is getting it right on policy. nejra: what happens to curve? the two's, tens, do we see flattening? does it steepen and whether we get the flattening or steepening, is a table or bear? -- bull or bear? john: i think the fed has it right in what it is likely to do. you may get a hike or two, you could get high front-end yields as that plays out but you do need to see an ongoing improvement in the data. markets wereasons getting anxious -- it wasn't just because the fed was sounding hawkish. of datan the context that was deteriorating into the end of last year and q1. if that continues to improve, the prospect of another fed hike later this year could come back in. 10 years look around fair value, so the curve should bear flag a little more. nejra: john wraith u.k. head of

rates strategy stays with us. we will look into why the dutch government bought a 40% stake in air france klm and what that means for the company. this is bloomberg. ♪

nejra: a little bit of risk on in asian markets to end of the week. some optimism around trade talks. we've had the tie she and data topping estimates and msci boosting the china stock waiting in em industries. let's check on markets around the world. mumbai niraj,m the rupee has clawed back losses. our markets overlooking the flareup between india and pakistan toward the end of the week or are we seeing tensions escalation? the markets want to believe

the engines could be de-escalate -- tensions could be de-escalate it and the currencies clawed its way back a little bit. equity markets seem to be doing a -- ok so we are seeing green. the nifty sensex and the nifty indicators, a key good start to the trading day and by and large, the market seems to be positive. of thing to bring to mind everybody, the last four or five sessions, while we have been talking about the escalation, foreign institutions the last five days, heavy money coming in the last couple of days. more than average, so maybe they are seeing something others aren't. heading for some de-escalation and because of the market movement, there is green on the screen. nejra: thank you so much.

anne-marie, you've been looking at air france klm after the netherlands announced a stake earlier this week. rarely do the dutch feature into state intervention but this is something we are used to seeing from france. anne-marie: the perfect day to talk about it because both finance ministers will be meeting today and the top of the agenda is the discussion of air france. the dutch aren't the ones who intervene, it is the french who pioneered this idea four years ago when president macron was economy minister. he built up a stake in renault and now they have 15% of the company. this upset the japanese government because it meant the french had more of a strong hand when it came to the nissan -renault partnership. they have an 11% stake in airbus and a 14% stake in air france. the dutch have about a 13% stake. show you what happened

to the share prices when we learned about the dutch building their stake. of can see the share price air france dropping 12%, just on wednesday before some perspective. look across the msci airlines index for europe. air france is still outperforming. what you may not know is when you look at all of these companies the french government holds, the holdings index in white, it is underperforming the cac. this is something to keep in mind as we see state capitalism make a comeback in europe. we are seeing talks of it in the u k and germany, so this is more of a broader picture of what this could mean across markets. nejra: absolutely. there was a story on the bloomberg talking about how more broadly, france's heavy corporate hand has foreign partners chafing. thank you so much, both of you. italy, whereto

tensions in the populist coalition are fueling speculation about an early election. the alliance is being tested by the five-star movement's slide in polls. >> our goal is to reach the end of the legislature. the government will last five years. it is part of the government's contract to last five years, keeping the full dialogue with the european institutions in order to spur italian economic italy becomend see europe's first manufacturing force. we're asking the question on mliv, will the u.s. or italy have higher 10 year yields by the end of march? join the debate, reach out to us and the mliv team on your bloomberg. is still with us.

john: in our opinion, 10 year yields in the u.s. are going to continue to be very stable. the question becomes where do italian yields go? we think yields in europe head higher in due course. we have the european cover regaining momentum that recovery regaining momentum. -- regaining momentum. think italian yields rise more than u.s., but there are different ways of them rising. we had hoped it would be in a benign way on hopes of a better recovery. the worry is if things don't start ton europe, you see concerns coming back about the size of the italian deficit and then, that is a big question. he see a rise in yields of a more line nature. nejra: talk about the recovery of europe through the prism of euro-dollar. trading at the tightest quarterly range since the euro

1999. because the u.s. and europe economy have more similarities than differences at the moment? john: they've both been somewhat disappointing into the end of the fourth quarter and the beginning of the first quarter. withfore, the question regards to the currency pair is how do the relative economic performance is developed from here? in our opinion, we think the u.s. is well priced. we think the u.s. will continue performing ok, reasonably stable with a fairly benign fed. we hope they eurozone will accelerate so that would mean the euro does better against the dollar in due course. more recently, the data has not been clever. nejra: what convinces you the data in europe will pick up from here? john: we are not convinced. you have to look at the first quarter and see how much disappointed to the downside, expectations in terms of growth. the ecb was forecasting growth of .5 in the first three

quarters of this year and next week, they are certain to downgraded the first quarter and potentially the rest of the year. a need to see evidence of re-acceleration and at the moment, it is scant. nejra: what are you doing about european bonds? more people say, rightly, that bunds are expensive from here but do you want to short them without conviction you will get a pickup? -- beyou need to get a careful. yields are low for a reason. downgraded growth and inflation expectations on a fundamental basis and safe haven demand that undsys feeds through into b when there are worries and the prospect of economic recovery and what it would mean if the economy doesn't react celebrate when the ecb and national governments have no room to maneuver. if the economy needs more assistance. bund yields are here. we think the yields rise, but we wouldn't short them aggressively

because at this point, the jury is still out. nejra: is there anything you are rushing to do in positioning in europe? john: not really, no. we have a bias the euro goes higher, bund yields rise and as a result, some peripheral spreads moderate a little bit. we think it is a slow process and we would need to see some evidence that what has been going on over the past few months is an anomaly rather than the new reality. if it is a reality, it is more worrying for assets. u.k., if we look at the it was pointed out by goldman sachs this week that the longer and of the u.k. curve has been underperforming the rest of europe. does that make it an opportunity, given brexit and what the boe could do from here? john: the long end of the u.k. andet is a strange animal, it tends to behave in different ways to fundamental drivers elsewhere. it is about pension fund demand. it is about institutional

appetite for long dated gilts, which ebb and flow in unpredictable ways. the next month, the bank of -- ind is buying gilts about a week's time, as it bonds in itsuring qe portfolio and one third -- nearly 7 billion is going into the long end of the conventional market at a time when supply into the end of the fiscal year is pretty light. the supply-demand outlook for the long end, over the next month or so, is pretty positive. long gilts have been doing better of late and will continue to do better into the end of the first quarter. nejra: if we do get some sort of deal around brexit, or even with the extension, the uncertainty pushed out further, does that mean flattening for the gilt curve? it meanswe get a deal, the front-end rises and we get more rate hike expectation. that will flatten the curve.

if there is a delay, which seems the default direction we are heading, it depends how long the delay is. if it is only a few months, it doesn't create any certainty for the economy. you see a slowing in investment because no one knows what happens in months time. if you have a long today -- delay, it lists uncertainty for a period of that delay and the first half of the delay. if you have -- and we are not expecting it -- a two-year delay, the economy would rebound. nejra: is cable looking toppy from here? john: if it looks like the deal was going through, cable would go higher. if you see anxiety on a short delay that the economy is misfiring or the risk of this going wrong, europe might not grant a delay, we could still get no deal in a month. if you get worries about that growing, cable will fall. nejra: john wraith, head of u.k. rates strategy at ubs stays with us.

let's get the first word news with debra mao in hong kong. pilot an indian air force may walk free today from pakistan but it is unclear if the release will escalate and military standoff between the nations. india says it will not engage with talks with islamabad unless the country take steps against terrorism. with elections weeks away, there is little incentive for india to back down. north korea's kim jong-un has vowed to continue nuclear negotiations with president trump after their two-day summit collapsed due to disagreements over sanctions. the pledge was released through north korea's state-run news agency. kim expressed appreciation for trump's efforts, calling the summit "productive." veteran bond investor bill gross retires today but even after one of the most storied careers in finance, he still has some surprises left. he revealed he was diagnosed with as burgers syndrome. he says it could explain why he

rubs people the wrong way but why he has been such a successful investor. bill: it helps you to focus on longer-term things without getting mixed up in the details. it allowed me to take what we call the secular approach, a long-term view. take. a good view to the fulln't miss special, "a conversation with bill gross" tonight and over the weekend on bloomberg tv. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong. thank you so much. bee is what you should watching today. a slew of economic data, financial manufacturing pmi figures for the euro area 9:00. likely to reinforce a weaker outlook for the sector. attention turns to the u.k., the

factory gauge comes out at 9:30 u.k. time. look for weakness ahead of brexit. next, elon musk delivering on his promise of a $35,000 model 3 tesla but has a warning on profits. and when you are traveling to work, tune into bloomberg radio live on your mobile device or dab digital in the london area. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." the days of tesla losing money might not be over yet. reporters thetold carmaker will probably not post a profit in the first quarter, contradicting several of his past predictions. tesla shares fell as much as 3% in late trading. elon musk made the announcement while announcing a long-awaited with a model 3 along plan to close stores and cut jobs. joining us from tokyo is dave

mccombs. great to have you with us. let me ask, on the drop in share price, potentially based around what we said about profitability, this is something investors have had to grapple with for quite a while. why such disappointment this time? when the person who is running the car company says they will make money and don't, it is a surprise. there were analysts who had been calling for a loss, so it is not a complete shock. these shirts have been quite volatile. after-hoursline in trading, so not a huge shock but certainly something of a surprise and yet another dent to musk's credibility in making predictions about the future of his car company. nejra: talk about the significance around the news of the model 3 then. dave: there are two ways to look at this. one part of it, this is musk

fulfilling one of his promises. when he first announced the , that was his statement that yes, we are going to be a real car company in that we make cars anyone can afford. any car buyer can buy. we won't just make super luxury models for people want a next her car. detractors said there is no way you can make this kind of car at that price. now, he says he is going to do it, so that is backing up one of the long-held promises of the company so it does help him build some credibility and he needs that these days given his history of tweaking all manner of things and not being able to come through with it. on the other side, you have to say this is a lower-priced vehicle in a market that is supposed to be overwhelming demand. the question is supposed to have been, can they make cars fast enough to meet demand? they have this huge backlog they are trying to meet. to, the shift has focused

lower in price, which usually happens when you are trying to stimulate demand. this does have analysts questioning what is the demand for live -- delivering these vehicles in the u.s. at that price point? what will the demand be for that vehicle with a lot of new competitors coming along online in the electric market? nejra: let's talk about the plan to trim costs by closing stores and cutting more jobs. to first question that comes me is, why give more guidance when the guidance you already gave in the past quarters has led to this decline in shares in terms of the profitability outlook? dave: right. sure, it is not like they actually had to say here is how we are cutting costs in order to make this price up, but this is something that is suited to tesla. the idea they will not have dealerships. this never was a car company that envisioned itself as having this global network of and it is the kind

of car aimed at the target market where buyers are happy to look online and find out what they want, and don't necessarily need to shop the way they would for conventional vehicles. it is a bit of a different product and that and this is one recognition of that. there is the question of service. with the question of the internal combustion engine, you need more parts and infrastructure for the maintenance. ant is not as necessary for electric vehicle, but still a question analysts are asking. without dealerships, can the reservists these vehicles? how will they deliver servicing and build the confidence that some buyers will need before they put down the money for av google -- a vehicle like this? nejra: dave mccombs, thank you. let's turn to the wider story on corporate earnings. the season is nearing its end and the results have been underwhelming. stocks have gained 16% since bottoming out in december. taking down the results is bloomberg's dani burger.

dani: more than half of companies in the s&p 500 have beat their earnings estimates. even though this is weaker than last quarter, we saw 70% beat, so the downward trend is something that is setting a concerning tone but the week is here concentrated in europe. only 42% have missed eps expectations. going to individual sectors, there have been bright spots in europe. take discretionary companies. over half corporate's -- half of corporate beat expectations. luxury goods, lvmh, they had strong demand from china really helping their earnings. the big laggard was financials. the majority of firms missed estimates. i want to look into the outlook. showing you in my terminal and you can see analysts continue to expect deterioration in eps for financials. estimated earnings versus the

wider benchmark has plunged this year. this is a 2017 low. it is testing the low since 2016, but we have trading revenue coming in weaker, as well as litigation risk mounting for these companies. so risks, still on the horizon when it comes to earnings. nejra: dani burger, thank you so much. john wraith head of u.k. rates strategy at ubs is still with us. what is your take away from the earnings season and how it trends -- translates? john: interesting looking at the european financials. there are underlying concerns about the so-called sovereign bank doom loop in the eurozone. we were talking about italy, a good example of where the banks held a lot of their own sovereign debt and as worries grow about the fundamental economic weakness in the eurozone, which we were also talking about in recent months, that starts to get people

concerned about sovereign creditworthiness and it feeds back into the banks because they hold so much of that debt. if we see a stabilization, if we see some more reassurance from the ecb next week and people start to be less concerned about the economic -- macro economic situation in europe, i would imagine some of those concerns priced into financial stocks in europe would start to unwind. people will be less worried about the potential credit worthiness of the sovereign bond the banks are holding. nejra: if we look at the u.s. s&p 500t struggled, the to get above the 2800 level, four times since october. what is that telling you? john: what we saw into the end of last year in a range of areas, including equities, the oil price was on dramatic falls on the concern the central bank in the u.s. was going to go too fast and hard at the tightening they wanted to enact.

as i has become less of a concern, we have seen something of a rebound. if you look at the moving the first quarter, 16% rebound in stocks despite the fact that earnings have been underwhelming, it is more a correction to the extent of declines in q4 than anything specifically about what is going on in the first quarter. we seem to be somewhere more the fair value and hence reduced volatility and stabilization we are seeing in yields, sovereign yields, and equities in recent weeks. nejra: it is like you are reading my mind. you mentioned reduced volatility as i bring up a chart on global fx volatility. we talked about the lack of vol in treasuries, but global fx, you can see the precipitous drop, heading for its lowest since 2014. certainly the lowest since 2016. i know your view is we could see the fed back in play in the second half of the year. are markets going to get their

head around that to the extent that vol remains suppressed or do we see a slight higher? but it is does happen seen as synchronized with a pickup in the data, markets will stay pretty relaxed because this isn't necessarily about whether central banks are active. it is about whether their actions are proportionate to the way the data is evolving and as i said before, for now, whether it is the fed or the ecb, the bank of japan, bank of england, they are all seem to be on message and on tune with where the markets perceived strength and weakness of the data. what will change the volatility picture is if you get shocks. full resolution of the trade negotiations between the u.s. and china, or bad. if you got deterioration around the brexit process and that started to raise concerns about the u.k. backdrop and more widely knocking into the eurozone and what that might bring, you see volatility pickup because concerns will start to rise.

for now, things feel fairly contained and it feels like that synchronization between central banks and assets and markets is in a good place. nejra: synchronization in a good place. you mentioned brexit. that is your wheelhouse, and your expectation is that we do eventually get may's deal and there is upside for sterling? john: it looks unlikely we will get it when it was expected or hoped to go through, but once we had a delay of two or three months, the dynamics change. once the deadline is a hard deadline rather than a flexible one, it will concentrate minds in the u.k. parliament and in europe, as well, to make bigger concessions. whichever way you come to it, theresa may's deal is going to go through at some point. nejra: thank you so much, john wraith, head of u.k. rates strategy at ubs joining me this hour. could the world see a u.s. china trade deal signed a matter of weeks?

bloomberg reports that progress in tariff talks. bloomberg users can in -- a direct with the chart seen on gtv . this is bloomberg. ♪ this isn't just any moving day.

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nejra: from the city of london, i may read it. these are today's -- i'm nejra cehic. top stories.ay's china's pmi data surprises on the upside as u.s. officials repair a trade deal that could be signed in weeks. jay powell sticks with a message of a patient approach on rates. we hear from the gross on the role of central banks today. it is a battle between central banks and blue interest rates and deflationary forces. canquestion becomes, central banks inflate? nejra: elon musk delivers on the

promise of a new model 3, but tesla shares dip as he warns of a loss in the first quarter. nejra: good morning, everyone. just 7:00 a.m. in london, under an hour from the start of cash equity trading in europe. we have seen risk on in today's session, both in asia, but if you look at u.s. futures after a dip, geopolitical concerns. today is a little bit of a risk-on across the board. dax,es former on ftse 100, and cac 40. some positivity perhaps coming through in terms of the prospect for a deal within weeks with the u.s. and china.

pmi has come in further as well, adding to the sentiment to increase the waging of china asia. you are seeing that elsewhere as well in terms of a weaker yen, which has hit a fresh 2019 low. this coming through here. basically what was expected was a week end to 2018. what we are seeing is 2019 comparable organic sales growth down 1.5% to 2%. that is the headline. 2019, comparable organic sales growth down 1.5% to 2%. let's look at some of the other wpp, 2.3 one billion pounds, the estimate 2.34. full-year headline profit pretax, 1.8 6 billion -- 1.86

billion pounds. strong headwinds in the first half of 2019 due to 2018 client losses, so a bit of a warning signal. it is proposing a total dividend of 60 pence per share for 2018. theheadline to focus on is wpp now seeing 2019 comparable organic sales growth down 1.5% to 2%, and the broader context is the surprise drop in fourth-quarter sales that set the stage for a bit of a week season. london stock exchange, let me get that up for you. numbers coming through, full-year total income coming in at 2.14 billion pounds. that is a beat for the full-year total income. it sees good progress to the achievement of financial targets. what else we are looking at is the four-year adjustment pretax operation coming in at 865 million pounds, a beat on the estimate of 850 53.2 million.

8653.2. the final dividend for share at 43.2 pence. lots to talk about in the asian markets. let's get to juliette saly in singapore. good to see you again. chinese: certainly stocks listed in hong kong and on the mainland really boosting this rally for the first trading day of march. the csa 300 closing higher by only 2%, in what has been a stellar week for the index. all of this has caused billions of dollars to flow into this volatile market, the msci boosted the asia inclusion component. you also have any in looking better after a volatile week. -- indian stocks looking better after a volatile week. the cost be closed today, but

yesterday it had a big fall after the hanoi summit abruptly ended. let's have a look at what we are seeing in the currency market. you have seen the yen drop pmi number coming through out of china that was stronger than expected. weakness in the rupee. 80,ould actually get to ruby to the dollar. but you have seen more momentum coming back in as pakistan tensions end somewhat. that hadng at the one a huge drop less afternoon, fairly steady against the dollar. it could underperform em fx over 2019. they are saying the low volatility environment is returning, and that is going to send a few headwinds to the korean won. nejra: juliette, thank you.

u.s. officials are said to be preparing a final trade deal that president trump and his chinese counterpart could sound in weeks. larry kudlow says agreements will commit beijing to cut subsidies to state owned companies and disclose when a central bank intervenes and currency markets. upther advisor also talked the chances of the deal. >> i can't get into negotiations, but we have made an enormous amount of progress. joining us is the cio barclays investment solutions. congratulations. let's start with the trade issue. we have positive signs for the end of the week. looks like equity markets are playing that. our equity markets shooting a little to the upside in terms of optimism on a u.s.-china trade deal? ascertain.icult to

because it was such a great story, we may be exaggerating its role in the outlook to the world economy. you saw that last year, dramatic moves in capital market this gripping story, but the reality deliver itly slowdown in the chinese economy, where the chinese authorities play whack-a-mole with the stability risks popping up. they have tapped their foot on the accelerator more. moremay be the important story to follow. nejra: ms case -- in that case, the economicout outlook for 2019 being discussed for china. how much of a risk is there, if we get a downgrade to the growth forecast, that the buoyancy we have seen in chinese equity markets could be halted? will: china is a very important

swing factor for sentiments in the area. we do not have a strong overweight in the region. it is the only area in the equity markets where we have some faith. that is where you are starting to see the private sector feel better about life. if we see reforms in china, that will be positive, but the real feeling is you will get better earnings then you will get in developed markets, and evaluation is less overcooked more generally. nejra: the msci expanding its waiting as well in its benchmark indices. the that sort of change dial for you at all, or is it so incremental that it does not matter? will: it helps, and those kinds of things should be in the price. it is helpful, i guess. because you are profitability story in the emerging markets looks less

further away from peeking, let's say, and your earnings growth attractive,more that means the incredible price moves we have seen do not necessarily overstate what you are going to get in fundamental terms. nejra: shares on the china will also join for the first time. are you positive on the tech aspect of china? will: cap was one of the areas that jumped around last year. one of the interesting things about china tech, particularly the big four, and the question that remains is, how will these companies manage to prosper in the international market is? -- marketplace? they have been fostered behind a firewall. that is something that remains unanswered to us. we are not necessarily singling out the tech sector. in the korean tech data today, you are seeing the chip cycle. that has peaked a little bit. more generally, we want broad-based exposure.

you brought upd south korea, because there is a chart that shows the relationship between those exports and the fact that those have come down, whereas at the moment, the chipmakers have not. is there a drop you are expecting for sentiment in chipmakers? will: one of the things we use .he korean trade data for they tend to have quite a good lead indicator relationship with trade. that is one of the more interesting things about the china story and the coincidence with the trade tensions. is theu found authorities assets to restrict growth came at the same time as the peak cycle in a slowdown in global growth. that hits at the same time as trade tensions escalate. we find it difficult to disentangle the factors affecting global growth. nejra: i understand that, but

but overall arching question in your research, whether the chinese economy is a threat. what is your answer, in a nutshell? will: it depends on the quality of growth. if you see china going toward its potential growth rate, which may be south of the growth rate we saw last year, that probably means we should be less worried about china. the way the world economy is portrayed is a head-to-head arm wrestle where only one side can win. economists have long sort of supposed that it is a positive sum game. all sides can win to a certain extent, but it is how the west redistributes. some of the problems we have politically in the west may have to do with how the gains in china's entry to the world economy have been redistributed in the developed world. nejra: let me show you the chart that shows the credit signals signal better time ahead for the

emerging markets. you are still quite positive on emerging markets. is this the reason, or is it down something else? will: yes, that is one of the things you want to see. a turn in the credit cycle is important. we do think what we have seen in is anst year or so inventory cycle, and a sense, and that corresponds with other cycles, so if you are seeing this turn, you should start to see your economic prospects brighten at the margin. you are already seeing flows back into emerging markets. ,t seems to be more consensus and we expect to see that play out the rest of the year. nejra: let's get the bloomberg first word news with debra mao. debra: kim jong-un has value to continue more negotiations with president trump after their summit collapsed due to

disagreements over sections. the place was released through north korea's state-run news agency. kim expressed appreciation for trump's efforts. as you demaio is confident that neither party will pull the plug on italy's coalition government. power, themonths in alliance between the five-star and the league is being tested. snipinglmost constant over issues from migration to economic policy, but the deputy prime minister still has faith in the partnership. to -- our goal is to reach the end of the legislature. the government will last five years. ,t is part of the contract keeping the full dialogue with the european institutions in order to spur economic development and see italy the coming the first manufacturing force. >> an indian airport pilot in pakistan may walk free today,

but it is unclear if his release will escalate a military standoff between the two nations. india says it will not engage in talks unless the country takes steps to fight terrorism. and the days of tesla losing money are not over yet. elon musk admits the electric car company probably will not post a profit in the first quarter. this contradicts several of the ceo past positions, but musk did deliver on a big promise, to reduce the cheaper model 3 to $35,000. global news 24 hours a day, this is bloomberg. nejra: debra mao in hong kong, thank you. today we are asking the question, will the u.s. or italy have higher 10 year yields by the end of march? you can join us at ib+tv on your bloomberg.

the 10 year yield is probably not going to move much. coming up, the bond is bowing out. bill gross still has some surprises up his sleeve. we will bring you more with our exclusive interview with the billionaire founder of pimco. ♪

nejra: 7:18 a.m. in london. this is bloomberg: daybreak europe. billionaire bill gross is about to retire. today will be his last as portfolio manager at janice henderson group, which he joined in 2014. he has been reflecting on his successes and has shared a few surprises during an exclusive interview with bloomberg's erik schatzker. he has been diagnosed with

asperger's syndrome and believes it has helped him in business. thinking,s a line of i am sure you are familiar with with thatays people condition -- i would not call it an affliction -- do better as investors. do you think that is true? bill: i think so. , in myve understood it experience, it has allowed me to stay at 30,000 feet as opposed to on the ground. as other people would know, when i come into a room and they say bill, you know, i'm up here. that's not necessarily good in terms of one to one. people think you are angry or an

ole or whatever, but it helps you to focus on longer-term things without getting mixed up in the details. i think it is very important, because it allowed me to take what we call the secular approach at pimco, the long-term view, a good view to take as an asperger. fun were a day-to-day had -- hedge fund manager, not so good. erik: interesting. do you think it helps you identify patterns better? but i neverly, thought of it in those terms. probably from the standpoint of yeah. feet, it allows me to just forget about the minutia and to focus

on one big thing, whatever it is at the moment, as opposed to find different things. erik: do you think finding that it, and perhaps coming to terms with it on a personal level helped or hurt? bill: i think it helped, personally. it explains a lot. i am introverted, basically. but i have always had problems going up to somebody and saying hello. i expect them to say hello to me . it explains a lot. it is a mildsay, condition of autism, on the border.

it is nothing to be ashamed of. i am proud of it because it i wasned in part why who i was. upbringing, mymy family background, and how i came out of the oven -- we all come out of the oven with a personality, as you as a parent know. you have two and i bet they are different. erik: they certainly are. bill: there is all about, but i think it helped a lot. it lifted a burden for me. hey, it's not necessarily my fault. i am trying, i just can't compete with the extroverts like it would be nice to be able to do. erik: as someone who now knows about it and can look back on your career and can identify what it did and did not do for

you, what would you say to younger people who find themselves with the same who are entering the financial markets, as you once did? is there any benefit of experience that you would offer them? bill: if it was the same condition as mine, i assume everybody is different. if somebody is an asp or -- an asperger, i don't know. but it can be a positive for careers, to look or will you not get dragged down in the day-to-day, to have a plan to succeed. and if you are down, you can get back up, etc. i would also say the markets are substantially different today than they were when i started.

it is more day-to-day, more machine-dominated. time to work, given market conditions. staccato-like as opposed to when i started. manus: that was bill gross -- nejra: that was bill gross speaking to erik schatzker ahead of his retirement. you can catch the full show tonight at 2:00 a.m. in london. let's get more with will hobbs, cio at barclays investments. we were talking as it was running and you were saying there is a question to be asked

about the dispassionate sentiment of markets in general. will: it was fascinating. what you want is to be objective and have a constantly objective and dispassionate assessment of incoming news and information. if everyone were like that, there would not be much to be made for tactical traders, because markets would be totally efficient at all times. there are moments when our weavioral influences -- crowd, we listen to the media too much sometimes, and that can create implications here and there. nejra: how is that helping you right now? you may change this week. will: one of the things we look at his sentiment. .e have a sentiment gauge when it swings to extremes, that can be a tendency to act in opposition to the market. having been deep in depression in december, everyone was getting ready and packing their bags, it is now one of the best

starts of the year for a long time. that means we are underweight u.s. equities. we are underweight u.s. equities for the first time since 2012, and that is a short-term trade. we are not expecting a recession. the outlook for the world economy has not actually changed that much. it has deteriorated a little. the risk of recession is a little less than it was. in the strategic portfolio, you are quite a bit overweight to equities, right? will: that is the mix of assets you are looking to deploy over the long-term. do i believe in productivity and is valuation ok? those two answers have been ok for us. nejra: will hobbs, thank you for joining me this morning. we have seen futures move higher ahead of the equity market, coming in just over 30 minutes time.

let's get a check on one bond markets are doing. 10-year trade as not done much. that's it for "daybreak: europe." bloomberg markets: european open is next. ♪

nejra: welcome to bloomberg markets: european open. i'm anna edwards, alongside matt miller in berlin. matt: today the market say that's what we wanted to hear. china leads gains after surprises to the upside. trade deal iss a not far away, sending futures in the u.s. and europe higher as well. the cash trade is less than 30 minutes away. anna: