francine: john optimism, optimism emerges as a trade deal could be on the horizon. tesla troubles, elon musk warns the carmaker will not turn a profit this quarter but delivers on the promise of a cheaper model three. take on the state of u.s. politics and what the fed's next move should be. >> this battle between central banks and low interest rates and d is inflationary -- disinflationary forces. the question is whether central banks can inflate. ♪

francine: welcome to "bloomberg: surveillance". a lot of these markets are ending the week on a positive note among mainly thanks to some data little better than expected from china. also, we have not had any terrible news when it comes to earnings. you see the stoxx 600 gaining some 0.6% to treasuries are holding up to declines at the dollar was higher earlier on for a third day in a row. at 1.1364. manufacturing out of the euro area for the month of february. it is a little bit backward looking, pmi coming in at 49.3, we were expecting 49.2. later on, we will be speaking to kristin jensen harlow -- chris giancarlo, he was here earlier in the week talking to mark carney.

let's get straight to the bloomberg first word news. >> north korea's kim jong-un valley to continue nuclear negotiations with president trump. this is after the 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 quote productive. israel's prosecutor plans to indict benjamin netanyahu for bribery, fraud, and breach of trust. through israel's political landscape and comes just 40 days before a closely fought election and could usher in the end of his decades long political career. is confident neither party will want on italy's coalition government. after nine months of power, the alliance is being tested. there is almost constant sniping over issues from migration to policy, but the deputy

prime minister still has faith in the partnership. >> our goal is to reach the end of the legislature. the government will last five years. as part of the government's years,t the last five keeping full dialogue with the european institutions. >> a tense military standoff between india and pakistan, india saying they will not engage in talks with islamabad unless the country takes steps against terrorism. with elections just weeks away, there is little incentive for india to back down. 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. francine: thank you.

the u.s. and china are on the cusp of a remarkable historic trade deal according to white house economic adviser larry kudlow. haveid the agreements will to beijing cut subsidies for state-run companies and disclose when the central bank intervened .nd currency markets >> i can't get into negotiations right now, but we have made an anonymous amount of progress. president trump is back in washington meanwhile week.a pretty big 's former lawyer testified in front of congress and he walked away from making a deal with north korea. for more on all of this, let's get to our chief washington correspondent. kim,d not see a deal with will trump be more willing to make one with china? >> deal for the deal. the president seems poised to

get some kind of deal with there is a lot of pressure facing president trump over the next couple of days to try to move the ball forward, so to speak. particularly on the issue of trade. it was less than a week ago when the vice premier was visiting in china meeting with president trump, as well as treasury secretary mnuchin. the president, while here in , addressing addressing president xi jinping, praising him for his role in helping to negotiate. but also saying he wants some kind of trade deal. the business committee wants this, republicans on capitol hill want this to the president is facing intense pressure to get some type of win, so to speak. francine: how is president trump's decision to walk away from the senate viewed in dcm

d.c. andonally -- in internationally? >> chuck schumer praised on the senate floor, saying it was the right decision, the right call to walk away. said, democrats like next close he have criticized the president for even coming to vietnam in the first place without any concrete type of action to be executed. that is really the notion i gathered as well from reporting with sources in the nuclear intelligence world who were disappointed that they did not really seem to be a game plan here on the ground in vietnam. it seemed much more haphazardly thrown together, and there does not appear to be any cap forward. reports, conflict in the north korean saying they only wanted some sanctions, the u.s. saying they wanted all censures lifted. -- sanctions lifted.

north koreans are open to another summit, the u.s. says there is nothing planned. francine: thank you, kevin. francine: thank you, kevin. to keep the conversation on trade, joining us now is jeremy stretch head of fx strategy at cibc. thank you both for joining us. first of all, we did not see that much volatility overall in the currency markets. givengiven what is been happenis that a surprise? >> to an extent it is. markets have seen a great amount of uncertainty, so in a sense, they have become used to headline risks. in the context of events this week in handling, did we really expect something substantive to come out of the meeting? probably not, we were not in the usual diplomatic process with a sharp as do the heavy lifting and leaders come in and sign in to get the resolution. in a sense, we were in an unusual circumstance.

but the mood music seems to be the wayg, and that is the markets have largely discounted we will get some degree of resolution, perceived to be a win-win for the u.s. and china and we can move on and allow equities to continue to hold up relatively well. francine: do you agree with that? >> jeremy is absolutely right. what i will say is we don't actually know what happened to world trade after the u.s. shutdown. but a lot of the slowdown we have seen has been driven by the eurozone. the other point i would make that the market is missing is the action we are seeing in terms of gdp growth in the eurozone and elsewhere, not actual tradable goods. secondly, the tightening we are seeing. ecb, we listen to the have had several members speaking this week. it is quite clear they are focused on the tightening labor market. yesterday, we saw positive indications for the eurozone.

this point about the world trade cycle does matter, but it is informed by domestic demand, and what we have seen is a slowdown in the eurozone trade cycle. we don't know what except that is or what we are seeing in france, and so forth, but the markets are missing the bigger picture. francine: if we do have an agreement between china and the u.s., how can we be sure it holds? but let us assume it holds, is germany the biggest beneficiary? >> one of the biggest. brexit is a key concern of theirs, they don't want to take on brexit, pushing not just the u.k. towards recession, but the rest of the eu itself of including germany. germany are very exposed because of supply chains to the u.k.. brexit is the second thing to their agenda, not necessarily u.s.-china trade talks. francine: let me bring it to my chart, which i love, charting fx

volatility, market volatility, and the g7. you can see it plummeted. what needs to happen for it to come back? good volatility were bad volatility? bad volatility? >> we have seen the markets reflecting the presumption of global liquidity remaining plentiful. that is one of the variables in place. we have seen that reflected in the way the fed has been talking about patience, but also balance sheets. if there were to be changes in presumptions of global liquidity, that could create a little bit of volatility coming back into the market. but also, trade tensions are relevant, and i think david is right that, in the context of thinking about the eurozone and the impact of the brexit process, having that degree of collateral damage from a european perspective as well. francine: thank you both. germany and david both stay with

us. up next, our exclusive interview with bill gross, the billionaire cofounder of pimco. fed,ighs in on debt, the and where he has common ground with alexandra ocasio-cortez. . this is bloomberg. . ♪

francine: economics, finance, and politics, this is "bloomberg: surveillance." i'm francine lacqua in london. the bond king is bowing out. for many years, bill gross was the biggest name in fixed-income. now, as he retires, the

cofounder of pimco has a few more surprises up his sleeve. in an exclusive interview, he gave us his thoughts on debt, global deflation, and why government borrowing could go much higher. >> as that builds up in interest, it becomes a burden and deflationary ultimately, if interest rates rise. you can if they don't. --ond of all, democrats demographics are deflationary. older people, like myself, and even in your 60's don't spend as much. house,n't need another another car, they just need more health care technology is very deflationary from a standpoint of computers, but also amazon is deflationary. the prices are low. those are three substantial

changingl situations debts are not going to change that is deflation, the central banks are spiting your -- fighting it. the constant easing, the low interest rates, we cannot deflate because the burden of debt is too large. and if we deflate, companies will go under and the great recession will look like a fun to, you know,ed the world's largest roller coaster. battle between central banks, low interest rates, and the deflationary focuses that continue to exist. the question becomes can they inflate? it is a tossup. a coin flip. >> let's 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 and are becoming more and more the same. it used to be that the banks and central banks were their own things, and yes, they accommodated treasury to keep interest rates low, but as we have seen in japan, the boj buys everything that the government issues. they are the same. europe, itcase of has been done in the last five years, 30 or 40%. 20% or so, no longer.

they are almost one in the same. this was almost like the south sea bubble in a way. and if you look at the sleigh, you know, if the monetary and together,icies are then why can't the government have a $2 trillion deficit if the fed is suddenly going to buy it like they do in japan japan?r -- they would say it will be inflationary, but it has not been because of these deflationary forces. yeah, i would say trump, or the next president, whoever he or she is that could go to 2 trillion as long as the fed was willing to accommodate. francine: that was bill gross exclusive -- speaking exclusively to erik schatzker.

do you think there is a deflationary problem? >> i would collect disinflationary. if you look at previous structural change, you have the railroads, the industrial revolution. you also saw periods of strong growth followed by falling and rising prices. inflation was much lower than we can use to in the postwar. but you had growth alongside low inflation. structural change via the internet, price discovery via amazon whatever is disinflationary can lead to stronger growth. they're thinking more in terms of normal gdp growth. >> i would not disagree with anything that has been set. it is one of the interesting points bill gross is picking up. i think there is a structural change. like japan, which is been at the vanguard of this, is

in this disinflationary environment. populist moves increasingly towards an elevated degree of aging. that is an underlying factor which all central banks are going to have to deal with. all right, thank you both. be sure to tune into our full special conversation with bill gross on bloomberg tv tonight and over the weekend. coming up, elon musk falls short of a promise as tesla keeps losing money. will bring you that story shortly. this is bloomberg. ♪

♪ francine: economics, finance, and politics, this is "bloomberg: surveillance." i'm francine lacqua here in london. today's that the days of tesla losing money are not over. elon musk told reporters the carmaker will not post a profit in the first quarter, contradicting his earlier prediction. must also announced a plan to close stores and cut jobs. tesla scares -- shares are falling in extended trading. joining us is an editor for bloomberg news in berlin. of a concern is tesla's slipping back into the red? hopefully, it is not a big concern if they can turn it around again. must said he planned to post a profit in the second quarter, so if they can show the first quarter is just a blip and not a sign of things to come than they

should be able to move past it. francine: could the store closings be a problem for sales? , i don'te buy them know of its online word-of-mouth. yeah, i mean, musk said that closing stores could help them do better with sales because they run into some franchise issues. more than the store closing, is the presence issue. one of the concerns, especially for a mass-market consumer is going to buy the model three, is really where can they get their service? model threeue for and that's what they have to pick it up. he said that would be a focus for them. we also heard that they would deliver on this cheaper model three. when do we know whether that is a, a success, and be, if you can actually do it. >> that is riding the issues he

is talking about. closing stores and cutting jobs to get to that level where they can sell a car profitably for $35 that sort of price ranges increasingly important for tesla, because as we will see next week, volkswagen is coming big-time into the electric car market, the germans are coming. the first mover advantage is decaying and is getting smaller. , if some of those sales incentives helped tesla close the gap to mass-market consumers, they are declining over the course of the year. it is big for them to be able to get down to that price level. francine: thank you very much. ,ust getting some headlines mark carney saying that it is virtually essential to have a brexit

business investment decline is huge. the pound is seeming to the reacting on the back of this interview, but did we learn anything? >> where full well that business investment has been under pressure, so clearly that is impacting the production. going forward, that is a reason they have been trending down there growth estimates. it is self-evident that the issues in terms of the business cycle are causing problems for the u.k. economy. francine: we will come back to jeremy and david. up next, some of the uk's most by -- most vital public services are not ready for brexit we talk bound -- pound and talk brexit. this is bloomberg. ♪ want more from your entertainment experience?

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welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. francine: economics, finance, and politics, this is "bloomberg: surveillance." i am francine lacqua here in london. we are keeping a close eye on

your markets, there is a little bit of optimism out there, which is why stocks are ending the week on a positive note. we have the latest economic data from china offering reassurance to investors that were concerned about global growth. treasuries holding on to some declines, i am looking at the manufacturing gauge at a three-month high. we're looking at some data out of the european union. u.k. data. for the month of february, just a reminder, it is a little bit backward looking. but pmi manufacturing bank in line with expectations. itnomists were forecasting to be 52. let's talk about the latest data points, we are back with the jeremy and david. how much do you look at this data? brexit will change it very quickly. >> not at all, this is white noise. the most important observation to be taken over the next few veryand weeks, it will be

interesting whether theresa may can finally get a deal across the line. but the risk seems to be now reduced. but if she goes back to the eu and ask for an extension, which seems much more likely, does that mean we are moving towards another referendum? there will probably demand we stay in the eu for longer, meaning we're part of the action next. so, you know, everything is up in the air. what we do know is that the bank of england have a bias to tighten policy further. they will raise rates again, but we don't know the timing. is there a concern with what is priced into pound? is this belief were hoping from markets that tended to be pro-remain but there will be a second referendum? >> the reason we have seen sterling rallying through this

week has been that repricing lower of that no deal scenario. i think the markets have taken a more sanguine view, in terms of the no deal exit and has encouraged a repricing. the question is can we see sterling getting through that 1.3 five and 1.34. we get to a resolution and perhaps theresa may getting that deal across the line, i am not sure there is a justification to buy sterling. all about the propensity for a no deal scenario and the changing dynamics of that. ,f we get a second referendum it will be fascinating to see how the market reacts. we don't necessarily understand the reality of what that will entail. of course, the opinion polls were rather mixed going into the first estimate. francine: and the polls have not changed that much. >> i take slight issue with

that. john curtis is the professor of all opinion polls. francine: did he get it right last time? -- well, well -- francine: we can call him the professor for now. >> he suggests there are people who are more buys now and you have this cohort of people who did not vote and younger people who are, by and large, for remain. the opinion polls have shifted slightly and that should be highlighted. francine: that is slightly, because you look at the margin of error, last time the polls were not right. it is like uncertainty 2.0. >> it is additional's uncertain to -- additional uncertainty. but we know that the younger voters are predominantly ideally likely to vote for remain. we also know about demographics in terms of the elderly generation and the impact of the

aging population. it would appear the mood music should be shifting in that direction and anecdotal evidence suggests there are some quick change their opinions, particularly those in the north will be most impacted by the manufacturing impacts if there were to be that no deal crash out scenario. the market would like to see or probably trade favorably on the context of a second referendum, but it would still imbue a degree of uncertainty, so not a straight line of rapid not beation and it would enough for the bank of england to consider hiking rates until there is a resolution. francine: jeremy and david, thanks so much. retirement is a time for reflection, usually, and bill gross has been opening up, sharing his views in an exclusive interview with erik schatzker. he believed the rich should be forced to pay more taxes to restore balance in american

capitalism and fund benefits like health care for the middle class. >> do i dare ask you if you sympathize with the so-called democratic-socialist's? the likes of alexandria custer cortez? >> -- ocasio-cortez? >> she is a fresh face and i like her courage. edge, andously at the i'm more inclined to think about health care from the standpoint ofincreasing the universe population to receive it, either through medicaid or medicare, whatever. a common sense observer would you don't voteat socialist from the point of health care overnight summit takes a long time -- overnight,

it takes a long time. health care has to be a critical question and it is something where the disadvantage relative to the advantage, that against understand that they are getting the short stick. -- they begin to understand they are getting the short stick. they will make that known at the ballot box. >> you admire her courage, do you admire her ideas about health care and beyond? do you agree that, for example, taxes on the wealthy need to be higher so the government can access more of a redistribution every actor? actor?stributionary >> it is a necessary evil, if you want to talk that. capitalism has proved to the the mosto be successful system in the world, it is a question of balance.

what should the tax rate be? >> what should it be? >> higher than it is. it shouldn't be where it was in the kennedy era. >> nobody pays that rate. 70%? >> no, i'm not in that category. i just think trump took it too far. we need some balance. maybe it should be in the form of a large deficit, maybe don't have to increase tax rates, maybe you can keep the engine going from the standpoint of corporations keeping tax rates when they are. to be moreave benefits for an increasingly anddvantaged and aging, age middle-class. -- aging of middle-class. else, you will see, just like global warming, you see the opioid crisis. of nothing totion

do, disadvantage, no benefits, unreasonableld a -- what else would a reasonable person do then turned to drugs? >> scary thought. >> yeah. a good economic system balances continues toell as maintain incentives for people. that wantsporations to succeed and can generate, you know, productivity and technological progress. you need that, but you also need, on the other side, to balance the benefits so that things don't happen. they will happen, it is just a question of time. it is just like global warming

your it will happen. that was bill gross speaking exclusively to erik schatzker ahead of his retirement. be sure to tune into our full special conversation with bill gross on bloomberg tv tonight and over the weekend. coming up, italy's five-star movement has suffered several hits recently, but the leader is still confident in his party. we bring you our conversation with the deputy prime minister. this is bloomberg. ♪

♪ francine: economics, finance, and politics, this is "bloomberg: surveillance." i am francine lacqua in london. but get straight to first word news in new york city.

>> u.s. officials are preparing a final trade deal. president trump and xi jinping learnedgn bloomberg has the administration is considering a mid-march summit between the two leaders. the white house is still debating whether to push china to make more concessions. msci will expand the weighting of chinese shares listed and it may. the decision could see billions of dollars flowing to the world's most volatile major stock markets and is happening when a sudden bull market in chinese shares is raising concerns. the market is overheating. elon musk admits tesla probably won't post a profit in the first quarter, contradicting several of his past missions elon musk did deliver on one big promise, announcing the long-awaited cheaper model three pricing in $35,000. 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. francine: italy is facing speculation about an early election. the alliance is being tested by the five-star movements slide in opinion polls. they're confident neither party will pull the plug on the government. our goal is to reach the end of the legislature. the government will last five years it is part of the government's contact -- contract the last five years, keeping full dialogue with the european institutions to spur italian economic developed in c italy becoming europe's first .anufacturing force francine: jeremy, our first question of the day is quite clever, slowly start off with that.

loser, youloomberg should log on it to our markets blog, where today we are asking if the u.s. or italy will have a higher yield by the end of march kind of encapsulates the two concerns. i think yields in italy will be somewhat higher. there is obviously an element of political risk, and it is fascinating in terms of the growing pains, if i can call it that. invariably, when you do have coalition partners, there is always one that is rather better going forward and one that is a net loser, and it seems to be the case that five-star are under a little bit of pressure here. been rathernce has poor of late and it does seem to be the case that the power structure in terms of the coalition is really diverging, and that is going to make it rather difficult, despite participation to see the government lasting the course. francine: let me bring you to my

chart, which i have not shown on the show before, between the 10 year u.s. and 10 year italian. >> it is a close one. what i would say is that there is so much chatter focused on italy and italian banks on the need for another form of clarification on what will happen going forward. it is clear from the ecb if you listen to all of the features , they are not rights on their radar. you got banking figures produced yesterday, you see bank lending picking up not just in germany, but sharply compared where we are or -- were. belgium is running 10% year on year. francine: will they have to extend it? >> know, most of the rollover. in terms of a cliff edge, we will see this next year. at the end of the day, if you have got bank lending having

picked up in these other countries with the exception of italy and spain, really, you've got strong lending growth and the smaller countries as others donesaid, it cannot be purely for a specific country in mind. have,s the only concern i that maybe next week mario draghi disappoints us. ugly can italian gdp get? >> italy is flattening. -- flat lighting. -- flat lining. we agree with the ecb that the market is to down on eurozone prospects. and we'll hopefully dragged italy in its wake, but of italy rolls over, the markets will seriously question the dynamics going forward. >> yes, i think david is absolutely right in terms of markets and his interpretation

of eurozone growth dynamics. we would expect some degree of uptick in the second quarter and beyond and there should be a slipstream effect. one of the things i have highlighted is the fact that -- debt to gdp has been excess of 130% ever since i have been in the market. [laughter] and that is some considerable time. francine: just a couple of years. >> we are not talking about anything that is new. in a sense, it comes back to demographics, another issue to consider. that is not a factor to consider for today, tomorrow, next week. francine: what are the chances of a cut from the fed? it is in the market. >> i wouldn't say zero, but it is very low. francine: where are the markets looking? moment, my colleague is very confused.

last week, he was very irritated by some of the noise around the balance sheet. but he thinks it is quite clear. francine: thank you so much, gentlemen. see and david at jefferies international. 50 minutes, but i feel like we should have a three-hour show. coming up, tensions between india and pakistan do not seem to be easing. we are live in mumbai next. this is bloomberg. ♪

♪ francine: economics, finance, and politics, this is "bloomberg: surveillance." i am francine lacqua here in london. hand overs due to indians captured air force pilot today in a bid to ease tensions. but whether that will be enough is still unclear. the pakistani prime minister says the move is a gesture of thee, but he also stresses escalation efforts should not be seen as a sign of weakness. we cover the story from both sides of the border. is in southern pakistan and our executive producer is in mumbai.

first of all, let's start with you. we are following geopolitics around the world, because we're looking at pictures from handling. this is the leader of north korea, a different story. yesterdayng-un, two had to cut short his summit with president trump. now leaving the hotel where he is staying. these are live pictures from hanoi. will be keeping an eye on what is happening, but now get back to what is happening in karachi. the prime minister has been working to ease hostilities. what is the mood in pakistan today? clear mood has been very and pakistan's glance it has been very clear since day one. pakistan wants to talk this out. since the first attack happened, they want to talk about. yesterday was a surprise to many, but he came out and said

will free the pilot, another have in trying to reach out. trying to get them engaged and solve the issue. pakistan has had the same thing. if an attack happens again, they will be forced to retaliate. that is where he is trying to show this is not a sign of weakness, but he wants to talk this out, he wants both parties to sit down and hash out a solution. francine: now that the indian pilot is expected to be released and returned anytime, will that help defuse tensions? what is india's view? anxiouslye, we're waiting for the pilot to come home. india is happy pakistan has made this offer and has allowed them to be released. but there is no indication

whatsoever that this would mean a diffusion attention -- of tension. alsober, india has mentioned the terror outfit that was responsible for the police force that lost their lives in that attack. india wants to see concrete action now, and india believes the time for talking is over. that is not all, there has been a fresh flareup. india has accused pakistan for using u.s. made f-16 jets targeting indian military sites. onlyntract, these jets can be used for counterterrorism operations and not against any other country. the chief of india's defense showed evidence of wreckage to drive home this point. at this juncture, while india is waiting for the pilot come back home, tensions still remain high. francine: thank you both for joining us.

our executive producer in mumbai and reporter in karachi. -- earningsrnings season is coming your an end, but even with lackluster growth, stocks have been gaining 16% since bottoming out in december. breaking out the the reactions is a dani burger. >> let's kick it out with a positive. more than half of the companies in the s&p 500 have beat earnings estimates, but it is still weaker than last quarter. this downward trend we are seeing is setting a concerning tone. when it comes to weakness, we have to talk about europe, where 42% of companies missed eps expectations. there was one bright spot, discretionary companies. over half of these beat expectations. keep in mind, we had companies like montclair, luxury goods with the surprise winner thanks to continue to demand in china.

but pain is really concentrated in european financial companies. the banking sector, more than half of those firms missed analyst expectations and the outlook does not look much brighter. analysts continue to see deterioration in eps, which you can see here. expectations are now the lowest versus the wider benchmark 2016. -- since 2016. francine: dani burger with the latest on some great stocks. we continue in the next hour. we'll be talking to the chairman of the commodities futures trading commission who was just in london speaking to governor carney. that is at 11:30 a.m. london time. this is bloomberg. ♪

♪ francine: china is a -- china

optimism. economic data beats estimates. stocks rise. tesla troubles. elon musk delivers on the promise of a cheaper model three. his takeond king gives on the current state. the question becomes, can central banks inflate? francine: this is "bloomberg surveillance." i'm francine lacqua in london. tom keene in new york. we are closing off on a little bit of a positive note on better-than-expected data out of china. of course, we will get geopolitics. we were just looking at pictures of kim jong-un leaving hanoi. tom: the seismic change

yesterday in the united states was a better than good fourth quarter. ancient gd port with yields really moving up -- gdp report with yields moving up despite resistance. francine: let's get to the first word news in new york city. here's viviana hurtado. viviana: president trump and aina's xi jinping could sign deal in a mid-march summit. the administration is still deciding whether to press china to make more concessions. north korean leader kim jong-un is vowing to meet with president trump again despite the collapse of their summit. the country's official news agency releasing a more optimistic report, calling the summit productive and says there

are active efforts towards results. india is accusing pakistan of that u.s.-made fighters were only supposed to be used for counterterror. india is waiting for pakistan to make good on its promise to free the indian pilot shut down and captured during the fighting. in italy, deputy prime minister dimaio says the country's intelligence services have no security concerns about chinese equipment maker huawei. >> we understand and hear the concerns on huawei and telik munication's in general. as minister for dashed and --ecommunications in general and telecommunications in general. we will verify all of the telecom technologies from various operators. also on huawei, we will carry out verifications as on other

market operators. if there are anomalies, it is the law that they have to be excluded from the possibility of inserting themselves in our national strategic networks. viviana: shares of gap soaring in premarket sailing, making what some see as a desperate move, spinning off the old navy discount chain. old navy sales have been propping up gap for years. 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. i'm viviana hurtado. this is bloomberg. tom: thanks so much. let's go through the data right now. bonds really front and center. futures with a nice risk on pop. i'm ahead of myself. curve steepening 20 basis points. euro not part of the discussion.

next screen, please. the vix showing 14.41. maybe you get a 13 level today with where futures are. 25,916 in the close. there we are in germany. breakout,lds not to a but really buttressed up against any kind of resistance. 3.10 on the 30 year bond. francine: actually, i am quite looking forward to showing you my chart of the day because it is the difference between u.s. 10 year yield and italian 10 year yield. that sets up the story we are trying to tell. overall, stocks in europe ending on a positive note as we have economic data from china. i guess offering a little bit of assurance to investors on global growth outlook. treasuries is always a beautiful thing to look at. dollar pushing higher a little bit. futuresing at wti oil

climbing towards $50 a barrel -- $58 a barrel. tom: let's look at the price of the 30 year bond. you can see nicely the support is priced down, yield up. here's the trend of a lower 30 year yield over 2018. what is critical here is this level on price on the 30 year bond. you can see the abrupt rollover of a lower price. major shower it -- major shout clara the vice chairman --vice chairman clara to vice chairman clarita. francine: this is a classic chart. this could have felt out of the blue a couple of months ago. they have higher tenure yields by the end of march. that is what i am trying to figure out today.

there is an implied a trade staring you in the chase because the yield gap is less than four basis points. that was not the case back in april, so that is a really good .ay of looking at it let's get back to the markets. let's get back to central banks overall. tom and i both chose some bond charts. we just had euro area inflation picking up 1.5% in february. in the u.s., fed chairman jay powell made his pledge to stay constant on policy. joining us is a portfolio manager and partner. where do you see this being priced in the markets right now? tom is looking at german bond yields. i am looking at italian ones. will we see a shift in anything? guest: we are in a low yield environment at the end of the cycle, but yields got a little too low. bund is just below 10 basis

points. fears of a recession. see a reboundo because we also have a stimulus cycle coming from china and potentially a u.s./china trade deal. we have the u.s./china trade deal, and remember europe is secondary to china. when china starts exporting, germany benefits. car anye largest fracturing hub in europe now. essentially, this is the supply europeand china can lift even if policymakers are on the sidelines. francine: are we pricing in german bunds? guest: there's going to be a repricing. it is not going to be at 1%.

as we have said in the last month, fears of a recession, of a global recession got a little far ahead in the last year. people who were not into risk assets and were all in safe haven assets finding themselves very short. francine: what are the chances of an actual cut by the fed? where are markets looking at that? guest: the market is pricing a good chance of a cut, almost 50-50 depending on your time horizon. we think this is a little bit excessive now technically. we think the market still has too much fear of a global slowdown. again, you have had -- you are going to have an announcement of detailed chinese stimulus this month. of may have some fading out risks in europe with brexit theg kicked ahead, with

negotiation evolving in something more quiet. so we do think that these binary events market has been worried about a lot are going to fade. we are, however, near trend growth, just above 1% in europe, just above 2% in the u.s.. so we are not going to see an inflationary environment where the bond market boils out of the pot looking frog. tom: alberto, good morning. ant tonds like you w grab the coupon. is that where we are? is it time to say thank you? guest: in the next few months, we like that. we particularly liked doing it in europe, where there is more isr, so the yield on bond still very high.

you got bonds that were at 100 and went to 90, 85, so there is a good 10%, 15% upside on top of the coupon and european credit. longer-term, if you think about where we are, there's a lot of debt. central banks have failed to normalize policy. qe.ave 10 years of they tried to normalize for two years. backhas stopped, so we are to a qe environment, almost like japan. a lot of the world is looking very much like japan. in a low yield environment, if you thing about the next slow down, if you're going to have rate cuts next year or the one after, then what is the best trade? the best trade is the economy is going to kick the can along the road, so credit is a good yield to get compared to sovereigns, which are going to be close to zero, below inflation, and potentially in some cases issue a lot more debt, if you think

about what the u.k. could do if there is brexit, or what italy could do to stimulate. so we think credit is a safer asset than sovereigns, and risk-free bonds are going to be less risk-free in the future. tom: thank you. with a nice update for us and a lot of opportunities forward towards total return. we will continue. coming up, this is very important. the gentleman who understands tol return of his generation. on the coupon and capital gain. this is bloomberg.

♪

viviana: let's get the bloomberg business flash. elon musk warning tesla probably won't post profit in the first quarter. the ceo making the remarks while announcing tesla will finally start building its $35,000 version of the model three sedan. musk also said tesla will cut costs by closing stores and only taking orders online. uber is in advanced talks to buy its dubai-based rival. they may announce a transaction in the coming weeks, valued at about $3 billion. the deal would expand uber's ride-hailing operation in the middle east. wppe is expect in revenue to fall by up to 3%. they are feeling the effect of client losses, plus its agency in north america is struggling with the shift to digital marketing. shares have fallen by more than 1/3.

that is the bloomberg business flash. tom: it has been end extraordinary 72 hours for international relations, whatever nation you are in. let me bring you one of the great pieces we have seen over the last 12 hours, 18 hours, wrapping up the collapse in hanoi. we are going to go to kevin cirilli, but here's the is experts on the nuances of north korea. the two leaders fundamentally the twoed each other -- " leaders fundamentally misjudged each other. it could make it very difficult to move negotiations forward at the working level since the discussions on even basic principles have failed at the highest level. are we safer as a result of the hanoi summit? no, north korea is the land of lousy options." kevin cirilli joins us right now. you mentioned that the press

conference of north korea was extraordinary yesterday. paint that picture. kevin: it was totally unplanned, and just unscripted. haphazardly thrown together. the north korean officials were taking photographs of reporter press credentials and ushering us into a small hotel conference .oom with about 50 chairs mostly international press. by bloomberg colleagues were able to get into the room, and then you had the foreign diplomats there and the top officials presenting was an , totallyranslator contradicting what president trump secretary pompeo said just across town hours before. at air force one,

after delivering a conciliatory tone, saying he is hopeful to move forward as denuclearization talks, and then the north koreans say they are not so sure that is the case. they say they only wanted some of their sanctions released. it was remarkable. it was a very unscripted moment, and that is how i would describe this entire second summit. i do want to get to some of our breaking news, and that is we are just getting headlines now that china has said publicly after speaking with secretary pompeo they want to play a constructive role in denuclearizing the korean peninsula. tom: the backdrop to you is one of the most honorable parts of vietnam, the lake of the restored sword, where people go to have fancy photos. to the essay that i just mentioned from csis, is there any optimism that there could be theresecondary --

could be secondary or tertiary discussions between the two nations? koreans sayorth that on the one hand, they are open to having an additional summit, but at the press conference, their foreign minister said they are fearful that the moment to have some type of serious talks have eclipsed them. in the past 24 hours i have been speaking with lawmakers back home, as well as staffers stateside, and experts in the nuclear field. senate minority leader chuck schumer, democrat from new york, said on the floor that he was glad the president didn't opt for a photo op and walked away from the deal. from a policy standpoint, americans are understanding that no deal is better than a bad deal. but from a political stance and from an optical sense, the president is facing criticism from democrats, as well as even some republicans, for the tone

he struck here on everything from otto warmbier and human rights violations to the very unscripted nature of this denuclearization summit. francine: very quickly, because the president did not get a deal with kim, will he want a deal with president xi of china on trade? yes.: the president didn't get a deal with kim. our colleagues are reporting that the pressure is now mounting on this white house to get some kind of deal with the chinese. we have to decouple these issues, but you can't really because the chinese are so involved in the denuclearization issue. tom: thank you so much. greatly appreciate it. we need to digress to a very important conversation. bill gross, retiring from janice henderson, the gentleman he mentions joins us on our fed show with scarlet fu and myself

when we have fed meetings. let us listen to mr. gross on the next bonking. -- bond king. >> i think in the right environment 20 years ago, he could have been a bond king. he's got a great long-term thinkctive, but i don't he's got the market to be a king. king?uld want to be [laughter] well, i guess i did, but in retrospect, it carries a certain burden. the crown is heavy.

♪ francine: this is "bloomberg surveillance." , and francine from london and new york. we were talking about brexit -- tom and francine from london and new york. we were talking about brexit. the bank of england governor mark carney has said the drop in visited med -- in business investment is due to brexit concerns. interesting that he chose "the daily mail" as an outlet. how do you see brexit from here? guest: it is going to be delayed. that is our base scenario. if businesses are to take a 10

be inecision whether to the u.k. or somewhere else, they are still going to leave, so there is still an outflow of investment, and we have seen across several industries. risk, but still some stagnating environment. tom: what is priced into -- francine: what is priced into pound? i've heard of soft brexit, but a lot of the institutional money, may be managed by people who tended to vote or want to remain in the eu, actually are hoping for a second referendum. ,hat is the possibility of that and does that give us certainty? i think it is unlikely . guest: i think a soft brexit is sort of priced in. we need more good news to have an improvement. second think a

referendum is priced in, but the road to a second referendum is very uncertain. ntly started to support a second referendum come almost unwillingly. it is not clear what the real stances. if it ever happens, it is going to take a while. francine: thank you so much. alberto gallo stays with us. shows up, china signs of reversing a slowdown on the heels of a final trade deal. an associate professor of political science joins us next. this is bloomberg. is bloomberg.

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getting into march. with the first word news in new york city is viviana hurtado. viviana: reportedly a plan calls for all american troops in afghanistan to leave in three to five years. forfirst steps calls halving the number of americans there in the coming months. in israel, prime minister benjamin netanyahu called it "an unprecedented witchhunt." the news coming just 40 days before the election. today, former bond king l gross calling it quits -- king bill gross calling it quits. gross telling bloomberg he has asked burgers syndrome -- has syndrome, on the autism spectrum, saying it made

him a better investor. >> it allowed me to take what we call the secular approach of a long-term view, and it was a good view to take. viviana: don't miss the full special, a conversation with bill gross, tonight and over the weekend. and it will be the richest contract in u.s. team sports history. the philadelphia phillies ready to sign the washington harper for ayce $330 million deal. 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. i'm the vienna or tonto. this is -- i'm viviana hurtado. this is bloomberg. francine: the u.s. and china are on the cusp of a remarkable trade deal according to u.s. economic advisor -- two white house economic advisor larry

kudlow. --ning us is stephanie r stephanie rickard and alberto gallo. welcome to the program, stephanie. will we see a deal between the two leaders? is it likely a substantial deal, or smoke and mirrors? >> i think we will see a deal, but i don't think it is going to address structural issues at the heart of the conflict. we are worried about china's involvement in state owned enterprises and industrial policy. those will not be resolved in a 150 page trade agreement. francine: are you talking about huawei? if so, can we rebuild 5g without huawei? >> huawei is definitely involved in the discussion, but i think the trade agreement will try to set that aside and say we are going to track that in a different way. they will try to address issues like currency manipulation, state owned enterprises, and industrial subsidies, but those are deep shoes at the heart of

how china's economy works. we cannot resolve them in a 150 page agreement. even if we sign them in march, it won't be the end of the road. francine: alberto, where do you see this going? >> we see it as a framework. for emerging markets, sometimes you have imf programs monitoring fiscal performance and debt. in this case, the best/china agreement -- the u.s./china agreement will monitor intellectual property regulation, so there will be priority assessments of how china's doing based on certain metrics about intellectual property, trade, importing more u.s. goods. the aim in economic terms is to create an incentive for cooperation in the medium-term, so it is not the end of the game. tom: stephanie, i don't buy it for a minute. i don't mean what alberto or you are saying, but what we witnessed in hanoi is front and center.

we will have the two leaders of china and the united states, let's say down at mar-a-lago over two scoops of vanilla ice cream, and they have to decide to change things after what we witnessed in hanoi. are we going to have another hanoi in, let's say, mar-a-lago? >> i don't think so. i think hanoi is going to make it more likely we see an agreement. trump is hungry for a deal. tom: we know that. >> he wants this, but there's also economic incentives. the farmers are getting hurt. the steel industry is doing ok, but there's still 10% tariffs on $200 billion of chinese goods. tom: but what do the chinese want over two scoops of ice cream? >> chinese exports have gone for cliff. we have seen a massive decline. xi has huge incentive to bring a deal. there is a big political conference happening next week. he is also under pressure to bring home we deal.

will it resolve the fundament conflicts? no, but we will see a deal because both sides are hungry for an agreement. francine: doesn't move remember the- does it move remember order the dollar? >> there is a positive trend of including shares and portfolios. the china stimulus we are going to see this month is going to be a little more domestic. industrialenefit for countries, metal exporters to china. it is going to be more about consumption, and china developing capital markets to import capital to allow consumers and banks to lever up and fun spending and consumption in the future. they are becoming a little more like the u.s.. they want to become a more consumer-based economy and a less industrial economy. francine: if there is a deal, is currency going to be part of that deal?

>> i think we are unlikely to see currency be part of the deal. the u.s. as said we are not going to manipulate the currency. if you do, we are going to use tariffs to sanction you. that is hard for china to agree to. it is a difficult political issue. even if it is part of a deal, how do you enforce it? how do you actually enforce any rules on currency and apply agreements where the u.s. gets to be judge and jury and say you are breaking the rules, we are going to sanction you? francine: alberto, if we do see an agreement between the u.s. and china, what does it mean for autos? on is that taken off the table, or could we still see president trump enforcing those? of course, that would hurt germany and europe disproportionately. >> i think the existing tariffs be, they, and this will potential removal, would be a best case scenario event, subject to compliance going forward. the second point is europe and

car tariffs. that is under talks. people talk a lot about brexit, but not car tariffs. we don't see that as a cliff event where trump wakes up one morning and imposes car tariffs on european countries. there's been a lot of discussion about that. car companies have been there, and actually produce a lot of the u.s. cars in the u.s.. to we see that as a threat encourage europe to import more , what it means, essentially, is there is elections next year in the u.s.. we need to boost growth. there is still growth above trend in the world, but u.s. is going to take a slightly bigger share than the dollar. rickard, what is the likelihood of just waited out? lfc.re at

area, what is the likelihood that china just says we are going to wait this out? >> i think there are incentives for china to waited out, but they have a history of agreeing to deals, agree into compromises, and then just not doing it. that may be what we actually see. they will see we will sign it, we will commit to this, and then not actually implemented. tom: what you just said is absolutely critical. thatou going to recommend when that happens, the president just walks away? is that what we are going to see in march and april? >> i don't think the president is going to walk away. i think the president wants a quick win and that we double moment -- and that tweetable

moment, even if it doesn't accomplish very much. the way to change china's behavior is via the wto. china just lost the case and the u.s. won in china illegally subsidizing agriculture. francine: if you are saying he wants a deal at any cost, it could mean we have a handshake, and two weeks later we are back to square one. >> i think that might be how it play out. deal,ht get a superficial and the ultimately deep questions are not resolved, the question about china's government involvement in their economy. they cannot be evolved -- they cannot be resolved this way, and we will not come list that into weeks. francine: if we have a smoke and mirrors kind of think agreement for a photo op -- show us how it is done, alberto -- what does that mean for the markets? >> the market has priced some good news, and we do think there is a possible development, but

china needs a deal because the national people's congress, and the u.s. needs some positive momentum into preparation for elections. changing the structure of the chinese economy is really hard. changing the use of intellectual property, the links between the government and private enterprises, there are now government officials in most companies, including technology companies, so that is not going to change easily. we may have some disappointments along the way. the way we treat it as a framework. we shouldn't open the champagne because there is a nice t weet and a couple of weeks. tom: jon ferro tells me there are darby's in the united kingdom. stephanie, one last question that your "washington post" piece recently talked about.

can you predict tariffs will go away in the united states? >> i think tariffs are here to stay in the medium to longer term. trump has a political incentive to provide these. there's a base that wants to see these tariffs. they are helping the steel industry. so i think those are here to stay, unfortunately >>, for at least the medium-term -- unfortunately, for at least the medium-term. francine: thank you, stephanie rickard. alberto gallo staying with us. chairman, the cftc will talk about derivatives. mark carney also talking about brexit. that's at 6:30 a.m. in new york, 11:30 a.m. in london. this is bloomberg.

♪ francine: this is "bloomberg surveillance." ? -- will italy's coalition government collapse? here is the deputy prime mr. of italy. -- prime minister of italy. >> our goal is to reach the end of the legislature, five years. it is part of the government contract to last five years, keeping full dialogue with the european institutions in order to spur economic development and see italy becoming europe's first manufacturing force. francine: we are back with alberto gallo of alger breece -- of algebris investments. if you look at the government currently in italy with two with two varied --

very different, how can this coalition last? guest: public -- it has custody public guest: -- guest: it has cost the public a lot already. to $10lion billion has already been paid an extra interest. it has decreased investment. it has already pushed italy into a technical recession with germany and china slowing down, but even faster than other countries it is. unsustainable.y especially with regards to the five-star movement, which was the movement proposing all of these unrealistic policies like

citizenship income at the same time as more spending and a country that has very high debt. i think after european elections, it is possible there is going to be a reshuffling. result?ld be the if you look at the polls, you have the northern league which has been more focused on immigration, but it is the pro-business party, so that party could lead. you have another center-right party, so it would be a more pro-business coalition. francine: let me bring you to our chart of the day, which i quite liked. basically pitting u.s. treasury yields with the 10 year btp's. guest: here you have a different currency. in the u.s., rates are 2.5% higher. in absolute terms, if you think btp's are not as

good as treasuries. but near-term this news is potentially positive. there is change in the government coalition. a lot of investors are worried about european elections. i am neutral on this here. however, i think there's a lot of countries and banks that have completely abandoned and are trading at a percent to 10% yields, sometimes more, and going through the cycle. they are not insolvent. . francine: are we going to see in an -- are we going to see a recession in italy? guest: not this year. when the slowdown comes globally, next year or the year after, then you need a good government in place for italy to sort out its finances and reform. that is the key question to answer this year. are we going to have to muddle through with the current coalition -- and this is for europe as well -- or are we

going to have german stimulus and a changing government after ists?opul we are the u.k., realizing that populists are damaging their countries. francine: alberto, thank you so much. alberto gallo of algebris investments staying with us. the bond king is bowing out. i am looking forward to hear more with bill gross. tom: we spoke to him the day of his announced retirement. this really goes much further into a lot of the different emotions and backgrounds of how mr. gross retires and moves on in his life. we will talk the medicine of bill gross in a minute. this is bloomberg.

♪ viviana: bloomberg has wormed gold says -- very

newmont will consider the offer, but at the same time, criticizes barrick's operating model. the gold producers making their cases to their biggest investors. new york city's amazon dreams aren't dead yet. investors and politicians are urging jeff bezos to reconsider his decision to give up on locating part of the company's second headquarters here. they say governor andrew cuomo will take personal response ability to get state approval. amazon killing the deal after an angry backlash from some new york logicians and community leaders over tax breaks an investment in the local community. elon musk says tesla will start building a model three sedan that costs just $35,000, but acknowledges it probably won't make a profit in the first q. he also announced tesla is closing its stores and will only take orders online. that is the bloomberg business flash. tom: thank you so much.

there are all sorts of corporate stories i really founder our couple. some of the restructurings, creative destruction and restructuring in february, ending with a boom yesterday on tesla. good not just at the product stuff and all of that, but actually the business. on march 1, do you know the business plan forward for tesla? reporter: not really. i see 2019 is a big focus for them in europe and china, so moving away from the u.s., where they are pretty well-established. in a number of european markets they are well-known, but they need to ramp the scale and get that model three-car into customers' hands and in their driveways this year in europe and china. aat is what gets them to be sustainably profitable business, potentially. morning iuestion this

heard three or four times, and thought about it last night when i heard the announcement, is they do away with all of their dealerships. will i get my working tesla fixed? reporter: it is a bit surprised to see how that one goes. apparently they said they will send them to you for a week in trial, but you can give back up to 1000 miles on the clock. what they are planning to do is send engineers to your home. they think most issues can be fixed that way. i guess if it is something more substantially mechanical it has to go to a proper service center. it is a very different model from the traditional car industry. francine: how much of a setback is it that two executives said they are not going to make a profit this quarter? not tooot -- reporter: much. this is more of a long term story. it is a huge investment to get

into europe and china, so not a huge setback. francine: do you worry about elon musk being banned from being chief executive because of his tweets? reporter: i think it is more fundamental about that, with the develops going on at the likes of b&w and audi, whether they are going to close the gap on the technology lead. i think whether he is ceo or not, he's always going to have an effect on the company's future. it is just maintaining that against traditional carmakers is the issue. tom: greatly appreciate it. we need to look at one of the stories that has been very front and center this week. , butot hanoi or beijing pakistan and india. there is a transfer of the indian pilot that will occur between pakistan and india, on the grand trunk road, the

acclaimed road from thousands of years ago the goes from couple , all the way over to bangladesh. we will wait to see if we have images of this as well. coming up, we will move forward on ther conversation dynamics of international relations at how it forwards into the -- how it folds into the foreign exchange market. there'll myers joins us with hs -- darrell myers joins us with hsbc exchange. this is bloomberg.

tom: the president returns. by all accounts, empty-handed in this hour. kevin cirilli in hanoi on this friday president trump will cohe and gop senators to say there is "no national emergency at the mexican border." we heard headlines this hour. watching the collapse in hanoi. what does it mean for china u.s. trade talks? it is march and yields move higher off a better than good u.s. gdp report. and yields breakout ever hired for the march 20 fed meeting? good morning. this is "bloomberg surveillance." i'm tom keene . francine lacqua, what is the brexit zeitgeist? francine: we were four weeks away from exit we will see

whether there is any movement. what's more immediate i would say in the next hour or so is the standoff between pakistan and india. we've been following it closely all week and there is a brilliant piece on the bloomberg terminal that says this is also an ideological fight or could be an ideological fight between two men. we will delve into that a little. that atare looking for the border. right now and update your first word news. preparingficials are a final trade deal. president trump and xi jinping could sign. consideringtion is a mid-march summit between the leaders. the trump administration is still debating whether to push china to make more concessions. kim jong-un valley to meet with president trump again despite the collapse of their summit. the countries official news agency -- kim calling the

summit productive and expressed appreciation for president trump's efforts toward results. india is accusing pakistan of using f-16 fighters in its rate on kashmir. that would violate terms of the agreement between the u.s. and pakistan. allows the planes only to be used for counterterror operations. india is waiting for pakistan to make good on its promise to free the indian pilot. he was shot down and capture during the fighting. italy, the dippy prime minister says the country's intelligence services have no security concerns about chinese telecom equipment maker huawei. >> we understand and respect concerns of the united states on cybersecurity and on the security of telecommunications in general. as minister for economic development i've created the national center for certification and assessment which will allow us at the ministry to verify all the telecom technologies which

concern the various market operators. we will carry out investigations as on other market operators. the law says they have to be excluded from the possibility of inserting themselves in our national strategic network. global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. tom: equities, bonds, yields higher of the gdp revert yesterday. other news as well. francine mentioned mixed inflation reporting in europe. big risk on futures up 16, dow futures up 159. euro even with a modest lift on we go with curve steepening. the vix showing a bull market 14.43 and the yields at the bottom i focused on the 30 year bond in the last hour. that should be grain up two basis points.

higher yield and the german yield -- i will tell you that is a stunning number for the german yield, 0.19, versus 0.11, a good cup of german coffee ago. francine: you are right. stocks in europe ending on a positive note. we saw economic data out of china may be reassuring some investors that were concerned about global growth. i'm also looking at wti. $58.utures climbing toward 57.34 on american oil. tom: into marched best in the march 20 fed meeting, fed officials out talking the talk. the chairman of the federal reserve. the community will be patient as we -- may be appropriate to support our objectives. this commonsense risk management approach has served the committee well, often. tom: chairman powell.

need to get to washington at theichael mckee is meetings of the national association for business economics. everyone shows up except me. i'm too busy doing hanoi and all that. what have you learned at the meetings in what did you learn from chairman powell that changes the body language to march 20? michael: you just put a qualifier on that. i don't think we learned anything that changes the body language. everyone here is pretty pleased with they call it a pivot but the fed took to being patient and watching what's going on because no one thinks we have inflation problem. as a division over how far you can go with the economy at this point. nobody is expecting anything out of the march 30 meeting. tom: one of the big relapse of this first quarter has to be the vice chairman who told you and me about a solid american

economy. we observed that in the data. what is the confidence among the exceptionally smart statistical there at an abe, what is confidence we come out of this first quarter slump? michael: they are fairly confident we will come out of the first quarter slump and there will be a slump in the first quarter. some people believe we might get 1% growth out of the first month of this year but the general feeling is we will be up around two for the rest of the year. telling me that yesterday at the congressional budget office. other center around two to 2.3 or so for the year. a significant deceleration but nowhere near a recession. hasand abe -- the nabe suggested we will not see a recession until 2021 maybe after that. francine: what do you see being mispriced in the markets? is it a fed cut or something

else? >> fairly priced be honest in terms of interest rate excitations. in a way we are now casting as a marker saying what's the conversation currently and what does it mean for the rate outlook. we should be thinking about what's the conversation going to be in five to six months time around the fed. looking on an economy that's come out of this slump and having a fresh debate about where the neutral rate is. bey told us it going to based on what inflation is doing. the neutral right is going to feel like it will be a little higher. we have to gauge that future conversation. tom: we will continue this discussion, daragh. they have been on fire as a shop. really looking forward to catching up with you on the and .be meetings really a precursor to the imf sixings coming up in about weeks.

let me tell you about what's going on bloomberg daybreak. a conversation with the gentle man who somewhat say codified total return in bonds. by the coupon and wait for that credit recovery. ♪

>> let's get the bloomberg business flash. elon musk warning tesla will not post a profit in the first quarter. the ceo making remarks while announcing tesla will finally start building its $35,000 version of the model three sedan. must also seeing tesla will cut onlyby closing stores and taking orders online. uber is in talks to buy korean

network. the company may announce a cash and stock transaction. -- a deal would expand uber in the middle east. wpp expecting revenue to fall by up to 2%. advertising firm is feeling the effects of client losses plus agencies in north america are struggling with a shift towards digital marketing. shares of wpp have fallen by more than one third. tom: thank you so much. it is extraordinary, something we live every day at our world headquarters in new york because we are surrounded. banana republic, gap and maybe a couple zip codes away, old navy. we've enjoyed watching the collapse of gap. jennifer redding is an expert on this. everybody bought beige. they been buried in beige have

they get out of the depths? jennifer: thanks for having me on. spinoff ipo is that idea. i don't know that it's a magic bullet. especially for old navy, the fourth quarter was a little disappointing for them. there got to turn that around pretty quickly for the spinoff to be valued with the shares up the way they are. i don't think it's the answer for gap necessarily. yet.ve not seen cap turn i don't know if that's going to do the trick. -- whath of the depth is so important here is that these fashion debacles, it's debt that kills you. does gap, banana republic, the new old navy, are they

encumbered by a lot of debt? jennifer: i think old navy will spinoff ok and the debt won't be an issue for them. i don't think that's with going to kill them. . think the balance sheet is ok i think it's more of product issues they have at gap. francine: good morning from london. you are saying this was a good idea? was it an up 25 percent in share price good idea? why with the markets spurred into increasing by one fourth the value of this company? jennifer: i think the markets have been wanting this. wall street has been wanting it for a long time. our tech has been cdo and people have been asking for this. the question is kind of why now did this happen and i'm not sure down 30%es have been

since 2014 and all of a sudden they are up after market close yesterday. i don't know what decided to make it happen now. what is concerning about it, the fourth quarter for old navy, the markdowns were up and it was a disappointing quarter. for us it looks disappointing in the first quarter. that is something i would keep an i on with shares of the way they are. everybody thinks this is kind of a magic bullet and i'm not sure that's the answer. tom: jennifer redding, thank you so much. the continued restructuring at gap. an extraordinary headline. north korea speaking the south korean news agency. they say un's sanctions must be lifted if no missile tests. i would suggest that's an

ordinary headline because it moves from north korea to a south korean news agency. francine: pretty remarkable, given that kevin cirilli was also in the news conference yesterday. i think it was midnight hanoi time where we heard from the time where we heard from the north korean leader. we will try and put it all together to get a global picture of what exactly north korea for peace andnge possibly an armistice. moves dollar at this point? when we look at headlines from geopolitics, be it india, , does it hanoi, china move dollar significance? daragh: i think those effects

moves the dollar against the yen. moving higher generally when the markets move. that plays across equities and geopolitics. of political fatigue at least in the currency market about how much should we respond to the latest headline, to what korea,hearing, north india pakistan, whatever. we are more fixated on the ecb, the fed, what we are seeing in the economic data than the geopolitics. francine: is it fatigue or is it that the market in the eventuality of something escalating in geopolitics just would not know how to price it? periodswe've been in where we have had spikes in geopolitical risk and the market response in conventional form. you might buy the swiss franc

and you are going to sell your risk assets. curiously at the moment it's not clear what that might mean for the euro. buying risk assets the euro has best geopolitics might cause you to scramble out of the yen are you than buying the euro? tom: i want to ask what it's like working with a steve major whose nailed the bond call or been lately who's been n laaordinary -- be deler was exceptionally alone. have you dovetail their successes? daragh: you're getting the right direction from our rates view. tom: what does that do to your dollar direction? daragh: it makes us feel we are living with perfection around us. i'm 22 years married and my wife keeps reminding me -- she is not watching so she will get the complement. does ithelp but how

translate into a dollar view? dollar consensus on the has not been that way. we've seen with the rate view -- tom: dollar strong, where does the euro go to? daragh: we got 110 at the end of this year. that is a big gap. we are couple with it. tom: imajor is all over the bubbles at west ham. i'm trying to display my football talk but i'm going down in friday flames. francine: let's move on. tom: coming up, there's a lot going on. bill gross with important conversation with erik schatzker . this is tonight and through the weekend. very important conversation with mr. gross. ♪

francine: the u.s. and china are on the cusp of making a remarkable historic trade deal. that's according to white house economic adviser larry kudlow. washington officials are said to be eyeing a summit between the presidents as soon as mid-march. if we have a deal is it going to be a deal that holds? a substantial deal, and what

does that do question mark daragh: but she element for the market, let's just get the deal. -- a key element for the market, let's just get the deal. i think we need to see the names on the dotted line. i suspect it is the currency stability element and the best that treasury secretary mnuchin talked about last week, that care part of the deal. the mechanisms for ensuring compliance. are they an intrinsic part of the deal? that will be the key for mnb. the markets will react to that aspect but we had to get the deal first. chinane: what th agree to keep the yuan stable? daragh: i think they've agreed they will not manipulate the currency for competitive gains. i think that is an economic truth in china.

when market forces are driving your currency weaker for whatever reason does china than have to step up its disagreement -- if the agreement is signed to prevent that from coming to play in the whole? they made these commitments at g20 that he change would be is there a mechanism within this trade agreement that forces china's hand under some circumstances? tom: we won't go into the history of the hong kong shanghai banking corporation. you are at the mandarin hotel in hong kong and you walk across and there you guys are. what is the singular research message out of your headquarters in hong kong? daragh: on china's economic front we are looking for that -- tom: you are not looking for a hard-landing? daragh: we do think policy has

taken steps to underpin growth. we think we will see acceleration in the second half. the big picture is china wants to liberalize its currency so that should introduce greater two-way volatility driven by the market but we will get peng shuai did by politics, capital flows, china opening up, a very positive message. tom: i want to rip up the script if we could. philip lane is one of the giants of irish academics. out ofw his work trinity. he will enjoy the move to frankfurt. how will the anglo-saxon kool-aid -- you know what kool-aid is. welcome to america. how will the anglo-saxon kool-aid play in frankfurt? daragh: i think it will play pretty well. they've approved the promotion, the appointment. i think they will like that. it's a perspective that may be

needed. we gone through this long period wrong.ecb getting it they promised a bounce inactivity from the last year. short-term is a year? tom: maybe we will find time for this. the irish short-term is a little different from the germanic short-term. mmer with us making us smarter. francine: they were talking brexit and derivatives. this is bloomberg. ♪ mberg. ♪ you.

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and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. i can customize each line for each family member? yup. and since it comes with your internet, you can switch wireless carriers and save hundreds of dollars a year. are you pullin' my leg? nope. you sure you're not pullin' my leg? i think it's your dog. oh it's him. good call. get the data options you need and still save hundreds of dollars. do you guys sell, other dogs? now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. tom: bloomberg surveillance. good morning. a quieter friday off the tumult of the last two or three days.

it is not quiet for kevin .irilli, still in hanoi his radio program yesterday was extraordinary. nationwide with his perspective. picking up the debris. let me go to another piece right now that i thought was spectacular. the acclaimed jeffrey lewis of middlebury, truly one of our experts on all of this talk of hanoi. he mentions dinner. besides apparently struggled over the menu. the trump administration's special envoy emphasized and might mean so many things or nothing at all. in hanoi was trump in kim finally confronted the fundamental difference in their expectations, nuclear weapons, trap us together with our enemies like scorpions in a bottle creating a shared danger. give us an update on the scorpions in the bottle.

there is still a threat from north korea, correct? yes.: in fact yesterday on our radio program i interviewed senator ben cardin, member of the senate foreign relations committee and he said americans should still view north korea as a significant threat even after these talks failed to materialize any type of major breakthrough. that piecet note captures this so incredibly well. the dynamic between the u.s. and north korea. it got rear -- it got real in hanoi. you got to the forefront of the underlying issues. there's not much in common between the u.s. and north korea. francine: we just had a headline from north korea apparently speaking to south korean wantaper saying they sanctions to be taken off for

them, not to test missiles anymore. has it been so it's gotten more dangerous or less than yesterday? experts as i interviewed as well to lawmakers stateside, it is a volatile situation. the notion is they might not be testing missiles but if they are building them that is still a serious threat and the president said that at his press conference. he noted the u.s. has intelligence beyond the missile testing site in north korea that's gotten much of the attention here. there are other testing sites in north korea according to the president at the press conference that has caused alarm not just for the u.s. but other nations. if you are not testing but still building that does not really make a difference. tom: thank you so much for your work in hanoi the last couple of days. our chief washington correspondent.

he will travel home to the quiet of washington. with a storyegin that is developing quickly at the border with pakistan the indian pilot who was captured when his fighter jet was shot down he's waiting to be freed. pakistan's prime minister .alling this a gesture of peace violate terms of the agreement between the u.s. and pakistan. to bey allows the planes used for counterterror operations. in israel prime minister benjamin netanyahu calling it an unprecedented witchhunt. donations attorney general telling netanyahu he plans to them and that he plans to indict him for bribery. in teamest contract sports history. -- the-up you phillies philadelphia phillies ready to sign a bryce harper for $330 million to a 13-year-ol-- a 13

year deal. global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. tom: thank you. i'm told the cftc will be doing commodities futures on bryce harper and the philadelphia phillies as well. i want to point out from the news agency m.d. tv in india, theacclaimed ceremony at best which some members of our team actually attended has been canceled as we wait for the iaf pilot to be moved from pakistan to india. we moved to the realities of brexit and what it means for global wall street. he and governor carney spoke yesterday and through the week in london.

he joins us now, of course chairman of the cftc. great to see you. you have the single best quote of the week. i love it. we are a people separated by a common language. in the wall street world this is really true. the separation of new york and london in that common language. how separated are we? >> separated by an ocean but in terms of these markets we are actually closely aligned. london is without. in terms of its role in the global -- without peer in terms of its role in the global market. ofannounced a series packages to make sure the trade across the atlantic continues. tom: do you want to do london or do you need to prepare at the cftc where you have a common language? christopher: london is without a

pee in its servicingr the markets. there is no cap will . maybe it will emerge. in its ability to service these multi-trillion dollar markets over-the-counter derivative products. francine: we were looking at your news conference, governor carney on monday. can the city of london survive this? you gave a major boost to the city of london but can it survive the rest? mr. giancarlo: from our point of view and the united states we take no position in brexit. that's a european issue. it's important that we have continuity in these markets. american banks support anywhere from 50% to 70% of trading in these markets that we have an interest in the united states and making sure there's continuity. right now there is no rival to london in being able to provide all of the support that

goes around this marketplace. we wanted to make sure that certainty was there between the united states and britain, whatever happens with brexit. francine: does it change your relationship with the eu? what i've heard within the corridors of brussels is that the pro-market countries in europe will miss the u.k. because they gave them a little more of a market focus when it came to banks and regulations. how will your relationship with frankfurt change because of brexit? mr. giancarlo: to that very point i left london right after that press conference with governor carney and to the euro star so i could walk the halls of the corridors to meet with counterparties in europe and to let them know while we take no view in their brexit dispute we need to maintain continuity in markets. we are working closely with our counterparties in brussels and paris and frankfurt to make sure

however this evolves there is continuity in our markets and the united states takes an impartial view but a supportive view on both sides of the channel. francine: i'm not asking you to weigh in politically, but do you believe with brexit germany and the eu and france will be less market friendly. mark mr. giancarlo: we will remain as friendly and supportive of their markets as we can be. the rest is for them to determine. adaptive.s are very we've launched bitcoin futures a year-and-a-half ago. tom: how has that worked out? mr. giancarlo: spectacularly well. tom: please explain. 20,000 to 3000? mr. giancarlo: let's go back to 2017 when the first post crisis bubble began.

by the summer of 2017 that price was accelerating rapidly. by december it reached $19,000. the day bitcoin futures launch was the high water mark for bitcoin -- tom: translate that. -- giancarlo: 19,000 1500 the day the bitcoin future launched an on that day institutional money could say that's a ridiculous price and within 90 days the bitcoin price came back to its own fundamental. tom: you and alan greenspan are right on this derivatives can provide stability for a path to provide a social good. what is your next project? free agent in baseball? mr. giancarlo: i think the next thing is in cannabis. you are seeing cannabis developing around the world. a lot of money and there's concern as you do in any agricultural product as to whether conditions, price conditions and i would think you will see a cannabis derivative product sometime in the near

future. tom: i can probably say it will be on the euro side. we will stop in amsterdam, francine get me into trouble. francine: we never get into trouble. tom: this has been wonderful. giancarlo.r ji today this is an important conversation, chairman of the federal energy regulatory agency , looking forward to that. border ofking at the pakistan and india. ♪

viviana: this is bloomberg surveillance. if you want to buy a new car in beijing you have to beat the odds. part of china's plan to cut down pollution. this story is in the newest issue of bloomberg businessweek. >> beijing says it's air quality is getting better. still, it is one of the world's most polluted cities. since 2011 the government has been using a lottery to restrict the number of new cars registered each year. that number has been shrinking. from 240,000 vehicles a year, to 100,000. all this in a city of roughly 21 million people. but winning the lottery to buy a car is just the start. aging restricts the use of gas powered cars to certain days of the week, retirement -- determined by the license plate

number. many try to beat the system by registering the cars outside the city but the government car caught on. cars without local licenses are allowed to be driven in beijing 12 weeks a year. viviana: it's all in the latest issue of bloomberg businessweek and it's on newsstands today. tom: very cool. it is a better beijing in the last number of years. a better single best chart with all the news flow particularly involving the american story. we need to do a chart for francine lacqua and all of our team in queen victoria street. boring, the brexit sterling chart. 140-ish, what is your call on sterling? 1.37.: that is not boring though, that

is a great chart. -- about a month ago people were so bored with brexit but amongst our clients much more of a discussion point because we are getting to the crunch and it's become more of a debate. francine: are we? that is the best news i've heard. i'm so happy. daragh: who knows? maybe that was optimistic. tom: some brexit perspective on this chart. francine: just to the point, are we going to come to crunch point? let's say the eu gives the u.k. an option to postpone but what he two months or crash out are they going to go to the 22 months because parliament does not want a no deal? daragh: the crunch point i had in mind was march 12. votets there might be a brought forward the middle of next week on prime minister may post-brexit deal. may's brings aer

deal. how far sterling would fall if this vote is not go through. she lost that vote by 230 votes. -- aact we are suggesting remarkable shift in market sentiment. to see how that one plays out. i think the extension we have to wait 48 hours for the next vote thereafter. the next point of focus is going to be the march 12 vote. tom: francine freezing on the green with an air -- if we get e u.k. going to be a flow story or an interest rate differential story? daragh: i think it's going to be a long time before we get beyond the brexit story. think they will be doing our

retirement video feeds on bloomberg before we get -- briggs it moves off the radar and has been the dominant driver of sterling. bank of england focus? brexit will be rumbling in the background for many years. say -- i think the vote should happen by march 12. in two weeks we will have an idea. let's say theresa may pulls it out of the bad and manages to get parliament to vote for her deal? daragh: on the evidence of the current data i think they can steal from the fed and say we can afford to be patient. still a lot of uncertainty. governor carney talking about the weakness of investment in the u.k. the fed are not doing anything,

no one is doing anything, i think the bank of england will join that club. saying they will do very little and the bank of england will agree you've if we get that deal on a 12. tom: thank you so much with hsbc. we will continue here. bill gross retiring, and interview we had, we continue the discussion forward with erik schatzker. a conversation with bill gross on bloomberg tv tonight. ♪

tom: bloomberg surveillance. francine lacqua in london. i'm tom keene in new york. with bill gross it's about bonds and the fed but what about bill gross? erik schatzker a fabulous effort with mr. bill gross. part of it was a discussion about 37 million people who have an autism spectrum disorder called asperger's. here is bill gross on bill gross. , notross: my personality

to get personal, i'm an asperger. they tend to compartmentalize. they operate in different universes without the other universes affecting them as much. feelings about pimco. wellnk i did pretty in compartmentalizing. not that i did not wake up in the middle of the night, but when i came to work it was all .usiness i don't think it affected me that much. it's hard for me to know. you are not your best witness when it comes to trying to figure out whether something is affecting you are not. so that's a possibility.

erik: i did not know you had asperger's. is that what you meant in february 2016? in one of your outlooks he wrote about michael lewis's book and the movie, the big short and you said you shared an affliction with one of the heroes if you will of the book and it was not his class i. mr. gross: there's a fascinating story. i read that book and lewis is a great writer. what's in that chapter about michael bury, he listed 10 things aspers have -- asp -- some of them were not being able to look someone in hobbies likeular stamp collecting, etc. i go, that's me.

so i took the book out to my ex-wife i said read this. she read it, i think i have asperger's. she said, you do. not, you do? i said how do know that. she said when we were having dinner with bill gates and melinda, that was like five said we were she sitting at the table and i looked at gates and looked at you were doing exactly the same thing at the same time. your mannerisms were the same. i heard he had a mild form of asperger's. mei said why didn't you tell and she said because i thought

it might hurt your feelings. erik: you did not know this about yourself? mr. gross: until i read it in that book. 70's? mr.our early gross: it explains a lot. i'm sort of proud of it otherwise i would not be telling you. it explains a lot about me. asperger's are not geniuses. behavior and ability to relate to people. my singular hobbies, i said maybe i do. so i did go to a psychiatrist. said do youeting i think i have asked -- and she said oh

yeah. tom: bill gross will be listening today to michael mckee and discussion with one william dudley. 9:00 p.m. in new york and through the weekend as well. 7:00g up shortly in the hour. the former new york federal reserve president, bill dudley, ash xan sachs goldman sachs. this is bloomberg. ♪

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miss. factory orders hit their biggest slump in six years. the collapse of volatility. equities inand u.s. a range. elon musk says by a tesla online. online. tesla david: welcome to "bloomberg daybreak." spring is coming. in the meantime, big news out of footlocker. alix: their earnings were really good. .omp sales up about 10% david: they also beat on earnings per share. stores. closing some alix: