francine:francine: rally on stocks surge as the u.s. and china are set for a trade deal. for a dealost hopes growth as tories outlined their conditions for supporting prime minister may, sterling rises, inviting the fed. president once again takes aim at jay powell. president trump: i want a strong dollar. i want a dollar that will be strong for our country, not a dollar that is so strong it is prohibitive for us to be dealing with other nations and taking their business. ♪ francine: welcome to "bloomberg surveillance."

this is what the markets are doing. stoxx 600 gaining 0.4% overall. we are seeing signs of progress between china -- between beijing and washington over the trade deals. that is in the context of the people's congress, also starting this week in china. the pounds, we are expecting more backing for theresa may's deal, probably coming from the hardliner brexiteers. coming up here on "bloomberg surveillance week -- "bloomberg we hear about the trade deal and brexit. let's get to the bloomberg first word news. 's ceo is suing canada for wrongful the tension. rights wereer breached and is seeking damages for what she's has announced a false imprisonment.

china is accusing china of abetting the political persecution of huawei. she was arrested after a request from the u.s.. president trump the congressional hearing of michael cohen interviewed it to his decision to walk away from negotiations with kim jong-un. low" toed it was "a new open the hearings during such an important summit. it remains unclear how the testimony impact of the talks. theresa may is promising a 1.6 billion pound boost for poor areas of the u.k. it was immediately attacked as an attempt to buy support for her brexit deal. this coming as the telegraph reports that the attorney general has abandoned supports to secure support for the backstop. juan guaido says he will return to grok us. the opposition leader secretly left the country to oversee aid by allies. this is the latest move in a bid

to end the rule of nicolas maduro.unclear if the government will arrest nicholas -- juan guaido. spacex taking a leap forward with thie successful docking of its capsule at the space station. the only passenger was a life-size dummy fitted with sensors. gave spacex and boeing contracts worth more than $6 billion. global news 24 hours a day on air and tictoc on twitter, and powered by 2700 journalists and analysts in more than 120 countries. i'm the deanna russo to. this is bloomberg. thank you. the u.s. and china are said for a trade deal that could lift most or all american tariffs, if beijing policy or on pledges ranging from better protections buying products. stocks rallied on reports that the shanghai rose above 3000 for the first time since june.

joining us for more is david inglis. great to have you on the show. what is the mood in beijing after these positive trait headlines? nash positive -- positive trade headlines? david: there is more meat on the bones, and they may have something soon. morning in the asia-pacific on reports that both sides are closer to a deal, because we understand what those parameters and conditions are. you mentioned that china will have to buy more u.s. goods, and we are getting more conversations when it comes to u.s. corn, soybeans, lng. that is the low hanging fruit. the other bid is when it comes to intellectual property. a lot of people say the structural nature will take more time. but this morning in beijing, we had this pre-national people's

congress press briefing, and the spokesperson said that the strengthening of ip protection will be folded under what they call this new foreign investment law, that the npc will be voting on. you take those things and you understand why people are more optimistic than last week. francine: what are we expecting from the national people's congress? the leadership in china is already consolidating power. markets. pertains to it is the work report that comes out 30 minutes before the cash markets opened up here on the chinese mainland. within that report, several things. we get the official growth numbers, the official growth targets for 2019. that will be the benchmark with which we compare activity the next 12 months.

related to that and how they get there, it is the budget deficits target for gdp. you have economists and they have encouraged looking at fiscal spending as a means for beijing to achieve that growth target. you ask our bloomberg economics team, and what they are thinking 6.5%, range from 6% to coming off two straight years of around 6.5%, there will likely be an acknowledgment that growth will slow moderately for 2019. francine: david, thank you. david ingles joining us from beijing. our guest is joining us. you both for joining us on such an important day. james, let's kick it off with you and talk about what a possible trade deal means for global stock markets. who will benefit the most? james: it is a good question.

we have seen chinese equities on a ripping tear over the last several weeks, and i think there is a decent amount of optimism baked into those. essentially, my economic the is isde -- my economic view trade has not been the problem with respect to what we might expect from the national people's congress. for me, this is a sentiment boost, taking away some potential downside risk. it has structural influences over the long-term. i don't think markets are willing to look that far into the future. 10%n't think we will see a valuing off the back of it. francine: what implication do you see for the chinese economy? how week is the economy from the trade? i think the chinese economy is showing signs of great resilience, as is the u.s. economy.

perhaps we are among those versus consensus, who are somewhat less concerned. but having said that, the whole trade issue is of course the issue that is the most important for the strength of the global business cycle going forward. hasing about protectionism an impact in the first quarter of 2018 on trade volumes. regulatorce, the air showed numbers for air freight december.most 2% in as a whole, volumes grew by 2.5%, a sharp drop from the nine point 7% growth recorded in 2017. as long as trade lanes remain positive, we think recession can be avoided. but there is no greater threat to the business cycle than trade

in spite of this news. francine: what is the probability of a potential slowdown that is so big it could flirt with recession? james: for china or the global economy, or both? theally when we talk about global economy and recession, we do not mean negative growth as we do with sigel countries. -- with single countries. the risks are higher today than i would have said 12 months ago, because the slowdown outside of of u.s., the slowdown economic data has surpassed even my expectations for the eurozone where i am incredibly bearish. it is incredible how much we have seen activity decline. i would again point to china as being the probable cause for that. they have turned the monetary spigot down if not off, and we wallseen the economy hit a . it is all about chinese policymaking.

it is all about the extent to which they balanced the near-term economic cycle versus the structural problems that are increasingly going to run into. withine: if we do flirt conditions, what does it mean for the fed? will they cut this year? marie: that would be very surprising to me, unless the data that comes out in the future shows something we are not seeing at the moment. one of the positive things in the major economies is the fact that inflation is so low. we have a bit of a debate here, where lots of people are saying that in europe the inflation and has toow target

be by any means brought up to target. i take issue with that, because even higher inflation will sink into real wages at a given nominal wage growth rate. in essence, thanks to lower inflation in major economies and across the board, with few exceptions, we have significant wage gains, and that is propping up personal consumption. as long as that remains the case, it is also difficult for us to forecast a recession. thomsen: marie owens with us. athey stay , the president ramped up his attacks on jay powell. details on that next. this is bloomberg. ♪

president trump: we have a gentleman that likes raising interest rates. lovese a gentleman that quantitative tightening in the fed. a gentleman who likes a very strong dollar in the fed. , and we want ase strong dollar, but let's be reasonable. with all of that, we are doing great. that was president trump once again hitting out against jay powell's monetary policy, speaking to his base at the conservative political action conference this weekend. still with us, marie owens thomsen from indosuez wealth management, and james athey.

to the president's words have any affect on the bed? do they want -- does the president's words have any affect on the fed? fed is anhink the institution with huge very clear, and a mandate. they will pursue that in a technocratic fashion, i would argue, no matter who is in the white house. francine: do you agree with that? it must make a difference. james: we are talking about human beings. look at the wide body of evidence across global central banks. it seems clear the institutions themselves has credibility to varying degrees, but the institutions take onto a large degree the mental model and personality of the governors in charge. that tells you there are degrees of freedom within the central banking model. to your point, it would be

difficult to believe this has no impact on us feeling conspiratorial. look at the journey the fed has been on since october of last year. i would say that it is very difficult to believe that is purely about the economic data we have seen or that anyone is expecting compared to the fed's own forecast at the back end of last year. i am not suggesting there is a conspiracy theory story, but i also think it is unreasonable to consider the human nature of the i thinkunning these -- it is reasonable to consider the human nature of the people running these institutions. francine: does that that have a tendency to slowdown in light of economic data that may have been disappointing, but because of political pressure-- james: the fed keeps saying data dependent, but they keep acting an increasingly speaking in ways which suggest they are trying to find a way out of being hawkish for any particular reason.

one thing that could get them moving is inflation. what we are hearing, the public discussion around the inflation mandate, this notion of average inflation targeting without any real understanding of the periodicity of that approach. to what extent do you average it, over what period? it leaves so many holes in the model. from rule-based monetary policy that essentially it is completely discretionary. given the way at which they have dovish, ireasingly find it difficult to believe they will get a hike done in 2019. francine: where do you see dollar in 2019? marie: our hypothesis that underpins our global scenario is for the euro-dollar between 1.10 and 1.20 this year. one of my favorite variables is the current account, because that would determine where

currencies go if we allow ourselves momentarily to abstract from financial flows. the u.s. has the world's largest current account deficit in u.s. dollar terms. the u.k. has the second-largest, although it is less than half as large as that of the u.s. these currencies i would argue are fundamentally depreciating, and of course the chinese currency has a long time been supported by its large current accounts. that support his waning, and the other large currency surplus is europe. francine: thank you so much. marie owens thomsen from indosuez wealth management and james athey stay with us. there are signs of hope. we will break down the latest numbers from the ecb meeting. this is bloomberg. ♪

this is "bloomberg surveillance." recently, the euro area released its dismal eco-numbers, but if you scratch below the surface, there is a glimmer of hope. companies are continuing to hire and consumers are spending more. this will play into the ecb's policy decision on thursday. still with us, marie owens thomsen with indosuez wealth management, and james athey but aberdeen standard investments.when you look at ecb , what can we do this year?

will we see more accommodations, even possibly including a new round of gtlro's? worker they be more hawkish than the market is pricing in? marie: one important piece of information will be their new projections, the economic forecast that they make. if we think they are going to take the recent data to heart, then lower their projections for gdp and inflation, that would arguably move the first rate hike of the ecb in this cycle into 2020. we have to wait and see what they say about this. but clearly, liquidity is a focus, of an central bank so we can expect them to make sure there is liquidity in the market to the best of their abilities. francine: would they be right to wait? did ithey wait too long,

miss that crucial time where they can get stuff done. marie: no. any kind of economic policy has .o be pragmatic they can be illuminating and show us a certain number of things. if they apply the rules blindly, that can be the thinking, and that would be terrible. we are moving into an era of adaptive monetary policy. we have gone from gold standard to the fixed exchange rates to money supply targeting to having inflation rate targets, and the importance of the independence of the central banks has been the mantra. i think we are moving clearly into a new era in terms of monetary policies, an era which wants to be more pragmatic. more fore might see

the target of inflation rate rather than fixed numbers such as 2%. i also believe the debt overhang is exerting some constraint on monetary policy, and we can expect increased collaboration between central banks. they will communicate around these changes is going to be fascinating going forward, because obviously if my hypothesis is correct, that will be a step away from trying to isolate monetary policy into its own separate universe, and instead trying to issue a new type of communication that takes the surrounding realities more explicitly into account. francine: that would change depending on who would be president. james: absolutely. i don't know if it has emerged. we know how these things emerge. we have other processes going around that in the european union.

again, to the point i made earlier, i think central banks to a large degree take on the personalities or mental models or purchase of their governors. francine: thank you so much, marie owens thomsen and james athey. up, there are signs of compromise from conservative headliners and the eu. could theresa may's brexit deal pass the common vote? we will look at the pound and some of the things we have seen when it comes to sterling over the last couple of days. this is bloomberg. ♪

francine: this is bloomberg for surveillance, i am francine lockwood. we are going to have some data out of the u.k..

construction is a good measure of if homeowners feel good about the future and it gives a sense of what the actual state of the u.k. economy is. we have had some data that was disappointing, and we had some really good data. for the month of february, it's a little bit backward looking, it's below 50. that means it's a contraction, but it's not far off what we were expecting. 50.5.dia analysts was the pound is not moving. we are back with james. a we will get to brexit. withu are into traction construction, do you care about the data? james: the starting position is important in terms of economic momentum.

sterling focuses on the brexit stuff. construction is highly sensitive to weather conditions in the winter. i would never extrapolate one or two months from this time of year anyway. francine: we will come back to james. we also have david merritt onset. the u.s. and china are close to a trade deal. u.s. tariffs all as long as beijing follows through to buy more u.s. products. the u.s. and south korea agreed to end their biggest joint military drills in a bid to ease tensions with north korea. it came days after donald trump and kim jong-un on failed to

reach an agreement at their summit. the decision was made to pursue permanent peace on the korean tesla. bill gross defined his investing career by meeting benchmarks. he said the era of outperformance is over. thin, betweenor treasuries of different maturities. he said central banks of changed the nature of the game. the probability of generating historical output are much less than they were. spacex watched its first echelon ready capsule at the international space station. no humans were on board this time. passenger was ripley, a dummy with sensors attached.

global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. francine: thank you so much. less than four weeks have brexit , the you is paired to provide further guarantees that the irish backstop is temporary. reporting times are pre-brexit problem's. the u.k. secretary welcomed the new steps. >> i hope it's a genuine attempt to map out growth where we can have common territory in the run-up to the 12th of march. >> we're joined now by david merritt. james is still with us. thank you for sticking around. welcome to the program. wind we find out if it's

concessions or explanations or the new things the eu is promising? david: we are all waiting to find out. jeffrey cox as been put in charge of this legal wrangling. something is definitely eating cooked up kind scenes. he has gone back to brussels this week. we have conflicting reports on both sides about how much progress is being made. isn't that unusual? some of the more hard-core brexiteers are looking for ladder to climb down. they are a lot softer than the conditions used to be. probablya gap there with what the eu is saying in public. talks are going on behind the scenes. we will see if something emerges this week, leading up to the deadline of this next meaningful vote. francine: this is the gre basically, they want to safeguard exit.

if they do vote for theresa may's deal, can they get it through the house of commons? david: if they come around to saying we will reluctantly backed this bill. that's not enough. they've been pretty quiet over the last few days. they might smoke out some more support from across the board. laborst big number is the mps. we saw some of them voting with the government. as many as 35 labor lawmakers will back the government. so they can't be blamed for delaying brexit. what does this mean for investors? the pound has been rallying quite significantly. people are expecting the theresa may deal to go through?

james: we are into that stage of the process which suggests how these things work. as we get closer and closer to the deadline and risking some of youmore extreme options, start to see some bending and negotiating and some agreements and concessions. then, if you're one of the few mps ready to stick your head up, you do take the risk of being personally blamed. this point, it gets real and suddenly you have responsibility. the labor mps all report back to constituencies who overwhelmingly backed brexit. what happens if the deal gets rejected in the house of commons? we don't have a real date yet.

that ifhe process of it's rejected again is the following day. the prime minister will hold a vote on whether or not no deal is going to happen. you assume no deal gets rejected by parliament. there is a vote on an extension to avoid no deal. we are then in the territory of brexit getting pushed out further. is it a short extension? the question. it's not if brexit is kicked into the long grass, it's how far. know if it'son't fun, it goes to the possibility of a no deal breakfast and what food you can still eat if you're living in the u.k. the u.k. imports so much food. lamb,ld be left with

potatoes, milk. david: we are really unwinding the british diet since we've been in the eu. maybe this could be the final scare story that sharpens the minds across the spectrum to pass this deal. going tohat people are feel the impact of this straightaway when i go to the supermarket. supermarkets say they will be out of source food from elsewhere. so much of our food is dependent on this trade with the european union. francine: no bananas, no avocados. it's a great read. here's what british people could eat in a worst-case brexit. thank you so much, david merritt. james stays with us. one wide-out heads back to cueto.

that story is next. this is bloomberg.

francine: let's bring you an exclusive interview with the co-chief executive. it was trade war with china is the biggest global risk. if the u.s. stock market and economy are doing well. he also weighed in on president trump's comments about american currency. martin: we have to ask ourselves why he is commenting on the dollar. he clearly wants it weaker to boost exports and continue growth in the economy.

growth is good there. i always say in fund management, you ignore the u.s. at your peril. the stocks continue to do well. you sent equity is the best investment for 2019. we have seen a healthy correction. do you stand by that? martin: we will go back to more. qemalized markets now that has almost finished. stockk that brings back pickers. a business like ours which is sort of bottom-up there was a tough time the last few years until the last quarter of last year. the markets are i hope turning back toward active rather than a more passive style of

management. >> does that continue when we see the fact that the u.s. china trade relation is thawing. hopefully, we will get some sort of agreement. i think trump would like to reach agreement. they can take the hawks in his really tendnt who to being anti-china than he probably is. >> is that still the greatest 31k, that we have march approaching. is brexit a greater risk? martin: i think u.s. and china are a bigger risk. brexit is a local risk for the u.k. and a bigger risk for ireland than anybody else. their supply chain comes in through the u.k.

if there is a hard brexit, ireland could see a slump. it is a risk. it's a risk for europe as well. a lot of their exports go to the u.k. there was a big trade deficit with the u.k., which is significant. >> what about what businesses will do. if fund manager stay in london, is that a positive outcome? martin: what we have done in fund management is locate businesses in dublin or wherever. we already had businesses and luxembourg, which is where we tended to be. as far as fund managers are concerned, they are reasonably well prepared for hard brexit if it came to that. i think sterling weakens a little bit. -- i don'trtainly

think there is anything in sterling that forts hard brexit. most people still think that some sort of deal will get done. donedeals as you know get at the last minute when i have to reach negotiations. that was -- let's get to the business flash. viviana: tesla will unveil its model y crossover. it will have normal doors. it will cost about 10% more than the model 3. an ceo resigned after behavior.ion into his he took a leave of absence from the british fashion retailer in december. the acting ceo continue in the

role. a company veteran is appointed as ceo. the five months of leadership after the departure of mark wilson. improve stock after years of stagnation. d aviva in 1992. opposition leader of venezuela will return today. he did not provide details about how he will be returning to the company. he is received a lot of foreign backing and support inside the country. let's focus on emerging markets. james is still with us. emerginglook at markets, it's a dollar story. how much of a gift will the fed be giving? james: that's the crux of our

analysis. i think it's really interesting to note the behavior of emerging markets in the past two or three months. dollarn't seen the increase the people were expecting. we are seeing a big divergence in terms of local currency. the market was being aggressively in the high names across the board. that rally has moved to a fairly large distance. it's going to be difficult to see a hard currency performance without new information. that probably means china getting better. locals of not been as good of a performance. i don't know which of those markets of the mormon -- moment is right. it is notable how resilient the dollar has been. when you look at the economic divergence, it continues.

the fed has become more dovish. the rest of the world economy has gotten worse and worse. u.s. exceptionalism is something to be attached to. unclear,t's quite performance has been difficult to come by. there have been no trends. i am cautious. francine: what would you do with treasuries? james: by them. tactically, i was hawkish with quantitive tightening. that has been shocking. now, it's a good day until you see yields rising aggressively. the fed is not going to respond. buying duration across the board has got much more attraction. francine: thank you.

now, she sues canada for alleging wrongful detention. we will give you all the details next. this is bloomberg. ♪

francine: this is bloomberg surveillance. financial officer said she was wrongly detained. she claimed her rights were breached in a case she said amounted to false imprisonment. the canadian government will proceed with an extradition hearing at the request of the u.s. first of all, what are the implications? >> it took them three months to come back, it implies that hallway has some means to fight back. government, not only from the united states and australia and europe, europe is

a very important arc it for them -- market for them. these countries join the u.s. to ban their equipment, that would be a huge setback for the company. francine: what could be the impact on why way? about, thest talk rest of it is really bad for the company. the route they can take is to focus on smaller companies. other than china, they need other countries to use their equipment. korea orrely on south southeast asia, they may be

laggards in terms of 5g deployment. they have a very impressive 5g handset. that would be the only way they could render through this uncertainty. francine: one of the wider implications for the tnt sector? definitely. what happens is uncertainty is always bad for the market. uncertainty of their ban by other governments, mobile character -- carriers don't know what to do. should they follow their threeal plan to have a equipment providers?

should they eliminate them in case the government decides to abandon the product. this kind of uncertainty is negative for the capital standing and 5g deployment. the network is not ready. the handsets note sell. uncertainty would be negative for the stock market and for the development. we have heard complaints from mobile carriers saying the elimination of them from the equipment supplier list would delay their 5g rollout. francine: thank you so much. let's take a look at what stocks are moving. >> let's start with one of the biggest movers, daily mail up 4%.

though revenue matt estimates, there is slower growth. they may be facing some competition from amazon. francine: thank you very much. we continue in the next hour. tom keene joins us out of new york. we will be talking to john newman -- norman. this is bloomberg. ♪

francine: rally on, stocks surge as the u.s. and china are

nearing a trade deal. brexit hopes hardline tories outline their conditions for theresa may. sterling rises. president trump once again takes aim at jay powell. >> i want a strong dollar. i wanted dollars is going to be great for our country. not one that is so strong that is prohibitive for us to be dealing with other nations. francine: good morning. good afternoon if you're watching from asia. this is bloomberg surveillance. we have a lot to look at. it is ecb decision this week. we will get your politics in the u.s.. we will talk about the mueller report. convinceds have themselves there will be a trade deal. tom: disinflation is front and center. i will show a great chart on that in a bit.

it's really front settle for the ecb. francine: we will talk about the bloomberg first word news. viviana: the u.s. and china are closing in on a trade deal that could and u.s. tariffs. an agreement depends on beijing following through on several pledges, among them find more american products and better protection of intellectual rights. tariffs.ered to lower the u.s. and south korea are making an attempt to ease tensions with north korea. they agreed to end their biggest joint military exercises. this comes after collapse between president trump and kim jong-un. president trump is renewing his assault on the federal reserve. conservatives, he criticized paolo somebody who likes raising interest rates and likes a strong dollar.

the president could use the fed as a scapegoat in cases policies don't succeed. at least 23 people were killed when a tornado struck a rural community. they called this devastation incredible. it destroyed a number of houses and mobile homes. the winds could have been as high as 206 miles per hour. the british prime minister is accused of trying to buy support for her brexit plan. she is offering sweeteners to soothe labor members of parliament. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: thank you so much. it's a nuanced data check.

real businesses emerging. this monday looks like a first day of march to me. francine mentioned dow futures are up 65. there is curve steepening over the last couple of days. the vix is showing the bull market under 14. there is the dow, set now. that's friday. the yield level and the yen get my attention. getting up near 112. francine: i like that. i did a similar data check. we are looking at stocks rising .ith the you one -- you on i wanted to show you the pound. we understand it's the more hardline brexiteers that may go ahead with the plan. we don't have the exact arithmetic. the pound is gaining.

tom: i'm really glad you put that in your opening. thank you and hyman for bringing this chart in. slope matters. time of inflation and expectation. here, it's at little bit of a rollover. it's interesting to see if we will breach this level. francine? i know you don't like bar charts. it's a brexit bar chart. fabulous. francine: the exchange traded $650 have drawn nearly million.

this is a good way to look at some of the brexit risk. thank you for bringing me that chart. u.s. china trade war may be nearing a resolution. we understand that the two sides are close to reaching an agreement. we just learned that china will have a three percentage point cut atop the bracket. that is pretty much what was expected. part of the measures to support a booming economy. and the trade war, let's get straight to our guest. thank you for joining us. we will get on to trade and we will get on to the u.s. in a second. heard that china is planning a cut. does that mean we are going to see a china that will do everything they can to support

the slowing economy? john: i think they will give you everything to drive growth up a percentage point or so. it's good that they move in a steady direction toward stimulus. i would not have bullish expectations about what this will do to the economy. about thetalk to me markets convincing themselves that there will be a trade deal. john: i think this will hold. president wants to make a deal irrespective of the long-range issues that are not resolved. they will talk about the behavior on the part of the chinese. the tariffs were tax hikes. i think you might see earnings upgrades come to the market. that's a newer theme that is starting to emerge.

tom: is it a hard landing in china? john: no. they have never wanted to deliver a hard landing. they have the policy tools to avoid that. the real debate as if they are delivering enough stimulus to uv stability or even more to give you an upturn. we think this is about stability and not the upturn. tom: do they have the same quiver of arrows that every other economy has? is it a different quiver? more quivers and they are different. interest rates are higher in china. content -- cut taxes. this is a latitude a lot of countries don't have because it's much more closed and they can deliver forced buying of those additional bonds that will be issued.

they have more degrees of freedom than other countries. francine: when you look at the u.s., how much does the president need this deal with china? have why did not go great. general, does he need it? >> assuming we are close to a deal and there is no last-minute law, he will sign off on it instead of doing the unpredictable thing. he needs to demonstrate a win politically. something too stimulate the u.s. economy. it's not growing at the same rate that it was 12 months ago. francine: i want to ask you what will be in the deal. the co-chief executive of standard aberdeen spoke about this trade war. >> i think america and china is

a much bigger risk than brexit. brexit is a more localized risk for the u.k. clearly. francine: we are hearing the deal could make beijing follow-through on pledges for ip, require them to buy a significant amount of american goods. are these things of the last western mark jacob: this is not a framework that will lead to a long-term resolution or stabilizing the trade situation. that would require longer set of negotiations and more buy-in from congress and a more stable situation in the u.s. tom: let's continue. we are beginning monday briefing. jetlaggedent is back,

know, long speech yes. this is the president of the united states. >> we have a gentle man who likes raising interest rates in the fed. he loves quantitative tightening in the fed. we have a gentleman the likes of very strong dollar in the fed.

viviana: let's get the bloomberg business flash. resigned overker accusations of misconduct in the workplace. he denies the claims. stocks plunged after they said it would be hurt by percy. manned craft docked

with the international space station. this test flight plays the way for a manned mission. elon musk is competing with nasa. for business with the u.s. in china's trading partners are anxiously watching talks between the two countries. this economic summit in november. is paramountion for us. not just because of the development of trade, the prospect of global growth and trade. prices,ts the commodity it affects the exchange, the different currencies. factorse, many macro

are in connection with the situation. we are following it very closely. the bloombergis business flash. francine: thank you so much. we are getting breaking news out of greece. this feel significant after everything greece has been through. bondare selling a 10 year that they have mandated banks to sell. this speaks volumes to where the country is now compared to seven years ago. tom: let's throw a chart up and see if it sticks. how about the greece 10 year? this is how fast on the terminal we can find some of this secure stuff. there is the plunge we saw in anticipation of this announcement. -- back toe to this this. all attention is looking to the jetlagged one. the president is back from vietnam.

here he is at cpac. we have a gentleman that likes a very strong dollar. i wanted dollar this going to be great for our country, not one that is prohibitive for us to be dealing with other nations and taking their business. north korea has a brilliant economic future if they make a deal. they don't have any economic future if they have nuclear weapons. the relationship seems to be very strong. that's an important thing, especially when we are dealing with this situation. russia, we are going to go into his finances, we are going to check his deals. these people are sick. to: i believe it to others discuss the length and content of the speech. we have the perspective of john norman.

give the going to general sense of the speech. he was speaking to the converted. are they a smaller group of america? are they an increasing group? john: i'm not sure it's a smaller group. the most recent polling has the president back up to 40% approval, ever take. that's the median point of his presidency. 36 when things are really bad. it's a very thin range in comparison to other presidential approval ratings we've seen. sense that he is locked in. this is his rating. fors the danger zone president to be reelected. it's not impossible.

three or four points lower, he's looking at being a one term president. tom: i know you watched every word of them still are on saturday night live. there are a lot of distractions for this president. can you rank the distractions right now? a distinctions between distractions and things he should be worried about. the mueller investigation is his biggest distraction. as chris christie pointed out, the more greater danger is not from the mueller investigation, it's the southern district of new york. it's what michael: was alluding to. it's the investigation into the trump organization's finances, where the financing came from, his personal net worth, the trump inauguration, the trump foundation. they are being carried out by

state law enforcement which he has no control over. that's the party should be worried about. he seems hung up on robert mueller. francine: what do you make of the fact that he's attacking the fed and jay powell? this this change the economy at the margin? john: they have laid out every possible excuse at the end of january. it was a global slowdown in the u.s., the stress of financial markets. they've already put in place that pause and following up with a lot of discussion around average inflation, that makes people think they will be on hold for a long time. i don't these comments is having that much impact. the course of fed policy is what shouldabout guide policy and how long should extend. i do think pressure from the

president is on the margin. francine: what you understand about the u.s. economy that would make it easier to understand hikes? john: ironic anyone understands the inflation situation in the u.s. despiteation is so tame labor market that is generating wage growth. steer uponve a good what drives the inflation process. the fed is conditioning on actual inflation above 2%. it's difficult to call with the next fed hike is going to be. there should be some debate about whether they should cut if theeconomy is robust and inflation is under the 2% target. tom: when the foundational ideas, a new lower rate we are heading to within economic growth.

john norman is with us. jacob is from chatham house. we've got a killer dollar chart to get to. coming up, john taft of baird. they are ringing the bell at the new york stock exchange. john taft, where are the moderates in the republican party? this is bloomberg. ♪

tom: white u.s. bloomberg

surveillance? maybe you watch us on twitter or all of our digital products. francine is in london. i am in new york. you watch us for charts to make john norman look smart. we've got to go right to a dollar chart. thepresident talking about strong dollar. it's actually pretty elegant, going back six years. up we go to dollar strength three years ago. it's a fabulous trend with the average. is the dollar top strong? : the reason it was strong in the first 18 months of his administration is because he made the fed tightening. about the backdrop in 2019 going forward, the fed

is now dovish and trump who is making peace with asia. that's not a strong dollar environment. the focus is misplaced right now. tom: is it inflation dynamics? is it a question of money flowing into trump's america? john: the money is going the other way because of the prospects of an extended trade truce. even though in some ways policy is looking at reasonable, the beneficiary will be the emerging markets and china. e.m..llar is lower versus dxy won't do much on the basis. francine: where you see the mainline for the fed it? what is it like if they cut? john: i think that pricing is wrong. they are targeting higher

inflation, they need to generate stronger growth. most of the fed it would be uncomfortable cutting interest rates in the unemployment rate is low. i think it's difficult for them to abandon this caution which comes from low unemployment. francine: john, thank you so much. up, we will be speaking with the investment management director. look for that interview at 8:00. this is bloomberg. ♪

tom: your monday brief. here is first word news. all tariffsost or

as part of a trade deal with china appeared both sides are close to reaching an agreement. china to follow through on a couple of promises, one increasing the amount of american goods, another protection ip rights. china will use the $90 billion tax cut to boost the economy. china will cut the vat tax by 3%. corporateould help profits when the economy is under pressure. on capitol hill, the senate has enough votes to block president trump's declaration of a national emergency on the border with mexico. tod paul says he will vote reject the president's move, leading to the president's first veto. it is timecron says

for french-italian relations to return to normal after hitting a postwar low. they have fought over eu budget rules and the future of a high-speed rail link. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. four weeks to go and tell brexit. to offer prepared further guarantees that the irish backstop is temporary. meanwhile, tests must be passed to get support. still with us are our guests. closer. she is closer.

she is not closer, but what do we know? is she getting support for her brexit deal? deal. is closing in on a there is enough time it could go either way. the question is whether she will bring her party with her. , thewe saw this weekend conservatives laid out conditions. it as an olive branch because it is softer than re-open agreement which they started with. it is a pretty high bar they are setting. they want a time limit, unilateral exit, a clear mexican i mechanism to withdraw. they will not get all of that. what happens when they get something that falls short? doessquint hard and say

this meet our criteria for we are not happy with that? francine: what then. we don't know if theresa may has the numbers to get this through. it changes almost by the day. what happens if it gets rejected? >> we have seen party discipline breakdown, so we think she will bring some conservatives with her. many.'t know how she is making a direct appeal for labour party members to support her, and a lot will. 70 mp's don't like the idea of a second referendum the jeremy corbyn proposed last week. they would like to get this deal through. they hate the idea of going back to the voter. tom: is this going to script? didn't a lot of people predict conservatives would cave as we got towards the march date?

>> if she pulls this off and gets a deal through, it will be a big case for saying it was an ingeniously conceived negotiation, but it is by hook or by crook and a lot of things can go wrong. you could say it is going to script in that she has prevented it is either her deal, no deal, or brexit. is the are seeing conservatives say do we want to take the risk that this goes into a delay that sees the brexit process compromised. tom: i want to mention your stunning necklace, which harkens back to the victorian and black on next. -- onyx. how nostalgic are the conservatives, not that they want go back to victoria or edward, but what is the nostalgia meter this morning?

channelingd i am that. tom: you are channeling judi dench. now continue. >> we see a lot of harking to historical periods. we talk about the dunkirk mindset. this is a big part of the brexit narrative, whether conservatives a positive momentum for britain post-brexit. those who want to say the eu represents this unacceptable compromise of sovereignty for britain may still cling to that and oppose a deal. say historywrong to is important in the final stage of this. francine: i wanted to bring in our guest, not to talk about

fashion, but it does hearken back to the victorian age, but a piece that is fancied in the newsroom, basically looking at what u.k. citizens could be eating if there is a no deal brexit. here is what british people could eat and a worst-case brexit scenario. peas,es, piece, lamb -- lamb and milk. what do we know about what groceries are stockpiling? >> i am worried about increased friction from a regulatory standpoint or tariff standpoint. the significant interruption around commerce. complicated, lengthy, or expensive process, where the economic dislocation is coming from. francine: is a no deal brexit now off the table? >> it is rescinded as an option.

never say it can't happen, even now. option,ill legally the but i think it is rescinded as a possibility. tom: i want to bring this up. this is for john norman. francine insisted i do this. risk.s the real brexit serving at a local restaurant? help me with this fear mongering about food. you have to be kidding me that off of a week's upset that england is going to start for food? >> if you are committed to your avocado test in the morning -- toast in the morning, you might pay more for that. a you go to rules, which is

highly priced restaurant, but they serve game, and the english are good at shooting things now, so i think you are safe. for what does this mean my stilton cheese? francine: the stilton is fine. for a lot of u.k. citizens, they talk about brexit. they don't understand how it impacts them, that when it comes to food that the u.k. imports most of its food. as long as it is homegrown, it will be fine. otherwise, prices will go up. a word of warning, no avocado toast. tom: we will be back with john norman on how liverpool can't score. we think our food critics for their wisdom on brexit. coming up, an important conversation on the deficit, but the former senator from georgia, sam nunn, on nuclear threat.

stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." venezuela's opposition leader will return to caracas today, calling on protesters to take to the streets. he did not provide details about how he will reenter the country or risk being thrown in jail. he has received a lot of foreign backing and his support in the country is less firm. our editor joins us to talk about the situation. whether heany idea can go back to venezuela and what the next step is?

will we see a elections, or are they a long way off? >> he will try to get back into venezuela. he made that assertion. in the pastdor several hours. he has not been seen since. by all accounts he will attempt to get back into venezuela and that would raise the risks of his arrest at the border should we setetected, and then off all sorts of different sinners depending on whether he is arrested at all, but let's see. kind of backing will he get from the international community if he does go to prison or get arrested? he has made various pronouncements about the support he has in this whistle stop tour

around a latin america, brazil, colombia, ecuador. he met mike pence in bogotá. he is claiming he has a lot of support. he said should he be arrested, the plan would be an active. whether that carries any weight remains to be seen, but if he is arrested and thrown in jail, the international community will have its bluff called in this respect. puts is not arrested, that mr. maduro in a weak position. he does still control the military. tom: there are a lot of bloomberg terminals and south america. to ave provided leadership political and economic team across south america for decades. you mentioned the vice president of the united states. what is his influence in this debate? >> it is significant. venezuela as part

of its area of influence, and it a kind large degree also of diplomatic battlefield between the united states and the european nations and russia, china, and strangely enough turkey on the other hand. turkey is a member of nato, but president erdogan has thrown his weight behind the maduro regime. that is why mike pence has been meeting with juan guaidó. francine: thank you so much. john norman of j.p. morgan is still with us. i don't know whether you say it but it goesatic, back to the fed story. how much opportunity can you see in emerging markets in 2019? >> the opportunities are

region-specific and independent of the venezuela issue. the issue is how it could stress in the oil market and drives up the oil price. , it isside that issue about whether policy will support flows of high-yielding emerging markets and whether the truce will continue restoring flows into asian equity markets. i think both of those will hold. there are opportunities, but they are asia around opportunities in latin america around currencies. francine: latin america is a brazil story? >> it is more than that. it is brazil as a reformer, where the risk premium should diminish. mexico is about plain interestoned high real rates in place because of the geopolitical stress created by buttrump administration, may be those stresses will

stabilize and diminish and the real yields are still quite high. that is why it is interesting. tom: what is the trade right now? how do i take advantage of this trading opportunity? in thequities, it is u.s.. the client positions are underweight in those markets. fixed income is about owning duration. tom: what about currencies. >> it is owning latin american currencies and in oil currency like russia. even though the fed is on hold -- tom: do i play brazil against what? is it dollar-brazil, short u.s. dollar? >> i would keep it simple. some people look at brazil versus mexico, but they are both interesting, so i would elong both of those versus the dollar. tom: thank you so much. francine? francine: coming up, tony

fernandes, air asia group chief executive at 4:30 p.m. in new york, 9:30 p.m. in london. he will talk about his fleet, whether he will buy new aircraft in the price of oil. this is bloomberg. ♪ il. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. in japan, the new lawyer for carlos ghosn said his third request for bail may succeed. he has been jailed on allegations of financial misconduct. he has promised to accept camera surveillance to monitor his activities. iron orof the largest producer is stepping down. he promised there would never be a break on his watch. january, mored in than 180 people killed, 120 missing. way claims shee was illegally detained. she was arrested after a request

from the u.s. government. canada has agreed to an extradition hearing. trump accuses her of violating sanctions against iran. cisco suggest government should not worry the chinese telecom will dominate the race to build five g network. wireless infrastructure will continue to be built by companies from the u.s., europe, and china. there is concern that huawei gear could be used for spying. that is the bloomberg business flash. francine: recently, the year old area has released dismal economic -- eco-numbers. companies are continuing to hire and consumers are spending more. the date that will play into the ecb policy decision is thursday. john, do you believe the ecb

will take a chance to do something to start normalizing? >> i think they will wait and see. in terms of policy measures from them, they will almost certainly -- ltro toher ttro replace an existing one. it is not geared towards creating additional stimulus. it is geared to keep policy in the status quo. francine: maybe the fed could have missed the window and they should've hiked more quickly? >> i don't think they were in a position where hikes would have been useful. if rates are higher, that gives more latitude to cut rates when adownturn comes, but if region faces a slowdown and hikes in the face of that to give them latitude to cut later, it exacerbates the underlying slowdown.

they have missed the window. tom: a great acclaim to j.p. morgan for the analysis of the terminal value of gdp. what is the terminal value of eu , and ifer than the u.s. lower, does it approach the zero bound? lower than the u.s. because it is demographics and immigration. line growth and trend growth as a function of that plus productivity. what separates the u.s. from europe is really immigration and demographics, but that is positive in my mind. it is a region that should be , soing around 1.5%, not 1% the pessimism is not about europe being like japan. it is not the u.s., but not what japan experienced 20 years ago. nsa from they,

council on foreign relations on the continued austerity at the bundesbank. is there austerity being committed in europe right now? >> i don't think so. policy,asing monetary loosening in the big economies, germany slightly, france, and italy, so i don't get this talk about austerity. it does not describe what is going on from the monetary or fiscal side. francine: are we becoming like japan in europe? and if we are, what should we do? >> mindsets are becoming japanese in the way people approach europe is fatalistic, but europe does not look japanese from the point of view of nominal gdp growth. it is still somewhere between 2% and 3%. what japan expense was zero nominal growth or a decade, so

the facts of the situation are different, even though people are using the same labels to describe these two parts of the world. francine: is it demographic? i have disagreed with he may be onto something. is it the composition come demographics, or monetary policy? >> there is slower population growth, but not an outright shrinkage of the population. you might have that in germany, but that does not describe the region as a whole. the slow growth europe has been in for the past year is a function of what happens globally would trade and idiosyncratic issues in germany, france, and italy. equation out of the and europe group around 2% in real terms for the past decade , so it is abrothers myth that europe doesn't grow. it does grow. tom: this has been a clinic.

thank you so much, john normand. we have much more coming up. work,rom john normand's where we you in january, february? where will you be or want to be in march? our guest will join us. he is at blackrock looking at the allocation of your vast wealth. he will join us here in a moment. 1.3227., a beautiful new york, a snowy day. this is bloomberg. ♪ this is bloomberg. ♪ so with xfinity mobile

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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. a marchs morning, is it to hire yields, the yen weaker.

we consider the bull market you are not participating in. thed the jett soo like with a two hour chat with conservatives. he will have to break out the to sustain his border emergency. forget the refund, pay the order of the internal revenue service. good morning everyone. this is "bloomberg surveillance." we are live in new york. i am tom keene. queen victoria street in london. francine lacqua, good morning. brexit update, sterling not moving in the but march 12 is the new date for brexit? francine: theresa may will put her deal to the parliament by march 12. , butn't have an exact date we heard movement over the weekend of the eu, so brussels could maybe get to resume a

helping hand in the average backstop, making sure people understand it is temporary, and at the same time, the more hardliners may come around and support her deal. we don't know if she has them laugh, the -- math, arithmetic. one person says it is not the eternal revenue service, it is the internal revenue service. thank you for that correction. there is first word news. >> the u.s. and china closing in on a trade deal that could end tariffs. an agreement depends on beijing phang through on several pledges , buying more american products and better protection of intellectual property rights. to lower tariffs on u.s. farm products and cars. china will use a $90 billion tax cut to help boost the economy. china will cut the value added tax the covers the manufacturing

sector by 3%. the move would help corporate profits when the economy is under pressure from the u.s. trade standoff and the domestic debt cleanup. hisident trump's renewing assault on the federal reserve and chairman jerome powell in a speech to conservatives. the president criticize jerome powell as someone who likes raising interest rates and a strong dollar. there is speculation the president could use the fed as a scapegoat if his trade and tax policy don't succeed. prime minister theresa may is accused of trying to buy support for her brexit plan, promising a $2.1 billion boost. her opponent say she is offering lure labour party members. 23 people were killed when a turn it a struck a world community inrural

alabama, destroying houses and mobile homes. it raided a level at three, meaning winds could be 206 miles an hour. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you. data check, equities, bonds, currencies, commodities. i am watching yen, mr. draghi this week. futures up 55, bull market levels. we will see the vix. the euro not doing much. the vix under 14. the yen near, and 1.12, weaker over the past couple of days. francine: i'm happy you're looking at yen. i'm looking at renminbi, yuan. it has to do with the trade concerns.

markets seem to think there will be some deal. the market will focus on both superpowers for china's national people's congress coming yielding possible policy clues, and the latest read on the u.s. economy. china is making efforts to curb the fx of a slowing economy and the u.s. trade war. it will cut the value added tax that covers the manufacturing sector by 3%, a $90 billion tax cut. joining us now is our chief agent economics correspondent from hong kong. first, thank you for joining us. are we going to see a deal between the u.s. and china on trade, and what will it look like? >> the first way of looking at it is you have to consider how far we have come in a short time. a few months ago, the china and the u.s. seem to be digging

deeper into a protracted trade war. here we are and it looks like both sides are closing in on a deal. we don't have the specifics, but it will be china buying more goods, and of course they would offering more protections for intellectual property. whether this can be enforced and china can take the steps needed remains to be seen. one final point is china want something in return. they want the tariffs implemented last year to be taken back off in return for their own efforts in the trade war. we are still waiting on the details. francine: talk to me about the tax cuts. if they go ahead with this 3% on vat does it show that policymakers are worried about slowing in china's economy and they will do everything they can to support it? >> it speaks to this broader

point, they have shifted to a pro-growth side of things in china. they are concerned about the slowdown in manufacturing, both gauges are in negative territory. this tax cut would lift them ineffectually -- manufacturing sector. is the don't seem to be kitchen sink sort of stimulus we have had in previous cycles. we will get more details tomorrow. the report tomorrow will set the givefor the year ahead and us a hand whether they are willing to go out for a much bigger stimulus, or they will continue with the nuanced approach. tom: thank you so much. he mentions the people's congress, which will be most interesting at the end of this week. long, blackfar too ands global allocation team

brings a synthesis of black rocks strategy each and every day. now ase you doing right you recalibrate? >> we are trimming a bit. this has been extraordinary rally. we have seen the vix go down nine weeks in a row, u.s. equities rally 20% off the bottom, and not much of a change in the underlying economic situation. the economy is still decelerating. we are trimming our equities holdings. tom: we just heard about china and the enthusiasm of emerging markets. do i go to emerging markets, or is that a consensus call you want to walk away from? >> it is not one homogenous market. china is emerging market. there are advantages in consumption. tom: give me an idea. >> we see in china places that

are geared towards domestic consumption, chinese internet retail, chinese liquor manufacturers, so there are places in china where we would like to be that are less dependent on the trade war and more dependent on the long-term growth in china's consumption. francine: are you saying they will consume less alcohol or luxury products from abroad to focus on domestic ones, and that is why you like domestic players? >> these names are geared towards domestic consumption. we continue to see growth in the middle class in china, and finally they are cheap. we saw chinese names get down to single digit p/e ratio's last year, so a lot of this is not just a secular theme, but the valuations that these names are traded. we are looking for to discussions through the hour with the gentleman from

blackrock. the president off the plane, a little shot i, no golf to be had. here is the president on chairman powell. >> i want a strong dollar. but i won a dollar that will be great for our country, not a dollar so strong that it is prohibitive for us to be dealing with other nations and taking their business. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. resigning ted baker over allegations of misconduct in the workplace. he denies the claims. shares plunged after its profit would be hurt by adverse

currency movements and other factors. a key milestone for spacex and nasa. docking withaft the international space station. it paves the way for a manned mission planned for the summer. this mission included a dummy inside the council. the company is competing with boeing for business with nasa. that is the bloomberg business flash. tom: thank you. much to talk about, and part of that is keeping up with washington. let's begin monday with the president of the u.s. a gentleman that likes a very strong dollar, but i want a dollar that will be great for our country, not eight islars so strong that it prohibitive for us to be dealing with other nations and taking their business. north korea has an incredible, brilliant economic future if they make a deal, but they don't

have any future if they have nuclear weapons. it is really a bad thing for them. again, the relationship seems to be strong, and that is important especially dealing with this kind of situation. collusion with russia, the collusion delusion illusion. we will go into his finances, check his deals -- these people are sick. president.urs of the joining us in washington after reporting in hanoi, kevin cirilli. thank you for what you did on bloomberg radio with your episode nationwide at 5:00 p.m. i thought it drove the conversation forward. ,evin cirilli, the backstory the new revolt within the democratic party. let me bring up the read of the day. this is fabulous. i will call him the liberal.

new democrats from districts in the past would have elected the gop with moderate aggressive inclinations, many important policy debates are being carried out almost entirely inside the democratic party. they need to figure out how to make genuine progress on the issues that rightly engage their parties left in ways that allow their new constituency of virtual liberal republicans to join the effort. let's start with first principles. who was the president speaking to this weekend? kevin: his base, but 70,000 voters who voted for president obama, then switched for him. i have covered countless trump speeches. .his is not a political cliché when i touched down in washington, d.c. and was looking at twitter as the speech was was the start of the 2020 presidential campaign for president trump. he bulldozed through every allegation against him and

essentially said, game on, michael cohen, game on, democrats. tom: game on, ben stiller. ,ithin the new democratic party which some would say is the old democratic party, what is the tension between speaker pelosi and others? kevin: less between speaker pelosi and congressman hoyer, then tension between alexander --sta are terraces i read speaker pelosi's rolling stone interview last month. she will have to navigate this ship of in peach mccall's, particularly -- impeachment calls, particularly as the miller investigation wraps up and others like michael cohen come to the forefront. when people learned last week as they can capture the attention of the nation and drive the

conversation forward by having those types of hearings. there will be more of them, whether members of the first family or people like mr. weisel berg in terms of the organization. -- trump organization. this is far from over. what do we know about the mueller investigation? when will we see the reporting's? will they be made public? kevin: in terms of whether a not it will wrap up, there are a lot of reports to suggest this is nearing the end. the only person who knows is bob mueller. ,hether it will be made public a poll released over the weekend of americans 66% believe the mueller investigation ought to be made public. what the administration has done is suggest that only a summary of the report the released to congress.

report released by the ag's office is different than the entirety of the report. expect a fight they are. tom: thank you so much. our guest has been more than patient. we will come back with him of blackrock. david westin in conversation with james lankford, the senator from oklahoma. look for that in the 12:00 hour. please stay with us from london, new york, this is bloomberg. ♪

in: "bloomberg surveillance" new york. with us is our guest from blackrock. it is called the efficient frontier. ,e are all trying to find it but can we find it in the character of this volatility, stocks, bonds, coupon, use of cash, blah blah blah, can we find the efficient frontier? >> you can come up it doesn't remain static. when issue coming back is will bonds provide a hedge. you think about the world -- tom: that is the theory. >> it worked well in the fourth quarter. it didn't work at all last february. will we see that negative correlation between stocks and bonds reemerge? tom: how do you allocate something like banks that did not participate last year?

right now you have momentum in this and this. what do you have banks as a lead brick? underweight banks outside the u.s. we believe we are in the latter part of the cycle and will see the curve over time contract, eventually invert. this is not the best environment for banks. francine: what does that mean? attractiveare not and will become attractive and we will see consolidation? >> we will see consolidation in the small and mid-cap sector. it's not that things are not attractive. we have names we like, but we look at the financial sector late in the cycle and want to be judicious where we have cyclical risks in the portfolio. energy, industrials, where we see better valuations and

opportunities than a banking sector dependent on the direction of rates and the shape of the curve. francine: what kind of energy stocks? energy going back to saudi aramco, people are saying there is no appetite from the markets because there is a bleak that 10 years from now we will have made the transition to renewables, two electric vehicles? >> we think that transition will happen slower than over a 10-year horizon, but that is discounted in the price. energy stocks in the u.s. in december were trading up the largest discount to the s&p 500 since 1995. people are aware of the shift towards clean energy and are concerned about stranded assets, but a lot of those concerns are reflected in the price. particular integrated countries in europe are in next resource of carry in a low-rate environment. or valuet a value trap

opportunity to look at hydrocarbons? >> it is a value opportunity. if you look at a two-three-year horizon, oil is not going down to zero, $25. it probably remains in these range and these companies are extremely profitable. tom: where is another opportunity? 20% down and up we go. where is another opportunity outside of energy? >> asia is where we are overweight. japan is trading at half the price to book to the u.s. improving corporate governance, profitability, only central bank in the world still leaning heavily towards easing. francine: what does that mean for currencies? is there a currency you find attractive at the moment? do you worry about a sharp

pricing in treasuries or german bunds? >> most of the dollar overweight is against the euro. we are more concerned about european growth and don't see a lot of opportunity for the ecb to tighten anytime soon. rates have rates, remained fairly steady through this rally. we have had a huge rally off the lows. investors are seeing are starting to change their assumption that when the fed ends the cycle, it will be lower than they thought six months ago. francine: what is the common understanding about china? this goes back to the calls you made, regarding local players. what happens to renminbi? >> you have seen a stable chinese currency. this is part of the trade conversation. our view on chinese equities is not predicated on the currencies , it is predicated on the

domestic economy. many of these names are extremely cheap. .om: we will come back we have a chart to look at here in a bit. coming up, this is timely. at they ringing the bell new york stock exchange with an important anniversary, but the future of wall street, and we must speak to john taft on all those republicans migrating to the democratic fold. it is a snowy day. you need to read. this is bloomberg. ♪

francine: this is "bloomberg surveillance." overlooking st. paul's. -- after 10at days

days of great weather, miserable. provides prepared to further guarantees that the irish backstop is temporary. the sunday times reporting progress and conservatives have put down three tests to get their support. joining us is our bloomberg brexit star. emma, you've been following this. does theresa may have more support than she did three weeks ago? emma: the hard-core brexit supporters are slightly softening or at least opening the door to how they can be persuaded to back her deal. what has changed is that when theresa may took the option of no deal off the table, she forced the brexiters to appear at the prospect of losing brexit altogether. eu -- is about can the

the eu is not going to offer a massive concession, but can they offer something that the pro-brexit hardliners can at least latch onto as a big enough reassert -- reassert -- reassurance that this is a brexit. francine: theresa may will put the vote to parliament by march 12. what happens if it does not get through? emma: then the following day parliament will be asked to vote on whether it wants to pursue a no deal brexit. everything suggest that at that point parliament would say no and the following day parliament would be asked to vote on whether it wants to extend the brexit deadline of march 29. everything suggests they will say yes. francine: thank you so much. our bloomberg editor. let's get straight to bloomberg first word news. upiana: the u.s. what end

lifting tariffs as part of a deal with china. trump administration still needs time to follow through on key issues. one is the amount of american goods it buys. another is to better protect intellectual property rights. the u.s. and south korea are making another attempt to ease tensions with north korea. theirave agreed to end biggest annual joint military exercises. coming just days after the collapse of talks between president trump and kim jong-un. north korea has repeatedly criticized the war games. now to capitol hill. the senate looks like it has enough votes to block the president's declaration of a national emergency on the border with mexico. rand paul says he will vote to reject the president's move. that is expected to lead to the president's first veto. neither house appears to have the votes to override it. emmanuel macron says it is time

french relations to return to normal. they have been fighting over the eu budget rules and the high-speed rail. italy's leader went to france to meet with members of the arvest protest movement. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. tom: thank you so much. breaking news from eli lilly. this is a big deal in d issue. the price of drugs. we talked everybody in every party and they will tell you drug prices is the biggest deal going. lily, who has led in insulin research talks about a new lower price version. mr. grassley would like to hear that as well. my book of the summer, it is three pillars, a spectacular

effort. already in march i contain with great certitude, three pillars will be my book of the summer. years ago my book of the summer was by jay taft, who talked about global wall street. what was it like to have john vogel put a stamp of approval on your active world? jay: it was his lifelong engagement with issues of ethics and finance that true him to the book, which was about stewardship, which should be the core principle of the financial system. i the privilege, after he wrote the forward, which was in some ways better than the book, i had the privilege of going to his office and spending an afternoon with him. it was one of the honors of my life. tom: to stand up on the podium at the new york stock exchange, it is really cool.

the company i work for is celebrating its 100th anniversary of the negative is flying into ring the bell and commemorate that. it speaks to the resilience of what today has become a unique business model. it is an independent, privately held, employee owned business that nonetheless still has the scale to invest in all of its businesses and stay competitive. that is what wall street used to be about. partnerships were the partners came to work every day and put their money on the line. that appeals to a lot of the best people in the industry. francine: john, congratulations on your anniversary. how do you see your company changing over the next 10 years as we see more automation, more robotics, and the future of finance being in doubt?

john: i would use the word evolution more than change. like any financial services industry, baird faces probably the most disruptive set of changes and development in the 40 years i have been in finance. the thing about baird is all 3500 employees who work their .ove the firm the way it is our challenge is not to stay still. there is that we can stay still and remain competitive. our challenge is to find ways to invest and evolve that did not change the character of the firm. the character of the firm has always been about the kinds of ,alues i wrote about in my book which is putting client interests first. treating customers humanely and caring about the communities in which they live and work. our challenge is how do we invest and grow in a way that makes us a better version of what we already are. there is a laundry list of things we need to do. francine: how do clients want

you to change? -- the amazonwant phenomenon is hitting financial services industries. tom: is bear the same as black rock, lower fees? john: clients and customers want lower fees and lower price points. the more seamlessly like. even though we have this the regulatory environment in washington, the cost and complexity of complying with regulation up every year. tom: i want to get a politics. hickenlooper from colorado throws his hat into the ring. dionne writes about the cap republicans. they -- about the taft

republicans. you and your family have lived this before. if moderate and liberal republicans moved to the democratic party, is it for good or do they migrate back down the road? john: speaking as a generic republican with six generations are republicans in my family -- tom: are you going to vote for hickenlooper? john: you're not going to draw me into one of these cage matches. i am waiting for the republican party to get back to the kind of conservative principles -- when i is growing up republicans were the adults in the room. they cared about constitutional principles. fiscall solvents -- solvency. i still think that is in our dna. i do not know how long -- how far back the tafts.

john: 1834. tom: you enjoyed the collapse of the weight party -- of the whigh party. is the republican party going the way of the whigs? john: i think the republican party is here to stay. my wing, the moderate wing, the rockefeller republicans are not in the ascendant. i believe one day we will be. there are so many serious challenges facing the country that republican values can speak to. and ross, at blacklock you have to fold this political debate into the investment. >> you do and you have to think about how that will affect the economy. you raise an excellent point. i would say this is not just an

american phenomenon. we have seen this realignment in politics through the developed world. in asia, in europe, it does mean that the right/left divide is no longer -- tom: francine, this is important. francine: let me jump in. we have headlines from the spokesperson of theresa may, currently briefing reporters. will wante u.k. mp's time to scrutinize changes to the brexit deal and they are still working to do changes to the brexit backstop. let me recap everything. we understand brexit hardliners ,ppeared to soften a little bit their opposition to theresa may's deal, and theresa may is now focusing on getting labor mps on her side while negotiating with russell's to

have a better understanding of what concessions they could give her. we'll be back on brexit and talk more about globalization's. john taft of baird stays with us. this is bloomberg. ♪

london.ncine lacqua in i am tom keene in new york. here with tom -- with john taft of baird and ross cost rich of -- and ross cost rich -- and russ koesterich is with us. slope matters. the great disinflation. , we have rolled over with a vengeance.

what is the character of the rollover in inflation expectations? russ: it is the fact that despite all of the concerns, mass inflation never happened. what has happened is a slow grind down of inflation and inflation volatility and it looks like that is a function of secular factors, demographics, technology, the change in the business model. it is not clear why that would stop. important, iso mentioned in my book of the summer. in the great midwest we have an opioid crisis. we have 10 vietnam's. is disinflation a slowdown due to a anemic economic growth into many parts of america? the important thing is this chart gives the fed some cover. the biggest policy mistake that could be made would be premature

monetary tightening in the face of the global slowdown in growth that is affecting the u.s. economy. francine: russ, do you agree with that? has the fed lost the window to hike? russ: i do not think they have lost the window but i agree they can take their time. wage growth is ticking up a bit but it is modest. i agree there is nothing pressuring the fed to act. a lot of what about people saying they need those tools that in the case of the downturn, if they have used up a , they do notols have anything to combat the next recession with. russ: in previous cycles the fed cuts 300 basis points. it is not obvious they would get

anywhere near that level. the latitude to ease monetary conditions when the next recession hits will be limited. that is compounded by the fact that given recent deficits you will not have the fiscal resources. the next recession maybe not that deep but we may be slow to come out of it given the typical tools may not be available. francine: when do you think the next recession will hit? john: we think we are more in the middle innings of this economic cycle than toward the end of the game. we think there's a lot of runway left. it is beingile affected by global slowdown in growth has never followed into a recession. , and ourways led economy is still strong. we have never gone into a recession with interest rates below 2%. we are still close to zero. we think there is still a ways to go before the recession that

would affect the markets hits. tom: i want to know if there will be a change in the use of cash. do we still see buybacks and dividend increases? russ: i think you're going to see buybacks and dividend increases. yield is still rare commodity. something investors value. tom: baird's out there trumpeting blue-chip, blue-chip. do you agree? john: on buybacks i think you had an anomaly in the amount of buyback activity last year. $700 billion, a third of which was used for buybacks. what is wrong with buybacks? nothing is wrong with buybacks. you will see them but not the same level as last year. tom: this has been wonderful. russ koesterich from lack rock and john taft with us from baird. up, liz young,g

cny melon investment manager. we talk about emerging markets in the price of oil. look for that interview at 8:00 in new york. this is bloomberg. ♪

viviana: breaking business news on the bloomberg. announcing it will introduce a lower-priced version of an insulin drug. a single vial is priced at about $137. the new price will be 50% lower than the current list price. this announcement coming at a time when both political parties are turning the spotlight on skyrocketing drug prices. benefit -- and can also be a defining issue for the 2020 presidential election. the and china business partners are discussing -- are watching talks between the countries. we spoke with the countries by straight minister. >> the situation and how it evolves is paramount for us. not just because of the

thelopment of trade but prospect of global growth and therefore trade. ,t effects the commodity prices the price of the different currencies, oil. many macro factors are relevant in connection with this situation and we are following it closely. elon musk says tesla will unveil its model y crossover in less than three weeks. that comes at a time where there are questions about the electric carmakers closures. aree fourths of the model y common with the model three. that is your bloomberg business flash. tom: is spacex and it is a

launch and it was a successful launch. what was so important -- unmanned that presumed manned flight to go up and meet with the space station. our bloomberg technology analyst matthew blocks joins us. when do we see men in orbit again? from u.s. soil, possibly as soon as july. the spacex has to successfully returned to earth, which is planned for friday and after that they will do another test flight in june. if that goes well they will be sending astronauts in july and if that goes well, they will be officially in the launch schedule. not far away. memory of the risks include what we saw the latest isie, "first man," which

where armstrong had attached units in wild spinning chaos. a rocket engine was stuck open. there is a set of risks out there. how you manage the risks of her private mission versus the risks nasa has run for decades? matthew: by being incredibly thorough with technical development and with the testing. what we saw on what we are seeing this week is very much a part of that and also the fact they split the contract between spacex and boeing helps to spread the risk and create competition to make sure the technical examples are there. learning from past mistakes and being certain you are not taking risks with people's lives when you put them on top of a rocket. francine: is quite incredible.

we watched it at home as a family on the internet. because it is the first off the pad, how much competition does spacex have? it is not because it is the first off the pad that it will win at this. contractnasa split the between spacex and boeing intentionally to ensure there was not a monopoly. .oeing is far behind if their testing goes to plan, they are probably a month behind. in april we will see them doing a similar launch. probably by august they will be hoping to put their own test astronaut up into space. i think it will continue. is the space tourism or is it for government astronauts? matthew: at the moment it is for government astronauts but both boeing and spacex see an

opportunity in space tourism, following on things like the virgin galactic program. that is down the line. tom: thank you so much. on spacex. we have much more coming up. the backdrop is weaker yen. somewhat near a 1.12. higher yields. futures up seven right now. we will drive forward the conversation on bloomberg radio. ross cost rich -- russ koest will join blackrock us and jonathan ferro will explain why liverpool cannot score. stay with us. this is bloomberg. ♪

>> i want a strong dollar, but i

want to dollar that will be great for our country. alix: president trump tries to talk down the dollar and blame a certain gentleman for liking quantitative tightening. and a deal insight. china and the u.s. hammer out specifics of a trade deal. we speak to adam posen of the peterson institute. and theresa may accused of trying to buy brexit. theresa may promises money for poor areas of the country. david: welcome to bloomberg daybreak. i'm david westin with alix steel in a very snowy new york. alix: those streets are totally clear and i want to know why my kid not go to school. david: you are in the city. had two snow days my entire life when i grew up in new york city. david: you resent it. alix: