francine: ecb may cut forecasts for inflation again, while fed officials say they can't afford to be patient. huawei sues the u.s. government for banning the equipment, saying america should not plate judge, jury, and executioner. we are live at the black walk symposium will speak exclusively to our guests. ♪ francine: good morning, everyone. good afternoon if you are watching from asia. welcome to "bloomberg: surveillance"

littlexx 600 is down, a bit of pressure as investors try to digest some of the potential cuts to forecasts by the ecb. euro-dollar will be the one to move a little later than we hear from the ecb and the pound, as negotiations are ongoing. you can see the pound at 1.3167. coming up, we speak to the vice-chairman of a black rock. we talk markets, central banks, and brexit, let's get straight to bloomberg first word news. huawei is suing the u.s. government, as you mentioned. the action is aimed at a law that blocks government agency from using their equipment. the company argues it is unconstitutional to single out a person or group without a fair trial. the chief legal counsel says china has never asked the company to spy. huawei is a business.

we have never received any request from any government, including the chinese government, to install any backdoors for intelligence. to do that would be committing suicide for a business. in the future, we will also refuse to take such requests the at from the chinese government or any government in the world. economy, in its latest major book report, has the fed saying growth was slight to moderate with the winter weather holding back consumer spending. they say the central bank can still afford to be patient. >> inflationary risks just don't seem to be out there right now at all. somewhat thating we don't need to tighten monetary policy as much as i previously thought. >> european officials are reportedly pessimistic about the chances of a breakthrough.

understands they are increasingly concerned that whatever they offer won't be enough to get the deal through parliament. the eu is reluctant to shift the position without more certainty it would help get the agreement over the line. u.s. regulators are ready to scrap proposals for providing volcker rule restrictions. this comes after a provision drew fire from wall street lobbyist. regulators initially called for new standards for transactions that should be banned and are backing off after bankers complained. 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, back to you in london. francine: thank you so much. growth concerns mount. viewed has downgraded its as the government shutdown took its toll. set to cutthe ecb is

economic forecasts by enough to justify in other round of bank loans. the latest projections show extensive downgrades for inflation and growth. let's focus in on europe and the future of the banking sector. joining us now for an excuse of interview from the black rock wealth symposium is philipp hildebrand, vice chairman of blackrock some of the world's largest asset manager. i want to talk to about blackrock and about world growth in a second. first, we focus on central banks. how has the outlook for central banks changed? are they turning dovish? philipp: good morning, great to be here. we are in this latest cycle phase where we have a synchronized slowdown there they are seeing this and responding, initially i being cautious in terms of any further normalization, or indeed in the case of europe, the beginning of normalization.

the first stage of the response, and typically what they will do is watch the date and see how it involves and be careful, deliberate, and cautious. francine: is there a chance they missed the window to normalize and we see a downturn in the world economy? philipp: that is my biggest concern at the moment. they're still a good chance we have the slowdown now. it is late cycle, everything gets more complicated. it does not mean we cannot have a soft landing. the chances of a recession are very small this year, even into 2020. the challenge is to avoid a crisis, a policy mistake, or something else that goes wrong but then puts us in a place of heightened volatility, given of limited space that we haven't policy both on the central banking side, but frankly on the fiscal side. francine: given the current

economy, mr. hildebrand, what does a policy mistake look like? imminentwell, the most one would be a hard brexit. that is the obvious one. longer-term would be the inability to solve or at least reduce the tension around the trade discussions between the united states and china. probably the most important one longer-term is how to manage what appears to be a much deeper confrontationp or between the united states and china. to me, that is structurally the biggest range we face and will require statesmen to step up and manage the tension. we know we have a petition and tension, the key is to avoid an outright confrontation between the united states and china.

francine: do you see any signs there is an escalation? what we are hearing from both sides is that the u.s. and china wants to strike a deal what we do not know is whether that deal lasts more than three months. your thoughts? philipp: exactly. if we focus uniquely on the trade deficit which seems to be the dominant focus of the president the i am rather optimistic something can be done. if you look at trade in general, i will say there is a good chance we will find at least some kind of arrangement that last for some time. the more difficult issue is the underlying tension around who is going to have supremacy in this digital age around technology. that is the one that will be much more challenging to manage going forward, i suspect. francine: on brexit, do you believe the markets are complacent about the possibility of a no deal break -- brexit?

philipp: the way i would put this as the representative of a firm, many financial firms, but also corporate firms, it is extraordinary that we are a couple of weeks away from this legal date, in a sense, and you still have no clarity whatsoever about what is going to happen. i would assume that evil a cabinet member today probably cannot -- even a cabinet member today cannot tell you with much certainty what will happen. this is a shocking development, in a way, not a surprise. but when you consider the amount of money that has been spent by the financial and corporate sector to prepare for something we still don't know how does going to play out, that is a problem. given the uncertainty, there's always a risk that things go wrong. i suspect in the end and i hope we won't see a hard brexit, and

that leaves a risk factor that weighs on market sentiment, no doubt about that. francine: is the biggest risk and that you see to the u.k. economy, is it too banks that need to move to make sure they comply with regulation ahead of the march 29 deadline? was it really the pound and possible volatility? my sense is very simple, francine. united kingdom is simply not ready for a hard exit -- brexit. that is on every level banks are financial services, in terms of medical supplies, logistics, transport. farming policy, you name it. the reality is that the country is not ready for a hard brexit and we can all hope that this outcome can indeed be avoided. but it is the legal default. people forget this.

if nothing else happens, we end up in a hard brexit. that is the legal default option and that is deeply worrying. francine: who do you think is better at predicting crises or severe downturns? the markets are economists? and what are they -- or economists? and what are they getting wrong? philipp: both markets and economists, as well as policymakers, frankly, are poor at predicting crisis particularly the next. we don't knowuch where it will come from, we know we must avoid a hard brexit as the next and most imminent risk to his fragile economy. the key point is that we are in this late cycle phase, and this synchronized global slowdown. it is not to say it is not something to worry a great deal about them a but in this environment we want to avoid in

-- and unnecessary policy mistake. we will be in a very exposed position once that happens. francine: philipp hildebrand, thanks so much. will go back and talk more about banks and some sustainable developments. stay with "bloomberg: surveillance.". we will continue our conversation with philipp hildebrand, and later on, we have an exclusive interview with larry fink. don't miss that interview at 11:30 a.m. london time. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg: surveillance." i am francine lacqua here in london. let's turn to the future of finance. it has been a strong start of the year for actively managed funds. according to goldman sachs, over half of active funds have beaten the benchmark. if this continues, it would be the best year in a decade. -- is this the beginning of a long-term trend? let's get back to philipp hildebrand, vice-chairman of blackrock. what are we going to see in 2019? more volatility or more of a shift tactic management -- to active management? philipp: i think it is a year where we will see a fair amount of volatility marked by uncertain, because we are in a macro global slowdown backdrop. you should expect a year that is difficult and challenging in every way for policymakers, for

investors, and client. this is not an easy year where beta carries the day, it is a year you have to really work to create a decent return. is this because of geopolitics? because markets are going through shifts? what will be the biggest shift this year? is it monetary policy? fundamentally, it is the question of whether we can get a soft landing in terms , or whether cycle we end up in a situation where we get into a recession environment at some point in one of the major economies. i think that is the first big question, and if you look at the different regions, the big question and driving force will be how much of a slowdown are we going to see? to what extent can china stabilize its growth outlook?

china today is by far the most important growth contributor to the world. look at the last five years, china has accounted for one third of global growth whereas the u.s. has only been 1/5 and is going to go to 1/10 going forward. so china is a key issue in terms of global risk. francine: good governance is a cup concern for blackrock as a powerful shareholder. has your view on the european banking sector changed at all with news of possible money-laundering? philipp: look, this is a very difficult topic. is thati would frame it european banking is undergoing a very fundamental transition and has been for some years. you can see this in price-to-book ratios, you can see this in total return. of ae is in the midst painful, painful transition that will no longer take a couple

years, maybe several years before it can reemerge. this is partly a function of the prices, partly flawed business a function of the macro environment. so i think we have brace ourselves for difficult transitions. we have seen this year in switzerland around the bank secrecy tax that too was a painful adjustment, but today, the swiss banks have largely succeeded. come throughly this, but i would expected to entail significant changes in the way banks operate, and their business models, and it will take time. francine: talk to me a little bit about e-cigs -- esg's. how can you build sustainability without funding things that are not sustainable? how money questions of loopholes do need to make sure you close to investing the right stuff?

philipp: that is a very good question, and you are right to point to it. fundamentally, this is a research problem. the good news is that compared to 10 or 15 years ago, today we have analytical tools, big data. there is an enormous amount of academic research going into this, and it is beginning to reveal a promising story. namely, that you don't have to trade value for value. you don't lose performance, you don't have to sacrifice performance of incorporating sustainability factors into your investment offering. and that is a really big change. traditionally,-- there was a sense that you wanted to do this because you believed it and it reflected your values. what the research is empirically beginning to show, and we have just published a paper on this that it is no

longer the case, certainly on a risk-adjusted basis. convincewill significant demand here in europe. francine: philipp hildebrand, thank you for your time, vice-chairman of blackrock. we'll have plenty more throughout the day. coming up, we will talk to the come party chief executive about the global drinks industry. our interview next. this is bloomberg. ♪

francine: this is "bloomberg: surveillance." let's turn to the global drinks maker campari. the company is benefiting from the revival of cocktails. but there is plenty of room for growth, particularly in asia. bloomberg intelligence says the region only makes up around 2.5% of their sales. joining us now is the chief executive. great to have you on the program aired -- program. when you look at the potential in emerging markets and china is that where you want to come in? the focus on the u.s. and europe? bob: absolutely, our core markets are the u.s. and europe. it is fair to say our weakness in a -- is asia. that is because we have not invested or focused much on asia, because it was a high and

cope back or single malt markets -- singlest was huge malt markets. the rest was huge local brands. but with consumers getting to travel and experiment with mythology and cocktails abroad and they're there bringing the habit back home. that is a great opportunity for us. we have the number two cocktails in the world, the negron he -- n egroni. and i see a lot of young chinese drinking our drinks in milan. francine: are you expecting consolidation in your industry? we saw massive consolidation and now it is in pause. bob: a little bit of a lull, lately. but if you look at the fundamentals of the industry, if you compare spirits to beer, for instance, we are incredibly fragmented. the top 15 players account for 15-20% of the volume, more in value of obviously.

over time, something is bound to happen. francine: i don't know if people are holding back because of trade concerns, but what do you worry about? is it supply chain, trade? bob: macroeconomics. the world has become a very volatile place. we saw what happened in latin america, particularly in argentina. we had to react to it and became very stringent on credit. that impacted us significantly in q4, slow down by 200 basis points. but soviet, we're not going to take any risks. francine: where do you see the biggest opportunity? is it europe? if you look at the possibility of a slowdown, is there a direct correlation with how rich i feel and how much i spend on drinks? bob: more a question of lifestyle. people are getting into cocktails and it becomes a destination. cocktails are moving into meal occasions.

even in italy, we're seeing people having pizza or whatever with spritzer's. i see a lot of opportunity out there. francine: i'm sure a lot of people watching us are guilty as charged. , chief so much, bob officer of the campari group. a brexit breakthrough is unlikely, officials are reportedly pessimistic about any breakthrough this week. we drill down on possible outcomes. i think i saw some pound movement over the last couple of days. but that vote, theresa may going back to parliament with her beal -- deal by march 12. brexit is next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." where are the best places for women to work?

new zealand is among the top five. may be suing the u.s. government, but it also may be straying into the world of beverages. blackstone group expects to reach around $20 billion when it completes the first phase of capital raising for its flagship funds. mitsubishi's expansion in the debt market hits a roadblock. deutsche bank employees are facing deep cuts to their bonuses. let's get straight to the bloomberg first word news. wei suited the u.s. government. ziplocs u.s. agencies from using the tech giant's equipment. the chief legal officer saying

the company has never been asked to spy for china. huawei is a business. we have never received any request from any government to extort any backdoors for intelligence. to do that would be committing suicide for a business. in the future, we will also refuse to take such a request, be it from the chinese government or any government in the world. filed a bill browder complaint against swedbank. these allegations follow separate claims that ties swedbank to almost $6 billion in suspicious transactions. today, paul manafort will be sentenced for tax and bank fraud. he is 69 and could get up to 20 years in prison. observers believe a federal judge in virginia will give him less than that.

his lawyers say he was unfairly snared and robert mueller's investigation. please projections showing extensive downgrades for inflation and growth in 2019 despite the revisions of full announcement on full loans may not come. the decision comes at 12:45 u.k. time today. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: the clock is ticking down for theresa may and things still seem to be going her way. are once again stiffening their resolve. tories are saying she should take the eu out of -- britain out of the eu without a deal.

joining us this morning is the director of the national institute of economic and social research and emma ross thomas. onwe have a clear picture how many people want a notable brexit and how many what a soft brexit and how many what a referendum? no brexit was about 60. over the last few days, the brexit hardliners have decided that the threat of an extension isn't that bad. there is a momentum about this. the same is true on the labour side. 's have been talking to mp who have rebelled. we sort of thought the question

was how many labour mp's might back her deal. momentum is away from the deal, why would you and your career consequences of rebellion in order to reduce the scope of her defeat? ur both sides, we have labo increasingly optimistic that they won't face a rebellion. on the other hand, the hardliners thinking that they can push her. it is a curious idea, but the hardliners telling me that she .hould ignore parliament next week after the deal if it is rejected next week, what happens is we have a vote on the or a veto on whether the u.k. should leave with no deal,

and then the following data will be a vote on extension. the idea last week was that that fear of extension would force the brexit hardliners into line. in brussels, the mood was very dark last night. my colleague talking to people last night. the defense was willing to offer something at the last minute, but they are very reluctant to offer something if it won't work anyway. francine: where do you see brexit going? >> very good question. of the problems is that politicians don't necessarily tell you what they think. there is strategic play across the parties. data seems to suggest the most likely outcome will be a short .elay

we will not be leaving without a deal and there will not be another referendum. francine: the default is no deal. jagjit: there is a significant probability of that. did put that around 13% in terms of the outcomes. any of these things may happen. oft is driving the level uncertainty that businesses and individuals are facing at the moment. the bottom line is, in the world in which politicians seem to be unwilling to make online, there's a tremendous amount of uncertainty. no one can really pay for past. -- path. nobody knows exactly what is going to happen. we haddle of next week, the idea of what will happen with the economy. francine: do we have any kind of

inside information on what the prime minister's thinking is? emma: march 12 does seem to dictate -- does seem to be the date. it would be very difficult for her to postpone it again. if you want to look desperate and optimistic spin on things, -- if youargue if want an optimistic spin on things, you could imagine a scenario where parliament moves towards a softer brexit. you mentioned a second referendum. we will be seeking amendments next week on a second referendum, either a straight up thend referendum or

problems of the amendment which says we will support your deal if you put this deal to a public vote. francine: what does it mean for the economy? jagjit: people have to make plans. one way of handling it is assuming a note to brexit, which is the worst outcome. you will end up with people forming plans that will lead to the economy deteriorating quite rapidly. there are things that could be put in place announced by the chancellor next week potentially bringing forward cuts or investment allowances so that more damaging effects can be limited.

that is really where business sits. not knowing what is going to happen and waiting for some portity as to what sup it can be given. francine: is the government ready for all scenarios? emma: no. earlier this week said no deal brexit was not as terrible as it looked a few months ago. in the area of financial -- these two airplanes not being able to take off. that has also been mitigated. the government said they will weigh in most goods imports from the continent. there is no sign at all on the eu said they would reciprocate. one would find it unlikely that they would. even if you have trucks allowed to come in one way, he would

still have the backlog going the other way. among the disaster scenarios we have looked at, while there will be a derivatives crash, certainly with things like food companies are stockpiling but they are finite. it was carney the other day that said for small companies -- francine: it is a nightmare. coming up, huawei hits back. the chinese tech government sues the u.s. government for borrowing its equipment. we are from the chief officer. later, we sit down with an exclusive interview for black rock's chief executive, larry fink. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash. viviana: $20 billion is how much blackstone expects to reach when it completes the first phase of capital raising for its flagship fund. the first has yet to set a limit for the size, of the company telling investors the first vote may come in march or april. it is benefiting as the private equity sector outperformed other asset classes and hedge funds. deutsche bank reportedly made the cuts to 2019 bonuses. the overall poll has been cut to less than 2 billion euros. it is making selected payo

uts in an attempt to keep certain -- alan howard is the sole manager of a hedge fund. that is the bloomberg business flash. francine: thank you so much. let's focus back on european banking in the future of finance. deceptive make it a boost from a new round of long-term loans that the ecb could announce today. the money laundering scandal that started with danske bank is spreading. joining us now for an exquisite interview from the black work -- blackrock wealth symposium is nick. great to have you on the program. thank you for giving us a little bit of a busy schedule. you have been involved in money laundering issues.

can you update us on what you guys have found out? what we try to say, we did in press releases. if we have news to tell, you saw $75 million. we do our utmost at the moment to apply to all regulations. -- theroblem going on only thing i have to say about it at the moment. francine: do clients turning away from ing because of this? nick: not at all. i think the impact on ing in germany is limited. francine: give me a sense of the german banking landscape. for the moment, it is quite fragmented.

almost a in and day out we hear about possible consolidation. what part could ing be in all of this? francine: the german market is very fragmented. there are more banks in germany did supermarkets. you see it already a lot of consolidation going on. about 100 banks disappear to a number of -- , we had a very good year last year. of course we keep our eyes open all the time. if there is news to tell, we will tell. francine: d.c. buying someone else, a domestic player -- do you see buying someone else, a domestic player to prove your integration skills? nick: what i see more is maybe not so much buying scale.

if you see the whole transformation in the banking sector where we started as a savings bank, then having other banking products, we try not to diversify so we are adding many loans. something, iuy would look much more to what fits strategically in diversifying our business, and also be ready for the future in the new digital world. less about skill. getting some capabilities, we are building up our own capabilities, much harder than buying those capabilities. francine: with that the tech companies? is it harder to do your amtech inside? do you have to look at another player? nick: i think so. that is why we bought lend eco-because we thought building

our own business is much harder than buying the whole digital platform and building from that ourselves. the second part is also the conference we are at today is partnering -- we truly believe in investment products, that is why we partnered with scalable capital because we thought it is in much better way to serve our customers. behink the game changer will customer experience. can add to the customer experience by partnering or working more together with other tech companies, i think that is really the future. knowine: you have efforts, your customer. how is that affecting your clients? how are these controls affecting ing? ck: i think the good news is we are still a big retail bank.

the way we do kyc, the regulator demands of us and what we're trying to do is say more digital ways of identification and using technology to do the know your customer. i would say we are well-positioned in the german market. francine: thank you so much for your time. nick, the chief executive of ing germany. huawei is hitting back against u.s. obligations it was involved spying.fraud and it is suing washington for arming its equipment from certain networks saying it is unconstitutional to punish them without a fair trial. tom mackenzie sat down with an exclusive interview with the chief legal officer of huawei.

he is confident they can win the case. >> we hope the u.s. courts will declare the ruling invalid, participate in fair competition and the u.s. market and bringing our advanced technology into the u.s.. tom: i spoke to a legal expert who said the chances were very slim. where do you think the chances of success lie and is this more about messaging for huawei? song: i don't think our chances of winning are slim. every case depends on detailed facts. we think we have ample evidence and i think the chances of success are high. tom: how much has the congressional ban on huawei equipment cost the company? this case has damaged many aspects of the business. we could lose existing projects as well as further opportunities. our partners may stop working

with us as it damages our global reputation. these are huge losses for us. tom: given the opposition in the u.s., isn't there an argument for just cutting losses in the u.s. and focusing on other markets? 20%: the u.s. accounts for -30% of the global communications market. it is very important. we hope we will have a fair chance to compete in it. leaving the u.s. market is really only a last resort. we haven't considered fully exiting the u.s.. we hope to keep partnerships with our clients and take part in market competition. we want to continue bringing value to the u.s. francine: that was bloomberg's tom mackenzie speaking with huawei's chief executive officer. douglas the conversation with the u.s. ambassador to china. bill browderer, has filed a criminal complaint against brown bank.

this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." withrie: let's start off the danish brewer. they are announcing a share buyback. they are initiating that plan. and theirthe miners the ones driving down the european benchmark. down nearly 2%. they are trading ex dividend today. that is putting more pressure on stocks. also growth concerns coming back into play. springer to the downside. says theirley revenue outlook for 2019 is seen as cap it. francine: thank you so much. we continue in the next hour. tom keene joins me out of new york. we have an exclusive interview

and the blackrock chairman chief executive at 11:30 a.m. london time in 6:30 a.m. new york time. in the meantime, we will go through some of the stock movers. we're looking at brexit and pound. the eu is set to be pessimistic that it brexit breakthrough is actually and reach. i'm looking at pound. it is currently moving sideways. this is bloomberg. ♪

francine: growth concerns.

the ecb may cut its forecast for growth again. upping the ante. huawei sues the u.s. government for banning its equipment. the tech giant says the american government shouldn't play judge, jury and executioner. good morning and good afternoon in asia. this is "bloomberg surveillance." there's quite a lot of market movement. i'm also looking at a couple of things coming in from brexit. brussels, is that in they are not feeling confident they will make enough headway to give theresa may another deal. we are still expecting to have a permanent fixture. we don't exactly have a date yet when she will put it to parliament. tom: she made some real complexities. brexit is moving tick by tic this morning. i don't want to say it is major headlines, but it is really interesting the warfare back and

forth. francine: of course we need to a bit of time to see if it is just noise or will lead to an outcome. first, let's get straight to the bloomberg first word news. huawei is heading back at washington's claims it russia's five. -- spy. huawei is a business. we have never received any requested from any government including the chinese government to install any backdoors for intelligence. to do that would be committing suicide for business. in the future we will also refuse to take such a request be it from the chinese government or any government in the world. warns it mayta

stop building cars in the nikkei if there is a note to brexit. their head of europe saying a withdrawal would be on the britain crash out of the eu. criminalder filed a complaint against sweden's largest bank for money laundering. handleds a swedbank $176 million linked to the death of sergei. he was browder's russian lawyer. later today, we speak with him at 10:00 a.m. new york time here. more drama in thailand over this selection. a court ordered a political party to dissolve. the party is linked to the exiled prime minister.dissolving

the party could hurt offers by his allies. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's do a 48 second brexit check. futures at negative, three days in a row. at 1.13.ning number one thing i am watching is the germany 10 year during the draghi press conference this morning. ? what do you have francine: i'm looking at pound because there is a little bit of movement. we don't really know whether it is just noise. it is very difficult when you speak to politicians to know exactly which way they will vote.

the eu is set to be pessimistic on a brexit breakthrough is in reach. 1.3164.ing at pound tom: we are thrilled to bring you bill and david in the next hour because in the u.s., there is only one story and that is a record trade deficit back 10 years. let's look at the chart. what i have done here is i have flipped the trade deficit to a positive number, and then i have taken a long where slope matters. here is the gloom of the last decade. the financial crisis instability. here's the trump election and the convexity up, the curve up of an ever greater trade deficit. convexity or acceleration is the real issue here. it is unthinkable what he does with the chinese if we see the trade deficit expand over the next number of corners and months. francine: i like that chart a

lot. at. it what i'm looking goes back to the simple question of the day which is, can the ecb stimulus revised euro volatility? that is thanks to hillary clark. ecb today expected to make some outlook cuts. on thursday, opening the door to another round of loans in a return to stimulus efforts. it is a good way of looking at euro volatility and what could come out of the meeting today. european officials are reported to be pessimistic in this week's brexit talks. negotiators a suspect that what they offer won't be enough to get the deal through parliament. joining us now is the head of fx .ates strategy

i am unclear of what is priced in town right now and whether they are overly optimistic. other discounting that a no deal brexit definitely won't happen and are they wrong if that is what they are discounting? >> i think the market is most definitely thinking of that in no deal brexit is probably out of the question. in fact, our models have argued that if we were to have some kind of a deal, the pound would decline to something like 85 or slightly lower against the euro. the market has been trading with a deal in mind and not too far from the levels that are fully priced. the probability of at least a little bit of an upset is underpriced. francine: what are the chances of a no deal brexit? that is the default. it could still happen.

what is the probability and what happens to pound? : it is not a 50% come, but it is not a 0% outcome either. the probability is nonzero and it is not -- the main problem is that the downside for the pound in that scenario is a symmetric. parity of our estimates, with the euro would be the first level they reach. maybe equilibrium is even weaker. affectsassed through with the euro pricing. i think that the main problem that you mentioned is not that this is the desirable outcome. parliament and the kate hudson --y would vote against that parliament has said they would vote against that. if nothing happens, the outcome

is that. tom: the calendar year as we get to tuesday and a vote before we get to march 29, right? morning,nated this then he battling and new warfare. can i say nothing has changed in 90 days? emos: not too much has changed. at least from the deal side. what do you and ubs propose we should watch for as we try to get to tuesday? are you watching europe, where we have got nothing in the last 24 hours? or are you watching some flavor of leave and remain in the united kingdom? themos: i think it is mostly the latter. i think the hope from the market at least is that the closer we get to deadline, the more it

becomes clear that it is either this or some kind of undesirable outcome. the more people move into the camp. pointin question to your is if the result is not a win, how heavy is that defeat for the deal? if it is a very narrow defeat, we are getting closer. if it is a very wide defeat, i think we're back to square one. tom: thank you so much for that briefing. as an outsider, it has been a aotic 24 hours. eric is -- we will speak with larry fink on the big picture. just as important, him discussing the future of active management. please stay with us from london,

from new york. this is bloomberg. ♪ ♪

francine: this is "bloomberg surveillance." time francine from new york and london -- tom and francine from new york and london. bloomberg understands that the latest projections will show extensive downgrades for inflation and growth in 2019. we're joined by matt miller from frankfurt. what exactly will you be looking out for? is there anything rosy when it comes to the eu economy right now? matt: i don't think so from mario draghi's perspective. the first a banquet to be

looking out for is his official cuts to inflation forecast. they are not real until he says so. hsbc is expecting him to change his forecast to growth of 1.2%. and it kept drastic his inflation outlook going out three years. i think the street really is waiting for any details on loans additional loans to banks. we don't expect to get the very details of that in today's press conference. 2018 is headline of that single headline by mario draghi. could we see another bombshell today, another headline where he extends out even further? that.the could see

problem is they don't want to look too week and they don't want to scare the market by being too dovish. i was talking to themos earlier and he said the ecb needs to keep up somewhat of a strong front. you don't expect that kind of turn. they do want to get back out and normalize policy eventually. themos says they will be able to get out of negative rates by next year. francine: when will we find out who replaces mario draghi and how will that influence the ecb policies? is it time for a german to be in charge? the germans are obviously a lot more hawkish. bundesbanknt of the thinks this economic slowdown we are in is temporary. on the other hand, added a link think we could be stuck in a downward spiral. he wants the ecb to get a lot more dovish. it will be fascinating to find

out -- i'm not sure what that decision is going to come. mario draghi's term is up in november. it can't wait much longer. francine: thank you so much for the update. matt miller joining us from frankfurt. ubs. get back to themos of thisyou look at euro, volatility get reignited with what the ecb is doing? themos: at some point, something is going to be reignited. i'm not sure if it is going to be the ecb because basically the easiest way to reignite that isty is by an ecb even more dovish than what the market expects. unlikely.at is that is a statement both about the markets expectations which most of our analysis and forward simulations, the only way of justifying the path the market is pricing in as if the ecb will

almost never be able to fully normalized policy. at least in the forecast horizons that we can fathom. secondly, because already the market has priced quite a few of the items that we could leave in the short-term. obviously what the ecb will deliver is the other question. francine: let me bring you over to my chart which is free month implied volatility. if you look at it, it is at a low since 2014. does that signal more pessimism from europe's the economy? themos: i think what it signals is that the market understands that the fed is close to neutral rates. our analysis shows that has been the case since february. where you can have a surprise from his from europe. the surprise would be if the data was stronger. you are not getting that surprise yet. i think you look at that surprise probably through the middle of the year. that is what is going to move the market in my opinion.

tom: we spoke to bill dudley of the new york fed yesterday. centers believe that things are going to pick up in june, july, august. a huge body of people in the market don't agree with that. what are they missing in the united states and europe? how are we going to get that pickup? withs: my vote would go bill. he was my former boss, an incredibly smart man. what i would say is this. a number of the items that have driven u.s. economy slower are behind us. a slowdown we were expecting and our forecast from economists were linked to trade. obviously, the government shutdown had some smaller affect and there are a lot of other one-off factors.

the data is not as weak as the market would expect. financial conditions have eased. the reality is that we are probably going to be above 2%, even closer to the 2.5% line. that is the u.s. china is easing. they are not using just for the sake of the. they are using because sequentially, growth is to relative to targets. the idea is that sequentially, growth will closer to the target. how does that affect europe? if you look back at the last year, european growth slowed by a total of 70 basis points. 60 out of those 70 basis points were trade. if china and the u.s. does ok, the odds are that europe will pick up. look at what the market is forng, a positive surprise the data is not particularly high. francine: thank you so much.

themos stays with us. coming up, we talk eu-u.s. trade relations. you can catch that exclusive conversation at 3:30 p.m. in new york. this is bloomberg. ♪

viviana: this is "bloomberg

surveillance." schroeder saw investors last year pull out a net $12.5 billion. the firm's assets under management shrink by almost 6%. they say macro and political issues. a german clothing maker is focusing more on sales for its own retail network rather than using third parties. an increase in online sales has also helped hugo boss. a new study says women and black workers make gains that may last as the u.s. economy runs hot. the fed president and several co-authors suggest when the fed leaves interest rates low and lets the labor market run strong, and equities in the labor market could shrink. that is the bloomberg business flash. tom: thank you so much. we need to look at trade with themos.

i want to go to a chart which i find absolutely fascinating. right now.hart up this is u.s.-china exports to china and imports from china. this is fascinating to me of market to list them, which is where i want to go with you and the effect on europe. down we go with a huge drop in the financial crisis. we have seen imports stable and the rollover here in u.s. exports to china. does europe have the same risk of mercantilism as we are observing in america right now? themos: i think trade is becoming more focal as you highlighted. i think that every region is trying to create the best conditions possible for their own champion industries. what i would say to add to the conversation is that not all of

this trade gap between u.s. and china reflects the balance between u.s. and china because let's not forget that value chains go through china. ands come from other places increase value as they built up and get exported back to the u.s.. is the gapthat between demand products. the second thing is that some of that slowdown that you are describing there, which is something to keep in mind for the global cycle, also cts the fact that there has been tightening in policy for more than a year now. they recognize they have been tightening policy quite aggressively and have turned the corner. we are looking a little bit of brexit and the italian banking system.

the linkage between gdp and strong or weak banks. to -- chiefe talk executive and founder. this is a challenger bank in italy. he will have his pulse on exactly what the italian economy is going through. he will give us his outlook for italy's economy and also risk factors to look out for this year. with that conversation next and then we will talk a little bit more about consolidation in banking in europe. we look at deutsche bank. this is bloomberg. ♪ want more from your entertainment experience?

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just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. >> the united kingdom is simply not ready for a hard brexit and you can look at that at every level, whether in banks, financial services, in terms of

medical supplies, in terms of logistics, in terms of transport, in terms of farming policy, you name it. the reality is the country is not ready for hard brexit and we can all hope this outcome can indeed be in voided -- avoided. >> i actually think we are headed for some kind of deal. the u.k. government hasn't managed to get any movement on the backstop, which is the real issue, but i think we will inevitably have a delay. i don't think any of the parties will put their weight behind a second referendum, which is the only way we actually don't leave. >> in effect, the marking -- demarking his own homework. francine:francine: that was the leadership of blackrock talking about brexit and now we have a live shot of parliament. we are hoping to find out -- get a little bit more news on when the meaningful vote, i.e. when

parliament, the house of collins -- comment votes on the deal. we are hoping to get confirmation on when the vote is. the government has repeatedly said this will happen, this vote, by march 12. march 12 is next tuesday. at the same time, through our reporting, we hear european officials are pessimistic about the chances of a breakthrough in brexit talks. a pretty empty house of commons we are looking at. we will bring you any update on when the exact timing of the vote will be. let's get straight to bloomberg first word news. trump campaign chairman paul manafort will be sentenced for tax and bank fraud. manafort could get up to 20 years in prison. observers believe a federal judge in virginia will give him less than that. his lawyers claim he was unfairly snared by robert mueller's investigation into

russian election meddling. in turkey, president erdogan breaking his silence to stand by an arms deal with russia. brushing aside a threat to punish turkey with sanctions. erdogan calls the sale a done deal. it is a top start to the year for alan howard. bloomberg learned the fund he -- fell 8.5%..5% the macro fund gained 30%. lack stone is signaling the appetite -- blackstone is signaling the appetite for equity is not over yet. in january, blackstone said it planned to take in $100 billion this year. global news on aaron online at

tictoc -- on air and on tictoc on twitter. been too long since we checked in on the challenges of e.u. banking. all of this is wonderful given that we will speak to corrado for sarah -- how is the anglo-saxoning going? give us an update on how e.u. banking is adapting and adjusting to 2025. >> that is a pretty big question. from they different italian banks dealing with the bad debt they need to bring down to be able to return, to lend more aggressively to banks such as deutsche bank grappling with a question of what they want to be, that they can find a way to sustain profitability.

it's a pretty big question. i think there are a lot of challenges and you can see that with european banks trading at a deep discount. remembere months ago i the drama of carter showing up like a bad hollywood sitcom and the people getting out and going to the bank and the regulators were going to check on the bad bank. what is the regulatory pressure on deutsche bank and all the other e.u. banks right now? is it a u.s. equivalent pressure? are at different stages in the cycle and the pressure in europe is -- they need to be returning to growing, feeding the economy with loans and anyway they can do that, that is what the ecb will focus on. it is a region that is uber in banked -- region

manyis overbanked in areas. anyway the banks can fuel economic growth is what regulators will be looking at. francine: thank you so much, elisa. joining us now is the chief executive and founder of liberty bank which specializes in lending small businesses. cabinet minister of economic development under the prime minister. themos fiotakis. you have a challenger bank. >> more than a challenger bank. francine: it is a challenger bank for our intended purpose, you want to lend to small and medium enterprises. italian banks are under pressure. what makes you think you can do a better job than them? problems -- the

real problems in italian banking are behind us. toxic assets are not an issue anymore. it has been moved out. in the shadow banking world, that is an issue, but we will not talk about that now. banks have been clean. the real challenge today is to face the challenges of the redesign of the financial service word. digital technologies on the one side, new regulations are totally reshaping the industry and new paradigm banks that are specialized banks with totally new and innovative business goods, we succeed and make money and tap needs that today

are not serviced. sme's that are second-tier, but with good potential, certainly a good -- big need to be served. state of the direct banking services for households and bepanies that do not want to interpreted in old ways. room for growth, challenges for incumbents. francine: how do you not worry about gdp in italy? we are talking about possible recession and whether the government holds. if there is a recession, will that not hurt bank loans? corrado: actually know because we focus in companies that can .e restructured first of all, i do not expect -- i don't see around the corner risk for recession. we will grow very little, but i

don't see a risk for a series recession in our country. for sure, we are not investing enough. government is not tackling this issue siri enough -- serious enough. for sure, we are not moving in the right direction. the real risk is not there. tom: i have like 14 questions and not enough time. let me talk to a guy out of wharton who is arguably the most anglo-saxon banking executive out of europe. it is european getting anglo-saxon fast enough? do they need to go faster like you did at the italian postal system a million years ago? corrado: what we are not doing enough is europe in general is the creation of the single market. if we want to compete at the global level, we need to create an economic area, region, the

same way the u.s. has done and that is something not happening yet. that is the main responsibility of the new parliament and new commission. create champions that will be competitive at the global level. ofhout that a word, a number specialty areas will be interesting and useful. tom: what would you do with deutsche bank commerce bank? i will go back to the italian postal system. what would you do day 1 at bank?he-commerz corrado: first of all, i cannot bankers.ce to such easying mergers is not an task. in that case, the combination of the two business models is

possible. it has to be done rapidly. germany needs consolidation. germany is the country that is probably the last one joining the party of the countries with an organized, consolidated banking system. tom: we will come back with mr. passera and continue this conversation. francine and i demand we talk about there are too many tourists in venice. coming up in the next hour of "bloomberg surveillance," an important conversation. lawrence bank of lack rock, any number of ways to go. larry fink on black rock and active and passive management. this is bloomberg. ♪

francine: this is "bloomberg surveillance." us -- themosoc fiotakis and corrado passera are with us. we are talking about the hopes you have for banking in the next five to 10 years. it talk about the banking union. are we going to ca banking union -- see a banking union with good rules in europe in our lifetime? corrado: we have to help so and we have to do our best to implement it. we cannot stay in a situation where each country actually is a separate one versus all the others. cac -- capital

and equity -- you create a group, but you do not create a real european bank. that is the responsibility of the new parliament and the new commission. the ecb will have to push in that direction. until that time, we will not be able to compete at a global level with u.s. and chinese banks. tom: we picked out -- francine: we picked out a morning must read. what is most remarkable is the political color of the government, talking about italy, spearheading -- to asia. firstre running a italy administration. what does it mean for italian businesses? businesses you are hoping to lend to? corrado: it can mean a lot.

not only the italian future, but european future is tied to the development of international trade and export is the component of our gdp that can grow the fastest. from an economic point of view, creating bridges with the chinese economy is a priority do certainly a good thing to . but, we never have to forget the geopolitical implications of choices. with our western allies, we have to be allied and in line with the move that can change the shape of the world. economically, the direction is clear. geopolitically, we have to manage it properly. francine: i guess we will see what the parliamentary elections bring and whether this coalition holds and what kind of reforms will push through? themos: absolutely. let me say we have been -- the last 6 months, the market has

been pessimistic on italy. i think we have seen one of the most market unfriendly political scenarios play out in a much more friendly way than we imagined. we have seen weakness in the data, but that cannot be exaggerated. historically, it is very much gdp.d to european you can dig through the deals of prints in italy. spreadsw wide italian -- i think some italian assets may be okay. tom: we are going to rip up the script. francine and i spent time in venice and mr. passera is with us today. if you go up the tower, you get

a view of venice that goes back to the 15th or 16th century. you are an authority on venice. what do we do about the flooding in venice and what do we do of load inorgivable tourist venice? corrado: a number of things. a couple of them are within our reach. given myself as a minister, i started the stopping of the big cruise ships entering. tom: thank you. corrado: that are a threat to the city. on the others, we can regulate a bit better the entrance of millions of people and some sort of ticket is something we can consider. beyond ouroblem is possibilities and it has to do

with climate change. venice is really one of the places that is most threatened -- the i want you to speak to present italian government of the urgency of the public works in venice. corrado: i take the commitment and we will do it together. tom: that would be very good. corrado passera, thank you so much. timo's feel talk us -- themos f iotakis with us as well. stay with us, this is bloomberg. ♪

>> now volatility is back and it does mean returns will disperse. francine: this is "bloomberg surveillance." european mining stocks falling this morning with mounting concerns about economic growth in china. is industry consolidation the answer to weather the storm?

themore, we are joined from blackrock wealth symposium by the investment leader of the national resources team. thank you for joining us on "bloomberg surveillance." downgrade the the chinese growth impacting or hurting miners? >> it is a good question. what we are seeing at the moment is a shift in some of the macro policies around the world. when you look back to 2018 and the broad-based consensus of continual tightening of markets and that led to concerns around dollar strength, rising u.s. interest rates and expanding into what that would mean for emerging markets in china. as we have gone into 2019, the perspectives have evolved. we are seeing loosening of monetary policy, fiscal stimulus

, and expectations around u.s. rates move to a less aggressive phase and potentially a loosening the end of this year. if anything i think the macro is becoming a bit of a tailwind. francine: are investors seeing it? we are seeing companies under pressure, a little bit of the actual commodities and this is anna growth concerns. is it being overdone? evy: i think short-term moves are always very difficult to forecast. we look for medium to long-term perspectives and we see strong earnings across resources. with the companies being so conservative in the way they are financed, i think the risk of being invested in equities is much lower than it has been in many of the last few years. tom: there is a fair amount of gloom about australia. as a media makes a big fanfare about has there been a recession

since they invented foster's beer. how gloomy is australia right now? make a is hard to sweeping comment around the country on its own, but when we look at the subcomponents of the australian economy, one area that is booming is the resources sector, we are seeing fantastic prices of iron or. -- iron ore. if anything, i think the outlook today is one that is way ahead of expectations compared to a few months ago when commodity prices were thought to be lower. tom: once again, as you say, they are booming. can you call a super cycle right now? we just had a couple guests a little hesitant to get back to a boom. can you get back to the commodities boom we saw 10 or 12 years ago?

evy: it is amazing to think it was that long ago. the things we look at right now are the kind of -- what is laying itself out for the medium to long-term. we are seeing companies structurally under investing because they are being much more disciplined in the way they allocate capital. they are not building for the sake of volume growth, they are building for the return of stakeholders. that is controlling the rate of supply growth. it demand is actually higher than it has been. we are seeing commodity markets that are tight. inventories are relatively low. some are extremely low and that is feeding through to prices. he if -- if these things continue and we see the rates of economic growth and consumption, we will have tight markets, which should lead to good prices. francine: will that also lead to consolidation? evy: yeah, that is the big

question. i think we are seeing quite a lot of consolidation in the precious metals area. we saw a large transaction last year and we see proposed transactions. the precious metals area seems to have shorter life assets and the need for consolidation is greater. if you are sitting on resources that allow you to be into production, the need to consolidate is less. tom: thank you so much, evy hambro. we have much more coming up including david rosenberg on your disinflation. 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. tom: this morning, a stronger dollar, a kind arm us -- a

ginormous trade. this hour, william lee, mario draghi speaks in two hours. he will speak up disinflation buried in this hour, we slice, we dice. disinflation with michael rosen -- david rosenberg. nkun's fink of -- lawrence fi of blackrock in the future of asset management. we are live at our headquarters in new york. francine lacqua. the movement of brexit and i think we captured it in the last hour. today is not an important day except it is, right? francine: negotiations are ongoing. we are trying to figure out whether the e.u. can get something back. i think we are going round in circles. it's the same question, but we haven't had any answers. we think they said no and we

kind of try and understand what want.o brexit people then we wait for an actual day for that to be voted on. all i know is manchester united won and tots won. here is viviana. awei is heading back at washington's claims it helped china spy. u.s.awsuit is aimed at a law that prevents government agencies from using equipment from huawei and its rival, zte. >> huawei is a business, we never received any request from any government, including the chinese government to install backdoors for intelligence. to do that would be committing suicide for a business. in the future, we will also refuse to take such requests. viviana: toyota warns it may

quit building cars in the u.k. if there is a no deal brexit. the japanese company telling could be a withdraw on the table. nissan changed its mind about building an suv there. --filing a complaint against sweden's largest bank. bank handled money related to -- suspiciousillion in transactions. we will speak with bill browder here on bloomberg tv. more drama in thailand over this month's election. a court ordered a political party to dissolve before nominating a print cents --

for prime -- princess minister. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much fruit equities, bonds, currencies, commodities. in two hours,cb the press conference in two hours. euro elevated over the last 24 hours. german 10 year yield, that should be right on the screen, lower by one basis point down to 0.12. that really has my attention. francine, what do you have? francine: i have a similar data check. that is different just because of the comings and goings.

--understand the e.u. is set said to be pessimistic. european stocks down because we are expecting downgrades from the ecb. tom: to our global audience, i cannot explain how in america, coast-to-coast, the lead article in nonfinancial journals is the trade deficit. william lee is the perfect person to talk to. we are thrilled to have you. let's go to the chart and show -- i have a couple of charts today. some really good work out in the last 24 hours from bloomberg and others. the ugly trade deficit from the middle of the last decade and trumpian deficit gets better during the recession and then gloomier. what we have a new mercantilism is -- to a worse trade deficit.

is trump mercantilism working? are showing is a lot of bilateral deficits have gotten worse because the u.s. economy is so strong. consumption is very strong. we are the only economy with a to handle on its growth number and everyone is worried it is two and not three. the ecb lowered germany to below 1%. i think the u.s. is doing quite well. goodthere has been so many insights the last 24 hours. i will pick on deutsche bank. whatever we do with china, they leak whatever that thing is out to other countries so it is not a true bilateral outcome of whatever we do, it harkens back to william klein and the class of -- classic work of 15 years ago. if we play with china, they move the shop to vietnam.

bill: absolutely and that is a big dilemma facing chinese policymakers, how to boost domestic demand and get gdp to grow. chinese economy produced 13 million jobs this year. what is the target -- last year. what is the target for this year ? 11 million. that is the source of political instability and i think that is what president xi is going nuts about. francine: communication seems to be pretty good. they put in a stimulus so they would stabilize the markets. are you confident actually they have a pretty good handle on how to manage and also communicate what is going on? bill: the communication is brilliant. the range of uncertainty, everyone is targeting the lower end. the untested nature of the fiscal policy is something i

worry about. everyone says fiscal policy must work. in china, fiscal policy not accompanied by a mass credit stimulus is something they have not tried before. they are constrained in their ability to great credit out because they are trying to deleverage the economy at the same time. the slowdown in china started way before the trump trade talk because they needed to deleverage the economy. francine: what does that mean for how much of a boost if we do have a trade deal, it could give to the chinese economy? is it confidence? do people start consuming again or is it smoke and mirrors? bill: it is confidence in the rest of the world that we can put money into china and perhaps capture the benefits and the profits and not that -- not let that a leak into the chinese economy, including our technology. one of the things we have to look at is the source of stimulus in china.

demand,t just domestic but the ability of a foreign investment to come in and boost the economy. francine: thank you so much. bill lee stays with us. coming up, an exclusive interview with larry fink, the chairman and chief executive of blackrock. that is coming up in 20 minutes. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." apollo global management reportedly agreed to buy direct -- according to reuters, the price is $2.5 billion including debt and the deal may be announced today.

-- it is owned by swedish firmtment firm he cute -- eqt partners. almostance armed that brought down general electric. apollo already bought aliens of investments wants managed by ge capital and bloomberg learned it is looking at a ge's insurance and jet leasing businesses. clothing maker is focusing more on sales through its own retail network rather than using third parties, and increase in online sales help hugo boss. made and black workers against that may lapse when the u.s. government runs hot. when the fed leaves interest rates low and lets the market run strong, in equities the

labor market could shrink. tom: thank you so much. .illiam lee with us we are thrilled to bring you david rosenberg, mr. rosenberg with us only if the montreal canadiens were a wildcard team. but theyey lifted up, raised the bar, that is the problem. tom: gary shilling comes on and we talk about low interest rates. belief in steadfast low inflation. areinflation expectations bottoming out. does the public have it right? that inflation expectations should be set low? david: they have been set low and they will probably go down more. there are the structural reasons on the fiscal reasons.

the structural reasons are debt everywhere and technology and heading into 5g will be deflationary from a business cost standpoint. why are inflation expectations going to bottom out? the global economy is turning lower? hours, mario draghi has to speak and chairman powell has to act on march 30th. there is a consensus we are going to see a lift up later this summer in growth expectations and maybe actual gross and i believe with that, a lifted inflation. you don't agree with that? david: in two words, pipe dream. where is this lift off going to come from? why would you formulate your forecast on this growth when the leading indicator has declined 13 months in a row? you look at the u.s. leading indicator and what we do is we

strip out the real side economic components, the five hard data, not surveys. today stagnated since march. the leading indicators are telling you there is no lift off growth. we are going to get the second half, it is a forecast. i doubt it will be an accurate one. francine: i wanted to ask you whether you think now central banks are going to be more dovish around the world and whether that will create a policy mistake because they missed the window of normalization. david: firstly, i don't think that is the forecast anymore. global central banks are turning more dovish. we have seen that huge pivot by the fed. expectations have shifted in australia toward a rate cut. they have been using policy through liquidity in the bank system. this process is already starting. the concept of normalization is

based on -- where is the neutral policy rate? which is inherently unobservable . when you take a look at inflation and that is part of the equation, so much of the cpi computedflator are services. they are numbers the government makes up because they are not really prices you can compare. i will make this point, when you look at prices that are observable in inflation data, it's not even running at 1% annual rate. where is the normal interest rate? the fed tells you it is over for and now it is two and a half -- 2.5? growth. percent global are we headed for a rosenberg recession globally where we have dampened economic growth along with dampened inflation? david: europe is in the doldrums and the natural rate of growth

is slower. according to david -- this is something they have to recognize, productivity has not picked up and if it doesn't pick up, it is likely closer to zero. there is a likelihood policy mistakes will not be there because the nature of the economy is one of slow growth except possibly in the united states when a lot of the tax reforms and structural reforms and the regulation may have impact trying to boost u.s. productivity and that is the hope in the prayer we all have. francine: when you look at central banks around the world, who has it most tough? is it ecb where you see these different countries and very little inflation or is it the boe? bill: the fact expectations are adaptive means the u.s. has to reckon with the notion we might be able to boost our long-term rate of growth. the ecb has to recognize the

boost we got last year in european growth with that two handle cannot last. central banks have to deal with, the fact expectations are very sticky and tend to be adaptive and backward looking. tom: are we seeing mercantilism in america? the dynamics, the size, the scope and scale, is it mercantilism in america? david: i would not go that far. there is a form of mercantilism when you look at a policy out of the white house, whether that will last two perpetuity, who knows. the trade data told you two things, the relative strength of demand in the united states, you saw that in the import numbers. part of the import numbers were pretty buying ahead of tariffs action. the numbers did not tell you

anything structurally about any kind of phobia in the united states. it is telling you the economy between growth in the united states and growth in the rest of the world. francine: thank you so much david and bill. and david rosenberg staying on. we will speak to the hermitage capital management chief executive officer. he is in the news on the fed bank in the past and has gone after vladimir putin. look for that interview 10:00 a.m. in new york, 3:00 p.m. in london. this is bloomberg. ♪

>> when you consider the amount of money that has been spent by the financial sector and the corporate sector to prepare certain -- prepare for something we still do not know how it will play out. that is the problem and given that there is this uncertainty, there is always a risk things go wrong. i certainly hope we will not see a hard brexit, but you cannot rule it out and that leaves a risk factor that weighs on the markets. francine: that was philip hildebrand talking to us early on about the risk when it comes to monetary policy and we also talked about brexit and what the outcome could be as we advance to the march 28th deadline. tom: lawrence fink at this hour as well with blackrock. and william lee

with us. how important is this meeting for esther draghi -- mr. draghi? bill: he has to tell the world what they are going to do about normalization. much.l not be able to say one of the greatest fictions in the history of policy making that stability and growth pact. ecb is supposed to be guided by the principles that debt ratios are supposed to be three and 60% of gdp. nobody observes that. -- debt to gdp ratio is less than 10% of euro 80 -- euro area gdp. tom: i get the idea of currency issues, but if italy is in recession, does germany care and the issue is they have to. bill: they have not in the past.

i was a euro skeptic in the days when i was in the german desk in the late 90's. for what i can see, structural problems have not changed. you cannot expect draghi to be able to boost growth using just -- nominal policy. i was going to take it a step forward and say maybe the u.s. is heading into japanification. it has gone global. the proof of the pudding is in the eating. the fed funds rate peaked a cycle. at no time has the policy rate peaked at such a low level. a brought the markets to sneeze and caused the economy to stall out.

you have to go back to the 1930's to find the last time the fed funds rate pete at such a low level. what does that tell you about the structural weakness. one ofcyclical recovery your guests was talking about capital spending and there was really no capital deepening. what did it tell you about expected returns of investment capital in the real economy when most of the cash flows and most of the tax cuts went into stock buybacks? inncine: i am going to jump here david rosenberg and bill lee. let's continue the conversation on economic concerns. ecb poised to cut forecast and we have u.s. jobs tomorrow. let's hear from the world's largest asset manager, erik schatzker standing by with the

chief executive of blackrock. over to you, erik. you werehought accusing me of being the world's largest asset manager. this is the blackrock private wealth symposium. you are the star attraction. larry: i think you are. erik: you run the world's largest asset manager. you meet with heads of states and you have your finger on the pulse of the global economy. are you optimistic or pessimistic right now? larry: relative to the mood of the markets, i am probably a little more optimistic. i don't think the world is that bad. it's not as good as we thought and we had a huge rally in the first quarter and throughout 2018, the market started falling and dissipating and we had a real crescendo and we saw a

capitulation. since then, we have seen investors realize it is not so bad and we have seen almost the total opposite of the fourth quarter. the fourth quarter, you could not find a bid to sell anything. that tells you -- i would say the tension of the marketplace. let's review the world. china is slowing to 6%. that is not so bad. erik: that is what they say. larry: okay, 5%. china has experienced the same two phase, two type of economies where one part of the economy is growing well and one is slowing down and they will experience the same kind of populism, unrest issues in the future. a japan growing at 1%. nicely andsia rowing you see supply chains moving from china to southeast asia. you have europe, which compared to where we were in january or

march 2018 -- we were much more pessimistic and i am worried about europe. that doesn't mean it will be a recession in 2019, but it will not be -- maybe it is a 1% growth, probably closer to zero and the u.s., we had the sugar high from the tax forms and we all anticipated the economy would slow down after the sugar high and that is happening. where is the u.s. economy this year? it is not so bad. consumer confidence is still good. i would almost call this a goldilocks moment where it is not so bad, not so good. central bank behaviors are probably more on the dovish side from where they were in the fourth quarter. i would say it is time for investors to be a little more relaxed. i don't think we go much higher than we are today.

we are going to be fine. what i worry about is rising populism, which -- what we are witnessing from rising populism, we are seeing shorter-term behaviors by governments. i talked quite a bit about long-term behaviors and it gets harder and harder when you see governments becoming more and more short-term area getting back to china for a minute, we may debate where the economy is going, but it is where chinese leaders are focused in the long term. erik: i know you hate the echo chamber, you hate it when there is too much consensus and people talk about the same thing incessantly and we can throw brexit and a number of other things into that camp. what i would like to know is in your opinion as you survey the landscape as you were just doing, what aren't people talking about enough? i am talking about investors,

corporate leaders, policymakers. larry: what are they not talking about enough? erik: yes. larry: i love that people talk about all this stuff. when i confusion, that actually makes me more relaxed. this is the power of the press, erik. when it is constantly discussed and maybe over discussed we find ways to mitigate. the hysteria actually does a good job of mitigating the problem. erik: is it a self-correcting mechanism? >> it is. am i not being asked, what am i not listening to, what am i not reading about. i would say the biggest issue is still retirement. probably the more intermediate ande is the u.s. deficits

the supply of u.s. treasuries. you can't find any offers right now so it's not a problem today. we are having deficits as large as a trillion dollars. you had the msci and the bloomberg indexes change the composition of the indexes more in favor to china in's and bonds which means less global demand for u.s. products. at the same time we have these large deficits. importantly, if there is a comprehensive trade agreement between the u.s. and china and china does indeed reduced trade surplus for the united states which is one of the main objectives, china does not need to then sterilize its currency by buying u.s. treasuries.

this is going to be a big issue and no one is talking about that at all. of u.s.ns $1.3 trillion represents 5%ch of our outstanding stock. if we have a trade agreement that brings the trade this -- deficits down they don't need to own these treasuries. are you saying a trade agreement with china is going to draw up treasury yields? >> it will reduce their demand for u.s. treasuries. erik: supply and demand being equal. is there another buyer? >> right now there's plenty of buyers. there's plenty of demand for

u.s. treasury. my worry about the next few years as deficits persist, we are going to see just because of the composition of the indexes china because of the trade surplus declined. there could be a moment in time where u.s. treasuries have to go higher in yield because we have a supply problem. is there a point in time where , let'sply of treasuries assume at a certain level does that mean treasuries are too high and is that harm the economy? what you're telling me is modern monetary theory is not going to take care of this problem. >> i was going to say something i shouldn't say on television. that's garbage. helpng taxes does not

modern economic growth. more importantly i'm a week a that deficits do matter. deficits are going to be driving interest rates much higher and it could drive it to an unsustainable level. the modern theory is harm until we see deficits , that will tell us deficits are too high. to me as a parent that's like watching your children have bad behaviors and you just watch until the behavior becomes monumental. i think that's not a good approach. not several years away. what about the interim? is there too much talk or not enough talk -- between now and whenever that he is that there

is supply demand problem for treasuries are treasury yields likely headed lower or higher? >> i don't see any inflation at the moment. the economysee falling out of bed. i would say we are going to be of 2.5%tty tight range to 3.25%. i don't see any reason for this trading range to break out. erik: that's back in the u.s., what about here in europe? >> central-bank behavior is more responding now not just to the economy. we are seeing a rise of populism. in europe we are seeing real

structural issues rising to the top again. we don't have a organized european response so the only game in town is still the central bank. few hoursnd out in a with the central bank is going to be doing. i'm not asking about just today. >> i believe we need a crisis in europe to really fix europe. i think the proposition from the ecb was we are going to do everything we can to stabilize and he's done a great job. i'm a big believer in the ecb and what mario draghi and the leadership have done. i believe they've been left standing isolated in europe. we have not seen a unified

result politically. were supposed to do all the reforms and they did not do all the reforms. one day we are going to have a pretty big crisis in europe. the ecb still could do more than than the market probably anticipates. we need a much larger public response. part of the response should be germany needs to do more fiscal spending. it in my conversations in germany most recently was that should be the response. big fiscal stimulus. more importantly germany is slowing down. there's very little inflation and i think germany has a rightl moment going on now. the german car companies are at the precipice of transforming

their entire fleet of cars electric. 2021, 2022,out it they're going to have a fleet of electric cars. today were a consumer would you wait for the lifetime change of automobiles? i think you will see a momentary slowdown in car demand. if i was sitting in germany today i would be focusing on things like making sure our cities and autobahns are prepared for the electrification of cars. that can be great fiscal spending. really transform. erik: have you talked to the german leadership about this? >> i have talked to many people in germany. i'm not going to answer who i talked to. you are going to see the slowdowns temporarily.

it's a giant change in the cars themselves. erik: what about fiscal spending in the united states? you have been outspoken on populism as a global problem. i talked to your friend, your fellow anderson's graduate of gross just last week and he surprised me by saying that he agrees in principle with the progressive wing of the democratic party. i asked him specifically about that galvanizing lightning rod of a freshman representative alexandria ocasio-cortez and he said yes. if the inequality problem isn't resolved thermite the socialist in the white house after the 2020 election. >> you know i've been very outspoken about corporate purpose and why i believe we need more political leaders.

business leaders to be more outspoken. and i am more committed than ever to making sure that the business community takes care of this. i do believe more than ever before our clients, our employees, 55% of blackrock employees are millennials. 35% of the american workforce are millennials. actually believe our clients or employees are asking more from every company and companies have to be more thought all and purposeful. let me finish because i think it's really important. vibrant onwhy i'm so this subject matter is because if we don't transform how we do see ass then we may government telling us what to do and i would much rather have the of the business community trying to find solutions and trying to be much

more socially cognizant of what's going on so we need to be much more mindful and try to help more people have a better future. asis that fear of the future i go back to retirement and the lack of savings. we have to do more as business leaders or we are going to have a government that is going to force that change. erik: that raises two questions. do much can business really to replace the role of government? and secondly what are the prospects that you can communicate that and actually find common ground with the likes of aoc, elizabeth warren or bernie sanders? such that they will actually listen to you and maybe believe you and come around to a less critical point of view on the role of corporate america in wall street? i don't know if i'm capable of changing anyone's opinion and

that is not my objective. my objective is to try to have more businesses focusing on trying to do the right thing. margin more on the business leaders are focusing on this. on the margin there is change. a conversation we had seven years ago never had these type of elements. slow,d argue maybe too but there is change going on. our clients are demanding it. our shareholders are demanding it and employees are demanding it. i think this is across every company. ceos are spending more time trying to create more inclusive capitalism and i believe that is going to be the key characteristic over the next 10 years and whether it's a political out some or they do it faster i believe depending on what the policies are that may or may not be the right outcome. partynow the democratic

is seeing every day a new candidate. towill see in the next six eight months who are going to be the leading candidates. i would just remind everybody the democratic party won control of the house by having more moderates. more centrist. theas not the left part of democratic party that one incremental houses. most of the new names we are reading about who are talking about these new policies came from very solid blue districts already and they may be moving but thecratic party democratic party won control of the house but having more centrist democrats. we will see where that ends. erik: that is for sure. thank you so much. that is the one and only larry fink, chairman and ceo and cofounder of lack rock. here at his symposium in

zurich, switzerland. francine: thank you. larry fink saying he worries about europe and saying the chinese demand for treasuries may wane. coming up, we talked eu u.s. trade relations with the european trade commissioner about tariffs on cars. you can catch that interview at 3:30 p.m. in new york. this is bloomberg. ♪

>> future parliaments look more like the society they represent. francine: live pictures from the u.k. parliament where the prime minister is talking about

brexit. she has confirmed that the meaningful vote when the house of commons will get another chance to vote on the theresa may deal will indeed happen on tuesday. march 12 was the self-imposed put one the cabinet had itself. we will have plenty more on brexit. we will follow those comments closely. let's go straight to the bloomberg business flash. technologyys its new will cut typical charging times for electric cars to about 15 minutes. the company's first supercharger .ite will break down tesla says the technology will reach europe and the asia-pacific region in the fourth quarter. u.s. regulators scrapped their proposal for reviving little restrictions on bank trading. bloomberg has learned they will come out with a rewrite the response to a provision wall street lobbyist tape. forlators originally called

a new standard for transactions that should be banned as proprietary trading. they are backing off after bankers complained. that's the bloomberg business flash. huawei.: now to the group is hitting back against allegations it was involved in bank fraud, technology theft and buying. makers saying it is unconstitutional to punish huawei without a fair trial. their chief legal officer is confident they can win the case. >> we hope the u.s. courts will declare the ruling invalid. letting huawei participate in fair competition in the u.s. market and bringing our advanced technology into the u.s. to a legal expert last night who said that the chances of success for huawei were very slim indeed. where do you think the chances

of success lie and is this more about messaging ultimately for huawei? think our chances of winning are slim. every case depends upon detailed facts. we think we have ample evidence and i think the chances of success are high. >> how much has the congressional and on huawei equipment cost the company? many ofcase has imaged huawei's business. we could use existing -- lose existing projects as well as further opportunities. our partners may stop working with us. these are huge losses for us. >> given the opposition took while way in the u.s. isn't there an argument for just cutting your losses and focusing on other markets? accounts for 20% to 30% of the global communications technology market so it's very important.

will have a fair chance to compete in it. leaving the u.s. market is really only a last resort. we haven't considered fully exiting the u.s., we hope to take part in market competition. we want to continue bringing value to the u.s. up. much more coming of course the ecb. our coverage through the morning including the important draghi press conference. stay with us. this is bloomberg. ♪

tom: bloomberg surveillance. in london. i'm tom keene in new york. there's that seen in the classic mary poppins where the weathervane changes. that happened yesterday. , the trade deficit was on the cover of every single paper in america. -- is theve time mercantilist president going to actually listen to lighthizer?

>> no. the president campaigned on the notion of decreasing trade gaps in the data just points otherwise. i was speaking with some republicans. that doesn't sit well with too many conservatives that i speak with. is the president -- is there any overation given the uproar the biggest deficit in 10 years that he will reset? >> i don't see an indication of that or it the white house says this isn't the end of the fourth quarter, this is not even have time. they say give the president more times -- time in terms of negotiation. isn't that much time between now and the start of the 2020 election cycle. tom: what about the international angle? any sensitivity to the

challenge the president she has with his congress? >> absolutely. the administration feels they have the upper hand domestically speaking. they look at the economic data coming out of fiber. it's a multilateral approach. it reports of the president threatening now as it reports to be positively trending. more tariffs increasing in europe. francine: what do we know about the mueller investigation? >> it's anyone's guess what it's going to come out. the cia director thinks it might come out on friday. i did interview congressman chris stewart yesterday. a member of the house intelligence committee. michael cohen was behind cold -- closed doors yesterday and he says he wants it to be publicly

released. the white house is saying let's just get a summary report. kevin cirilli, thank you so much. much more from our economics team worldwide on our trade dynamics. we continue the conversation forward on economics, finance investment, politics. draghi press conference at 8:30. listen to it on bloomberg radio. sterling weaker. 131 point 35. this is bloomberg. ♪

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find a bid to sell anything. first quarter, you couldn't find an offer to buy anything. alix: an ideal time for fiscal spending in germany. the european central bank start a new round of bank loans. the search for yield playbook is back. john williamson says the fed might not have to tighten as much as they thought. investors keep piling into emerging market bonds. david: welcome to "bloomberg daybreak." ecb day comes the day before jobs day. the presidentbs, convened his new advisory board at the white house yesterday, getting together big ceos including tim cook. he made a little mistake about tim's name. >> y