theer ted cruz adds to senate chorus calling for the grounding of the aircraft. maynext mode after theresa 's vote after theresa may final brexit plan fails. david: welcome to "bloomberg daybreak." i'm delighted to be bat back with alix steel. well done. we hadwere flying back, this scandal break. like,when i saw it, i was oh, yeah? doesn't phase me.

david: we had 50 people indicted. 33 were parents. involved --ties yargetown, stanford, usc, le. alix: you are trying to help your kid. how does that wind up helping your kid when they are in class and not up to speed? david: how does it affect the other kids? i have a junior in high school trying to get into school. that's how they get in. there mom and dad are willing to write a big check. brexit, have boeing, and bribes. taking a look at the aftermath of the failed brexit vote in parliament yesterday.

the cable rate up .6%. it feels like the brexit delay is what the market is talking about now. yields up by two basis points. $60 billion, what does that say about how the markets feel about inflation? downgrading forecasts for the u.s. peltz is joining aurora cannabis as a strategic advisor, getting some stock options. potill be the platform -- firm's second largest shareholder. wonder, when you have a strategic asset investor, what that angle would be. is it going to be selling or

expanding, into what areas? this is medicinal cannabis. i wonder how that will wind up playing a longer-term strategy. david: the luster of that peltz, that'sson going places. we are joined by gina martin adams and michael mckee. we want to start with the brexit development from yesterday. is what theresa may had to say in parliament last night. >> let me be clear -- voting against leaving without a deal and for an extension does not solve the problem we face. eu will want to know what you mean to make such an extension.

david: this woman has given her all -- you can hear it in her voice. she has a point. fine, we extended. for what? michael: that's the real question. the vote today will get a lot of question. what do we do now? there aren't a lot of options. one would be the norway style, softer brexit. it would require the british to freedoms,four including the freedom of movement of people. they would have to keep paying into the european union with having no say -- david: it defeats the entire purpose of brexit. that's why the

europeans are questioning, what are you going to do with this extra time? is there any alternative? there may be the possibility of a second referendum, maybe another election. they are up against this , may 23, because they need to get it in before the european parliament reelections. you couldn't do a new negotiation in that time period. alix: complacency in the market? gina: maybe a little. this is making the u.k. completely uninvestable. the ftse has gone nowhere this year.

the longer this goes on -- my this,n is, if you delay the longer this goes on, the greater the uncertainty, the greater the negative sentiment. the market is potentially starting to think, ok, a delay is good because maybe there's another vote, maybe there's another referendum call. happen, it could be a big disappointment come second and third quarter of this year. the takes the u.k. out of global story. it's not an investable market because no one knows where this is going. michael: the bank of england estimates this is costing them $1 billion a week. has wiped out 300 points from the doubt.

-- from the dow. this is where they are grounded, possibly halting flights. is this still an equity story or does it need to become a credit story? >> it is still an equity story until you see greater deterioration in the market. then it becomes a bigger problem. faaot news from the suggesting there's not a lot of reason to ground these flights. so far, no orders have been canceled. stall at this moment. faa?: we on earth is the unusual fors highly the rest of the world to buck the faa.

it does appear this is based on widespread panic. nobody knows what happened to the ethiopia airline plane. safetys fear that other regulators are reacting to. it's hard to justify except for the fact that there's another issue with the faa. their budget has been cut so much, they no longer do their own certification for safety. they allow the manufacturers to use their own employees to certify these plans. that will become a big issue on capitol hill. the new trump budget cuts 5% more. these problems will get more manifest. david: surprisingly good news

out of the eurozone -- the were going up 1.4% for the year. it's the highest it has been since november of 2017. michael: the only discouraging news, germany was the only major .ountry that saw a decline they will eke out growth because of services. just a slower rebound than people thought. a lot of what people had -- can they get growth higher? does that keep the ecb on hold longer?

deutsche bank saying this is costing us money because your negative rates are a real problem for us. how long does this go on? problem, thenly negative deposit rate -- they problem, the negative deposit rate. >> the european stock market is another question. there's still a huge valuation discount available in europe. two have rates as accommodative -- to have rates as accommodative as they are -- the european market looks relatively cheap especially compared to government credit or government bonds. the u.s. is a different story. the u.s. looks fairly valued. there's still a reasonable risk premium. it is relatively fairly valued. alix: thank you very much. you can find all the traits we

-- you can find all the charts we used on gtv . this is bloomberg. ♪

viviana: this is "bloomberg daybreak." nelson peltz is getting into the marijuana business. of creon fund management is joining aurora cannabis.

ofr is ramping up for one the five biggest ipos ever in the u.s. addedde-hailing service several banks to the list of underwriters. among them, bank of america, citigroup -- morgan stanley is leading the over ipo, along with goldman sachs. adidas expects sales growth sales areis year -- easing in europe. nike is getting run with hotselling new products. david: theresa may suffered another defeat for her plan in parliament last night. the question is where at the house of commons wants to go next. >> does it wish to revoke article 50?

doesn't want to hold a second referendum -- does it want to hold a second referendum? leaves it want to live with a deal but not the stiis d? these are choices that must now be faced. now kittywelcome donaldson. the question is exactly what she says -- where is it going to go next? i can get the sense that they are agreed on anything -- i sense that they are agreed on anything -- i can't get the sense that they are agreed on anything. >> there's lots of amendments, changes to the prime minister's

plan. -- theone to a free vote brexiteers aren't taking this lying down. they say we want a different that would allow for a managed no deal. they want to leave the eu with , a bit more time for people to prepare. they don't know whether they have a majority for that in the house. david: we will look forward to the next report out of westminster. alix: joining us now, mark .ccormick and evan brown the cable rate at 131. what is being priced in right now? >> we are getting closer to not having a hard brexit, all the

other scenarios coming around it -- it could be a customs union or a second referendum. we are getting closer and closer sometentially having softer resolution or full reversal. >> agreed that we are moving that direction of a softer brexit. there are so many different permutations, accidents can happen. from a risk management point of we are keeping close to home on all u.k. assets. david: is there a cost that is measurable of this uncertainty for this extended period of time? >> that's a great point. , stuff from here is an extension. the longer uncertainty goes on for u.k. businesses, the longer investment is delayed and that's not good for the u.k. economy. alix: maybe in nine months, you

will have another vote. are you playing the action? >> a lot of this comes down to volatility. here where wement are in the 128-135 range on the top side. structure one or two months call -- the key is if this is bad for the economy, we are trying to reduce the risk premium that is visible in financial market models and positioning. here in the united states, we tend to focus on cable. what about euro versus pound? is that a different dynamic? >> very similar. euro zone in general has very bad growth numbers.

we've seen that across germany. back, they dialed want to stay on hold for a bit longer and keep industries negative -- interest rates negative. there's growth uncertainty in europe. that's keeping eurosterling a bit sidelined. the key trade is thinking eurosterling not beat versus swiss. there's a reach for yield coming across all different asset classes, which reinforces if you are trading the reduction of your risk premium on the reduction of uncertainty and politics, you are long euro and long norway, funding through swiss, not the dollar. alix: at what point would you say i will look for some value? >> when it's all said and done. until everything is signed and

agreed between the eu and u.k. or there's an agreement on the full relationship, we will go ahead and start looking at what we want to do strategically with u.k. assets. you still have the possibility of some kind of no deal brexit. we want to keep cash available because there might be significant bargains there. there's no rush into this headline mess. up, pressure on boeing intensifies. groundingf countries the 737 max 8 gets longer and longer. this is bloomberg. ♪

david: boeing has taken the dow jones average down for two days now as countries around the

world ground the 737 max 8. except for the united states. joining us now, a defense analyst who has a buy rating on boeing. welcome. good to have you with us. would it change your view on boeing at all if the faa came out and said we will ground these planes as well? >> not really. there are 300 50 aircraft globally of the 737 max variant. it wouldn't change our view. are 350 aircraft globally of the 737 max variant. we said this would be a 5% impact to boeing's revenues for 2019. the 737 accounts for $29 billion of sales, 30% of total company sales for boeing. david: what does their order book look like now?

>> it is quite strong. that's not a concern. it accounts for 80% of boeing's orders on a unit basis. when lion air says we are switching to airbus, is that a hollow threat? >> there's always a lot of posturing with customers. the 737 max orders stretch across 80 customers. the backlog is over 4600 aircraft. that's over seven years or so. one not easy to switch from oem to another. there will always be headlines out there. alix: what's your level of confidence in boeing management? >> i thought the press release on monday evening was quite

helpful. they said they are working with i thought that press release settle on. -- said a lot. david: would you feel better or worse about boeing at the ceo came out and said today i will ground them myself until we make sure we get to the bottom of this? jim burke did that for johnson & johnson. think a, i don't grounding would have a significant difference in our view of what we think of the stock overall. 787 inthat with the 2013. david: i understand your point about the money. what about the brand? we don't think there's anything wrong with our aircraft, but we don't want to take any chances. >> sure.

from their communications perspective, they could take the view -- i like keeping it on the financials from my perspective. we've seen several changes over the years. the 787 battery issues have been in the past. the a320 had the speeding issues last year -- these things come and go. alix: thank you. stay with bloomberg for more on boeing. we will be speaking with jim hall. don't miss that. coming up, signs of euro zone area economic rebound? this is bloomberg. ♪ this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving...

simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. alix: this is "bloomberg daybreak." in the u.s., all eyez on me going. eyes one u.s., all boeing. eyes on brexit.

industrial stocks pretty much flat. watching airbus in relation to boeing as well. -- the cableble rate up .6%. the soft brexit scenario getting priced into markets. you are seeing selling across the bond market. yields up by three basis points. the lowest level on the 10 year yesterday for the year. $16 billion worth of 30 year supply coming online. up .9%. crude the iea revising down the forecast a bit. good morning. parliament can't agree how to

leave the european union, even though they voted to do so three years ago. today, they will vote on whether the country should leave the eu and 16 days with no deal in place. the other option is to delay brexit in hopes of getting better terms. the delay could lead to a second referendum on the issue or no brexit at all. today, paul manafort faces another sentencing in federal court. he pleaded guilty to two conspiracy counts. he could get up to five years for each count. time, a sympathetic judge gave him four years. a rally for juan guaido drew a small crowd. so today pro-government a probeation -- so did

pro-government demonstration. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. alix: what was really striking with venezuela, you wound up having a big discussion with the venezuelan ambassador -- they have to open up the oil sector. a huge seachange for venezuela. david: you are not going to invest a lot of money if you don't have some assurance. alix: i asked rick perry yesterday -- he said you will help venezuela if juan guaido takes the lead. he said there would be money

spent there, helping to develop their own oil sector. you need something other than oil. david: that all assumes juan guaido does become the real president. pompeomeantime, mike saying all u.s. citizens should get out of there. alix: you know that was the topic of conversation last night. in the market, it's all about the euro zone industrial production rising in europe. that was a surprise. you can see the uptick -- looking for a gain of 1%, looking at 1.4%. still with us, mark mccormick and evan brown. economy in europe is finding a bottom. we are getting some confirmation of that with this industrial

production bounce back. the weakness has been in manufacturing. services in general have been reasonably stable. consumption, the unemployment rate goes down broadly in europe. europe will be just fine. the u.s. looks to be cooling off a bit. with that, there's some resynchronization of growth. david: i'm curious about the services versus manufacturing issue. the yellow line is the services, which is taking up. which do you care about more? services is asay very important component of what's driving the economy -- manufacturing is about the trade wars and regulations.

is manufacturing cycle dominated by what's going on with the trade wars and what's going on in asia. you see across the pmi's for across the korea -- pmi's for singapore, korea -- this is happening in europe as well. the services sector has been stable, which is a sign that the domestic economy is holding up well. the manufacturing sector is starting to improve. financial conditions are now bottoming, they are showing a decent recovery, which should lead to higher manufacturing pmi's in germany. they are both moving in the right direction out. --t's right direction now they are both moving in the right direction now. alix: when you said you are looking at resynchronization of

growth, who is leading that? evan: it has to be china. china's weakness last year is what brought down the rest of the economy. it weighed a lot on germany and broader european exports. as china's stimulus takes effect -- we are finally starting to see it in this data. orders ist of the new taking up -- a component of that, new orders is picking up. that will filter through to europe, japan, broader emerging markets. david: if china bounces back, it will bring the rest of the world with it? evan: we've tried to take away the two extreme scenarios.

things in the u.s. look ok. mark: the fed has pulled everything back. they are trying to help the economy. the focus for the rest of the world is what happens in china. you think about how risk markets are priced, if we look at where msci was at the end of last year, and was pricing in a wasal recession -- it pricing in a global recession. europe will come along with that. the u.s. looks less exceptional in that world. alix: you agree? weakerd dollar? -- dollar? where g10 and emerging-market drivers emerge.

we are borrowing in all g10. , thed half of the year euro looks much more positive because we need more volatility in the europe. many of the economic data are backward looking. where do you reduce it down? is pmi in china the key number? evan: pmi is very important if you want to be tracking the leading indicators. it is credit creation in china. we had a big bounce in credit creation in january. difficult to track those. chinese new year tends to distort these numbers. it seems to be moving in the right direction. look at broad and social financing in china. that leads to the hard data in chinese economic growth. statemany are calling the

goldilocks. that or ise with that complacency? >> goldilocks was 2017 when you had global growth accelerating and inflation low. alix: is it goldilocks enough to have the search for yield come back into play? >> yes. it is a better environment for acceleration and equity performance. itwouldn't quite call goldilocks because it is just a stabilization of growth. david: msci says it is credit creation -- doesn't matter what the credit is created for?

we've had a lot of questionable situations in china. at what theo look credit is going for? credit, theof the new credit that is being allocated is trying to go through the private sector. that comes with lower productivity, but you are trying to scale it out to more people. the credit creation now seems to be more focused on the private sector. it doesn't seem like things are moving in the right direction -- it does seem like things are moving in the right direction. evan: we like to keep a decent amount of cash. in general, we are modestly overweight equities because we think the global economy is

healing. we want to leave enough dry powder in case we are wrong about china. there's a different type of support -- if we don't get the reflation, you could see earnings downgrades continue. we want to keep some cash available. we are there to buy in q4. alix: thank you so much, mark mccormick and evan brown. david: coming up, wall street heavyweights charged in a college admission scandal that is sweeping the nation. this is bloomberg. ♪

viviana: this is "bloomberg daybreak."coming up ohio,blican senator of rob portman. in private talks in the u.s., opec is spendin sending a messaf washington passes legislation to target shaley will production. that would cause oil prices to crash. more revelations about larry page from documents and emails worried he would lose control of the company in 2011.

he delivered a veiled threat to quit over the issue. schmidtrin and eric would sell special voting stocks. pg&e will not face criminal for the wildfires in 2017. the equipment caused numerous say itbut prosecutors would be too difficult to prove criminal negligence. david: criminal negligence is a high standard. it is wanton disregard that you have to prove. alix: they are still liable. david: strictly liable. civilly, but not criminally. alix: we turn now to wall street beat. first up, operation varsity

blues. heavyweights and lawyers charged in a college admissions scandal that is sweeping the nation. should the german lender merge with commerzbank? move over, no fee investing. paying customers to invest -- david: joining us now, the lisa abramowicz. it cannot bell, over emphasized, the idea of just how widely spread this was. this involved admissions directors of colleges that were the gatekeepers to get the best and brightest, athletic coaches,

prominent people on wall street, the head of social conscious investing -- someone and william tasked with going out and getting money and putting it towards socially good uses. streeta prominent wall -- a big heavy hitter. also the hercules capital ceo. the stock price went down on the news. lisa: it raises the question of how many stereotypes are true -- these top name colleges are for the most connected among us. this edifies the stereotype, the fear in markets that people at the top can solidify their place there again and again.

alix: that comes back to our world -- it's about income inequality and wealth inequality and how you fix that. jay powell spoke about this income inequality and education a few months ago. >> we want prosperity to be widely shared. we need policies to make that happen. education always comes up. we pride ourselves on being a country where you can go from the bottom to the top. if you look at the numbers and where the chances that someone can go from the bottom to the top, the u.s. lags in mobility. alix: irrespective of this kind of thing. david: it certainly doesn't help it one bit. how much of it is the fed plus fault -- the fed's fault?

we flooded the world with capital. that capital stock to the top -- stuck to the top. lisa: a lot of people on main street aren't going to invest in the stock market and benefit from the gains we've seen. it does emphasize those points. alix: the fed had nothing to do with your kid not being smart enough to get into the college you wanted them to get into. , if you had a merger with commerzbank -- 30,000 positions could be lost. the oversight body says we don't like that. >> this is the problem with the german banking system. every single region has a bank -- the elected officials don't

want to put it out of business because they want to cater to their constituents. country -- itbank is an over bank country and these banks are suffering as a result -- it is and over bank ed country and these banks are suffering as a result -- it is country and these banks are suffering as a result. how long can deutsche bank trip along here while the rumors swirl? they have to make a move. time is ticking here. there will be negative

fees -- >> this is a gimmick by soft financial. etf --ve won $10 million on $10 million etf. they are offering investors $.50 -- at that1000 point, everybody will get a car. crazy theow competition for etf's can get. and how completely unsustainable the says. -- this is. alix: zero fees hasn't been working. david: they go into other funds and things. alix: people are smart. i will go in and get the freebie. this highlights how much asset management is going to

shift to other types of services beyond managing assets. laggard,ve the etf it's all the other services, bank accounts, personal loans, securities lending that will generate enough revenues to pay the people to make the firm continue -- david: cross-selling. it worked for wells fargo, did th didn't it? democrat or republican lawmakers disagree on a lot of things -- one thing they agree on, wells fargo. this is bloomberg. ♪

david: wells fargo ceo tim sloan appeared yesterday before maxine

waters and the house finance committee -- they really beat him up. listen to one of the republicans. >> would you give us that assurance that you would follow the letter of the regulators consent decree? >> we will do our best -- >> is this the end of scandals at wells? will we have another hearing about this? >> i can't control the media. david: it's the media's fault. congressmanpublican really giving tim sloan a tough time. he goes out of that tough hearing and almost immediately, the occ comes up with this email statement. we continue to be disappointed

with wells fargo bank and their inability to affect corporate governance. the regulators saying we are not happy with the job you are doing, either. alix: there was a great article --ut the sales pressure that's a general you have to meet these goals. goals go up as they have more trouble. alix: 235 for the end of the year.n the tenur 10 this is bloomberg. ♪

alix: brexit's next bombshell. the next vote after theresa

may's plan suffered its final defeat. german factory orders disappoint. boeing crisis. the world races to ground the 737 max 8 aircraft. ted cruz adds to the growing congressional course for a temporary grounding of the for aft -- chorus temporary grounding of the aircraft. a lot of important interviews. alix: there has been -- i didn't hear of any bribes, though, to get their kids into texas university. million -- this is all according to the indictment. -- these, 30 parents institutions, very prestigious. alix: someone was wearing a

wire. they have a recording -- david: there was a man indicted in newport -- he said this is the way rich people get their kids into school. alix: the donating money didn't surprise me at all. david: i'm the chair of a private school. we don't do that. alix: i know of one that is the act's. faking your kids' how does that help your kids? david: the high school he went ,o didn't have a football team but they recruited him as a kicker. alix: that put your kid in a really good spot. go to class, be smart. david: what are you teaching your children in terms of values?

alix: s&p futures up eight points. cable up .6%. brexitars a no hard being priced into the market. yields up by two basis points. you did hit the lowest level of the year for 10 year yield. a good read through for inflation. crude up over 1%. 12 million barrels of oil -- david: theresa may is back before parliament today. we are seeing the opposition saying we just heard theresa may hoarse --he is so it's amazing. she was just speaking, doing her very best.

how do they pick up the pace of that -- pieces of that brexit plan? joining us now, emma ross thomas and maria tadeo. you instigated this, emma ross thomas. where do we go from here? why delay? >> that's the question the eu is asking. how will this help? tonight, we are expecting the lawmakers to take the option of no deal off the table. will push for an extension. the best case is parliament will force me to adopt soft brexit to maintain close ties to that you. -- to the eu. today, there's amendments kicking around. for, athem to watch out

plan be compromise for brexit the tories are getting behind. compromise. that would enrage the eu quite a lot. they've already rejected it. yet, once again, the tory party is trying to have negotiations their own way. david: we heard from lord mendelson earlier today. even if they ask for an extension, if there is no guarantee that you will go along with it -- the eu will go along with it -- >> they would say yes to an byension as long as it ended may 23. in the new deal, an extension could go to may 23. looking beyond may 23, there's

more to be negotiated. the eu 27 are pretty divided on how long the extension should be . an extension of two years would be unacceptable. the markets are very sensitive to the length of the extension. that is something we will need to get more clarity on. is we moment, the eu line are stepping up preparations, no negotiations are on the card. they are standing very from here. may beenresa will reject nohe deal. over on the european side, should parliament delay the vote, they will need eu approval. extend these

discussions because the -- wesion on article 50 have the withdrawal agreement. it is there. alix: how firm is that no? >> right now, it is very firm. the tone in brussels is bleak. inre's no positive majority the u.k. parliament. there is nothing the eu can put on the table. today, we have michel barnier sing this is done -- saying this is done. now, you need to take no deal very seriously, step up no deal preparations.

the chance that the u.k. crashes has risen in the eyes of the eu. alix: joining us on set, matthew hornbach. can you look at the u.k. in relation to the rest of the economic world or is this totally on its own now? matt: i don't think it's on its own. when prices go up, so treasury prices. there's some correlation with the rest of the global bond market. ultimately, this is one of the three pillars as to why the fed pivoted in january. global growth is a key factor for the government bond markets globally. david: specifically brexit. we heard jay powell on sunday say u.s. growth is good but he's concerned about china, the euro and brexit. drag onextent is that a

global growth? matt: the focus of investors we speak with is more on china and europe more broadly. tople are focusing on brexit the extent that it matters -- if there is this extension, that extends the uncertainty. focus in thehe macro investor community continues to be on china and how europe responds to any stimulus in china. alix: we did wind up getting better industrial output in europe. what is the strategy for european bonds? it's from our perspective, a bit too risky to be an outright short. the way we are recommending investors play this dynamic is to be underweight duration in .urope

and then the overweight duration in the united states. that spread is likely to compress and 2019 -- in 2019. alix: because the 10-year will come down? matt: initially, we thought u.s. interest rates would range trade somewhere around 275. then we have interest rates outside the u.s. move higher. the dynamic has shifted slightly. now, there's a bit of price action on both sides. forecast is 50 basis points for the german bund. we also have u.s. 10 year yield coming down 2.35%. ofid: matthew hornbach morgan stanley will be sticking with us.

has the options to raise tariffs on china on the table. rob portman will be joining us next. this is bloomberg. ♪

david: robert lighthizer appeared before the senate finance committee yesterday and said although the u.s. is making headway in its trade talks with china, there was more left to be done. increased tariffs remain a possibility. we welcome one of the senators before whom robert lighthizer appeared -- senator rob of ohio -- rob portman of ohio.

there talking with robert lighthizer. how did you take what he had to say? are we there yet? are we there yet on the china trade deal? what would you say to the markets? >> just relax. i think we are in a good position right now. we've made progress. addressing the trade imbalance itself -- there was talk of china buying u.s. soybeans, lng. second, talk about the ip issue, which is how this all started, intellectual property and the fact that the chinese have acquired joint licensure agreements, stealing intellectual property. many countries around the

trading countries agree with that. issue.s the subsidies that may be the toughest one. the chinese government subsidizes their production or exports directly. he's a tough negotiator. yesterday, he said we are keeping this option open of increasing the tariffs. the chinese government realizes that. they know they have to come through with something that is more equitable, more fair. david: the chinese have tended to be tough negotiators in their own way as well. do you have any indications at this point that the chinese might be willing to make some substantive changes on things like intellectual property? >> i don't think lighthizer will

close the deal without that. good news already with them buying more of our exports -- some relatively good reports from the meetings that took place in washington the week before last. will be between the two presidents. they won't meet unless there's something positive to report. bit on timingm a yesterday. there needs to be a sense of urgency on the part of the chinese government to come to an agreement here. david: i want to touch on the agency on nafta -- a lot of people are concerned about what happens with the deal. >> it's an agreement that is an

improvement over the existing nafta. day, it likelyhe passes. look atcrats, when you the changes relative to the existing nafta agreement, is positive. -- it is positive. there were no labor or environmental standards. than the lot better status quo. --hoping is this gets done and probably won't get done until we resolve the 232 issue. we need to negotiate something there. my hope is we can talk more about that. the canadians and mexicans will have a difficult time ratifying the agreement until we resolve that issue. david: we now have a budget

request coming from the administration. we talked with chairman yarmuth yesterday. he said it is an aggressive ask -- you will have an important role in deciding where that ends up. what do you like? >> budgets are a blueprint. budgets. put together there are good parts and bad parts. there's some, spending restraint. they funded some interesting programs -- one is the jobs act. it is bipartisan, very simple. it says we should allow pell be used for short-term training programs.

interesting, innovative program. other things i don't like so much, the great lakes restoration initiative. been an effective public-private partnership -- that is working. you pick and choose, i suppose. y, the end of the da congress will write the budget -- david: senator rob portman of ohio. countriesng up, more grounded flights of the boeing .37 max 8 this is bloomberg. ♪

david: time for the bottom line.

today, we are focused on one company -- boeing. more and more countries are grounding the 737 max 8. joining us now, brooke sutherland and james hall, the former ntsb chairman. so much focus is being placed on the faa, the only regulator that has not grounded the 737 max 8's. why are they on their own? >> i have no idea. it's a huge mistake for boeing and the federal administration. it sends the wrong message to the world concerning aviation safety and our interest in maintaining our leadership on that issue. david: one of the things we , there were cuts to the faa budget -- is there any possible link between less

funding for the faa and these safety problems? >> of course there is. look at the change in the budget to the certification makers of the aircraft -- you had the problems with the 787. now the problems with this model. you can draw the dots and see that boeing has lobbied hard to put themselves in control of their own destiny. they are not doing a good job on aviation safety. alix: when it comes to the analyst take -- in some respects, that is reflected in the credit market, not the equity market for boeing. one, you saw norwegian saying theye out, are looking for boeing to step up and compensate them for that

loss of revenue. you will see other airlines follow suit. the other issue is whether you see orders canceled. evaluateing they will their orders and weigh the outcomes of the investigation. that is the watch item for investors as well as what happens with boeing's backlog. they need to be more proactive and more out in front of this. they shouldn't let the faa fight this battle for them. well, the faa says it worthy -- it would be better to be more conservative forthright. experience, how long will it take to know what

caused these crashes? >> boeing is working on it right now. they said they had a computer fixed before they were working on a computer fixed before the ethiopian accident. the transportation ability tothe faa's oversee a company as large as boeing. those are questions that are in doubt now as a result of the actions taken by boeing and the faa on this matter. alix: it also feels like china is gaining influence as well. surpassel there will the u.s. in the next few years anyway. >> i don't know. byis certainly an exit boeing and the faa on leadership in aviation safety.

wouldn't you think you knew there was a problem with a fix,ter that you needed to you would ground the aircraft until you knew it was safe? we grounded the 787 on the battery issue. irresponsible. david: this model of aircraft is very important for boeing. boeing is very important for the sector. did ground the 787 and there were a lot of doomsday predictions at the time. 787 delivery surpassed the target they were looking at. i don't think it's the end of the world if you were to take a

more conservative stance. thisr as knock on effects, has been the position of strength for the industrial sector. aviation has been a growth driver. if you start to see a hit to the boeing backlog, that could way across the sector -- weigh across the sector. david: later, we will have the dreamliner,nded the ray lahood. you have price, pressures. this is bloomberg. ♪

alix: i am alix steel just moments away from the latest inflation rate in the u.s.. equity futures pointing to a higher open. european stocks again in the green.

in other asset classes, looking at cable rates. theresa may saying the government will ensure the u.k. is ready for a no deal scenario and the u.k. will only accept a divorce agreement in full, telling her party line. gilt still under pressure. inflation dropping. basis, comingear in at 2.5%. lighter than estimates. a month by month asus lighter .2%.estimate -- basis, up durable goods surprising to the upside, .4%. if you back out transportation, that turning negative. airplanes that have put it into the positive on the durable goods. alix: it helps the boeing news then. david: it not change the

year-over-year overall, but it did if you exclude food and energy numbers. alix: new orders for durable goods if you back out transportation fell. it is little bit mixed when it comes to that data point. rhame and is lara matt hornbach of morgan stanley still with us. is this a goldilocks number? knew i think we all january was going to be a month where a lot of uncertainty because of the shutdown. they were probably holding up some of these larger orders. it is not surprising it is relatively mixed number. the markets remain in a holding pattern because we had the payroll number that was not terribly good. we are still seeing some of the confidence indicators, the pmi,

the consumer confidence numbers mixed. we're also trying to get through the date of blackout period and wait for real guidance. inflation is not giving much guidance. the fed has been clear they are holding off until they see inflation data that warrants a move and it will cause us to wait for something to break on the inflation. david: you and your team of done a careful analysis of growth for the united states and inflation. to these numbers fit within your model? do they make you change it if your estimates? focusone of the things we on is what is going on with health care pti as well as financial services. those feet into the pce numbers. we cannot see them on the terminal, but that will be something our economist will look at. even looking at the headlines, this is certainly not in line with where are projecting inflation to go. 2.3%,e core pce ending at that is up significantly.

core pce is heading in the wrong direction. from our perspective, you will have to have upside in inflation to get the fed interested in hiking rates. these numbers do not suggest that is happening. flipside, dr. he for business equipment were up in january by the most -- factory orders for business equipment were up in january for the most in six months. are we in a situation where we could surprise to the upside if the data is firm enough? lara: i think that could happen. we can to get way too pessimistic or optimistic. i'm looking at the atlantic now cast for the first quarter has 0.5.h at 0.3 or i think our economy does develop momentum. we did get that disappointing payroll number.

overall, the labor market continues to look healthy. income gains are there, i think there's a lot of room for our economy to settle in at a more sustainable 2% growth. to continue to grow at a rate surprising the big downside expectations. you are above 2% for the united states? year know, for the entire are economists are at 1.7%. we have inflation a little bit higher. our economist believe growth will end the year below potential. in the first half of the year we looking at 1.4% growth, but in the second half that ratchets up to 2.1%. is that the consumer -- david: is that the consumer driving that? matt: it is the rebound you would expect after the government shutdown.

there is also upside potential saying we are underpricing any sort of good news. how does that meld with your 2.35% on the 10 year? matt: thanks for giving me press on that. we see it as a reasonable number. especially if you're a situation the second half of the year where growth gets back to potential and the fed hikes interest rates. that is not a combination we think broader risk markets are going to appreciate. remember in 2018 when the fed was hiking interest rates, growth was 75 to 100 basis points above potential, giving the fed lots of scope to raise interest rates. if we get the bounce in the economy back to a rate of growth and the fed reacts by starting to raise rates, our financial markets going to appreciate that? we do not see it. is the fed saying we will get out of the game unless you play? lara: the fed is in a world

where they are almost targeting financial conditions more than interest rates. it is interesting, the full forecast. if we are seeing pce rise, that is higher than it is now. the 10 year matching inflation speaks to me that real returns will remain limited. that will be the real challenge as we navigate markets. i do not know that we will see the massive equity run-up from here and what you do on the fixed income side? it is a world where we continue to see returns very limited, especially in that fixed income bucket. fair, which is why it the reach for yield is still front and center. is that the right way to look at it? lara: i think so, but you'll have to manage that volatility. as i look out over the range of forecast i see from all of my colleagues on wall street, volatility is the top of

everybody's list right now. we've had an easy first couple of months of the year. it has made us all complacent. alix: lara rhame of exit investment and net cord back of morgan stanley, pressure to have both of you. hurtado is here with first word news. viviana: the u.s. is doubling down on the safety of the boeing 737 max after that crash. safety administrators reiterating they see no safety issue with the jet despite deadly crashes. they say they will take action necessary. countries have temporarily taken the 737 max out of service. today paul manafort facing another sentencing in federal court, this time in washington, d.c., where he pleaded guilty to two conspiracy counts. he could get up to five years for each count. last year sympathetic judge gave them less than four years.

he could've gotten 24. a new report says kim jong-un's regime is using global banks to undermine yuan sanctions. the yuan says the banks facilitate the transfer of funds . jpmorgan is one of the banks named. global news -- 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. alix: we're going to update you on headlines about brexit. theresa may saying the government will ensure the u.k. is ready for a no deal scenario. she is still speaking in parliament. david, angela merkel seems to want to do a deal. david: she says there is still joint interest. she says brexit options are diminishing. i do not know there were many to

begin with. there are even less now. she wants to do something but she is not sure how it can get done. alix: nonetheless, you still have sterling up .6%. unbelievable. david: i do not think people really believe they are leaving. the market say we do not believe you. alix: theresa may horse with passion. -- hoarse with passion. coming up we will talk about the biggest risk in the oil market. this is bloomberg. >> you can see a tightening of the market. the u.s. has to make decisions whether to extend sanctions to iran or not. all of these things can make a volatile year. ♪

viviana: coming up later on bloomberg markets, mike wells, prudential ceo. alix: time for follow the lead, a deep dive into stories making headlines and moving markets. the insights from industry veterans and insiders. we take a look at the risk in the oil market. i spoke to -- he said geopolitical uncertainties are the biggest unknown. >> we made a purchase of the bhp assets in the u.s. -- because of a little bottleneck in the permian we will focus on the eaglefort. we are going to be investing in the permian but we will get the bottlenecks going and then study it. we have big plans for the permian.

not yet to be will make a projection. alix: do you feel the numbers like chevron/exxon are throwing out like growth of one million barrels a day are right? their investments are bigger in the permian but it sounds right at the right price of oil and the cost structure. things were to stay where they are today, i would say that is very possible. if the price of oil drops, that it is a different matter. no reason to think either one will happen. your forecast, i'm sure they sharpen their pencils well and probably told ted what sort of price structure they wanted. alix: what is the range you like? i thinkhe permian, breakeven costs will come down $40 a barrel for those that have the scare of operations with the company certainly do. place.ot a perfect

there are good spots in less good spots and thicker spots and it depends on where your acreages. technology is moving fast. production will rise as long as the oil prices stay in that window. we plan bp $50 to $65 a barrel. we have lots to do allow the world but we will remain disciplined. $10 billion in the permian is a big step for us. more pressure,t but you need to scale up even more? >> we will remain within the discipline. we will not open up the checkbook and do things large-scale. in the future, there's a lot of industrial. you know the permian's checkerboard it with acreage. we have every other one in some predict there will be consolidation swapping and more efficiency put in. alix: what is the biggest risk easy for the oil market today? >> there is uncertainty with the

obvious geopolitical uncertainty. venezuela is a human tragedy. you can feel a tightening of the market. make decisions on whether to extend the sanctions to iran or not. all of those things could make it a volatile year. if things stand the way they are now, we end up in this fairway of 60 to 65. it might be 50 to 70 and that is healthy for the oil industry. i do not know. you can never predict the price of oil. alix: because you are bp, even if you be in development mode for the permian, how confident are you you can handle volatility and not have to scale back? billion --ion to $17 we will probably invest $2 billion in onshore on the u.s.. we have lots of levers to pull.

we will not be in the middle of big projects. in some ways, the permian and u.s. shale give you throttle as they are slower. other big projects might not let you do. alix: that was part of my interview with bob dudley, bp ceo. i felt the volatility question is germane to the big oil coming in to us shale. if you are private or small producer, you cannot handle the volatility. if your caps on or bp, you can absolutely handle the volatility. david: or chevron. your big balance sheet and can afford to do that. it is different from the startups. one thing that stuck me in your interview, u.s. producers seem to be concentrating on shale, particularly in the permian. they're giving up on stuff around the world. alix: which is interesting because there was a note out from jpmorgan saying lazy returns from deepwater better

than that of u.s. shale. barrel whenbe $40 a it comes to deepwater. the differences the cycle. for u.s. shale you can get the money right away. for deepwater you might not get paid back for years. that is the distinction in the market. at what point do you cannibalize your own returns? david: which we talked about with the chevron ceo. they like it because they get a short return on shale. what happens after that? -- my interview with shells integrated gas and energy director, made a lot of news that shall wants to be the biggest power player in the world in 20 30's. stay tuned for that tomorrow. in the meantime we have breaking news. david: the chancellor of the

exchequer has been delivering his statement. this is something theresa may have been forecast. borrowing is lower than forecast. real wage growth in every year of their forecast. 2020 gdpprojecting growth of 1.4% and 2019, 1 .2%. he is saying they are in better situations fiscally than they were in october when he last reported. this is something theresa may was saying earlier when she was talking about the brexit. she said you will see we have more money to play with than we thought. alix: and markets go nowhere on that. cable still holding onto the highs of the session and gilt selling off yield by two basis points. ethiopian airlines says it will send the black boxes from the march 10 crash over to europe. we will have more on questions of the airworthiness of boeing 737 max with bob crandall,

former american airlines chairman and ceo. this is bloomberg. ♪

alix: ethiopian airlines says the black box for the 737 max will be sent to europe. joining as his bob crandall, former american airlines president and ceo. a real pressure -- real pleasure to talk to you. if you are running boeing, what would you do right now? bob: i would be absolutely sure everything i said publicly was absolutely true. i suspect that is what they are doing. alix: there has been some pressure on the faa for example, and also for going to say we are going to ground them now and find out the problem. we spoke to jim hall, former head of ntsb. here's what he had to say. onwe grounded the aircraft the 797 over the battery issue

and there was not a crash or any fatalities. i think this is irresponsible actions at the top of going and -- of boeing and faa. alix: what do you think? bob: i think that is irresponsible on his part. one of the things you find out if you've been around aviation is that it takes a long time to figure out what has gone wrong. there are four groups that no virtually everything there is to know about this airplane -- boeing knows all about it, the faa knows all about it, the airlines that operated know about it, and perhaps most important of all, the pilots know all about it. i do not know whether these accidents are late or not, but i hear all four of those groups, and most notably the pilot unions, saying we believe the airplane is perfectly safe and

we have no reluctance about flying it. airplane,und the money will be lost and there will be some inconvenience. neither one of those is an earth shattering event. no airline will fly airplane it does not think it is safe to avoid losing money. hand,k on the other everybody associated with aviation needs to understand we want to have absolute safety. we want to wait long enough before we act to get a reasonable understanding of what the facts are. we have not waited long enough. those who know the most are telling us the airplane is safe. if i was going to have a flight this afternoon or one of my children or grandchildren was going to take a flight on this airplane, i would not hesitate. david: it makes it so no airline will fly a plane it does not

think is safe. there's a different from being safe to being certain it is not safe. i want to go to jim murphy on the tylenol scare. a nationwidehe won tv and said i'm taking all the tylenol off-the-shelf. i do not know what is wrong but your safety is paramount. why doesn't that -- that represent something we should be considering at boeing. bob: i've -- i believe the answer is that if going at any -- if boeing had any notion there was some deficiency with the airplane or a deficiency with the software or a circumstance that a competent pilot cannot deal with, i think they would ground the airplane. i think the faa would and american airlines would in the pilots would say we do not want to fly. none of those things has happened. alix: have you ever seen a where youlike this

get so many groundings based on speculation and you get wanting conversation, the regional airlines threat to cancel their backlog order without the facts from the faa? bob: no. this is a completely unique situation. i am surprised by it. i am surprised that around the are groundingnts this entire fleet. unlike a unique -- is things that have happened in the past. looking at it, i am astonished by it. david: one of the things that has been raise this morning on this program is the faa has less funding than it used to and has got to self certification for aircraft manufacturers. is that something that should give us any pause? bob: i do not like the fact that the dot and the faa have

reportedly been less active in the last two or three years then historically. if you look at the wall street journal this morning, there is a long article on that subject, that the dot has been less active, materially less active in recent years than it has in years past. that is troublesome and that should be rectified. alix: great to get your perspective. thanks for joining us. bob crandall, former american airlines ceo. we will have the secretary of transportation. alix: a great voice to hear from. , bloomberg markets -- the open with jonathan ferro. this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪ jonathan: coming up, the

never-ending brexit story. parliament considering leaving without a deal. warnings piling up about the u.s. debt buildup. treasury market sewing few signs 737tress and the boeing groundings spreading. 30 minutes from the opening bell. good morning. futures positive by .2%. we could make it three days of gains. in the fx market the euro is stable. the outperformance in g10 coming from sterling. that is where we begin this morning, with our top story, the rising cost of the brexit delay. >> we do need to move to call for an extension. >> an extension. >> what we need to see in that extension is a credible plan. >> the european union is not going to want to sit black and watch this drift inexorably onward. >>