manus: our top stories this morning. and a newweek, bloomberg survey says the current cycle of rate hikes ending after one more increase this year. the s&p 500 had its best week. backmps are asked to theresa may's brexit deal. a chancellor says brexiteers face a long delay unless they support the plan. saudi arabia says balancing the oil market is nowhere near complete, and urges opec and allies to do whatever is needed. we are live at the oil summit. finally throwsnk in the towel on years of

turnaround efforts, and agrees to begin merger talks. the german government is said to have signaled it will accept job cuts. ♪ manus: it has just gone 9:00 a.m. across the emirates. this is "bloomberg daybreak: middle east." i'm manus cranny in abu dhabi. twop big things, deals and differences. .rent is slipping it is almost like robert frost, to ride stud -- two roads diverging. the russians want to hold their cards close to their chest. but the kingdom of saudi arabia comes out saying, nowhere near complete. oil slips as there is a lack of consensus. annmarie hordern is chasing

that. the global market map, the dollar is generally down. slightly more risk on. the author -- the house he dollar is up -- the aussie dollar is up. ofks are playing a full hand benevolence to markets. as the driving risk on view is the chinese are not done in terms of their support. the yuan is higher in the ruby is slightly higher. deborah is setting your agenda with the first witness. >> the new zealand government has made what is being described as principled decisions about god must after friday's mass shooting at christchurch that left 50 people dead. firearms thated the attacker could own because he had a category a gun license. the prime minister has questioned why such weapons are available legally. saudi arabia says opec and its allies' job is nowhere near

complete. fans as the parties will do whatever it takes to balance markets. the cartel an independent producers are meeting, and alexander novak told bloomberg it is too early to discuss an extension of output cuts. >> i think it makes much more sense to start discussing this june whenay or we have more clarity on the state of the markets. the department of transportation is said to be investigating the faa's approval of the boeing 737 max plane. it focuses on a safety system implicated in the lion air crash in indonesia. and he shut -- initial data from the ethiopian airlines boxes are believed to have similarities. in hong kong are facing disruptions after a

subway train collided with another carriage during overnight testing. two of the busiest lines has been closed. a local newspaper says the crash happened during checks on a new signal system. two drivers were taken to the hospital with minor injuries. global news, 24 hours a day on air and tic-toc on twitter, and powered by more than 2700 journalists and analysts in 120 countries. i'm debra mao. this is bloomberg. much. thank you very we have a new bloomberg servlet -- survey. the current rate hikes to come to an end after one more increase in september. that would leave the cycle at the upper end of the target range at 2.75%. the survey expected two hikes this year, with the cycle peaking at 3.25%. with the recent dovish pivot, it has shown its mark. the s&p 500 staged its biggest

rally of the year, and money flowed into equity funds more than at any time in the past 12 months. we get the new latest rate decision on wednesday. host.e our guest good to see you this morning. what goes through my mind is this. , in terms of a message, or is it benevolence from central bank balance sheet adjustment? likely the fedst will make an adjustment to the dots. that would not be any great surprise in the context of the last couple of months, when you see the progressive increase in this dovish commentary from fed officials. the inference would seem to be that previously the fed has been indicating two rate hikes in 2019.

the more likely outcome will be that they will anticipate just one rate hike in 2019, probably sometime towards the end of the year, and that will probably be the end of the cycle. manus: what does two year yields below fed funds indicate to you? what does 10-year paper being does the neutral rate, that indicate you should be more concerned about the economic growth, or just that is global risk protection? tim: i think a bit of both. i think growth has slipped in the first quarter in the u.s., and i think that is indicative of where the market is in terms of pricing yields. there has been a certain suggestion that the u.s. might be heading back toward recession. i think it is premature to think that yet. i don't think we are indicating that a recession is imminent in the united states, but i think

there is caution about u.s. growth. growth may come in at about 1.5%. there is also a degree of risk aversion globally. the trade issue has been about dominance this year, and there is plenty of others in europe, economicit and the climate across other parts of the world also under pressure. i think it is a mixture of factors. manus: when you talk about risk aversion, i suppose it depends what asset class you look at. the best rally in four months. notty markets are necessarily in the risk aversion camp, which is contrary to what you just said. tim: i am not sure equity markets reflect that risk aversion at a time when central

banks are signaling pretty consistently that they are stepping back from any tightening measures in 2019. i think the equity markets are reflecting that optimism from the dovish messages, first of all from the federal reserve, but other central banks adding that to the chorus from europe to the u.k. and other parts of the world as well. i think the equity market reflects the likelihood that it remains ample. i think that has been proven the last several years and allowed the equities to remain buoyant. manus: i think i referred to it as a moment of bliss, like chocolate produced by a swiss chocolate maker. let me make a monetary theory. dangers it creates zones, we could see spiraling inflation. i have that tim fox voice on modest monetary theory.

can we print ourselves into oblivion? tim: i think inflation is certainly not an issue over the short-term. i think markets have gotten used to the idea of central banks getting ahead of the curve and they don't need to be concerned inflation, and certainly printing more money for quantitative easing has not given rise to the inflation it might have done in the past. i think the world and policymakers are getting used to a new climate, a new landscape of monetary policy, one in which it needs to be less required. perhaps as a message from central bankers, it has orders to have growth rising, and --ernments need to take more be in the driving seat more to produce structural reforms to increase productivity. this is an issue i think we are moving more toward, that central

banks will probably take their foot off the controls and put more pressure on governments to do more in order to promote longer-term growth. manus: tell me this. i was looking at volatility with my last guest. talk about volatility in the fx markets, in the gtv library. there is a lack of capitalists with the mean reversion. there is a lack of necessity to go defensive at the moment. do you think volatility remains low because of global central banks stepping back to the dovish zone? tim: i think that is also one of fears that that the central banks usually have have not really rail -- really risen. markets take it well when they

have dovish messages. i think a lot of the other issues globally that we have been concerned about in recent months have not been either. incontinues to meander along terms of talks between the united states and china. it has not come to any sort of conclusion yet, likewise with brexit. that issue remains likely to continue for some time longer, but without any firm outcome for the time being. i think a lot of the concerns markets have had in addition to inflation have not been there. manus: thank you. you will stay with me. we will get into that favorite topic, brexit. pimm fox. still ahead, deutsche bank throws in the towel after years of turnaround effort, and agrees to begin merger talks with commerzbank. to back pressure mounts

theresa may's deal. brexiteers face a long delay unless they support the plan. this is bloomberg. ♪

manus: it is 9:15 a.m. in dubai. let's give you a quick snapshot. crude oil is falling because there is a lack of consensus coming. we have an record in on the ground. goldman sachs still has a $70 price tag on a barrel of brent. we will talk oil very shortly. debra mao is in hong kong and has your business flash. germany's biggest lender and its rival have confirmed they are in talks over a merger. deutsche bank and commerzbank ended months of speculation by

saying they are in contact, but say they will combine only if the deal makes economic sense. sources tell us the government may hold a stake in a lender that would avoid the german taxpayer being handed a likely lost. >> the outcome is open from these talks, and we will take time. it is more important to be thorough and detailed than quick. we us, it is also important, will remain a global bank with a strong position in its home market, germany, and europe. and maybe with commerzbank, we will be able to strengthen this position. approved aon has second hq campus near washington, d.c. the move is claimed to create jobs for the area come up with amazon winning subsidies of $50 million. countries across -- cities across the country competed. plans in queens were abandoned

after meeting resistance from local people and officials. raiseival lyft hopes to $2 billion as it launches its ipo roadshow. they are aiming for a market and ison of $25 billion due to set out the price range and number of shares it plans to market in an updated regulatory filing. beforell meet investors pricing on the nasdaq at the end of the month. that is your bloomberg business flash. manus: thank you for the roundup. theresa may is threatening to give up trying to get a brexit deal anytime soon, unless eurosceptics in her party back down and promised to vote for her deal this week. the british prime minister is still working to win support for her divorce agreement, but ministers say she will not bother putting this to a parliamentarian vote as planned, unless there is a chance it will be approved. a chancellor thanks more mps are

getting on board. >> what has happened since last tuesday is a significant number of colleagues, including some prominent ones who have gone public, have changed their view on this and decided that the unpalatableis so that day, on reflection among think the prime minister's deal is the best way to deliver brexit. manus: let's get to our rates and fx reporter. what are the near-term implications for sterling? we are wiggling free on the upside. if there is growing support for theresa may's plan? viewpoint, a brexit whether her plan gets past, if there is a third votes, it is debatable. it is quite a big swing. even if that does not get past, the can could get kicked down

the road and they could ask for an extension from the eu, which is a positive for those with the uncertainty of the no deal option. no matter what happens, it is positive from that viewpoint. the pound has gotten more to weather than the machinations of brexit. we have the bank of england meetings this week. it is looking for an escape. it is looking hard. david: the bank of england decision will be key indeed. it is under the assumption that the deadline is moved, and that helps the bank of england because it frees up uncertainty and the reaction function, and markets see how dovish or or hawkish they sound. . we have got some key data out this week.we have employment and

inflation data. if that comes in a strong when expected, the markets could be carneyhow hawkish sounds. manus: david, thank you very much, our fx and rates reporter on sterling fast -- sterling nasmachinations. this time, the brexit story is about give i'm ideal for the third time, or you will have a very long delay. is that the right threat? to be working to a certain extent. the negotiations over the weekend were that some tories were starting to get behind theresa may's deal. but it would probably take more than that to get it over the line, and most likely will also require support from opposition labor party as well --

opposition labour party as well. i don't know if they will achieve it this week. perhaps it needs a delay in order to get the troops around further. but at the same time, a lot of question marks about theresa may's position as prime minister. parliament at the moment is not in a mood or a position to back any kind of deal. i think there is very little support for anything that has been offered in recent weeks. was here in abu dhabi last night at the st. patrick's day event. there were a whole host of people in the audience and we were having conversations. they were clear. no deal brexit, hard brexit, is not off the table. it is still a live risk. agree or disagree? tim: there is a risk because the vote last week did not have the authority or power to insist on

a no deal brexit. as things stand, if there is not a deal struck this week and there is not an extension, more importantly, the 29th of march is still the deadline by which the u.k. will leave with or without a deal. so there is still a chance. a small chance, but a significant one. manus: very quickly, the pound. one could say it has an inflated sense of its own self-confidence, wiggling free on the upside. if we went into delay territory of brexit, what would that do to cable and eurosterling? what it print the consciousness of those who are long? tim: i think the delay prospect at face value, it looks attractive and the pound might respond initially positively. but it is what happens during that delay that could stand to disrupt any rally in the pound,

particularly if you are looking at the possibility of another general election. that is a possibility that is not fully considered. manus: as you say, that is another whole risk of a general election. it will be interesting to see which way the country turns as a result of these negotiations. great to get your input. chief economist at emirates nbd, tim fox. this is what we have stacked up for you. we have the u.s. very much in focus. it is said to be investigating how the boeing 737 max earned its wings. we have the latest next. this is bloomberg. ♪

the u.s. department of transportation is probing the faa's original approval of the

boeing 737 max 8 family. the report comes after an initial inspection of the ada reporters from the crashed ethiopian airlines jet is showing similarities with another crash five months ago. we are joined by our senior editor. what do we know about this probe, and what will they be looking at? reporter: bloomberg can confirm there has been a probe launched by the inspector general's office of the department of transportation into have the boeing 737 max aircraft fleet got approval. it is the second largest u.s. government contractor. it is an absolute beast in terms of capitol hill lobbying. you do not see many shops like boeing. but is boeing to good? did they get too close? there is a procedure by which sometimes the faa -- it is not the most resource rich sometimes.n

it will farm out part of its regulatory check works to the company itself, and they get a report back. the question is, did they farmout too much? was it entirely right or did it have serious errors, as some are saying it might have? there were some questions whether or not managers had pressured engineers to be a little bit too quick with the approval, too reliant on boeing. these are all things the inspector general's office and the department of transportation will look into over the next weeks or months. in addition to that, the u.s. congress is readying hearings on the matter. there will be a lot of scrutiny about the approval of the 737 max, this anti-stall system that was blamed in the lion air crash that may have contributed to the ethiopian crash. there will be a lot of scrutiny here coming up in the next weeks to months. manus: certainly both on capitol

hill and investigations. talk about the timeline briefly. how long could this process go on board, and where do we go next in the immediate? derek: i think weeks or months is the timeline. scrutiny is bearish in terms of the boeing getting its planes back in the sky quickly, but bullish if you are a u.s. regulator and are concerned that everyone from china to australia to europe does not believe you can't effectively regulate. given mind, after the faa said the planes are safe, all of those countries said we do not believe you. we will ground this anyway. the faa was one of the latest to the party. it has a lot of damage control to do here as well. manus: thank you very much. derek wallbank with the latest on the investigations. we are tracking that story across the day. course. staying the

saudi arabia urges oil producers to stick with the production curves, saying more work needs to be done. we hear from the man himself. ♪

manus: let's get straight to debra mao. >> theresa may is threatening to give up trying to get brexit done anytime soon. unless euro skeptics back down and vote for her deal this week. she is trying to bolster support for the bill. ministers say she will not put it to parliament unless there is a good chance it will be approved. rebel tories and the democratic unionist party later today. president trump has asked the gmc out to sell the automakers ohio plant or do something to get it working. the final car rolled off the production line on march 6 and

the line has remained idle. trump says gm has let the country down and that other car companies are coming to the u.s. in droves. fernandez has quit facebook after the site failed to prevent the livestreaming and repeated postings of the christchurch shootings. he said he had been the victim of many fake online stories. the new zealand prime minister says she plans to address the issue of livestreaming of the terror attack face directly. -- with facebook directly. weekend yellow vests protests in paris turned violent. 200 people were arrested. 80 storesncy says were damaged and looted. it was the 18th consecutive saturday of protests. president macron said strong action is needed.

global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's get over to juliette saly. juliette: we are seeing a pretty good vision coming through for asian equities. a rise of 0.7%. all eyes are going to be on the fed this week. we've also got other central banks in the region meeting as well. you can see china's csi 300 continuing that rally. we saw japanese exports falling again, really underscoring this weakening demand. in singapore, exports were better than expected. nonoil exports rising in february. when it comes to markets, electronics makers in japan leading the nikkei. indian stocks continue their

recent rally. continuing to hold at multi-month highs, also seeing foreign inflows once again. i was looking at the global market map. fed onll down to the pause? what is your take on the asian currency? >> the fed has a lot to do with the moves we are seeing coming through in em currencies. particularly as you see movement going into the rupee. you can see the rupee up by 0.4%. foreign inflows starting to help out that currency and the equity market in india. worth having a look at the south korean yuan. thes actually higher for first time in four sessions today up by 0.4%, snapping that

louse also as we see the north korea talks. the ringgit also getting a bid for the first time in four sessions. opec meeting about oil helping out that currency. the japanese yen a little weaker. that is that risk-off momentum. opec really dominating this week. thank you very much. the saudi energy minister says opec and its allies have much work to do to balance the global markets and insists parties will do whatever it takes. meanwhile, his russian

counterpart told bloomberg's annmarie hordern it is too early to begin discussing a course of action on production cuts for the second half of the year. >> i think it is too early to discuss what happens in the second half 2019. too little time has passed. months.een 2.5 there are too many uncertainties in the market today could affected either way. it makes much more sense to start discussing this topic in may or june when we have a lot more clarity on the state of the market. sometimeses have dragged their feet when it came to cuts. they have been more reluctant. is it going to be harder to get them on board? .> i would not agree

they are in conformity with the targets which have been voiced publicly at the end of last year and beginning of this year. they are fully on schedule with .he adjustment our companies have very good research departments. they are able to see the benefits of cooperation and stable markets. before we make any final we arens on the future, going together with the companies, discussed the pros and cons of continuing this format, and then we will make a decision. the decision will be impacted by

-- dictated by market needs. >> when will russia be 100% compliant implementing the cut? in regardsn schedule to the gradual reduction of production. this schedule calls for achieving the mentioned targets by the end of march, beginning of april. >> the u.s. president tweeted about prices, urging opec to cool off. are you hearing from other consumers any sort of concern or anxiety about oil prices getting too high? we hear from the same sources as you do, from the media. in regard to this, i believe currently the price is .cceptable for all parties acceptable to consumers and producers.

>> if we are balance at this moment, do you think there is any need to extend these cuts in june? >> we are balance at this moment in time, but i cannot say the same for any other time period. >> last year you talked about this range between 60 and 70. that is where brent is now. is russia still happy with that price range? >> we are consistent in our views. i can say again the $60 to $70 range seems except the bull the global economy. i can say at the same time, this is a price range which seems to suit consumers as well. they feel it is a healthy level. it allows us to maintain investment into the oil and gas sector. that was russia's energy minister.

two sides really of the oil. good to see you. you were listening to both. it seems there is a divergence. is that a fair way to assess the outcome? a little bit disappointing? agree.what, i would at the moment there is some strong momentum we see in oil prices, but certainly in terms of what the market was expecting, there is i'd divergence. >> to the biggest story, which is inclusion in saudi arabia, joining the great family. what i want to know from you is what we know of the story on the propensity for funds to flow in. i want to know what you identifies the biggest risk from

this inclusion moment for saudi arabia. >> i think for saudi arabia, the biggest risk -- i really don't see there being significant risks. there is certainly downside or some disadvantages that come with getting admission into a larger index. that means a lot of the diversification benefit saudi has enjoyed until now, meaning it is not strongly correlated to the rest of the global market universe. that will slowly dissipate over time. you should start to see greater correlation to the broader emerging market index and flows become more susceptible to the ins and outs of foreign institutions. the advantages of that outweigh the disadvantages. challenged you on our socks report earlier. -- stocks report earlier.

he said there are some that bigd have a -- could those names actually benefit, almost double up on the benefit from the inclusion? >> they disproportionately benefit versus the other names in the saudi market, and given that we've got a static approach to saudi's entry into the emerging market index, we would expect over the next 12 months to see gradual moments of support for these names, but i think our view for the index as a whole has been, given the fact that it is an expensive market, that the saudi economy is facing -- money coming into saudi arabia has to compete with china which is seeing an increase in a-shares inclusion. foreign appetite is not as

strong as we would like to have seen. the market overall will struggle to breach the 9000 level. overall upside is going to be capped at a proportionate level as well. >> you said bullish on ebit. the biggest week for inflows into the u.s. since 2014. how much more proportionately would you put to work in egypt relative to saudi, relative to dubai? >> for us, egypt is our favorite market. certainly more so than saudi. i think we have been disappointed at the level of foreign interest that has weakened over saudi and that is helping. the advantage that we feel is a multiyear recovery story, whereas with saudi arabia, it is

a window that lasts 12 months. egypt does become a more important market to look at, however, it suffers from low liquidity. seeing the number of equivalents asthe egypt index as far msci is concerned, pre-arab spring, there was a good 12 constituents, now is fairly three. the amount you can allocate to egypt is frankly quite difficult as a result, whereas saudi, being a much larger, more liquid market, it is easier to allocate to. performance wise, we definitely expect egypt outperform. dubai would be our lowest preference still. it is extremely cheap. it is unjustifiably cheap. we do not see any triggers for the near-term sustained recovery. nor do any of the points we look at that measure economic activity on the ground show any kind of meaningful change in recent months either.

thank you very much for your contributions this morning. homework, i'm back to a bullish note on divine. show, we aree going to take the pulse of the uae bank sector. we have had a rash of mergers. are there more to come? we are going to dig deeper. ♪

manus: the uae banking sector is experiencing mergers and consolidations. our next guest has run the ruler over the top 10 banks in the emirates. let's bring in the managing director and cohead of the middle east for alvarez and marshall. good to see you.

thank you for joining us this morning. you talk about the expenses eating away at return on equity. isthat ultimately what driving the consolidation story. >> thank you for having me. i think that's a very good point. the ends -- the expenses are one of the big reasons a lot of banks, frankly a lot of organizations would look at mergers. if i think of a bank, the fundamental cost would be around the operating consensus, around the cost of funding, and around the cost of risk. the larger the organization in theory, the better you will be able to get synergy to drive scale across all three of these. -- all three would be important.

>> you mentioned umb. they are in the process of merging. , my takend interesting away is scale absolutely matters for deposits. is that a fair estimate? or is that an anachronistic way to look at scale? >> i think there are two things that drive scale. two things that drive deposits. it is scale driven. linkedlso fundamentally to the bank's strategy and how the bank chooses to go about focusing on different parts of business. there are certain banks that are physically small but hidden above their belts in terms of how much deposits or loans they have. there are larger banks that should in theory have larger deposits, but they don't need that because they have other sources of funding.

scale should drive deposits, but it also depends on the state of the bank and the strategy. analystslot of our want to buy this bank, that bank , they talk about issues around turkey. out of all of them you are assessing, if we talk about the loan to deposit ratio falling, indicating excess liquidity and lower margins, who is most challenged? >> if i think about the banks and their performance, the one key indicator that we always like to look at his return on equity. anhink if we look across aggregate basis, on an industry basis it is healthy. the overall numbers are much higher than what you would see in the other developed markets.

there are a lot of variations between the different banks. what's important is to keep this very much in perspective. return of equity as a result of multiple things. it's linked to the strategy of the bank. some banks choose to take a riskier approach. times are good, the return on equity is very high. when times are not as good, the return equity takes a hit. if we look at what we have seen in our current report, what we see is banks are doing very well. was quitern on equity high. other banks have been more challenged. at inneed to be looked perspective on multiple cycles. not just as a single snapshot. trend ise other major

the poor housing market, the drop in houses, property values. from the bank side, should we expect 2019 to be a year of more provisioning and deteriorating? or are we in that cycle? we -- where are we in that cycle? collects if i look at the last 24 months, the elements you mentioned have been -- are now under control. about 24 months ago, cost of risk was high. this is right around 0.8%, which might sound small, but it's actually quite significant. if you look at the loan to deposit ratio at a bank, you will see continuous decline.

banks are retaining liquidity. they are lending left. not left, necessarily, but prudently. we expect to see this continue. oft we have seen is a lot what was going on last year has worked itself out. manus: great to have you on the show. a lot of different angles on the banks. cohead of middle east for alvarez and marshall. very latest on the banks from the middle east to the heart of europe. banking on a merger. talks withnk opens commerzbank after the turnaround plan fails. we are live to frankfurt next. this is bloomberg. ♪

manus: after months of informal talks and years of market value losses, germany's biggest banks have agreed to start discussions on a merger. bank and commerzbank could give wall street a run for its money. let's get to matt miller in france. what are the chances of an agreement? this is something that has long been speculated, and talks have informally gone on for months. they last talked about the possibility of a tie up in 2016. there are a lot of hurdles. the ecb is not for this kind of deal. neither is the local german regulator. a lot of analysts are skeptical about the possibility of success , putting two weak banks together does not necessarily

make a strong one. then there is the concern politically about firing up to 30,000 employees. remember when too big to fail was considered a bad thing? but her weot of time would get an official merger announcement. get anre we would official merger announcement. take years tod get efficiencies in. deutsche bank might need to raise capital. a great couple of points, especially on integration. deutsche bank is still integrating the postbank, a six mergern billion euro made 10 years ago. they are not finished. is the capital

raise. analysts are telling us it could take 8 billion euros of capital for deutsche bank to make this purchase. that's what it would be. a purchase of commerzbank by the larger rival. where will they get that capital? selling offs assets, of course. dws right now seems to be on the block. the equities asset management unit and elian's is said to be interested -- allianz is said to be interested. they would have to go back to shareholders. manus: i've already come up with the next set of stories. axel weber will be the chairman and sergio ermotti will go and run it. matt miller on the job in frankfurt. addition of daybreak middle east from dubai. from dubai, hong kong, and from

-- "daybreak europe" is up next. is there the appetite to give capital to deutsche bank? beautiful view of london this morning. ♪

nejra: from bloomberg's european headquarters, i'm nejra che -- we are live in frankfurt. mp's for anasks honorable compromise over frexit as the chancellor warns there deal unlessa skeptics back down. russia's alexander novak tells bloomberg it's too early to discuss an extension. we are live.

manus: we are live from london and abu dhabi. the dollar takes a little bit of a dip. the dollart changes, drops. 2-year note's are lower than the fed fund. the dollar is under pressure. ?s the fed setting the bar high have a look at the oil market. wherear bond yields are fed yields are. it is going to be a tough nut to crack. the oil market very much and focus. we will talk more about that with anne-marie. there is a less than cohesive voice from baku.

hesitant. little more two roads diverged in a yellow wood and someone has got to make a decision. we've got everything.. i think it is post-st. patrick's day excitement. anna: --nejra: i saw you tweeting about that. let's talk about equity markets. last week we saw the best week for equity since november. we could build on gains today. judging by these futures. the bond market telling a different story. a week and expected reading of u.s. industrial activity. a soft anti-manufacturing reading. to 16 upust gone above a basis point, but we did drop above260.ast week --

cable pretty much unchanged. week. a weekly gain last theresa may saying it's unlikely the vote is going to be put to parliament unless she is sure she can win. she is trying to get that deal over the line. from: certainly big moves politics to banks. deutsche bank, commerzbank have confirmed they are in merger talks. both banks have struggled to restore revenue growth for years . the german government is backing the consolidation. bloomberg understands they won't stand in the way of job cuts and cost cuts. editoromberg managing for europe joins us.

down here,ten prudence or desperation? what does this move say to you? >> i think a lot of people would say there is desperation in this . two struggling lenders, and the german government has played a key role in trying to smash these lenders together. that pushes being led by the german finance ministry. there were discussions we reported on that the bank said, forward, going to move we need the backing of the government for what could be massive job cuts. it could be as many as 30,000 job cuts in order for this to make sense for them. it's going to be difficult to push through. leaders haveabor key positions on supervisory boards of both of these banks. we have already had labor leaders come out yesterday

saying they do not back this proposal because of the job cuts. right now we are in preliminary talks. they say those talks will last four to six weeks. from there we will see whether there is going to be a merger of these lenders. >> good morning. as you say, some challenges ahead. one of the stumbling blocks in be job cuts. assuming this does go ahead, will it actually make the situation better at deutsche bank and commerzbank? critics say it may not. >> this is the million-dollar question. people who support this say bringing the lenders together will increase the revenue and scale. it does not actually get at the underlying problems. ultimately, one of their problems as the negative rate the ecb, which we saw a couple weeks ago that looks to be extended for some period of time.

ultimately it is very tough for either of these lenders to make money in the current market conditions we see. anna: thank you so much for joining us. bloomberg's managing editor for western europe. let's check on the markets in asia. happy monday. we are continuing to build on those gains we saw on friday, helped out by that global rally. stocks having their best week since november last week. you can see pretty much every major market closing higher or getting towards closing higher. 0.6 percentp by despite sluggish export data coming throughout japan today. export data out of singapore was pretty solid. ever grand looking quite good in the hong kong session of i-5 percent. 5%.ave seen -- up

have seen policy restrictions for the developers giving a boost to hong kong developers. also watching this pork producer . we have seen pork populations sliding due to the sliding. -- the swine. flu.e swine we see lessor -- less or fewer by these due to the global slowdown. days before the fed policymakers meet, the bond has collapsed. wednesday you are going to get the federal reserve expected to hold rates steady. investors are voicing concerns the decision may only spite -- stifle bonds further.

thank you for joining us. in terms of the fed on wednesday, richard, i started this morning, but it could be death by dot plot. what do you expect in terms of a shift? let's start there. >> it looks like the debate with one hikes, are there or no hikes this year? i think one hike this year, no hike next year. there is 12 years out. it is going to show similar to the ecb messaging that we are going to be here for a very long time. saying on the intro when it came to treasuries, falling within a hair's breadth of that 2017 low. low volatility may not be reflective of the fundamental.

do you see a catalyst to push fall higher this year? >> we are waiting for growth to pick back up and see if central bank will become overly accommodative. in've got a lot of pushback fx markets. that is taking a lot of the fallout in the rates markets. there is nothing that looks like it's going to shock us out of that in the near future. what should i be more disconcerted about? >> i don't think you need to be disconcerted. it is that move on the front end helping us to recover and get through a very soft patch in the data. you need to have the market leaning that way. the fed has ample scope to shift their messaging. at the end of the day, i don't think it's appropriate for the fed to cut rates.

if you look at the long end, that is a reflection of where global monetary policy is. -- 260 to 80 range 280 range. the dovish fed have the potential to -- the core u.s. market? >> i don't think so. there is a high hurdle for the fed to say something that would tremendously push us. the ecb felt that they were going to give the message to the markets that they were going to be very accommodative and spooked the market, what do you know that we don't know? the fed having seen the market is already priced over this year and next year can be a little bit more cautious of how they deliver that messaging. i had an interesting conversation yesterday with one of my guests. he says markets are behaving

almost as if there is an the triggering of qe1. do you see the momentum in the markets? >> i think it looks more to me like a carry trade than it does qe. what you are seeing is not the perfect correlation across all the assets in the market, but if you look at data surprises for example, those are moving almost lockstep with the number of risk assets. if you are looking at breakevens, credit spreads in europe, euro-dollar in fx, you see fundamentals, but they are moving where they have become more dislocated with rates and central-bank pricing. it's not necessarily the fundamental driving the market right now, but i don't see it as an anticipation of qe. i see it as anticipation qe is

going -- nejra: what about reassessing inflation? do we need to reassess it? we have seen breakevens going up in the u.s.. could we get an upside to inflation in 2019? >> you could, but it is looking more difficult. there were growing fears last year we were going to be in a higher inflation world this year . because central banks have been so passive, 2019 was going to be the year we got significant and nation. you are looking at inflation at or below target. that has made the fed and other central banks much more passive. why have one year inflation expectations dropped by 40 basis points and why are long-term expectations the weakest in history? is that all to do with gasoline,

or something else? >> you certainly saw a reassessment. happened,een what building up a lot of inflationary fears last year coming off as we moved into this year, and i think that spooked everyone. data andeeing the whatever upside surprises you are getting are moving breakevens higher. european breakevens have collapsed even more. correlations are spot on what we have seen from european data. the data needs to get better to go up there. it shows you where we are in breakevens is aligned with the softer macro profile. central banks need to step to the sidelines. this helps growth to stabilize and it looks to me that the market will respond and push them higher wednesday let that happen. now let's get the bloomberg first word news.

>> theresa may is threatening to give up trying to get brexit done. this is reportedly unless euro skeptics in her party back down and promised to vote for her deal this week. the divorce agreement will not put to parliament unless there is a guarantee it will be approved. investigating the approval of boeing 737 max planes. concerns were raised as early as but them -- that the manufacturer held too much sway over safety approval. the company has been able to choose personnel. saudi arabia says the job of balancing the market was nowhere near complete. the oil ministers as opec and its allies need to stay the course, but alexander novak says it is to certain -- too soon to discuss.

it makes much more sense to start discussing in may or june when you actually have a lot more clarity on the state of how these and on things are playing out. >> renewed violence in paris at the yellow vest protests flared up again. shops were torched into hundred people arrested. this puts emmanuel macron back in crisis management mode. 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. manus: coming up, pressure mounts on tory mp is back theresa may steel.

mps took backtory theresa may's deal. nejra: tune into bloomberg radio live on your mobile device or dab digital radio. ♪

manus: this is "daybreak europe." nejra: let's get a check in the markets. the equity rally continuing in asia. the pacific index in the green. the shanghai compass it rising by more than 1%. the u.s. on the front foot. last week was the best week for global equities since november.

in bond markets, weaker than expected reading of u.s. industrial data. today up one basis point head of the fed this week. about that fed. could they be more gracious? it is going to be interesting. we get thetures, stocks this morning a little bit higher. we are rolling higher on global equities. is that mispricing the growth story? there seems to be a difference between what the russians want and the potential for these cuts. let's get the mliv question of the day. opec plus extend crude oil's best quarterly rally since 2009? the russians are prevaricating.

a lot of the saudi's are more sort of more work to be done. annmarie hordern is getting ready at the moment. -- nejrai bring you and i bring you the latest estimates we get it. debra mao is in hong kong. is prepared to reveal its ipo planes. -- plans. oft is aiming for evaluation $25 billion. quantitative models generated double-digit returns for decades, but the hedge fund manager is having to come up with new strategies. he says the same algorithms don't work anymore.

>> they do not make money at the moment. when you combine that with the fact that more money has been squeezed into a narrower space, the returns and risk ratio is deteriorating. have turned cautious amid the slowest economic expansion in almost three decades. they worry china's middle class is scaling back on high-end. that is your bloomberg business flash. nejra: theresa may is working to win support for her brexit deal, but won't put it to another vote unless there is a stronger transit will be approved. that vote is likely to happen tomorrow.

she is expected to seek an extension to the brexit process. the u.k. would not exit the eu on the 29th of march. if her deal does not get through parliament, may has warned britain would have to take part in u.k. -- eu parliament elections and that would delay brexit even further and could put talks back to square one. richard kelly is still with us. eventually voting on the extension. we did see a rally on the pound. sterling, ruato seller of strength or a buyer of weakness? >> sterling is probably headed lower. there has been a tremendous amount of optimism or a significant amount. i don't think we are going to get that vote through this week. that is just not something that is going to -- for cable here. one of -- this morning

said just because they took no brexit off the table in theory, it is not really off the table. they are presumptive to be sterling supportive. >> there is no question the market is discounting the risks of no deal. whatever parliament says they would not like to do, no deal is the default if they don't come up with the deal. we have not managed to get parliament to agree to anything other than a mild book they did have a discussion a few weeks ago. there still is a lot of work to get done here. it is likely to get a deal. it is going to take us down to the last wire. perhaps she is getting close to getting dup on board. -- there's aing

lot of whack-a-mole going on of how does she get this over the line? >> how are you approaching this? viad you be approaching it volatility trades or options trades? >> it is difficult to be trading in fx right now. it is interesting, it actually has tracked data well to this point. a lot of that is the negative implication of this uncertainty feeding through. it does not look like there is a tremendous brexit premium. some of the discussions don't look appropriate anymore. i don't think there is any rush. time, there was a very obvious trade that sterling was going to go 10% higher. those trades don't look there and it looks similar to the rest of the world that you might not need to change significantly on the back of this. there is certainly sentiment, but we are not far off fair value here. have seen the shift in

probability of a hike from the bank of england to 40% by the end of the year. would you take the short end versus the long end? >> the issue is if we don't have a deal this week, it is looking unlikely we can have any hike before november. the market is probably a little overpriced even having 10 basis priced in this year. having one hike next year looks appropriate. i think there still is some value playing against the boe right now. manus: richard, thank you very much. richard kelly stays with the show. a lot more to dig into. let's get it straight. i think it is annmarie hordern inside the opec plus meeting my apologies on that. --will of course bring you we have live picture.

annmarie hordern. >> the markets today are still showing oversupply. we are still seeing when we look at inventories, increased volumes of stock in the first quarter. we are guided by a declaration we made last year that we want to bring stocks back to normal levels. this is the main guiding the 25.e for >> are they talking about iran with you? are they talking about what they are to do in may? >> everybody is hearing the declarations about where the .anctions are we are guided again by what actually materializes in terms

it, untilntil we see we see the impact on inventory, we are not going to change course. about the speak dialogue we have been private. whati can tell you is guides me and this group of 25 producing countries is the level of inventory. as long as the level of , we willes are rising stay the course driving the market toward balance. that is what producers around the world want from us. back off a little bit.

>> [inaudible] >> they have to move back so we can move back. we are trying. they have to move back. >> we are concerned about the fed. >> i know, i know. minister, will any decision be made in april? are you going to wait until june? >> stanback. >> i always get crushed, i understand.

>> the consensus we heard from is bilaterals this morning that april would be premature to make any decisions. i think i cannot speak for the committee. that there is a consensus building toward the decision being made in june. >> what decision will you make in april? >> that is a good question. we may not have a meeting in april. i cannot prejudge for 24 ministers. i think they will recommend that we reconsider the need for a meeting in april. stay tuned until this afternoon.