this morning. as we wait for the next part of this brexit drama that was stopped in its tracks by the speaker of the house of commons last night. we don't see a great deal of convention of where these equity markets will pull into the start of tuesday's trade. waking up these equity markets, looking for a fairly flat start to the trading day. love to talk about as we go through the week. the fed meeting looms large on the horizon and we see the bank of england meeting as well, even if no changes are expected from either of them in terms of interest rates. will they bring down those stocks to one hike in 2019 and will that be seen as dovish or catching up with the markets? let's have a look at where we opened up. the ibex a little more strength coming through from spain. the dax and little stronger. either side of the flat line on these european equity markets this morning. let's have a look at the sector picture. bring up the map.

yesterday, we saw m&a at the fore. financial looking much more mixed this morning. health care looking like the performance to the upside. utilities not doing too badly. energy and financials move lower. something slightly defensive of what is going on in the market. we don't have a great deal of individual corporate news flow to trade around when it comes to corporate earnings. we don't have a great host of that. let's have a look at what we do have. we can see some of the biggest movers to the up and downside. standard life is moving higher. inribunal ruled in its favor its dispute with lloyds banking group and has lifted the stock. the company saying their profitability is not under pressure in french. they are reviewing mobile assets as well. a couple of interesting stories

to keep an eye on. that stock is weaker. the downside on the stocks 600. down by 1.8% this morning. one of the heaviest losers on the stocks 600. deutsche bank after yesterday's excitement around m&a. deutsche bank moves lower this morning, down by just under 2%. the biggest follow. matt? matt: european markets are opening pretty flat. little bit of a mix. the dax is up. this comes as the fed is expected to point the way to just one rate hike in 2019 when it meets tomorrow. all eyes will be on the dot plot as annoying as that might be to everyone who works at the federal reserve the joining us is the global head of flowed -- flows strategy the what do you expect from the fed and do you

think markets are just going to be fairly flat until we get some news out of the fmo see? >> yes, i think the main logic and rationale for the fed is the leading indicator in terms of growth have been pretty weak, which is the rationale behind the decision to the tightening of the balance sheet. i suspect the stance will be dovish. we had a fewness weeks ago. staying on track with a slowdown in the monetary tightening positioning. francine: i want to bring a chart to everyone's attention. the measure of financial condition. this is a bloomberg measure. this is showing how we see the balance and financial conditions almost accommodative as they have been in the last five years. a tightening in december and things looking more accommodated. i raise this because some people are asking whether this kind of

background picture that might actually cause the fed to be a little more hawkish than some in the market have anticipated? kokou: if you remember, central banks measures take three to four quarters to have a impact on the real economy. one of the things we have seen is strong job data. particularly after the trump stimulus. i think the fed will be cautious in trying to see what is the incoming data looking like. they are unlikely to change their stance as quickly, because again, most investors and analysts expect a recession in 2020. there are clearly indicators to be cautious in terms of the strength of the economy and tightening conditions that the fed has put in place for the past few years. our live me put to you question of the day. things, the fed can do

regarding its concern about the economy, but also the markets react in a different way. two tracks of reaction from what the fed does. our question concerns the latter. how low must fed dots go to p lease stock bulls? hopefully, this is something the federal reserve governors are not thinking or is not at the front of their minds. what do you think? kokou: i think, obviously, it will depend on growth because the number of dots is the assumption of how strong the economy is an equity markets respond to the differential. i think the fed does not have to go as low compared to what they have currently to please equity market investors. francine: you mentioned as we were talking a moment ago about how most investors see recession in 2020. what gives you that level of conviction and what will drive

that? we talked in the past about how there was a real estate subprime prices in -- crisis in 2008, but this time high-yield corporate debt is your area of focus. kokou: absolutely. one thing to bear in mind, we are currently in the longest business cycle in history which started in 2009. the fed has packed in policy close to 20 basis points. the amount of debt sitting on high-yield. $5 trillion. half of that is triple. $2.5 trillion, just above high-yield or junk debt. investment has never been so low-quality over the past 20 years. we are facing a major refinancing wall, or even mountain over the next three years where a lot of these companies sitting on large amounts of debt will have to refinance at higher levels. francine: you say that most investors see a recession coming

in 2020. do you think that is market-based? kokou: the recession is negative growth. the point -- we talked to a lot of investors and the biggest worry is a slowdown in the growth, a cycle that we have so far. this is very much becoming consensus. the first half of 2020 or second half of 2020, it is not an exact science but there is a content is growing on the amount of debt sitting in high-yield and managing companies. matt: absolutely. francine: sorry, carry on. matt: no, i was going to point out that gary shilling wrote a piece for bloomberg opinion. he expects a recession this year, but one of the important variables he added is that the fed can do a lot about that. if the fed does not raise rates, gary does not think we will see a recession until 2020. if the fed does raise rates, that will push the u.s. economy

into a recession. thank you for joining us. it's great to see you this morning. label keep you with us for a few more blocks. up next, the stocks on the move so far this morning, including assos plummeting after reporting first-quarter sales down more than 10%. officially decimated. this is bloomberg. ♪

matt: welcome back to bloomberg markets. it is the european open. we are 11 minutes into the trading day with a bit of a mixed picture on equity indexes, although not a heck of a lot of movement in terms of the broader indexes. let's dig down into the individual stocks tories. for that, we go to dani burger in london. dani: a positive day for standard life aberdeen. they have seen successful arbitration, just announced this morning. this have to do with the dispute with lloyds banking group where they managed about 100 billion pounds for lloyds.

try to pull back on that agreement. standard life aberdeen can now continue to manage those investments. iliad, the struggling french telco company, is trying to do a different kind of turnaround. they are looking for investment partners in some of their assets as well as pushing back some of their profitability targets. the markets not taking it that well, although at the beginning, they were bid up. it seems like digesters are investing that news -- investors are digesting that news. asos down more than 11%. they did have a sales update, but the negativity have to do with their sales growth. it should be taken very negative the. the second quarter came in at 658 million pounds, that mrs. estimates -- misses estimates. they did not extent retailers. anna: thank you. going from the big you to a

market to u.k. politics, theresa may looks set to seek a long extension. the house of commons speaker torpedoed the prime minister plan to hold another parliamentary vote on her brexit deal. another vote is unlikely to kokou,-- let's speak to global head of global strategies. what is your solution then? we have had confirmation from a government official last night, a meaningful vote is unlikely this we given what bercow has said. what is your revised base case in this situation? kokou: our house view was that there would be a deal agreed in the end, because it is a very complex distribution of outcomes. two things. the first thing is that the no deal brexit scenario that the market was concerned about is pretty much out of the picture.

the volatility on sterling or different financial parameters linked to the u.k. n was a lote optio less than before. now going forward, what is interesting is that we can clearly be in the position where the u.k. actually does not leave the eu for a while and it is now a possibility. i also find quite interesting the scenario where a lot of the hard brexit are's suggested a bread deal -- bad deal was better than remaining in the eu. i want to give up on the last ditch scenario to get this sort of the of agreed to. anna: i wonder what price the erg and team might put on their support for theresa may, matt? matt: well, they had two chances already to vote for what they thought of as a bad deal. i don't see why it would change

it third time around. if she gets a nine to 12 month and extension, should the e.r.g. be happy to organize some other kind of deal? or is there no deal really that they e.r.g. will be truly happy with? is there no deal possible that takes britain out of the customs union? kokou: i think ultimately as time draws to a close, this is where pressure mounts. the scenario where no deal is of thencreases the odds u.k. staying in the eu. this is clearly some of the things that the e.r.g. is not looking towards. the bottom line is still a very fluid situation. that would not give up on a scenario where the eu would make concessions. anna: we keep that in mind as we look at this. the function on the bloomberg that ranks currencies. the strength of the pound, the best-performing currency against

the dollar over the last month. some real strength, of more than 1.6% against the u.s. dollar. does that continue in the picture you described? kokou: this is clearly consistent with the view that a no deal brexit scenario is out of the picture. the pound is recovering a lot of what it lost over the last few years. the concern is to have imported inflation because of the we currency. now, we could probably see the opposite effect in terms of cost of imported goods. i would not see any change, dramatic change in the path of the sterling going forward because it is pretty much consistent with a surprisingly strong economy in the u.k., particularly when it comes to the labor market. anna: we will get labor market data later. matt? matt: we are going to keep you. we have more to talk about, kokou, global head of slow

strategy and solutions. i want to talk about what is going on with deutsche bank shares after those two came out on sunday and said they would now begin official merger talks. the stock jumped yesterday in trading but now has come back down. you saw from the three-day chart -- a one-day picture which is interesting. the three-day chart is more important because it shows what happens after investors really get to think about the possibility of a merger, the probability of her merger even happening with government backing. you can see over the past three sessions, deutsche bank shares popped up but came right back down to where they were before. the same is true of commerzbank shares. next, taking the plunge on europe. european stocks have rebounded this year so why are some manager still not biting? dani burger dig through the details of that contrarian call. this is bloomberg. ♪

anna: welcome back to the european open.

20 minutes into your trading day, mixed picture for european equities. 5100 getting some gains. the cac and dax under pressure a little this morning. european stocks have rebounded this year, but some manager still are not biting. for the past year, equity fund outflows totaled $120 billion, the worst of even region. bulls are calling for a u-turn around -- a turnaround in fortunes. dani burger has been digging through the contrary and bets on europe. dani: i want to illustrate what you were talking about. over the past 52 weeks, we have seen 50 weeks of outflows. that will be the longest run in a decade. we are seeing investors blame some of the weaker economic trends that has pushed them close to the ground, kept that in bonds and cash. we are seeing some calls this will turn around. morgan stanley and jpmorgan are

the two most recent months. i have one of morgan stanley's one of justifications. you can see china pmi's in the blue tracks europe very closely. because of this coordination, we have seen a slight uptick in china data that should continue, according to morgan stanley, and we should see europe follow closely behind. then there is bank of america. they have called this the ultimate contrarian trade. they say that the market is an extreme. they point to the spread between euro area bond yields as well as the dividend yield. their data shows this at a 100 year extreme. look, we should get that income play back into the fore. fall of them are doing that now is the time to buy. anna, matt? matt: very interesting stuff, dani. very important for our viewers, dani burger on european stocks. kokou, global head of global strategy and flows, still with

us. what do you think about european stocks? the european blue chips index, the stoxx 50 is outperforming the u.s. blue-chip index, dow industrial average. the european broader index is outperforming the s&p 500. does that make sense to you? kokou: it is clearly a very strong rebound from a very difficult december of last year. one of the things you have to remember is low interest rates, negative interest rates remain a drag on banks in general. this is needed for a sustained recovery when it comes the european stocks are very bank heavy. clearly, the positioning and present is an when it comes to -- pessimism when it comes to europe is extreme. ultimately, you get the valuation you deserve. it all depends on the return equity. anna: we talked about bank

consolidation yesterday. two stocks falling after gains in yesterday's session but that led to an olive -- a lot of conversation about national champions or even regional champions. do you think it is too confused? do you think europe knows what it wants to achieve or what it's allowed to achieve? kokou: when you look across the cycle, typically when you go through a real leveraging cycle, a lot of companies and corporate go through merger to be more profitable. when it comes to financials, clearly the pressure is on regulation. when you are too big, you ultimately have more operational risk and have to take more capital. it all depends on the european banking union to see whether merger can generate profits and synergy by being able to sell and trade across europe. this is where we need to see more progress being done. matt: yes, still a long way off, european banking union.

thehear from the regulators executive should be doing it now a cross-border mergers, but we talk to the executives, they say they cannot do it with these rules. kokou: absolutely. this is where the challenges lie. ultimately, there is a lot of questions around the growth rate. you look at italy technically being in a recession. these have huge implications in terms of nonperforming loans. this is where we have to be more patient and wait to get more progress on the regulatory front to see m&a be more sustainable. anna: what role with low interest rates in europe -- a lot of people talked yesterday that bank mergers might cut costs. the bank of france governor talking about how low interest rates may be part of the problem in terms of generating growth. kokou: i think this is where -- the big theme is going into the

same lost decade we saw japan go through? europe has not really gotten out of its excessive liquidity and negative interest rate environment. this ultimately is a drag on the private sector to invest. it means government suck up a lot of the investment in the private sector so you don't have a lot of investment by companies, etc. interest rates ultimately are in indicator of long-term growth prospects. unless we have structural reforms, it will be very difficult to unleash the growth potential of european equities. anna: thank you very much for your time today. kokou, global head of flows strategy and solutions. let's have a look at where we are on the european equity story. 8:26 in london. pretty much unchanged in paris and berlin. london come a little bit stronger. that leads a little strength to the stoxx 600, just up 18 of 1%.

coming up later, angela merkel speaks exclusively to bloomberg from the global solution summit at 10 a.m. london time. a fascinating conversation. this is bloomberg. ♪

30 minutes into the trading day. top headlines off the bloomberg terminal. brexit blind side. theresa may's plan torpedoed as the commons speaker refuses to put the deal to a third vote. will the eu grant her a lengthy delay? committing to cuts. oil holds near 2019 highs after opec and partners continue to curb. u.s. sanctions on opec warned to be counterproductive. >> it is practically impossible to bring down the exports to zero. plus, stocks hold course

ahead of the fed meeting tomorrow. the central bank is expected to adjust to the dot plot downward. will that be enough to reignite the rally? welcome to "bloomberg markets," this is the european open. i'm matt miller at the global solutions summit in berlin, alongside anna edwards at the european headquarters in london. anna? anna: let's ever look at the markets 30 minutes into the trading day. we heard a little bit earlier on, no change in guidance. pharmaceuticals doing well, up by 2.9%. it note on that company from citi and the extent which it deserved a premium rating. report, issuese the stock up 2.5%. let's look at the downside.

european equity markets. the balance of moved to the upside across the stoxx 600, but only just. this is a support business to the oil sector, down by 7.6%. management change and slower progress on their debt, that could be headline news. gilead in the telecom space down by 7.6%. i'm sure that was one of the gainers in the trading day. they talked about how their businesses -- profits are not under pressure in france. they are reviewing their mobile assets. interesting to see the banking sector so weak after the gains on the m&a talk. deutsche bank and commerzbank both down by more than 2.5% in today's trading session. let's get the first word news update with debra mao in hong kong. the u.k. could be heading for a long brexit extension. the speaker of the house of commons says the prime minister cannot bring her divorce deal

back to parliament for a third time unless it is fundamentally different. this makes another vote unlikely before thursday's european summit, when the prime minister will have to ask for a delay. u.s. federal authorities reportedly began exploring a criminal probe into how boeing 737 max was certified, that was before the latest crash in ethiopia. bloomberg understands the investigation was prompted by information from the ryanair crash in october. the justice department is gathering information, including through a grand jury subpoena. nuclear submarines and a carrier battle group to the north arabian sea during its standoff with pakistan. from the country's navy was the most detailed yet about the military readiness. the pakistani finance minister hopes for a more positive relationship going forward. >> we believe that the current

tensions are a result of indian domestic politics, modi's campaign needed an aggressive stance against pakistan, and we are hopeful that after the elections, we will be able to get into a productive dialogue with india. debra: the tropical cyclone that tour across mozambique may have killed more than 1000 people. that is according to the nation's president. according to official counts, more than 98 people have died in zimbabwe, and 84 in mozambique. the devastation to a port city is described as massive. the red cross estimates up to 90% of the area is completely destroyed. day onnews 24 hours per air and at tictoc on twitter, powered by more than 2700 journalists and analysts, this is bloomberg. anna and matt. matt: thanks very much. debra mao in hong kong with your first word news.

let's take a look at the risks facing europe. brexit seems far from over. eu elections loom as well. investors can't be persuaded to put their money into the region's stocks, or at least they could not until recently. european equity fund's have seen outflows the last 50 weeks out of 52. it is the longest run in a decade. is the portfolio manager at allianz. recently, we have seen a big pickup in global stocks. is up 13%0 year-to-date, but it has taken a while to convince investors to buy. do you think they are ready now? >> good morning. i think the rally we are seeing today has probably surprised many investors. as you say, we have seen 50 consecutive weeks of outflows, which is challenging for us as investors in the market. the key reason you have seen these outflows is the ongoing political trouble we have seen

in europe. with valuations in parts of europe now quite attractive, if we do see a supposed positive resolution to brexit, i think there is potentially a wall of money that could reenter the market, particularly with pmi's beginning to show signs of recovering from january lows. anna: let me ask you about this. good morning to you, by the way. let me ask you about this.one of the stocks on the move this morning that taps into some of your thoughts. down by 5.7% this morning. some of the market on the things that have affected that business. give us your expectations for a company like this. marcus: i think the market is clearly disappointed with the sales. the sales revenue today. if you look in the details, there are a number of reasons to be optimistic. gross retail margin is much better than people expected. secondly, the first half is always much smaller.

thirdly, part of the reasons of the weakness are actually the strength of demand they have seen in the u.s. they are building up a new u.s. warehouse. the level of demand they saw was 3-4 times higher than expected. that created some delays and a backlog. you will see some order shift into the second half of this year. there is implied optimism that you will see recovery later this year. matt: i know you have been selling some of the consumer staples, as well. anheuser-busch. typicallyt of those more defensive areas? we are still recommended owners. we did trim it slightly. it is becoming more expensive to grow. growth rates, particularly like growth rates, are more subdued. you are seeing many of these

companies switch from the relentless focus they have had a margin expansion to shifting that slightly to reinvesting. buconsumers, we choose to through differenty channels. many of us have less brand loyalty than in previous years. these companies are having to reinvest to push down still. while i think they have a brilliant brand portfolio, when you look across the european market, there are other companies growing at higher levels with probably list amending valuations. -- less demanding valuations. anna: we talked about how far through this cycle we are. what excites you where to invest? marcus: we made the conscious decision to reinvest in areas of the market that sold off for multiple compassion reasons, rather than fundamental reasons during q4. there are a few examples.

i.t.ught a swiss core banking software business. they faced very strong results last year. being an expensive tech stock, that was not what the market wanted. we used the multiple compression to buy into that. you have seen a nice recovery year to date so far. similarly, a med tech stock from denmark, they have a very nice rollout story. they are focused on single use and this copy equipment -- endoscopy equipment. you are seeing the market in the u.s. transition away from multi use equipment, which carries the risk of infection, toward single use. the fda is pushing this at the moment. matt: all right, thanks very much, marcus. appreciate your time this morning. portfolio manager at allianz global investors talking to us about european stocks. crude is holding gains near highest levels this year. that follows a decision by opec

and allies to continue output cuts until at least june, when they will discuss an extension again. we spoke exclusively to the opec secretary-general this morning. let's listen in. it is practically impossible to bring down the exports to zero. the waivers, the extension of the waivers continue to be one of these growing uncertainties in the market because of the importance and the size of iran in the supply and demand balance. >> you just got back from houston. what did you learn? are you a surprised -- as surprised at the growth of production of u.s. shale? >> the u.s. shale continues to defy even the projections of the

companies themselves. ofhad our third round break-in with the company's. they continue to show cautious optimism and projections. but looking back in the last two years, we have seen that they have surpassed their own projections. attributed to the restored sentiment and confidence in the market and in the industry following the sustained implementation of the supply adjustments in the declaration that had failed to stability or restore in terms of supply and demand being brought in balance. they are very much appreciative

of the efforts of the parties. >> that has only helped them. >> yes, we both agreed that we will continue this dialogue. i want to stay in the u.s. that thebout this bill president is talking about, tweeting that opec needs to relax. then we have this nopec legislation lingering. how concerned are you? visit top of your agenda? where does it weigh on your mind? >> for obvious reasons, we continue to follow developments in washington. especially in congress. with regards to this legislation. last week, what i gathered is that it is becoming clear to the parties

involved, especially the important stakeholders, that such a legislation would not serve the best interests of the united states. that was the opec secretary-general speaking exclusively to bloomberg. coming up on the program, the commons speaker rejects a third vote on theresa may steel and to prime minister expected ask for a brexit extension. this is bloomberg. ♪ ♪

to theelcome back european open. 45 minutes into your trading day. european equity markets trading higher, gaining momentum as we go through the session. now up by 0.4%. in dax and the cac both positive territory. let's talk politics in the u.k. a thirdmay's plan for vote on her brexit deal has been thrown into disarray. hashouse of commons speaker ruled that may cannot bring the same motion back to parliament again. she will now seek a long extension to the eu's deadline. joining us now is a politics professor at queen mary university of london. i remember reach weeding your tweets that suggested john burke out could throw theresa may's

plans off because he could make this kind of ruling, which we now have seen him do. does this mean that theresa may's deal is dead or will the government managed to find a way around? tim: i think there are ways the government can actually -- it create a new session of parliament and therefore the rule would not apply, but it could also get parliament to actually vote to express its opinion that it does not want to be bound by this particular convention. the problem is could it actually get a majority for said vote? ift: that is an important there. i also wonder, the people at downing street seem to be blindsided or shocked by john berkow's decision. you saw this amendment tabled. people who understand , wasamentary position

downing street understaffed? thing not expecting this if their strategy was to bring the deal over and over again to parliament, they must have -- must have thought of this sometime. tim: they must have thought of it, but i suspect they must've thought that the speaker would not dare do it because it is a controversial thing to do. there has been bad blood between this speaker and the rest of the conservative party for quite some time, and i think the government probably assumed that this speaker, although he can be awkward at times, would probably, in the end, allow the government to do what it wanted. you are quite right. it should have always been aware that this was a possibility. kris bryant, another mp, made it clear that there was presidents for this -- president for this, albeit last century. they have no excuse, to be honest. anna: you don't have to go back to 1604.

if you are looking at a base case of what happens next, do you assume theresa may's deal gets through in some way in the months ahead or do you have to assume that we start from scratch and that theresa may's red lines are gone and that something more like a labor brexit takes to the fore? tim: that is possible and the logical solution would always have been for theresa may to reach across the aisle, as it were, and get jeremy corbyn and other people on board for a softer brexit. she still seems absolutely intent on not doing that, on trying to get her withdrawal agreement through. i suspect that she will try to override the speaker's veto, as it were. it is possible to do. and give mps one last chance to have a go supporting her particular version of brexit. i think if she does not get a meaningful vote three through the commons, however, i think

probably then we are talking about a much more creative solution, and that could be a softer brexit, had of norway-style brexit that some want, or could throw the whole thing open to another referendum. anna: nice to get your analysis, tim, think you for joining us. ale, politics professor at queen mary university of london. up next, stock movers, including fiat chrysler. how far will the hunt for m&a go? this is bloomberg. ♪

>> theresa may comes back to the u.k. with a new brexit deal. >> plenty of coverage. theresa may's deal has been defeated. >> the house of commons has rejected a no deal brexit. >> theresa may has something. >> a kinetic two-month extension, or something beyond? >> we have to wait until march 20.

matt: good morning, welcome to "bloomberg markets," this is the european open. we have some breaking news on the deutsche bank, commerzbank merger, potential merger. we now know a little bit better with the tombstone may look like if deutsche bank does buy its crosstown rival. they have hired citigroup, as well as fresh fields, to advise on the merger. we also know that commerzbank is working with rothschild and goldman sachs. if it actually happens, we know that those four banks will be advising these two banks on the purchase. let's get to our top individual stocks stories 45 minutes into the trading session. along with commerzbank and

deutsche bank, a lot of company stories on the move. theyng at fiat chrysler read reports saying they are interested in acquisitions of opportunities are there. one of the companies mentioned along with gm and a few others. they reported a cyber attack at norsk hydro, they are working through it, trying to figure up how to contain it. that is that while getting sorted out, shares falling by nearly 2%. if i reduced retail sales by 1.2% in the first quarter, but goldman sachs says that is still retail growth of 11% shows the resilience at the company and that is giving investors a positive story to bid the company up today. anna: thanks very much. france is down on the yellow vests protesters. the prime minister says the company -- governor this government will strengthen security rules and ban rallies in some areas.

that comes after violence flared up again over the weekend. are we going to your more about this through the day and this week? will the new measures be enough to contain future violence. which has been running a long time now? >> that is the big question. the protests at really been going down, both in numbers and any violence with them. upsurge inwas a big violence. the french government says that public opinion could turn against them if they cannot contain the violence. there was the burning of a building. they really need to be able to get it done. the question is will it be enough to actually do that? police --haven't the are there sufficient security violence stop this

when you see a surge like we did over the weekend? there are enough police if they are deployed. this happened back in december, when the first violence happened. the french government deployed thousands of police. if i recall collect -- correct, there were 8000 in paris alone to contain the protesters. it really did contain a lot of what these protesters could do, particularly the ones in france called the black bloc, the french political protesters, rather than the traditional yellow vests protesters, who are there trying to cause damage and mayhem. if you deploy enough people, you can do it. you have to have the people in place and they have to be mobile enough to stop these protesters, who are not declaring war, they are pop -- where they are popping up. matt: we are familiar with the black bloc in germany, as well. alan, thank you for joining us. bloomberg's editor-in-chief john

micklethwait is going to sit down exclusively with german chancellor angela merkel in just about an hour. don't miss that interview. 10:00 a.m. london, 11:00 in europe. this is bloomberg. ♪ . you.

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the house of commons refuses another vote but will the eu grant her an extension? the fed expected to reinforce but former new york fed president bill dudley says tightening could be later this year. committing to cut, opec and its partners plans to continue production curbs. good morning, this is bloomberg surveillance. i am francine lacqua in london and tom keene has the day off. we will look at the implications of the output cuts on oil and look at brexit, a curveball about the speaker of the house of commons and her interview with john micklethwait. day, all eyes on the dollar and interest-rate policy continues to move the dollar and we will hear with mr. patella from ing as he discusses how the

fed and dollar policy impacting things. francine: let's get to the first word news. brexit isdelay to what theresa may is looking for after house of commons speaker scuttled her attempt to win a parliamentary approval with a plan to leave the european union . she says theresa may cannot bring her defeated motion for a vote unless it is fundamentally different and she will have to ask for a delay at the thursday eu summit. u.s. officials made a for a criminal investigation into how ax was certified to fly. after an meet the needs and crash, boeing engineer fear the equipment. the trump administration says china could cripple its purchases of american farm goods in a new trade deal, the

agricultural secretary says the country's has china buying more corn, meat, that is one of the easiest things for china to promise in negotiations . singapore is still the world's most expensive city but it is tied for first place with arrivals, paris and hong kong, according to the economist cost of living survey, zürich and geneva rounding out the top-five and the three cities at the top are 7% more expensive to live in been new york which ranks seventh in the survey. 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. francine: thank you. palladium, a, metal we have been looking at the most. i think it is now at a record $1600, concerns about

shortages. classes,t all asset stocks are gaining in the trading session today, it europe, the focus on dollar, steady after recent declines when treasuries are going up. it is about the pound for me with the curveball, sterling is well up in 2019 this fight the exittorches -- torturous from the european union. in the u.s. equities market after a better day on yesterday. everything benefiting from a dovish fed but a rally in the s&p on low volume and outputs in the et's. that is certain is the 210 spread flattens and below 15 basis points for the third straight day. you mentioned point in, i wanted to -- you mentioned palladium but gold set to rise for the

third straight day. the dovish fed pushing gold a little higher. , below the 13 handled with low volatility across all asset classes. keep a closewill watch on all of these asset classes and i am looking at, the story in the u.k., where pound is going. this is pound rallying last week after lawmakers did not vote for the extension and we have the house of commons speaker saying that they cannot put it to a third boat. -- third vote. , what itake a look does to the volatility we see, we are tracking the jpmorgan global fx quality index, low volatility, i mentioned the vix,

tracking options on treasuries. we heard yesterday that some people wondered if we get too complacent and perhaps the dovish tone from the coordinated central-bank action, if you wonder -- you wonder if markets are getting too complacent and overpricing the goldilocks scenario we keep talking about. francine: let's get back to brexit and theresa may's plan for a third vote have been thrown into disarray as the house of commons speaker said that she could not bring the same motion back to parliament again, the u.k. prime minister seeks a long extension to their eu membership and officials say a vote is now unlikely before thursday's european union summit. maria joins us. let me start with you, do they

follow this day by day but say until somebody asks us something, we do not weigh in? you, untill tell prime minister may gets to brussels on thursday, we do not know what to expect from her because that decision yesterday was a game changer. donald test made it clear he will prepare your opinion leaders make a long extension when it comes to brexit, it is a lengthy time and there will be political division and extending for a long time, significant strength to it, for european leaders that means keeping the u.k. in the you potentially for two more years, the eu will say they must do this and potentially elect the next commission president or paid to the budget in 2021. it is a choice of do you go for no deal or grant the prime

, european leaders will presumably go for that. francine: what is theresa may thinking? what are her options? >> she is meeting with her cabinet to try to figure out where to go from here as it was unexpected yesterday, the speaker torpedoed her plans to hold a vote before the european council. the government said they were not warned so they need to reassess the options. the brexit secretary has been doing rounds this morning and said we are in a constitutional crisis at this point and the choices now are about a long delay and a possibly softer brexit or no brexit at all. they were trying to put it to vote this week but that will not happen. the boast help -- the best hope now is for the prime minister to

to an extension and goes london next week and says that we will have to have another vote. how can she do one? there has to be a change, maybe a joint statement by the eu 27, if it is a significant change for her to hold another vote at all. what does theresa may think she can accomplish during 12 month,month, two-year extension that she has not done in the last two years? >> that is a good question and the european union says there is no other deal available. what are the other options? she will have to rub out some of her famous red lines, maybe britain has a closer relationship to the eu they can negotiate, membership of the customs union, maybe a closer affiliation to the single market . it will be a different brexit. maybe that is enough time to put the boat back to the people, the

prime minister said she would not do that but with a year in hand, and parliament in a logjam, it becomes another option to break the deadlock. francine: thank you both. desk, theyack to our say strikes are related to brexit but we will get back to that. outre expecting boe to come on thursday with decisions, is it on hold because of brexit? march 29 is 10 days. >> boe is a passenger watching brexit now. trading the pound is for the fate of marks. -- plano parts. stressed

which of the scenarios do we get? do we get limbo for another couple of years or 135, 136 because a deal gets past even if it is slightly off of the march 29 deadline or is there a genuine chance we could get a brexit reversal. taylor: i want to talk about some of your calls and about being sector neutral. the recent developments within the u.k. and brexit dance change your calls on being sector agnostic? what would the change for you to be overweight or underweight assets in the u.k.? isbig question for the u.k. whether to get back at all because it is clear with the uncertainty, international investors have chosen to put the u.k. on the shelf and look

elsewhere. -- the uncertainty of the economy and over the currency. why would you invest in the u.k. at a time like this? i would suggest that once we get more clarity on the outcome for brexit, in terms of u.k. assets could become a lot more attractive. we would be looking at areas such as in the u.k. ftse dividend features because they benefit, if u.k. assets become more popular, but if something goes wrong and the currency falls, a possibility, the fact that the ftse is a negative correlation with the currency is a good thing for the future. either way you should be a winner. trying to find assets like that in nikkei which could benefit either scenario -- that could benefit it is scenario.

-- in the u.k. which could benefit either scenario. coming up, we will talk about the eu and brexit negotiations, and what happens next. this is bloomberg. ♪

let's get a> bloomberg business flash, citigroup will work with deutsche bank on a possible merger with commerzbank has they received a mandate to advise germany's largest lender, commerzbank is being advised by goldman sachs. palladium topping $1600 an ounce for the first time with little

sign of global rallies will slow down as the price of metal has almost doubled from the most recent low in august and palladium is using in car anti-pollution devices and there is expected to be a shortage for the eighth year in a row. u.s. regular the cap taking another shot at elon musk, the securities and exchange commission says it is stunning he did not seek the approval of any of his tweets about the electric carmaker because he was ordered by a judge to do so and the agency said its request must be held in contempt of court but his lawyer wants to file a response by friday. musk sagae elon continues. china has offered the u.s. attractive numbers for purchases of farm goods, the agricultural secretary spoke to us. >> we could easily see if we could come to a trade resolution of doubling or tripling that 2-4, 5 years.

taylor: he says there are concerns over biotechnology. joining us is our chief asia correspondents. square these numbers for me. laterill get to biotech but i do not understand the numbers as china already buys $20 billion and they want an additional $30 billion. do those numbers seem realistic to you? >> you heard the agricultural secretary set a possible tripling of what they buy, china has the capacity to buy more agricultural food with middle-class growth and so there is potential whatever the specific figure may be. the ultimate point is one the secretary made in the interview, if they reach a broader trade agreement, we know china could buy more goods and are buying soybeans i get. the broaderow if

trade talks are on track to reach the agreements that would save u.s. concerns. u.s. companies operating more freely and on a more fair playing field in china, and much broader concerns with china's own industrial strategy. last week we had the passing in china of a new intellectual property protection law, it drew a mixed response for american companies. it feels like trade talks are on track but there is a way to go before a final deal. francine: do we know when that could -- when we would have a better indication we are in the final push? a couple of weeks or could it take longer? >> francine, president trump commented last week and our colleagues in washington reported a sense of anticipation that perhaps there could be a summit with president xi jinping and donald trump perhaps this month, perhaps in mar-a-lago,

those -- that has been pushed back and we do not know when it will happen. the indication and the scale of issues trying to be addressed in these talks have yet to be fully figured out and be view from many was that a trade truce is holding an iteris are on hold but it is hard to get a read -- and the tariffs are on hold but it is hard to get a read and how satisfied china is, they are making the rounds on their own as well. nda.cine: thank you, e getting breaking news, a sovereign wealth fund of healthy but the ones that manage the most money, they have a net portfolio of about $3.8 billion, their chief executive in charge for 15 years and have nominated someone else.

they will become chief executive on april 1. plenty more on that and another great interview coming up. john micklethwait moderates a conversation with angela merkel as part of a global solution summit in berlin, that is coming up in about 50 minutes. 6:00 a.m. in new york. this is bloomberg. ♪

♪ this is bloomberg "surveillance," taylor and francine from new york and london. unemployment, for the unemployment rate falling to 3.9% instead of the estimated 4%. we are seeing a little bit of pound movement. this is for the three months up to january. if you look at the weekly earnings come in line with estimates of the ground, a little bit higher.

what is your pound: until the end of the year and 10 the boe do anything? >> we have a relief rally to 135, 1 36, and is something we could get clarity. that is a day by day assessment. there will be a slow burner towards what we think is close to fair value on the longer run call which is 140. this brexit deal dividend, even if we get it through, a lot needs to happen and investors need to see data picking up, including the pmi, the bank of england, the term structure of interest rates too low, but not just brexit but the global economy. 135 seems fair for now. francine: if we have a long

extension, what would that mean for a possible trade deal? we heard xi jinping will probably sign something with italy later this week. can the u.k. position itself and get a good deal from china on trade? >> i think it is difficult because you remain within the european union's rules, which you will trade deal negotiate will not take place for a long time and there is still uncertainty over the flexibility that the u.k. will have, even in the event they do exit, they find a brexit deal, because we do not know the terms of that deal, we do not know the flexibility the u.k. will have. if they remain within the european union, what will they have to do a trade deal, nothing in reality. taylor: talk to me about your call on the pound, you said 135 is fair value and a 132, does

that mean markets are under appreciating or underpricing where the pound really should be? >> yes, a lot of it is a one-off reduction in the brexit -- uncertainty -- brexit uncertainty. you have this underweight of u.k. assets looking to pounce on some clarity to give you valuation. taylor: thank you. more on the pound calls, both stay with us. coming up, the european commission vice president joins us from berlin. this is bloomberg. ♪ want more from your entertainment experience?

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and see how you can have an even better x1 experience. simple. easy. awesome. ♪ this is bloomberg "surveillance." francine lacqua in london, taylor riggs in new york. is likelyheresa may

to tell the european union it will be months before the u.k. can leave the bloc. the speaker blocked her attempt to put the deal up for a third vote. this hold up gives her opponents the chance to rethink the divorce. saycials in the netherlands and suspect in a shooting on monday has a criminal record. ifis too early to determine terrorism was a motive. brazil's president wants to show his government is friendlier to the u.s. than those in the past as he meets with president trump in an attempt to discuss trade. yesterday, he praised the president and visited cia headquarters. the pentagon is pushing to bring

-- bowing fighter jets. -- boeing. atwood more than doubled -- it would more than double the number of models being built this year. it is cheaper and costs less to operate. 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. hurtado.ana this is bloomberg. francine: thank you so much. theresa may's plan for a third vote on the brexit deal has been thrown into disarray. they ruled out her bringing the motion into parliament again and now the prime minister seeks a long extension for membership in the e.u. is the european commission vice president

said the e.u. he was conceptually open to a brexit speculation -- extension. what do you think the most likely outcome is, lengthy ?xtension for short extension first andvskis: foremost, we need some clarity from the uk's side, for them to file a formal request to the e.u. and then the e.u. can decide unanimously by all 27 member states. we have not received a concrete request for an extension, so if , it is fort comes the u.k. to determine if it is a

, and or long extension each has a different implication. francine: the e.u. seems to be saying it is the uk's turned to move, but the u.k. is kind of stopped. may seems to be overtaken by events every week. what would your advice to her be? what should she do? mr. dombrovskis: it is difficult from all sides to give advice. it is for the u.k. government and parliament to interpret the results of the referendum. side, we regret the outcome of the referendum but we respect it. it is for the u.k. authorities to provide the interpretation. , it isalk about brexit be muchbrexit deal will

less disruptive than a no deal brexit. , a longlk extensions extension for example, the u.k. would also participate in european parliament regulations, because according to the treaty, all e.u. member states have to help elect members of e.u. parliament. of e.u. cannot take the risk the legitimacy of european parliaments decisions -- parliament's decisions. that is one implication. if the u.k. were to actually organize themselves to have e.u. elections for the

parliamentarians, with that not almost be like a referendum? would that be useful? case,mbrovskis: in this we're just outlining the implications of concrete requests. there is a possibility to a short extension until the european parliament elections, but on the e.u. side it will be helpful to decide on this, to see what purpose it serves and what aim it hopes to achieve in terms of the brexit process. , it is atension complication or consequence. onncine: what is your take the possibility of a no deal brexit? we are 10 days away. is no deal still possible? there seems to be a general

consensus in the u.k. that that will not happen. mr. dombrovskis: in any case, also from the e.u. side, we consider a no deal brexit is a scenario we should try to avoid, because it will be much more disruptive than a with stroll with agreement. drawalh drawl -- with with agreement. side, we made the necessary preparation or contingency measures for the case of no deal brexit. taylor: we have talked a lot about the threat of a no deal brexit and i wonder if we fold this into the world at bloomberg, a lot of focus is on the site -- financial sector. have inangements do you

place if there is a no deal brexit specifically related to the financials related to the trade between the e.u. and u.k.? mr. dombrovskis: specifically financial, there was a working was --- financial, there sector, there was a commission. there were several areas like for example clearing and the e.u. has taken necessary steps, temporary equivalents decisions to mitigate those risks. of course still also in the area of financial services, a no deal brexit is going to be more disruptive and will require more

preparation, were -- more work from the financial market or disappearance. -- market participants. mitigated by the ecb and bank of england. taylor: some of the risks are a global slowdown or some softness or weakness in european countries. pmi numbers come out and germany and france look a little weaker. are you concerned about a slowdown or is this a short term blip on your radar? mr. dombrovskis: first of all, the e.u. economy continues to grow for a seventh year in a row. this year, we expect all 28 e.u. member states will continue to grow. employment is at record high levels.

unemployment is at record low levels. we are in good economic times. recently we have seen some economy,in the e.u. which comes from external and internal factors. i could mention trade tensions, conflicts, or slowdown in emerging markets, name of -- namely china, and uncertainties surrounding brexit and the fiscal trajectory in some member states like italy. as a result, we have seen some slowdown of the e.u. economy but we expect the economy to grow at 1.5% this year. francine: you mentioned italy. what will happen with the budget? has the e.u. been too lenient? mr. dombrovskis: as regards italy's budget, we have been in

discussions with authorities and as a result of those, italy adjusted its budget quite substantially and reduced the planned budget deficit substantially. what we see from all e.u. member states, italy has the most pronounced slowdown of the economy. it means the fiscal trajectory the government has chosen initially brought some degree of financial instability, increased , for therates in italy broad economy and consumers. it negatively affected confidence indicators and the economy slowed down. this is another reason to reconsider the fiscal trajectory and to ensure the budget --

francine: thank you very much, valdis dombrovskis. coming up, bloomberg editor in chief john mickelthwait moderates a conversation with angela merkel is part of the global solution summit in berlin. this is bloomberg. ♪

♪ this is bloomberg "surveillance," taylor and francine from new york and london. let's check in on what is trending. a dead whale in the philippines had 88 pounds of elastic in its stomach -- plastic in its

stomach. head to the site for more. on bloomberg.com, as the yellow vests movement gathers steam, the government suggest bands on rallies in certain areas, but how feasible is this? singapore, paris, and hong kong tied for the world's most expensive cities. place 10%t is said to of its managers on notice. theresa may plans to seek a longer extension. taylor: in the u.s., all eyes on the fomc. they are expected to hold rates. inflation likely will be at the heart of the fed's policy review. is rushdiscuss all this patel and edmund shing.

viraj patelatel -- and edmund shing. is there anything tomorrow that you hear from the fed that will change your call on dollar? viraj: for us, when we look at the fomc and hear the message from jerome powell, we expect marginal rate hikes going forward to be a function of confidence in the global economy, and that renders u.s. as passive in the dollar category. cycle, stage in the interest rates -- what we are really watching out for is the 2020 and 2021 dots. that will confirm or reaffirm investor expectations that this is the peak of the u.s. interest rate cycle. taylor: you also talked about

the peak of the u.s. interest rate cycle and the late cycle we are in. some of the calls on inflation will be big what we hear from the fed. they areas said willing to overshoot inflation, but we are hovering just below 2%. how do you play risky assets? viraj: the key story from the fed -- edmund: the key story from the fed will be when they andde to stop tightening withdrawing liquidity from the markets. they continue to withdraw liquidity and shrink their balance sheet, but today, i believe we are back to 2013 levels. there is quite a significant amount of easing already in terms of the balance sheet, and given the slowdown we seem to

see, we believe the fed sooner rather than later will say, we will stabilize the balance sheet because we do not want to push the u.s. economy any closer to a recession then we have to. that is a key point for risky assets, whether to do that. you could see equities move even a little higher. francine: when do we see a recession in the u.s.? edmund: talking to our economists, they are seeing in the next 12 months about a 25% chance so it is significant. gdpou look at the fed's tracker, it has gotten near zero and has been quite a slump. the yield curve is telling us that things are shaky and growth is slowing down significantly.

we'll know that what causes a recession more often than not is the fed. the one bit of good news i would hold out is that the fed seems to have gone on hold. assuming they do not raise interest rates further, they will have done a rate that is quite lower than a normal rate. that gives a better chance of avoiding recession this year and next. francine: where does dollar go from here and is it a euro story or dollar? edmund: it is the rest of the world. the dollar is kind of caught in conflict forces. endorsed aouse expect thear but we dollar to weaken 5% in the later half of this year, but we expect to see economic recovery in

china and europe to support the story of a weaker dollar. taylor: thank you. both of you stay with us. tomorrow, follow our special coverage of the fomc rate decision and jay powell's remarks starting at 2:00 p.m. new york, 6:00 p.m. london. this is bloomberg. ♪

♪ this is bloomberg "surveillance." it is a sign of new competition between two giants in silicon valley, apple and netflix. the netflix ceo confirming they will not take part in apples streaming service -- apple's streaming service. pressure is building on facebook and other social media after the new zealand mosque massacre live stream. the prime minister once a group to discuss a correct down in june. the head of opec says sanctions

cannot completely stopped iran -- stop iran from exporting oil. impossibleactically to bring down the exports of iran to zero. the waivers, the extension of the waivers, or the extension of the waivers continue to be one of these growing uncertainties in the market because of the importance and the size. viviana: that is the bloomberg business flash. francine: thank you. breaking out of asia, tamasek asekrnational named -- tem international named a new ceo. who is being replaced? holdings, temasek

will she stay or will she be replaced? but shes still the ceo will be replaced as chairman of temasek international. temasek international is the investment of domestic holdings. -- temasek holdings. thecine: how will it change day to day running of their portfolios? joyce: i do not think it will change that much because they have been groomed for leadership does he has been groomed for leadership for a while. he is seen as one of the key management helping to reshape their portfolio over the years. he has been in charge of various important portfolios overlooking

investments and the portfolio arm, and he has led the u.s. business for temasek. looking for temasek anything at the moment? do we have insight into what they want to buy, what blue chip countries? joyce: they are a longtime investor in banks, so their last year, theyuly last said they are becoming more wary of investors as threats to the global environment out. for this year, we have not seen many big ticket acquisitions by remain a bighey investor in banks and telcos. francine: thank you so much. coming up, our bloomberg editor

in chief john mickelthwait moderates a one-on-one conversation with german chancellor angela merkel. he will ask her a number of breaking news, including the merger. we had confirmation that commerzbank was in talks with deutsche bank. we will see if the chancellor supports that, and a chancellor in waiting, we will see what she tells john she will do next. this is bloomberg. ♪

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plan for tito did. torpedoed.n for 2 -- the former new york president bill dudley says tightening could be back in way this year. oil holds near 29th -- 2018 highs. good morning, this is bloomberg "surveillance," live from london and new york. i am francine lacqua with taylor riggs. we look a lot on brexit trying to figure out what theresa may's next move is, and we look at it from europe, on their side. i am looking forward to the conversation john mickelthwait will have with the german chancellor. taylor: at least in the u.s., so often conversations in politics in the market have been the u.s.

versus the rest of the world. i am curious how they fold in and tradeist policies, as well as the globalization we are seeing, as well as the big merger between deutsche bank in commerzbank. francine: there is a great piece saying a deutsche bank merger banks.t fix europe's viviana: prime minister theresa may is looking for a long delay to brexit after the house of commons speaker scuttled her attempt to win parliamentary approval. he says she cannot bring her twice defeated motion back unless it is fundamentally different. she will have to ask for a delay at the e.u. summit. explore aials may criminal investigation into how 8 wass. -- boeing max

certified. ing engineers cleared the equipment at the center of the investigation. the trump administration says china could triple its purchases of farm goods in a new trade deal. they say it is one of the easiest things for china to promise in negotiations. singapore is still the world's most expensive city but it is tied with paris and hong kong, according to the worldwide cost of living survey. zurich andneva -- and eva rounding out the top 5 -- geneva rounding out the top five. 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 am viviana hurtado. this is bloomberg.

all, we arerst of getting breaking news at of european data. -- out of european data. we were expecting a figure of -11 but the figure is coming in at -3.6%. we are waiting to hear from angela merkel in conversation with our editor in chief. i believe she has just entered the room. angela merkel has not commented public the on this merger -- commented publicly on this merger between deutsche bank in commerzbank. she is giving a speech and may discuss the global trade dispute. own5 minutes, our very editor in chief john mickelthwait moderates a one-on-one conversation with angela merkel.

this is what your data looks like. we are seeing a little did a volatility when it comes to pound. stocks in europe are gaining happy percent. treasuries -- half a percent. treasuries nudging upward. we do not know what theresa may's next move is, but a longer extension could be the preferred option. taylor: all eyes go to the u.s. markets leading to the fomc meeting tomorrow. the s&p had a strong day yesterday. it is a cautious rally. we have had outflows in some of the etf's it tracks. it is cautious but one thing that is not cautious is the 2-10 spread. we have seen a lot of inflows into longer maturity bonds in some expect haitians have not

gone -- expectations have not gone to where we thought they would. palladium hitting a record in gold looking strong. the dovish fed expectations pushing gold stronger. the vix keeps falling in terms of volatility. francine: we will keep a close look at volatility. we were listening to angela merkel starting her speech and then we expect john mickelthwait to sit down for about a half an hour. there is a great blog on the bloomberg terminal so i encourage everyone to go on it. one of our editors has said because she step down from the leadership last year, she is shifting into the last stage of her chancellorship and she may address foreign affairs, or she has more freedom to focus on foreign affairs and germany's

place in the world, starting with saying their problems cannot be solved with national interest. and stephaniei flanders joining us. when you look at brexit and theresa may's options, i do not know who is on her side. her attorney general said the deal does not go far enough, and yesterday being told she cannot vote a third time. stephanie: it is such a long night there that we all have to -- long nightmare that we all have to be like goldfish and forget we have had a conversation the past months over whether the same deal could be put through parliament a third time. what now happens in the european council? the golden rule is you do not go

to a leader with a question you do not have an answer to, have not negotiated an answer to. theresa may has not been following that rule and will not follow that rule this week. if she does not come out of the council with a clear decision, we are leaving the e.u. in just over a week. francine: how would you advise the prime minister? what should her next move be? extension, meaning the u.k. will have to put up some new elections which will be tricky. carsten: a long extension does not make a lot of sense. it might be the european partners will offer a long extension because from their point of view, this makes sense because it could mean we even see a second referendum or a

deal with no deal toward the end of the year, because then the hard brexiteers were not be in favor of a long extension. what is needed is that theresa may comes to brussels and comes up with options, because for the agreeit will be hard to on anything without getting a reason or goal why the extension is needed. francine: how difficult is it to be in theresa may's reign? what is it that she can try to do to move? it looks like she is in a stalemate. stephanie: is it her own making? many would say because she wants to keep her party together rather than reaching across the house, and that is the great unspoken thing. we had said months ago she would be at that point and looking

with the labour party to form a majority vote around the customs union or a norway type deal. she has not even begun that conversation and has not given herself a plan b or c. taylor: i want to get your thoughts on this. i understand brexit is complicated, but they have had a few years and have not made a lot of progress. what do they help to gain by the -- hope to gain by the extension and what will they be able to accomplish they have not already have the time to get done? stephanie: it is time to build a consensus in the u.k. and parliament about a relationship that will work long time. it was 2016 that we had this vote, but because we triggered article 50 relatively soon and

put ourselves on this timetable, we never had a conversation about the future relationship. the deal is only about how we end our relationship, not how we continue it in the long-term future. -- and the long-term future. confidence leaves too many questions unanswered, as well as all the stuff about the backstop. it is realistic to say we need at least another year. taylor: if we fold this into your world, we got numbers out of the u.k. that look ok with wage growth of 3.4%. the u.k. economy has some struggles, but the jobs numbers look decent. are the markets pricing in too much concern over the brexit impact on the u.k. economy? carsten: i think we will see

there is still a good market scenario. ende is the option we could up with a no deal by accident. it is not appropriately priced in. we haveget to brexit, done all the math in calculation, that once we get into brexit, this will be a big hit on the british economy. the uncertainty is it is already costing economic growth in the u.k. you will see invest moving away from the u.k. -- investments moving away from u.k. two-year. -- to europe. taylor: you said things could get worse, that maybe the u.k. has not seen the worst yet. how much should we be expecting and pricing in? carsten: by accident, if we

would move to a no deal brexit in less than two weeks, this would lead to market turmoil and turmoil in the economies. it would be worse with the u.k. economy. all the countries have done the preparations to face a no deal brexit, and all the chain supply disruptions, customs disruptions we will see, a no deal brexit in less than two weeks would be bad news for the british and european economies. francine: the boe is meeting on thursday. is it more or less a non-event? stephanie: it has to be. we continue to get good data out of the u.k., regardless of the week gdp numbers. we have the lowest unemployment since 1975.

they are clearly in a holding pattern. compared to other central banks pause, theecided to bank of england in other circumstances would be moving ahead. back to: we will get stephanie flanders and carsten brzeski. we have plenty coming up. john mickelthwait moderates a one-on-one conversation chancellor angela merkel as part of the global solutions summit in berlin. you can follow her comments on the bloomberg terminal. of thencellor ahead one-on-one with john mickelthwait is giving a speech and talking about multilateralism, and the concerns she has when looking around the world. angela merkel calling for organizationsal

and saying multilateralism is under threat worldwide. this is bloomberg. ♪

♪ this is bloomberg "surveillance." citigroup will work with deutsche bank on the possible merger with commerzbank. receiving a formal mandate to advise germany's largest lender. u.s. regulators have taken

another shot at elon musk. the u.s. sec saying it is stunned musk did not seek preapproval for any of his tweets about the electric carmaker since he was ordered to do so. they say he must be held in contempt and his lawyer wants to file a response by friday. francine: thank you so much. breaking news, this is a bloomberg scoop. china is looking at excluding listg's 737 max 8 from a of american exports it would buy in a trade deal. the trade deal is making progress, but not critical progress, but part of the fulfillment, we thought a lot of the planes were in it.

if china is excluding the 737 max because of all of the concerns we have been having, it will make it harder for china to fulfill this offer which would share its trade surplus with the u.s. over six months. still with us are carsten brzeski and stephanie flanders. this is a nice bloomberg scoop. we will dig deeper and wait for comment, but do you think we are closer to a substitute trade deal between the u.s. and china? stephanie: positive noises coming out of the white house, and the president is keen to get a deal as soon as possible. when you look at things they still disagree on, it is a bit like the u.k. brexit still disagreeing on ireland.

they disagree on the crucial joint ventures provisions that china agrees to do on that, how you enforce any of it promises, and how you walk both countries back from the tariffs. those are three big things on the to do list. it looks like we will not see a leading between -- meeting between the leaders until june. taylor: our markets accurately pricing in a trade deal -- are markets accurately pricing in a trade deal? we get some shuffles here or there, but overall it feels more constructive than a few weeks ago. are the markets accurately pricing in that a deal could get done? carsten: i see that we will get some kind of trade deal. we have so many different headlines coming out of the trade negotiations.

one day we are close to a deal and another day we are far away. in the conflict between the u.s. and china trade, we should see some agreement this year. the debt -- it does not take away from the larger conflict that goes beyond trade. attention will not go away, but regarding trade, i am confident we see relief in the next months. taylor: does the tension with the u.s. push china closer to europe? you see xi jinping making the rounds. scuffles withus the u.s. pushing china toward the u.s. -- europe? carsten: there is a big european summit this week that is not only about brexit but also about the e.u. strategy vis-a-vis china. ofre are a couple of issues

europeans trying to become more protectionist stick when it comes to -- profession is -- protectionist stick -- protectionist when it comes to china. we will see what happens between ,hina and the you -- the e.u. as they try to protect crucial sectors of the economy. francine: carsten brzeski and stephanie flanders both stay with us. chancellor angela merkel is speaking live from the global solutions summit in berlin. she is speaking about multilateralism, which in large part is repetition. it is a repetition of what we heard at the munich security conference. the big question according to the chancellor is how to deal

with non-tariff trade barriers of the future. our editor in chief john mickelthwait moderates a one-on-one conversation with angela merkel and we will carry her comments live. you can follow that on your bloomberg terminal. this is bloomberg. ♪

♪ francine: angela merkel just finishing her speech, saying there is a lot of work. politics can not solve the global issues on its own. she is in conversation with john mickelthwait. john: if i could push you a bit on this contrast between multilateral and multinational. you talked about china and america, and the change in power. you have the exact example of america is company saying it may restrict intelligence going to germany because of it. would you be happy with huawei be part of one of these consortiums bidding for 5g?

chan. merkel: well, i believe so far a number of countries are using huawei. it is true that this question will loom large on our agenda as we transition to 5g because there systems are more complicated and it is more difficult to keep track of them. that is why the federal government said our approach is not simply to exclude from the start one company or one provider, but we have certain requests and demands with 5g technology. we are going to lay those down in a telecommunications law. we shall then talk to our partners. there are two things i do not think one should do. discuss these --

sensitive issues publicly and secondly, exclude just one participant because they come from one country per se. we should not be naive about this, obviously. in china, they have very different laws than here and we need to evaluate that and talk to our partners. john: is that a good example? chan. merkel: it would be desirable. the more uniformly are in our project, let me tell you about multilateralism and the importance of it, europe is a problem in multilateralism. john: you mentioned george bush and what happened afterwards with barack obama. trump not mention donald

but i suspect he would say, the way i see it is that germany, the biggest multilateral organization he has concerns anut his nato you have ambition to get 1.5% but that is still below the 2% america is talking about. your finance minister has come out and said there is a new target of 1.25%. that is much lower. in the name of multilateralism, surely you should overrule with great politeness your finance minister. chan. merkel: of course i won't do this. we traditionally adopt our budget together in a coalition government. ,ut thank you for this question because it gives me the opportunity to clarify a few points that are currently being discussed publicly.

1.35%, at we have least according to predictions, for nato expenditure. we have come from 1.18% to 1.35%. obviously along with the growth rates, and 1.37% will be the increase due to the budget increase in growth. now the medium-term financial planning has taken a yardstick. look over the last 10 years how the medium-term financial planning has been. the real expenditure is what counts for each and every year, is what is crucial. i am always being corrected upward. this is not the time to make any safe predictions for 2021 and what the budget will look like.

one should look at this course 1.18% toaken from possibly1.35%, and 1.37%. we have come from a relatively low value. 2.0% at someowards point in time and in the meantime we will have 1.5%. that is not sufficient for the american president or the european partners. we can make cuts in our development. we have said no. we have said this in our coalition agreement one-on-one. we are one of the largest donors for syrian humanitarian aid.

the president criticized that we received so many refugees. if we want to act in the future in such a way that refugees see a future for themselves close to their home country from which they fled, we have to give them money, those countries that receive them. this situation what was wrong was we did not look at the distress and share need these people had previously. there need was so dire they had to trust the traffickers. that was a mistake we made. we said we shall go towards the objectives of 2%, but not to the deficit -- dutch event of better -- detriment of better things. world,n the multilateral

germany will have to give more. chan. merkel: it is true, we have to do more, but not only on equipment. one will have to ask what share of military engagement is being given to nina. -- nato. not each and everyone provides the whole military budget meant -- budget to nato. the u.s. has commitments in other areas. we need to talk about what is happening and what sort of contribution do we give to target the root cause of terrorism. over the past early years, germany has shouldered more and more responsibility year after year. was a cultural seachange and we will have to open up to similar engagements. only looking at the military engagement would be wrong.

we need to work for crisis protection and development. aspiration an ambition of the u.s. is a world power is different than germany. that was a political decision than a decade ago that was taken. we have not the ambition to become a world power, global power. we want to be an important player, but obviously we have to look at is ambitions. john: do you worry about their becoming fortresses, fortress europe, fortress nafta, fortress america, and fortress china? this is how world trade breaks down. chan. merkel: fortresses will also have to trade with one another. i don't think this will be the picture that will emerge. the current approach is always

invariably the second-best. different level playing field then the agreement we make with singapore, with japan, the new nafta looks a little bit different. second-best because obviously, each and everyone creates his or her own level playing field. that gives rise to differences in somebody will fight those or perhaps not. the final goal at the end of the international,n a global economic order, but for the time being that is second-best. obviously, people will have to stand up, will stand up for their interests. discussed, we have such a long time the agreement for south korea that would be to

the detriment of our automotive industry. openness has always reaped a reward. john: maybe we can go into fortress europe. you have a summit on thursday. the speaker -- chan. merkel: brexit is independent of the summit. mrs. may will calm in -- doesin whatever manner she , but the house of commons has told her she cannot come back with the same deal. that raises the question -- are you planning to give her a new deal at the summit? chan. merkel: i would say first, i admit that i am not familiar with the values of the house of commons dating back to the 17th century, i believe.

i was not familiar with those irms -- those terms, though noted them with interest yesterday. we will see if theresa may will tell us what their wishes are and we shall try to react to this. but it is not as if this had been an agreement that we had negotiated alone. the british government was for again, under negotiations these past few days, and the wish was to have something legally binding with regard to the backstop. we will very carefully follow what the british government is going to say with regard -- going to say. with regard to what was said yesterday, i will not say. john: if they ask for an

extension, do you have any prejudice? would you like a short extension so it does not affect the european elections, or would you like to give them a year to solve the problems? isn. merkel: allow me, what what i absolutely want to do? i am interested in having a good relationship with written -- britain even after they have left the e.u. i take theresa may seriously when she says britain stays in europe, it will simply leave the european union. we have common interests because of our geopolitical situation. britain has always been a country that has felt committed to the position of multilateralism. internal security and defense,

terrorism, and so on, that is why we made provisions for the citizens to have as clear a legal situation as possible, even in the event of no deal. that will invariably be the second best. we will work on this until the very last hour. i will find -- fight for an britain fromng of the european union. i am not in a position to speculate what i will do on thursday because it depends ust theresa may will tell and the situation in parliament. we will adequately as 27 react to this, and the less people speculate, the easier. john: you have talked to theresa may because she is the

you doent in britain and not like interfering into the sovereignty of others, but this is being decided by parliament rather than a government. if you had boris johnson and the brexiteers in front of you, what would you say? chan. merkel: the same that i say to theresa may. i am not talking with different tongues were different voices to different people. i say very clearly what my interest are and wait for the answers. we respect the parliament in germany. the federal chancery is aligned in such a way to look directly on parliament, so we know who has the political power and without a parliamentary vote and majority, no political decision is possible. we have learned more about the procedures of the house of commons.

it is not possible for parliament to set their own agenda we have every respect -- agenda. we have every respect no matter who is standing in front of me, to work on our common interest. john: you were going to talk about the idea of european champions. i wonder if you want the support -- i am wondering if you support what has happened between deutsche bank and commerzbank. think that is a decision that is best left to private business. i would very much argue along the lines of the federal government not in any way making kendrick -- public comments on this. once the partners have come to an agreement, we have an interest to analyze that. retain a 15%ill

stake in commerzbank, it is a decision of private business. with all of the challenges and opportunities and risks, only the stakeholders can evaluate that. we have sometimes government in the banking sector invested, is not something that is foreign. im waiting for the stakeholders to give their final say. john: on the issue of multilateralism in europe, there appears to be a feeling between yourself and president macri where france would -- macron where france would perform and germany would help push the deeper integrated europe you might have hinted at. france has done a bit of reforming and there has not in much integration.

is that a fair criticism? chan. merkel: no. each and every one of us has different ideas about where we are to reform. in the end, france and germany have always to see whether they can persuade all of the other european member states, and that is not something new. when you look at how the euro was created, that is a case in point. germany argued, the way france argued has always been different. they have always made a point for the stability pact not being so strictly adhered to or , and rathererpreted look more at the labor impact and the impact on jobs. we have always had to be strict with a view to the financial

sector. we will do so when we look at the capital markets union, the project of the european union, and all the other 27 -- sorry if we leave written out of it. -- britain out of it. john: do you have a germany first attitude toward the european union? chan. merkel: no, i don't think so. i am always opening for compromise and i have done a lot of compromise. we have been heavily criticized on the copyright laws and france attached importance to protect the intellectual property rights. after eight years, after 10 years, we now finally have common legislation on copyright and we have to make a compromise.

there are a lot of young people demonstrating against it, but we have to strike a compromise. our first question is from a young global assistant. will you ask your question? thank you very much. i am a young global changer from corporation. in the last summit, you a need for a saw taxation system that is just. to improveng done the accountability of large companies? chan. merkel: despite your global citizenship, do you have a citizenship as well? >> croatian. we have had this

debate in the european union on digital taxation and we are for a minimum taxation. ifthink we can do this best we have an international solution and the oecd is working on this. by the second half of 2020 we , we willve a solution bring a european solution forward, but until that time we want to work for a global solution, and international solution. this time it looks quite good because the united states are ready has that form of taxation so such a concept could fly. john: the next question is from pwc china. thank you. that you support the

kind of changes being discussed here including the multilateral approaches to global challenges. what is your ask of business leaders? chan. merkel: well, from the leaders from the business tomunity, i would ask them see the great challenges and factor, for example, climate change that we have in the world today, and factor them into their policies, that they stand up for fair and equitable taxation. quite often, leaders of business have a better idea of the technical possibilities in certain areas then we politicians. businessleaders in share this knowledge with us and

the less they protected and hold it close to their chest and then presented as a big surprise, this concept of a social market economy to which we are committed is actually one where both sides of industry shoulder responsibility, not only politicians. question is from the japanese g20. behind you. >> thank you very much. i think carbon tax is very important to achieve a green economy, however developing countries in asia are struggling to charge tax. from german experience, what kind of lessons could asian countries learned in order to prevent a carbon tax? frankly, we have a

tax on energy already, that is true, in germany, but we also have exceptions for our energy intensive industry. if we do not have a global level playing field, in the end, national measures will always be , that you havect to have certain exceptions built new companies will be at a competitive disadvantage. france andussing europe, for people who have no co2 taxation at all, who are not trying to bring down their onssions, introduce tariffs products imported into the european union. we get into difficulty when we

agree to three freight agreements -- free trade agreements. it will always be a taxation scheme with holes in it because we have to make exceptions. then you have the danger for those who are only active locally, only managing locally, have to shoulder the whole responsibility because all the other international players are being granted exceptions. that is not a satisfactory state of affairs. i think together with japan, we have to bring about international relations. will we everjohn: see a global carbon tax? chan. merkel: maybe. look at china. they have set up an interesting ambitious trading system. here in europe, we have certain

industries -- and i am not familiar with the german -- system. the more we try to harmonize the systems and then spread this around, so we will not immediately overnight sensation, each and every one in on this. john: another question from the founder of jango. 2017 under germany's g20 leadership, a very ambitious plan was assigned with africa, shifting the narrative from eight to equal partnership -- aid to equal partnership. what other progress can we report in terms of private sector funding and their accountability, and how can we go faster?

well, we have continued to work on this issue and we are delighted to see that japan has put this on the agenda presidency.heir g20 that means more transparency among the fiscal sector and also , getting better investment conditions. last year, i invited i believe 10 countries to a conference. for each and every country, we defined concrete investment schemes. we are small in nature and by the end of this year, i would like us to be larger. one billion was earmarked for making loans and interest cheaper. those countries that are in on this african compact where the imf and world bank is saying

their debt schemes are more transparent, the whole fiscal sector is more transparent, they will get concessionary conditions for loans, or companies that want to invest in those countries will get better guarantees that the conditions will enable them to do that. i think we have made headway. a number of countries in the compact with africa have been given a special partnership offer so participation will be increased. that is just a small building block. next, weday to the will not become a problem with no countries, but it is nice to see japan is in on this. john: 53 seconds over. merkel, this was

inspiring. it was particularly inspiring because it is not multilateralism for its own sake. francine: that was the german chancellor angela merkel in conversation with editor in chief john mickelthwait at the global summit -- global solution summit in berlin. the most poignant was the first question about huawei, saying actually she does not want to single out any individual telecom suppliers. still with us, stephanie flanders. it was a wide ranging interview. is there anything that stood out? stephanie: john mickelthwait tried to pressure on that with that example about huawei, but we have that tension between the national and international when it comes up with brexit, and a potential merger with deutsche bank and commerzbank.

she resisted the opportunity to talk about national champions. her own finance minister wants to do the merger. she avoided singling out huawei. she towed the line on brexit -- toed the line on brexit once again. germany woulde take ireland aside and say, we will put you under a bus and let britain have a better deal, there is no change of light. taylor: what did you make of the comments on nato and the trump -- the 2% target trump is so adamant about, as well as development aid? stephanie: there is enormous politics around this, because donald trump has pushed them a little further in this direction

than they might have gone. if you are a german chancellor, you do not want to give a lot of credit to donald trump. in the previous stances she has taken on the migrant crisis or anything else, she is willing to take a stand when it comes to doing what is right from an international standpoint. francine: stephanie flanders. tomorrow, follow our special coverage of the fomc rate decision and jay powell's remark. that special report coming up at 2:00 p.m. in new york, 6:00 p.m. in london. this is bloomberg. ♪

♪ >> buy the fed.

the fomc kicks off its two-day meeting. contested divorce, theresa may appears to ask for an extension on brexit. >> welcome to "bloomberg daybreak." interview with chancellor merkel. she will fight for an orderly brexit. alix: she wants to know theresa may's plan, then the eu will respond. the problem is that it is not theresa may's plan. david: