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: that's right.

theresa may had a plan. besounds like her plan will asking for an extension. alix: how long? she wants nine months to 12 months. do you give her that? david: we have parliamentary elections in may. britain will be electing members of the parliament they don't want to be in. alix: chancellor merkel fighting for an orderly brexit. whatever that means? the story is by everything except for the dollar and volatility. s&p futures up. dollar going up. money going into the bond market and equities, as well as commodities. by everything. david: except for the

volatility. alix: you will want the yield at the year-to-date low. atid: right now, today 10:00, u.s. factory and durable good orders for january. at noon, the president of brazil arrives to meet with president trump for a bilateral meeting, followed by a joint news conference. after the bell, fedex posting earnings. now it is time for bloomberg's first take. we are joined by our correspondenct and executive editor. this is the medium of the dots. many above, many below. the blue is the 10 year, neutral. >> it tells you the market thinks the fed is it neutral, not needing to go higher.

the question is does the fed go lower. clot, you would have to noe a lot of dots down for rate increase for this year. it is not clear if they can do that. one does not matter. what will matter if jay powell says we are on hold, doesn't make missteps fervently, and gives the impression nothing will change from the fed this year and less there is a major change. alix: is the bond market leading the fed. that is the key question. have that we volatility, now a dovish message, so there is a since the market is in control on the stock market and bond market sides. the markets are in control when it comes to the fed. the speaker of the house and the u.k. is apparently in control of brexit. speaker of the house of commons talking about

the next vote on theresa may's plan. dowhat the government cannot is to resubmit to the house the same proposition or substantially the same proposition as that of last week , which was rejected by 149. alix: who likes that tie? david: it is a statement. alix: the question is what has to change in her plan to be ok to vote on it? >> it is not clear. if it does change, they could hold another vote on it. she went to strasburg before the last vote and was able to get enough of a change that he allowed it to go forward. he could do that again if she could find some way to make a minor change in the wording of the proposal. the question is what does the eu do on thursday? extension?e her an

if you have no new plan, we will let you fallout? if they do an extension, how long? the eu is talking about giving her a short-term extension or not setting a final date to give her a chance to go back and vote once again. if she can't get that done, nobody knows what the u.k. will do and how long an extension would be or whether it would be worth it. saying, but what of the markets hearing? we don't think there's going to be an abrupt and disorderly brexit? >> right. the pound has been reasonably stable. the markets are hearing it is a mess without a clear end in angela merkelo saying everyone wants to avoid a disorderly brexit. --id: it has gone quite on quite a while. sonny perdue, we had a chance to

talk to him. this is what he said my come up for u.s. farmers. see if we aresily able to come to a trade resolution of doubling or ,ripling that number over tw to four, or five years. david: wow. >> that would be impossible. alix: the market agrees with you. >> we saw $24 billion of agricultural goods to 2017. if they were to triple that to $72 billion, what with they do with it all? they already have full silos. , they would be taking away sales from other countries. do they want to do that? what are the price dynamics going to be? number two, how much would that be?

there could be a 40% increase. do they need that much? it is hard to believe those numbers, and lesser starting from the base of we are not selling anything now. alix: the other part of the conversation was boeing will cancel some orders -- they will cancel some orders, making that deficit difficult. >> one of the easiest ways for china to close that trade deficit is on the agricultural front. we have the president of brazil going to meet president trump. he wants to sell more stuff. if they sell more, doesn't it come out of brazil's pocket? >> 80% of brazilian soybeans go to china. the u.s. is selling more stuff to china than brazil, so brazil will be selling less. can the u.s. and brazil come to their own trade deal?

this one will be tough to pull off. it will be interesting to parse the fine print. alix: we are having a really nice rally, particularly commodities, with the exception of soybeans. there you go. think about that. coming up, president trump will participate in a joint news conference with the brazilian president at 1:45 p.m. in new york. thank you both very much. on can find all the charts gtv . browse the features and check it out, gtv . thisg up, more on the fed is bloomberg. ♪ . -- on the fed. this is bloomberg. ♪

>> this is "bloomberg daybreak." largesthe world's aluminum producers is fighting off a cyber attack. it is saying it is switching to manual production when possible. it provides highly specialized aluminum parts to customers, including aerospace and automobile making. another shot at eli's muscat, saying it is stunning that elon musk did not seek preapproval for any of his tweets. the agency has reiterated its request that musk be held in contempt of court. it is a sign of new competition between two silicon valley

apple and netflix. reed hastings confirming the company will not be taking part in apple's new streaming service. apple plans to unveil the platform next week. that is your bloomberg business flash. alix: does that mean i can't get netflix on my apple tv? oh man. i'm going to have 17 different apps? fed officials begin their march policy meeting today. market participants expect them to stand pat. >> we are in a place where we can be patient and flexible. >> we can be patient. >> we can afford to be patient around policy. >> we can be patient and allow the data to flow in. >> there is no need to move quickly come up because we can see how things unfold over time.

>> my view is we should be patient and give some time to -- for the economy to unfold. >> it is a good time to be patient and watch and wait and see how the situation you false. alix: joining us now is our guest. what is the market pricing? consensus among fed policymakers. atyou step back and look where rates were at the come the of the year s&p had a good day, then a bad day, up 13% since january 3, so that gives you a sense of the about-face the fed did. boxan argue about the effect may be in, but for now, i don't know it needs room, because inflation is cooperating. gently below pce

target, not in the danger zone in the sense that europeans are fighting, but not too high. the fed has some wiggle room. they can set on the sidelines and the patient. complacency?ce and till april, june, what about december? >> it is a good point. it gets back to the dialogue going on, which is can we afford to go above target for a while. let's prove we can get core pce well above 2% before we even worry about anything. there has been a lot of dialogue about the fed's about-face. it is significant. i don't think the fed has moved so strongly in some time. it is quite market-friendly. we can argue they moved to

aggressively, but it is market friendly. as we were talking about, volatility has been pulled out of the market. alix: let's look at that. , fx,is volatility treasuries, u.s. stocks, european stocks. it does not matter, because they are all moving down significantly. do you want to hedge and buy some volatility here? >> we try to take a process. it is the case that when markets get fragile, volatility goes up. ,t is when you want to hedge but the cost is high. the s&p 500, you are not in a danger zone. you are above that level on the s&p. the vix is low. we would say there are opportunities to do hedging. you don't want to overspend. quiet markets perpetuate

themselves for some time. we are trying to figure out what catalyzes markets. you want to be disciplined and be adding to hedges. they are so inexpensive right now. meetings have fed today and tomorrow. is there any way they can go more dovish? if there's any risk, it might be to the hawkish side? has absorbed all the dovishness the fed can provide. ,f you look at rate curves there is some probability that the fed could ease next. there is no probability it will tighten. thate isd does eas, not good for markets. september was good news in that sense they undid some expected

tightening. if the next move will be in ease, it will be a reaction to something geopolitical. i don't think markets will will react that well to it. point, there is a narrative the fed does not want the market to be too complacent because you have low volatility and will take on more risk and want to search for yield and any change is going to shake investors out. how did they get out of complacency but not shocked the market? narrativeplacency comes up and get some attention within the fed. i don't think it gets a tremendous amount of tension. we are 12 years away from the systemic global crisis. i think a lot of the regulatory initiative post-crisis has done a good job. you could argue it is a

whack-a-mole. the risk shows up in other parts, for example. even janet yellen has said the leveraged loan market is something you need to look at closely. at lastook back december, the selloff and credit was substantial relative to movements in the real economy. that speaks to late cycle fragility. there are those things that are things to be aware of with respect to complacency. will giveink the fed it a tremendous amount of attention now. below 10to get the vix to start worrying about it from the fed's perspective. david: you will be staying with us. chancellor merkel plans to do everything in her power to make sure there is an orderly brexit. we will talk about that next. this is bloomberg. ♪

david: angela merkel said down

with john micklethwait. she said she will fight to the end to ensure an orderly brexit. >> we will carefully follow events, what the british government is going to say with regard -- yesterday, io cannot say anything on the situation. >> you have to presume she will ask you for extension. do you have any prejudice on your side? would you like to have a short extension so does not affect european elections? or would you like to give them a year to sort out the problem? want to do is i am interested in having a good relationship with britain, even after they have left the eu. it is in the interest of germany

and the 27 member states. i take theresa may seriously britain says written -- will leave the european union, so we have common interests because of the geopolitical situation. britain has always been a committedat has been to the principle of multilateralism. its security, internal security, defense, terrorism, so on. that is why we made provisions for the citizens to have a clear legal situation, even in the event of no deal. that will be in verbally the second-best option. invariably be the second best option. i will fight for an orderly brexit. we don't have that much time. we have a few days.

i must say i am not in a position to speculate what i will do. theresa mayn what will tell us and what the situation is in parliament. we will adequately and together as 27 react to this. that was angela merkel speaking earlier. alix: still with us is our guest. commerzbank had a great note out talking about the volatility of the dollar,sus basically around zero, so upside and downside. how is that possible at this point? >> it is an interesting number. if you go back to the brexit vote, june 2016. if you look at the volatility profile of pound options, one month implied volatility was three times what it is now.

we are approaching this vote where brexit may occur, and the market is much more sanguine about the potential for disruption. if you look at europe, implied volatility on the euro, that is at a near all-time low, so the potential for spillover is quite low. i am not smart enough to know the ins and outs of brexit, but i try to learn about positioning and the threats as suggested by option prices. prices does not tell me there is the potential for significant move. alix: why? david: is it because the markets are saying the options are narrowing? or is it because there are so many times you can talk about this before i'm not paying attention anymore? >> i think it is both of those. what has been the european

story? model --ough -- keep it together. it might not be a great outcome, but they will get through it. said the mostvey crowded trade a short european stocks. what will be the snapback? perhaps the strength of the pivot on the ecb side. they have a world of issues. alix: you would keep those positions, short euro, european stocks? >> i step back and look at volatility on the euro and euro stocks, significantly low. despite the problems, the

political side, the economy slowing, central ability to re-fire the economy, and inflation has always been suspect, volatility is extremely low. the market does not move that much. alix: you will be sticking with us. some of the numbers it came out were encouraging. some green shoots in europe for a while. alix: good point. coming up the trump of the tropics. brazilianore on the president's visit to washington. this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. want more from your entejust say teach me more. into your xfinity voice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. this is "bloomberg daybreak: americas." here is where the markets stand.

s&p futures close yesterday at the highest level in five months. america fund managers survey says equity exposure is the lowest since 2016. david: how can you get numbers going up if people like buying? alix: let's get a take on what i was saying, don't buy the dollar and you are good to go. the cable rate around the highs of the session. more uncertainty continues? deeper, 15n the u.s. basis points. year,rude at highs of the a solid bid. david: all you had to do was look at the colors, all green. it's time now for an update on headlines. may is now preparing

to seek a delay to brexit. the house of commons torpedoed her plan to win parliamentary approval of a plan. she will have to ask for a delay thursday. u.s. officials may investigate 737 max wasng approved. engineers cleared the equipment now at the center of the investigation. the head of opec says u.s. sanctions can't completely stop iran from exporting oil. >> it is practically impossible to bring down exports to zero.

the waivers, extension of the growingcontinue to be uncertainties in the market because of the importance and size. >> global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. alix: thank you. over the last couple of days, opec threw the ball into president trump's court. david: he has a point. it surprised everybody. alix: they didn't want the oil price so high. to $95 for oil might not be

out of the picture. there is this pesky supply and demand thing going on. we turn to brazil. the president arrives in washington today for talks with president trump on expanded trade and membership into the oecd. it comes at a time when brazilian stocks have shot up. our em credit strategist. still with us is our guest. welcome. you saw the stock market in brazil. look at the markets more broadly. local buying. foreigners have been selling for the better part of this year. spine, dragging that up, so thin volumes. if you look at the brazilian real, it is floating around that

average. volatility has collapsed and cuts.ne is timing they're looking at the coupon meeting for evidence brazil may/rates. i don't know if that is the right move. things are simmering beneath the surface. markets are looking complacent. david: give us a diagnosis? to come intojected .5% gdp growth, but inflation running hot it 4%. reserves are coming off. there are issues beneath the surface. on wednesday, the brazilian president will put the pension agenda to the lower house for military reform, but the lower house is expected to accept much of this proposal and put that through intimate, early june.

that is good news. , 5.1% on the 10-year in brazil, that is a two-year low. time youow is the want to be entering, i am not so sure. alix: you're betting the pension reform would happen, which means hedging political risks. what do you do? >> i think it is interesting if you look at the trajectory of central-bank policy around the world. their fed is suggesting tightening cycle is done and the next move could be to ease, it is a good bet every other central bank is in the same camp. you see that in the larger emerging markets, the curves flattening significantly.

one of the problems markets were up against was the trajectory of tightening policies. the question becomes have we baked in the good news. markets are off to an incredible start. volatility has collapsed. i come at it and say i think the trend continues to be slightly higher. we have probably bit off a lot of good news already. to use options smartly. you don't want to buy too many. you should be thinking about tactical hedges. alix: here is a wrench that might be thrown in later today. , there was talk about china buying more u.s. goods. >> if we are able to come to a trade resolution, doubling or tripling that number over two,

four, five years. alix: china buys more soybeans from the u.s. that will be at the expense of brazil. >> there will be new members on the brazilian central bank board weighing in. the new central bank governor will be status quo. they will extend with the former governor did. swaps, $70hese fx billion which brazil uses to manage its currency. the markets are predicting you will be less interventionalists. over thetart rolling swaps, you might see more volatility next year. go to fx volatility and talk about emerging markets, not just brazil. volatility is really down.

does that help em? >> it does for sure. if you look at the performance on an absolute basis and versus the s&p, it is correlated to volatility in fx. the dollar has been filed find -- flatlined for months, so zero's in terms of implied volatility in fx. that is good news. em is a carry trade and does better when there is stability. alix: the pickup and volatility for the real is idiosyncratic. are going to go to em local debt, central-bank reserves, central-bank spying other countries debt, we have not seen retail investors participating in local markets.

, but the s&pange is flying high. it is difficult to move money offshore. that is what we are talking about. fx full into the coming off is good number but can it sustain itself at these levels? i would use this opportunity to take something off. david: how many emerging-market central banks are using the opportunity to build up the reserve right now? >> it is hard to do. to manage your external debt exposure, the only way to fund your economy is to issue in hard currency, which you see a lot of people doing, primary issuance is going up again. to manage that and reserve levels is a tricky thing. we have seen countries that have kept the reserve levels.

brazil has reduced their funding costs and extended duration profile for their debt outstanding over the past year. there are a few countries doing good. it is idiosyncratic, not universal. alix: when you have an increase in volatility, it's going to be hippy or not? >> you never fight the imf for the dollar. higher. dollar breaking on a quality move. if you see trade talks collapse, thattors -- there is risks have not manifested themselves. it is wise to be prudent. >> i agree. if you look at the dollar, it

should be in your dashboard of things to look at. if you see days where there is a dollar rally and a risk off in risk assets, that is telling you something. revisit a time when we had that dollar rally. this is when emerging-market sold off quite a bit and there was a lot of discussion about emerging-market debt, which tends to be negatively correlated performance wise to the dollar. i don't think that playbook has come back, but something to watch for. david: 15 months ago, we had conversation about how calm everything was, then a blew up february. if it blows up this time, what will cause it? >> february was technical. 2018 wasility in q4 broadly sponsored. slippedjay powell loose

ellison geopolitical stuff with tariffs, signs of economic weakness. david: government shutdown. >> and you had positioning as well getting stretched. fragile laterket cycle. guest is the move down will have to be sponsored by something were economic weakness starts to reemerge. >> i completely agree. china has full employment all the time. output weaker, so look no further than china. alix: great to see you both. , president trump will participate in a joint news conference with the president of brazil at 1:45 p.m. in new york. let's talk about the space for rent. deutsche bank downsizing and

giving up office space in hong kong. that is coming up next. this is bloomberg. ♪

>> this is "bloomberg daybreak." chairman ofday, the the white house council of economic advisers. this is "bloomberg daybreak." this is your bloomberg business flash. bloomberg learning china may 737 max from as list of exports it will buy as part of a trade deal. key to reducing's

trade surplus, the 737 replaced by other owing models. ounceium topping $1600 an . there is little sign the global rally will slow down. it has doubled from its recent low in august. it is used in car antipollution devices. there is expected to be a shortage for the eighth year in a row. the new zealand shootings were live streamed, putting pressure on facebook and other social media. once tos prime minister discuss a crackdown. that is your bloomberg business flash. alix: you were saying angela merkel addressed that? david: she said you can't have a platform and not be responsible for what is on it. alix: deutsche bank weighing downsizing. it is considering giving up some

space in hong kong. female u.s. economist report discrimination, including hundreds of reports of assault and harassment. the economic slowdown is great for the credit side. deutsche bank, we knew they would lay off people, but they may have to give up space too. >> it feels like that next level down. in obvioushappen ways. with some prime real estate in hong kong, the tallest skyscraper, three floors. i was also interested in the numbers. they would save about $12.7 million a year.

that shows you where they are. alix: count those pennies. david: we were talking about angela merkel. asked angelawait merkel about the commerzbank merger. >> it is a decision of private business. themselves cans evaluate that. david: i love this response. we have no opinion at all. on the recording is her finance minister is saying, you guys get together. >> she used to work in banking. she knows everyone. they are clearly under all of this and intimately involved. this is deutsche bank. part of the bank,

government. a report from the american economic association said that half of email, miss have experienced gender discrimination and reports of assault and harassment. say the numbers are staggering. i feel like we are at this moment, the story in the new york times about a case coming to wall street. wall street in the world of economics have lagged in terms of the real reckoning. you wonder as this comes out, does the me too movement regain some traction here in different parts of business. anothervery day has one. out. the ft has come they want a warranty and

the club back. >> this is now part of due diligence. we were talking about this yesterday, the case of google and questions around who knew what when. when you see venture capitalists and money starting to ask questions -- alix: good point. you spoke with martin lazar he. he spoke about the slowdown. >> the economy last year grew greater than 3%. today, 1.5%, 2%, 2.5%? that will be a 20% to 30% reduction in growth. you don't have a recession, but you do have a slowdown. on the credit side, a slowdown

is great. >> it was really interesting. we talked about energy, retail. clearly he see some opportunities. he has made money in distress before. he said we don't need a major recession, but if growth is slowing, there our opportunities. also brackets for charities. cause, almostr a 50 people pledging $10,000, picking a charity. the winner gets the money to give to that charity. people get super into this. david: who won last year? alix: do you remember? won thew bill ford has

four. -- before. it's a great charity. fallenships for kids of soldiers. the charity's love it raises visibility for them. they are super competitive. the emails i get over the weekend while the tournament is going on, when will this be updated, who is ahead of me, who is behind me. david: you connect follow the whole thing on the bloomberg. many thanks. you can tune in on bloomberg radio every single day. coming up, take a selfie by the vessel and the hudson yards can use the photo. that is next. this is bloomberg. ♪

david: i am watching hudson yards. specifically, their vessel policy. you have to get a ticket to go in. consent to them doing anything they want with that picture. alix: why? david: other people do this as well. it is also part of the brand. it is part of their logo. they are concerned that they can up ownership and people use those pictures anyway they want and they lose control of the brand. it is understandable from a legal point of view.

there is of the question whether it is enforceable. they have already backed off of it. alix: is are going to be a line now? david: they had a big launch. was a little blemish. they are having pushback from people. enforcement.tioned can they take it away? david: the lawyers sometimes -- alix: again, the lawyers. coming up, allianz global investors will join us next. this is bloomberg. ♪

♪ the fomc big unwind,

kicks off its two-day meeting. we dive into how the fed controls rates. angela merkel passes the buck, saying it is up to executives to decide if merger plans make sense. contested divorce, theresa may heads to brussels to ask for an extension on brexit. david: welcome to "bloomberg daybreak." i am david westin with alix steel. we heard a lot from angela merkel. john micklethwait prester on defense spending. they have this goal of 2% of gdp. they are not close to that. she said they are working on it. she said we are spending a lot of money. alix: they also have fiscal spending as well. they have a struggling automobile industry that has maybe bottom the little bit? they have to deal with that. is notthe president

interested in their problems. alix: in the markets, the overarching theme is by everything, except volatility and the u.s. dollar. futures close in a five-month high yesterday. 2850 on s&p futures. stronger european currency, lots of shorts in the market. yields go nowhere. 2.61% makes sense. does? it shows what i know. at 10:00, u.s. factory in durable goods orders for january. the present president arrives in washington to meet president trump. the two will hold a bilateral meeting at 12:45, news conference at 1:45. fedex posting third-quarter earnings after the bell. of meetingsns two

today, acting on a decision made last month reflected in this "thement from its minutes, committee continues to implement monetary policy in a regime where an ample supply of reserves insurers control over the level of the federal funds rate and other short-term interest rates primarily through administered rates come in which active management of the supply of reserves is not required." i did not understand it, so i went to michael mckee to explain what this means and why we should care about it. he is here now. mike? >> reserves 101. i will oversimplify. it won't be exact. this is what we are talking about. thanks are required to keep 10% of deposits.

they call them reserves. they keep them at the fed. for years, the cost of the raw material for banks is the fed would buy or sell in the marketplace if they became more scarce. if they did not have enough reserves, they brought from other banks at that price. by theked the rate set fed. the orange line is where the fed wanted the rate to be, and this is where the buying and selling of reserves worked, although volatile. what happened? we got to the financial crisis and the fed needed to push rates below zero. they did not want to do that. they started qe. we remember that. they started buying a lot of bonds from banks. to those bonds credit banks and put the cash in the fed vault. what happens if you have a lot of cash and it gets into the

economy? you end up with inflation. didn't want that. they set a rate to pay banks to keep their money at the fed.

the amount of reserves is what would change on the balance sheet. what what they bring that down to? $1 trillion in reserves. the banks have to have high quality liquid assets. thing.n sell the safest so the fed has been trying to figure out how many they need. tomorrow, we expect a decision on this. the implication for markets is how many treasuries

the fed needs to buy and sell in the future to keep that level steady. it will have implications for the markets. we will see what we get tomorrow. david: now you can see why i always turn to michael mckee. he is the one who knows. we go now to our guest. about what the fed is likely to do. , we are watching a couple of things. one is what they would do on the rate hiking front. the second is what they would do on the balance sheet front. the market is expecting clarification. were looking for how far do they want to take this balance sheet? we are now about $4 trillion. ofare looking at consensus

$3.5 trillion for where the fed may want to in-depth -- to end up with its balance sheet. that would take about 10 months. if they go beyond that and say $3 trillion, another $1 trillion down, that would take about two years. at the end of the day we are of thisat an end tapering sooner than the market expected, so probably the end of this year or the middle of next year. the fed will be done with its tapering process. that is positive. alix: historically, what happens to the market? is at the same this time? >> we look at the last four fed tightening cycles, the most relevant for today. the equity markets can do quite well during a tightening cycle, and even after. the s&p rises on average 9%.

yearstypically around two after the fed's tongue with his tightening cycle when we start to see the slowdown in the economy and markets rollover. that is in line with what we are talking about. david: there is a correlation-causation issue. stopat point does the fed tightening because it sees leaner times coming? farne of the issues is how have they gone to slow the economy down. because monetary policy works with a lag, they don't know. people have said the fed has gone too far already and we will see a slowdown. others say we still have slack in the labor market. we are still seeing the unemployment rate come down. we can leave rates where they raise them if unemployment goes down because inflation could go up.

that is the ongoing debate. alix: does all of that make sense with a 2.6% 10 year? >> in the last nine years when you look at what has happened, the fed has kept rates near zero. it pushes investors into riskier assets. the fed has gone on pause, and other central banks, china in stimulus mode, ecb and the of australia, bank of india. and that rate environment where rates are 2.60 on the 10 year, investors have to look for a source of yield and return. we have seen equities and high-yield markets perform well. that is reminiscent over the nine your bull market. >> that is a concern for the fed. jay powell may ask about that tomorrow. do you encourage moving into riskier assets that could blow up at some point? david: the answer is certainly.

you will stay with us. weekend, we said goodbye to a great economist, good man, and friend. a laboreger was economist and professor at princeton. he served under the clinton and obama administrations. he was also a good friend of bloomberg and this program, a clearing -- appearing regularly. reflecting now on his career is michael mckee. you knew alan well. what will he be remembered for? analysis,nging data empirical research to the world of.. you go back to the 1990's, and theory told you that if you raise the price of something coming you will get lace -- less of it. he went out and studied the idea

of raising the minimum wage. new jersey raise the minimum wage, covenants -- pennsylvania didn't. he found there was a slight increase in employment after the minimum wage went up in new jersey. very controversial and the time, but he brought data analysis to it. he continued his work by going time and again to the data, rather than the theory. david: a pivotal moment in economics. he was smart enough to say if , ite is a change in policy creates an experiment. contribution major to the economic sciences. it really changed the way a lot of people think. a lot of people look at the world. he went on to continue looking at the data on the number of subjects dealing with labor and economics. he was studying the opioid crisis and found opioids where a

major reason for the declining number of males in the labor force, a problem that congress could address. he had a major contribution to the education debate. his data showed that going to the most prestigious college did not necessarily help you learn more over your lifetime, except for minority students who did not have a leg up into society. alix: notable economists talking about alan krueger. one saying he taught him about economic policy for two decades. to the point of the struggle between income mobility and equality, that is front and center and almost ingrained in our society. you see it every single day with various candidates. he was also concerned with wages and why they are not going up.

he thought there was a concentration and some restrictive covenants among employers there were curtailing wages. alix: something we are still struggling with here. david: many thanks to michael mckee. krueger, professor of economics and public affairs at princeton university has passed away at 58. his family encourages those wishing to honor him to make a contribution to a charity of their choice. this is bloomberg. ♪ this is bloomberg. ♪

david: angela merkel sat down with john micklethwait at the global solution summit in berlin. she discussed her government stand on cybersecurity in the

expansion of 5g networks. >> our approach is not to exclude one company. we have certain requests and demands. we will lay this down in a telecommunications law. we will talk to our partners, because they have their ideas as well. there are two things one should do. we will not discuss the sensitive issues publicly. secondly, excluding one telecom company because it comes from , i think we country should not be naïve about this. in china, they have different laws than here. we need to look at them and he fight with and talk to our partners. >> is the european approach a good example?

>> i think it would be desirable, yes. the more uniform we are in our , the value of multilateralism, europe is a project of multilateralism. alix: that was angela merkel speaking with john micklethwait. still with us on set is our guest. if you cycle it out, how do you have countries trying to agree when you have geopolitics at the same time, and cyber threats on a whole different plane? how does that square each other? >> one of the keys on any trade deal is how will you enforce it. that is the heart of the matter for intellectual property, cybersecurity, transfer practices. you have to have a way to ensure each country is following the rules. to see theesting europeans trying to get involved in this debate, when technology

has never been their strong point. the u.s. has 30% of the index and technology. china, similar amount. europe is under 10%. david: we saw your projections on global growth. connect it. tell, how muchan is china-u.s., european-u.s.? i think generally speaking when you have a slowing global economy, clearly from china and europe, that will impact the trade numbers. i don't know the trade war has been the cause of the global trade slow down, or the fact that the economy in general is slowing. the u.s. numbers are still healthy on the trade front. china and europe are lagging. alix: when you look at u.s. equities, how do you look at companies with exposure to china, versus exposure to the u.k. or europe?

how do you rate that when wanting to take on more risk? >> the s&p has a third of revenues from the international front. the majority of s&p revenues come domestically. , 70% the u.s. gdp number is domestic consumption. we are watching the u.s. consumer. signs are the u.s. consumer remains relatively healthy. consumer confidence is high, unemployment is low, wage growth is starting to pick up. there is demand for jobs in general. that remains robust, resilient, and healthy. internationally, the sectors with the most china exposure all outperformed this year. perhaps looking for trade to resolve itself, china to rebound after stimulus measures, perhaps the u.s. to rebound as well. david: you will be staying with

us. coming up, opting for more boeing f-15 aircraft. more on that. this is bloomberg. ♪

david: it is time for the bottom line, where we watch three companies. fiat chrysler, the parent company, the peugeot family is saying a buying spree is ok with us. they might be looking at fiat chrysler. alix: that might be helping the whole sector. there are still climate issues and scandals. i'm watching warner bros.. the ceo is out. this is the guy responsible for movie and tv content. the question is who comes in.

the competition will be fierce. i'm looking at at&t and verizon and the two directions they went. this raises question on at&t's media strategy. david: maybe this one will work. they lost everybody. alix: dc comics are not as good as marble. david: that is important. they barely had $1 billion. we are watching lockheed and boeing. our bloomberg opinion columnist joins us now. is still with us. a shift between boeing and lockheed here. >> the defense department is making a $7.8 billion investment in the boeing f-15. they will produce a claims this year, then stepping up to 18.

this plane was first released in the 1970's, used in vietnam, not necessarily cutting edge technology. the af-35 is supposed to be the modern fighter jet. they are saying the procurement costs are different, but the f-35 is expensive to operate and does not have the space on board to carry the type of weapons they are looking to put on this plane. david: it is a big reach. you go back to president trump tweeting how complicated airplanes are. it is amazing, but so complicated. back on the cost of the f-35 program, overruns, delays, complications. he has not been a big fan of that. now you're seeing some of that play out. we are getting political pushback, especially from texas and alaska where the f-35 is

developed. it brings to mind the bigger boeing issue. can wear your bellbottoms from the 1970's again. from where you sit, we talk about industrials and aerospace, do you like the sector or not? >> industrials have moved quite a bit. were looking at some of the laggards, health care and staples, very defensive sectors, that have lagged this year. we think they have room for catch-up. we like areas of technology. the disruptive technology in ai, cybersecurity, mobile payments, things that have a 5-10-year horizon, those continue to be on our radar screens. that is how we are looking at

the market overall its sheer. alix: good news for boeing, but the bad news continues. china might not include the in there trade deal? >> they have safety concerns. china was the first to ground of those planes. there was speculation that could be a political move on their part. alix: thank you so much. up, the u.k. speaker shuts down theresa may's plan for a brexit vote. angela merkel says she will fight to the end for an orderly brexit. what is the end? nobody knows. this is bloomberg. ♪ you.

all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere.

this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. alix: this is "bloomberg daybreak." i am alix steel. as we kick off lives that meeting, the market scene is , you buy you by equity commodities, you buy every

currency with the exception of the u.s. dollar. bank of america fund managers surveyed say equity is the lowest since 2016. how do you square that and what will happen if the buyers come back into the market when it comes to u.s. equities? in other asset classes, it is a different story. ,et yields a steeper curve funny when you're talking about a fed being on hold and a tenure at 2.6% which says more dovish and weaker dollar. david: you do not think the short end will go up? before they were thinking they're going to have to price higher good -- price higher. you haveeresting when the 530 in the widest in 13 months. the cable rate, we will go higher on that. we will say yes, we will bet on you, even though it is a disaster for theresa may. david: let's turn the united

kingdom. ruleseaker of the commons prime minister theresa may cannot get another vote on the same version of her plan which means she will have to seek a delay to brexit, even a long one. this is what the speaker had to say could -- what the speaker had to say. government cannot do is resubmit to the house the same proposition or substantially the same proposition as that of last week, which was rejected by 149 votes. we welcome -- david: we welcome bloomberg stuart biggs. is this is a prize to the government? is as a general rule of parliament? stuart: it is a rule the speaker had hinted at until now. whether the government knew that it was coming, the government

said it did not know it was coming yesterday but lawmakers have been saying this morning it should not of common as a surprise. the speaker has dropped enough hands, and then came up with a that has yesterday changed -- forced the prime minister to change her plans. does this finally decide we know the next step is asking for a delay? is there any other alternative for theresa may? the next step is to ask the european union for a delay. there are questions as to how long the government will request and what the european union is prepared to accept. my colleague in brussels reports the block is starting to consider a provisional offer that it would give to the u.k. on thursday or friday. that would still allow time for the prime minister to try to get the deal through parliament one more time next week. thed: is the critical date

parliamentary elections for the european parliament? are not u.k. and europe -- do not want the u.k. to vote for members if they will not be in. art: the u.k. wants to get brexit done before the parliament elections. if the european union says the extension to brexit has to be would, obviously the u.k. be put in a position where it has to take part in those elections. the government is trying to do its best to avoid taking part in that because they would regard it as not having delivered on the mandate of three years ago to leave the european union. david: thank you so much for reporting from london, bloomberg stuart biggs. a short time ago angela merkel sat down with bloomberg in berlin. she says it is up to theresa may

to decide how long an extension or to ask for an extension. but she will fight for an orderly brexit. >> we will carefully follow events, follow what the british government is going to say with , i cannotyesterday say anything about how the situation will present itself on thursday. >> you have to presume she will ask you for an extension. you have any president -- any prejudice on your side? would you like to have a short extension or give them a year? what i absolutely want to do -- i'm very interested in having a good relationship with britain even after they have left the european union. and inn german interests the interest of the 27 members. i take theresa may seriously

when she says britain stays in europe. it will leave the european union. we have common interests because of our geopolitical situation. britain has always been a country that has felt very committed to the principle of multilateralism. we have" operation on security and internal security -- we have close cooperation on security and internal security. that is why we made provisions for the citizens do have is clear legal situation as possible, even in the event of no deal that will invariably the second-best -- we will work on this until the very last hour of the 29th of march. i will fight for an orderly orderly leaving of britain of the european union. we do not have much time left with us but a few days and i must say i am not in a position

to speculate what i will do on thursday because it depends on what theresa may will tell us, what the situation is in the parliament and we will adequately react to this. the less each and everyone is speculating in public the easier it is. alix: that was angela merkel speaking earlier to bloomberg. headlines trickling out. the spokesman for theresa may and her department was saying some headlines is she will be meeting with boris johnson for talks on brexit and they are determined to find a way for parliament to vote on a deal, although it may not, this week. david: she is not giving up. boris johnson just wrote a scathing op-ed saying this will go on forever. he has been a big critic. she wants to try to get a vote still. alix: she says we will do it no matter what.

we will get that done. still with us is mona mahajan of allianz. how do you absorb something like her brexit and the constant turmoil we are seeing that is not reflected in the market? mona: as a global investment corporation we are looking at global markets. what is remarkable to me is how resilient the ftse has been. not that far behind. we are also up on sterling, which is another indication that investors have won, the sellers have left the market, or people are not expecting a crash out situation. they are expecting kicked the can or some model through scenario, which to them may be a best case scenario. march 29 is looming. 10 days away. still not much clarity on how this may play out. i think perhaps some of the tail

risk is starting to come off the table. david: or valuations have gotten so low that they became goodbyes -- good buys. are there particular sectors that are more or less exposed to the u.k.? mona: some of the names we do still favor are the integrated oils. things like british petroleum, ,hell, great dividend yield exposure to energy and based in the u.k. but global corporations. that is from a u.s. perspective. still yields over 4% versus the s&p up 2% and euros stocks at 3.5%. it may get attractive from a value investor perspective. alix: i spoke to the ceo of bp last week and he said brexit was not affecting his business. he was not stockpiling anything. he did not need to do that. he said it is not having any kind of impact. we will see. david: very different for the

banks. alix: you raise the point about the complacency in the market. this is volatility across different assets. you havethe fix, european stock volatility, your accent -- you have fx volatility. we are right around lows. how you deal with this? mona: it is reminiscent of 2017 where volatility was low. we do not get one 5% or 10% correction of the marketplace and that reversed in 2018 we had 210%. we are up 20% from the lows in the s&p. at some point consolidation, some sort of correction would be healthy for the market before we continue to climb the next set of walls of worry. more importantly, what is happening in the second half of the u.s. economy and chinese economy.

i think we may start to see volatility as we move throughout the year, similar to how we experienced last year up to february it was quite stable. david: february people think was technical. we have that strange volatility play that went the wrong way and it corrected itself reasonably quickly. december was quite different. mona: december felt like an imminent recession threat. china was going to radically, the eurozone was coming down and people thought the u.s. was in the same boat. the reason we reversed was the recession threat was taken off the table, the fed came off, and the china stimulus started to implement monetary and fiscal stimulus. you have credit suisse increasing the year and forecast on the s&p because he says investors have not fully rewritten their portfolio and the fears of a fed tightening in china trade have started to come off.

how much risk you want to be re-risking at this point? mona: at this point it feels like chasing the market. if you're not totally risk, it may not be the right timing. if you're in the market, the backdrop is more benign than where we were last year. showedy this morning investors are not fully invested in equity. there is more fear than greed. that is the environment where the market does well, where it has to climb the walls of worried. there are walls we will have to climb in the next few weeks. a good report from the fed coupled with progress on brexit and perhaps stabilization in the global economy. we are set up pretty well for a nice second half of the year. alix: mona mahajan of allianz, thanks for joining us. coming up, energy companies see a shift into renewables.

noronversation with equal ceo next on follow the lead. this is bloomberg. >> yep to think long-term. eventually oil and gas will start breaking at some point. ♪

viviana: this is "bloomberg daybreak." coming up on "balance of power", the chairman of the white house council of economic advisors. i'm viviana hurtado with your bloomberg business flash. pressure is building on facebook and other social media in the wake of the new zealand shootings which were live streamed. critics say the companies need

to quit hosting extremist propaganda. australia's prime minister once a group of 20 to discuss the crackdown. u.s. regulators have taken another shot at tesla ceo elon musk. the securities and exchange commission say it is stunning elon musk did not seek preapproval of any of his tweets since he was ordered to do so by a judge. the agency has reiterated its contempt -- its complaint that elon musk be held in contempt of court. angela merkel says it is not only the government that needs to act on climate change. angela merkel speaking exclusively to bloomberg editor in chief in berlin. >> both sides of industry shoulder responsibility, not only politicians. the more responsible act, the less laws we need to adopt. that is your bloomberg business flash. alix: time for follow the lead. a dive into stories taking headlines and moving markets with key insights from industry

insiders. to transition away from crude, its lifeblood. i spoke to eldar saetre a about the transition in houston. eldar: we have to think long-term. eventually oil and gas will start shrinking. we do not know the shape and form. [indiscernible] i do not want to look at that in make a choice down the road. i want to be part of that decision. it is also financial logic we use a different risk profile. alix: what you tell your shareholders about when and with what? eldar: we do not know. we have some direction. we are focused on quality. oil and gas, that is

cost-efficient harbor -- cost-efficient, carbon efficient, and we will grow that part of the business. alix: will they be patient? eldar: the transition to renewables is a different risk/reward profile. they have to compete with the risk profile. alix: today what is that for you? eldar: in terms of investment we are spending around 5% of our andtal in renewable energy we have indicators that the be 15% to 20% by 2030. it could be more, it could be less. it depends on access. goodis why we see renewable projects and have those available. you have to compete on these projects. it is competitive. then you are back to the industrial project, how you execute.

cost efficiency. you have to be competitive. alix: when you take a look at your initiatives compared to others, what do you think? eldar: i see a wide range. alix: everyone is talking they're going to transition and they're going to spend as much a new energies. what you really see? eldar: i see all kinds of approaches. i see ioc getting more into that space, into more renewables, adding to the competition i just talked about. i see most of these bigger players. they're obviously the more focused players within oil and gas production. , that is whatated i see all over. alix: another part of your strategy will be scaling up at lng.

how close are you to decision? eldar: we are -- we have one lng project. working on sizable asset in tanzania. it will take time that we are working on that. we look at lng projects, gas projects, renewable projects, they will have to compete. alix: where's the best cost profile? eldar: it is hard to know. many parts of the world. alix: the u.s. is a big player. australia, good access to asia. you also have israel which is trying to market lng gas projects. where might you be looking? eldar: a good project. connecting the dots when it comes to the gas market. a good start. scale to make this work. you need access to gas.

you need access to the oceans -- effective transportation you want to be in a location where you can arbitrage efficiently. it is a great location in terms of arbitrage both going into the pacific and into the atlantic and south america. criteria the of needs to come together. alix: that was my interview with elder subject -- with eldar saetre, equal nor ceo. -- equinor ceo. you just have to wait. as an investor, you and i get paid for that. david: there are so many businesses were you have to make investments and it is not going to return right away but you know you do not make the investments you'll be out of that would -- you will be out of

the game. alix: that is a tough spot and it is a bridge you have to gap. coming up, getting down to the details. talks between deutsche bank and commerzbank said to focus on five key issues. that is coming up. this is bloomberg. ♪

alix: what i am watching is the continued conversation between deutsche bank and commerzbank. getting down to the skills of their merger. joining us is a bloomberg executive editor for global deals. when it comes to the main questions -- what are the main

questions coming up right now? aron: bring these banks together is all about cutting costs and where you get the cost. infrastructure, etc.. these will be the first things they focus on. beyond that, how will they pay for the restructuring costs? what are the balance sheet? commerzbank risk has related to italian bond and deutsche which has this giant trading book? those are the bane -- those are the main questions being asked. alix: who would be the buyer? aaron: it depends on the structure they agree on. the general consensus is deutsche bank is likely to be a big buyer, whether it is a stock or cash deal or a remains to be seen. at the end of the day, deutsche will be the acquirer according to who we are talking to.

david: who will control the cyber? one of the issue is deutsche bank has not invested in technology and they've gotten tag for it. it was stronger in technology? aaron: it is a good question because if you look at both banks they have done deals where i.t. played a huge role. it isa boring topic but crucial because it costs a lot to integrate these systems. it was a bumpy died -- it was a bumpy ride it deutsche until the current ceo got involved. at the end of the day, they have two major systems, legacy ones deutsche and commerzbank are dealing with. they will look for what is the better technology. the deutsche's side with say we haven't, commerzbank would say they haven't. -- they have it. alix: was the easiest question they could answer? aaron: they need to cut costs and build revenue. it is a matter of how many

costs. the reality is this deal is only happening because the german government has given the signal they will not block drastic measures to close branches. these are real jobs at risk. it comes down to how many synergies can they get out of this deal to make it feasible and get the support of shareholders? alix: bloombergs aaron kirchfeld joining us. angela merkel saying it is not up to me. that does it for bloomberg daybreak. open, a bank of america merrill lynch global investment strategist. this is bloomberg. ♪

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

jonathan: equity markets inching back toward record territory. the s&p 500 at a five-month high. the federal reserve march meeting beginning. investors looking for a revised forecast. to way excluding the boeing 737 max from a u.s. trade deal. here is the price action. futures up 10, positive .4%. dollar weakness. euro-dollar 1.1352. treasury yields up three basis points. we begin with our top story. the fed meeting begins. investors looking for the fed to forecast patience. >> they will not change rates. we will see how dovish the fed is. >> they have shifted rapidly from hawkish to dovish. >>