a settlement could reach over $5 million as stock plummets. powell takes the stage. can dovish dots match investor expectations as the market prices in a rate cut? and brexit battle over delay. the eu pushes back on long extension. the next shutdown -- the next showdown looms. david: welcome to "bloomberg daybreak." i am david westin, alongside alix steel. spring. a gross margin of 34.2% compared .o an estimate of 32.9% net sales put much right on. -- pretty much right on. alix: pretty good quarter from general mills. all i hear from spring is my

daughter is going to stay up later. how do you make a toddler go to bed when it is light at 9:00? in the markets we have some idiosyncratic things, but overall it is and of latency. a little -- a little bit of weight and see. yields down by about two basis points and crew taking a hit. overall, caution ahead of the fed. that is your theme as we head into the fomc minutes later today. david: we will see what happens after we find out what they decided. let's take a look at first take now. we are joined by bloomberg's andro strategist process it reporter. overnightn bayer on the second round of carcinogenic findings in a court in san francisco, finding round up causes cancer. the stock down almost 12% now.

this raises questions about that monsanto acquisition. >> it does. sincedown more than 30% june, so clearly ever since the acquisition came to be, the share price has really taken a toll. right now if you look at what the settlement is valued at, bloomberg intelligence is saying about $5 million or so. one analyst is saying that is probably going to be a relief for the company because you look at the share price is right now, it is probably pricing and more than that. david: until now the company has basically said no way, no how. at the same time, the world health organization is saying it is a carcinogen. >> it is a widely used product as well. you just have to wonder, does this become a j&j situation? using this is the end game for bayer, but couldn't get even

bigger? once pandora's box is open to come other claimants are going to come in and this could get worse for them. alix: i also wonder how does this percolate in any trade conversations between the u.s. and europe? certain countries in europe are banning the product like germany, france and italy. ag is something europe once off the table in those trade conversations. >> that is a tough one. when you drill down to an individual product and company it is difficult to see that influencing trade negotiations. right now we are still trying to deal with the auto tariff situation with europe. alix: one thing at a time. [laughter] our second story is brexit. the story now is that there is argument over what a delay actually means. you have the eu wanting a longer extension. inn you have brexiteers theresa may's cabinet saying if that happens, we are going to resign. these are net short positions for the futures market. positioning, what is it like? >> since september have seen

shorts positioned against the pound come down. the pound is the best g10 currency this year, so more and more it does look like the stance of that no deal brexit is not going to happen. however, like you said, theresa may is stuck in this in between, and she has said very likely there is not going to be a long extension, but how are you going to get a new deal on the table, clean this up and have a shorter extension, and police the markets and please as well? david: we hear there is going to be in no deal brexit. could they just stumble into one? >> there is not going to be a new deal. the eu has said quite frankly this is it. s hard lining it have to come to the realization that there is no alternative. the instant -- the interesting thing is with all of the bad

news, the u.k. economy is doing just fine. sarah: that is actually a good point. that is why you hear some people in the market saying if we get value enough in the ftse we might open up a little bit. you've heard a lot of investors come out and say we want to get into the european stock market. tradenow the most crowded in bank of america's fund management survey. has more room to run because they are not seeing and iton pressures yet, is holding up quite fine. alix: and also the mess that is google and the eu. eu is finding google about 1.4 9 billion euros over unfair contracts. they say the misconduct lasted over 10 years. david, you pointed out earlier

that we are going to have basically a new way that google has to deal with its search within europe. david: this is the adsense part of it, the third of three. they've gotten two fines already. alix: and paid 7 billion euros. david: in the meantime, google is going to go to all the android users in europe and say, if you want a different kind of search, we will put a new kind of search. fair, and yesterday president trump did talk about social media response ability as well, so there is overhang for tech stock when it comes to regulatory format. sarah: there is, but right now the key seems to be talk. in the eu, they are cracking down. in the u.s. we seemingly hear about it every week, with politicians talking about how they need to break up big tech,

but we haven't really seen any action yet. the turning point will be when we actually see someone come to the table and say this is something we actually have to deal with. you want to watch it, the competition authority, the chief cop over there in europe, is having a news conference right now. in the meantime, let's come back to the fed. the fed meets this afternoon. i will put up the dots chart here because everyone is focused on the dots as a practical matter. right now we've got priced in essentially two hikes this year. something's got to give. sarah: there is clearly a disconnect. right now it seems like the consensus going into this rate hikesthat the will come down to one. it seems like it would be very difficult for the fed to come out with a dove a surprise

because they said over and over again they are to be data-dependent, they are going to be patient. the market is expecting such a dovish turnout, so investors are saying the fed needs to do exactly what they have done. if they just stay on the path they have been on, we should be pretty for now. alix: i still don't get the dollar because in theory, if you are going to have a dovish fed, you have a weaker dollar. vincent: it is not all about interest rates. there are a lot of other things that come into play. your differentials -- you'll differentials, real economics, real yields. so many other factors. the u.s. on an asset pieces is 8 -- on an asset basis is a lot better place to be them the u.k. or. even emerging markets at this time the fed is going to have -- or even emerging markets at this time. the fed is going to have a tough time placating markets. they are going to want to keep

some hiking in the scenario because they don't want to back themselves into a corner. thing.say one you look at fedex numbers last night, and if you are jay powell -- we should make a drinking game because the word patience will come up a lot today. david: that's a lot of liquor. [laughter] alix: thank you so much. really appreciate it. stay tuned for special coverage today at 2:00 in new york. the forecast for earnings-per-share, you can see what is going on right now with the general mills stock. alix: with google, the eu is finding the company 1.49 billion

euros. the chief cop over there, this is the third investigation about ad contracts. they've racked up about 6.7 billion euros. it is basically saying they cornered the market when it comes to ads an shielded themselves from competitive pressures, and they're going to change it. david: on "balance of power was quote today -- "balance of awer," we will have roundtable discussion on this. alix: coming up, what investors will be watching with charles schwab's chief investment strategist. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." fallarning profits will well below last year's level. bmw says pretax profit will fall by more than 10%. ubs says first quarter revenues at its investment bank fell 1/3 from a year ago. the ceo saying conditions have been among the toughest in years. over the last decade, the swiss bank cutting thousands of jobs while building the world's largest private banking business. theit was supposed to boost number of finance jobs in frankfurt. now the merger between deutsche could affect that.

that is your bloomberg business flash. david: thanks so much. the federal reserve announces thisatest rate decisions afternoon with the broad consensus that the biggest change will be taking down productions for future increases. joining us from boston is jeff schwab's chiefes global investment strategist. thank you for joining us. we just showed the projected dot plot for the fed. they are thing about maybe going negative. what is it going to be? guest: i think the fed is going to come toward the market on this. as for the probability numbers you can see, the market is expecting less than 1% chance of a fed rate hike this year. i think the odds are greater than a 1% chance. they certainly are not going to do two this year, but there is

opportunity for the markets to be disappointed with how dovish the fed comes out. remember, not everyone is aligned with the view that economic growth has taken a real turn to the downside at inflation pressures have receded. that is one of the reasons jay powell has advised markets to back away from reading too much into the dot plot. alix: fairpoint, and a distinction to be made between the slower pace of hikes doesn't mean a rate cut. that is going to put the fed looking at the markets in a really tight spot. where is the bias going to be? from ai think that market perspective, i'm worried the market may not just focus on the short end here with the dot plot and the prospects the fed may do more rate hikes this year. one of the things that might come out of this meeting is the fed is raining down expectations for quantitative tightening. that might be likely at this meeting, and that means less

upward pressure on long-term interest rates. if that is the case, markets are often very obsessed on whether the yield curve inverts, usually based on the fed hiking short-term rates. in this case, short-term rates same, but ite would only take another 20 basis points to invert the yield curve, which typically coincides with a peak in the stock market. david: really drawing the contrast between the yield curve going down on the s&p going up, that suggests one of those is probably wrong. guest: that's right. usually the yield curve gets these things right. the stock market and the yield curve moved in sync last year, so this year the stock market has taken off even though the yield curve is not so sure we are completely out of the woods from a recession standpoint. not that we are in one, but that one could be coming in the next 12 months. that is where i would be focused. jeff, another

disagreement is between the white house and the economists. i talked with kevin hassey yesterday, and he swears we have 3% growth as far as the eye can see. what does that due to to the fed? guest: it certainly changes the perspective if it comes with higher productivity and not higher inflation. that could certainly push out prospects for further rate hikes and reinvigorate the economic cycle and give it a second wind. there's certainly been a lot of fiscal stimulus applied in that direction, but we will have to see. embedded in this is wages in the u.s. rising at the fastest pace in 10 years, pulling up the costs for businesses. that is why we are seeing profit margins beginning to slide a little bit. wrap these two things together. we see the yield curve continuing to flatten, making you want to go defensive. the fed coming

down to meet the market is already priced in. i think that is one of the reasons the market has rallied for the way it has this year. if we think back to early october of last year, the downdraft. now the market saying they don't have any more to go. they might even do cuts. i think the risk is that the market is gone too far in taking the fed out of the picture. alix: so what is the call? do you sell into that, or rotate? guest: i think you might rotate a little bit. taking a look at sectors like health care that are less economically sensitive may be the safer place to be as opposed to court core cyclicals -- as opposed to core cyclicals. alix: thank you. coming up come up bayer -- coming up, bayer slumping over the second report that one of

its chemicals causes cancer. more on that next. this is bloomberg. ♪

♪ vonnie: bayer falling --alix: bayer falling in premarket trading regarding its roundup weed killer, which allegedly causes cancer. eric pfanner leads the european consumer goods team for bloomberg news. this is just the first step. how bad is it? what happens next? reporter: it is a big blow for bayer. you see that today with their 10% share price drop. it is the second case like this that's got against them of the more and there are 11,200 or so to go. this increases pressure on them to reach a settlement digitally with plaintiffs pursuing these, which could be costly. alix: do we have any idea of

what they could settle for and what analysts have priced in? ofc: we are seeing a lot numbers out there. they range from anywhere in the $15e of $5 billion to billion or $20 billion. obviously the latest 10% drop prices a bit more of that and then you would have yesterday, brings it back down to some of the lows after the initial court ruling late last year. david: give us a sense of the two faces to this trial. there's one phase that says yes, they cause cancer. there's another for punitive damage. eric: that is yet to be seen. those numbers can range quite widely. in the first case that went against him last year, the highal verdict was quite and got knocked down to

something like $78 million, so these things can obviously fluctuate from run trial -- from one trial to the next. if you have 1000 cases against you, the cumulative total is going to be high. david: bloomberg's eric pfanner reporting from london, thank you. good to have you with us. kleintop, obviously bayer is down substantially today. i put of a chart here that shows the stoxx 600 is really going up past resistance quite nicely now. what is going on with european equities? guest: they seem to be rebounding on prospects for maybe an acceleration or re-acceleration in economic growth. european equities have been tracing their last recession and rebounding seemingly out of it as growth has proven to be maybe more resilient.

gdp is still above 50 in europe. prices there, stock prices in general were brace for we get -- were brace for weaker economic data. alix: do you buy into it? guest: i do think having some european exposure in portfolios now make sense. there seems to be a rotation towards value taking place. i think that could possibly help european equities to lead over the remainder of this year. alix: how much of that is a china/u.s. trade deal being priced into the upside? if not, might we see a ketchup for european equities? guest: possibly. toopean equities are subject trade, particularly auto trade. european/u.s. auto tariffs, certainly europe has a lot in the game on that. it looks like we will probably

come to some amicable settlement there as we move forward on a number of trade agreements and the trump administration. that should further provide some support to european stocks. year, therete last were some one-off factors with the protest in france the auto shutdowns in germany that did weigh on economic data. in the near term we are seeing an acceleration of economic activity. we see a little spillover into europe. a complete breakdown could certainly way on european equities given the revenue exposure they have to u.k. markets. alix: where are you nibbling in europe? guest: i don't think you have to be country specific. i think looking overall at european equities, which make up most of the developed international markets, looks good. i think it may be time to make

that rotation. often time we see that one or two years before a global recession, we get that flip, whether international or u.s. stocks are performing. we may be at that point, starting to see that long-term reversal. alix: you will be sticking with us. coming up, trade uncertainty ways on fedex. the company cutting its outlook is international sales fall as the whole globe is slowing. more on the global growth outlook, next. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak." david and i debate the finer points of technology. we have caution ahead of the fed in all equity markets. dow futures per to flat.

we did see a golden cross yesterday. . usually a bullish signal. european stocks have been on a tear, although taking a look back. that is going to be a buyers story. classes, asset shocker, caution before the fed. the dollar is stronger against on safe currencies haven bid. i know a lot of uncertainty continues about brexit. 13 basis points, pretty flat into that fed meeting. volatility subdued. a little bit of caution as well. david: it is hard to imagine what the fed is going to say, that it is going to be better than what they think it is. alix: exactly. you had that headline yesterday that made markets confused. i wouldn't say rattled. perhaps china pushing back on trade deals.

david: we have the president saying it is going really well, but bloomberg reporting real problems developing. alix: which is not surprising, but anyway, the market taking all of that in. david: in the meantime, there are things going on outside the business world. for those we turn to viviana hurtado. viviana: president trump somewhat optimistic about a trade deal with china. still, some of his negotiators are worried china is pushing back against american demand. officials shifted their demands after agreeing to changes in their intellectual property policy because they haven't gotten guarantees the u.s. would lift tariffs on their exports. british prime minister theresa may won't ask the european union for a long delay to the brexit deadline. that move increases the chance u.k. could leave without the agreement at the end of june. it could also make for a tense meeting tomorrow between may and other european leaders at the eu summit in brussels.

in houston, all the fires had a petrochemical stores facility have been snuffed out. this plume of smoke extended a mile into the sky. authorities say there is still a internal facility that could reenact. -- that could reignite. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thank you so much. what struck me about the houston refiner if you have an enormous lack cloud. the pictures are insane. and don't worry about it, it is all good. it is not falling to the ground. go panic. david: sooner or later, it falls to the ground. the question is where it does. it could still reignite come up though, but unbelievable picture there from houston.

alix: in the markets, fedex took its profit margin down for the first time in six months, laying -- blaming slowing growth. with us is jeff kleintop of charles schwab. what you make of what they said? guest: it doesn't mean we are on the cusp of a recession, although we are on the horizon of one come about leading economic indicators have been coming down. the purchasing managers indices have been receding as well. we see a slower growth from and to. it is something that markets are dealing with. it is more like we could see in earnings recession that economic recession this year. alix: what are you more worried about, a china slow down or

u.s./china trade? guest: actually, a china slow down at the second largest as chinan the world seemingly attended to slow down its economy, and now it is getting out of control considering that the consumer makes more than the state. they are finding it difficult to manage. so i am a bit worried about the trajectory of china's economy and how fast it is slowing. just had aill lynch survey of fund managers saying the thing they are most concerned about how all 200 of them. even today we saw nissan report they are taking down the numbers because of week china car sales. guest: it should work.

they are up playing quite a bit of stimulus come about through things like corporate income a lending, reduction in the sales tax. these are things that take time. when you lower taxes, you've got with aconsumers willingness to spend that money that ends of an their pockets. that is not something chinese policymakers are used to. vonnie: why would you want to be diversifying --alix: why would you want to be diversifying into international when it seems like u.s. small caps would be where you would want to be if you are worried about china slow down? guest: certainly if that was the focus and it was only china. but what we are seeing are signs of a global economic slowdown, even in the u.s i think this is a global recession in the next six to 18 months, and there might be more

vulnerability in markets with higher valuation like those in the u.s. taylor: -- in the u.s. david: thank you so much. on the eve of brexit, the chanceellor of the exchequer told parliament although the uncertainty held over the economy, the economy was pretty strong. >> there is a cloud of uncertainty hanging over our economy, and the most urgent task in this house is to lift that economy. david: we welcome from london the right honorable mel stride, secretary to the u.k. treasury. you are a member of the government. give us a sense of how you are planning for the eventualities for what will or will not happen

. the main deal is getting the deal with the european union we have through parliament. it has been quite a bumpy ride so far, but the focus is very much still delivering on that. we can provide a certainty going forward that business is really need to see. what the prime minister is doing today is writing to donald tusk at the european commission to request a short extension to what is called article 50, which means it delays our department a little bit so we have the time to both get the deal through and also the legislation that will -- that will>> accompany it. david: can you hear me?

i'm afraid we lost audio with mel stride. vonnie: it does raise the question because of eu questions coming up, the eu is going to want u.k. to vote and that if they are not gone, and if they are gone, ok. david: it is awkward at the very least. chancellor of the exchequer there'sammond also said headroom for a disorderly brexit . the question is if this goes into the summer, they have to keep that sort of reserve off to the side, which limits what the government can do. alix: the worst part for theresa may is this is a blind side. this new conversation about delay or not was really brian -- was really blindsided when she couldn't get that hand in the air. david: it sort of makes some

since you can't just bring the same bill back again and again, but i don't know. alix: in the market, the rhetoric we like to talk about is that everyone is feeling more optimistic that you won't get a hard brexit, but then why are there still so many shorts in the market when it comes to cable rates? the expected weakness and an .ssociation more expensive with mel is back with us. sorry for that interruption, sir. at least we are on certain times. david: we heard from the chancellor of the exchequer that there was some room on it. if this goes into the summer, which is possible, what does that do for your maneuverability

at the government? guest: you are absolutely right. we have this headroom between where the economy is at the moment and meeting our fiscal targets. that is about 26 billion pounds. clearly in the event we can get this deal mailed down sooner or later, the nuttiest finance we can deploy, doing all the good things we need to do in our economy regarding the health and policing of all this things, rather than having to hold in reserve to deal with what could be a no deal situation and the uncertainty and a potential weight on the economy that will result in. that is yet another one of those arguments as to why i believe that members of parliament here deale u.k. passing this and removing, uncertainty. that firepower and a much

more productive way than we have been able to do. david: as i understand, you can't vote for that second deal again, so what is the way around it. is there a way around it to have the existing deal we voted on, or do you have to change the deal? is that doable? >> we've already had two so-called meaningful votes, the .econd different from the first so i think that illustrates it is not inconceivable that there could be another meaningful vote that will have someone perhaps coming out of the council, meeting with the eu come out that could put us in a position with another offering. it is the rulebook by which parliament operates that, under circumstances, would be quite

similar to what we seen before. but all of this is speculation. there is a great deal of uncertainty on exactly where we are going to land, but the government focus is very clearly on getting us enough time to get renegotiated with the eu to sort things out and make sure we get that deal through, the stability the business once. david: you would be positioned to give us -- to keep us informed on the situation. you have the time-honored rule of parliament not being able to use the rule. which is more likely? guest: it is very difficult. while you mentioned two possibilities, there are probably another dozen or so. a motion has gone down in the house of commons this afternoon which would not be binding, but

nonetheless it is saying the will of parliament that week extension very long to our arrangements with the eu, and otherwise we don't leave the european union for a long time. if that is granted by the speaker, how will we respond as a government? we will have to see what the motion says and so on. there are so many strands to this. it is really difficult to point at oneinger thing. we honor the results of the 2016 referendum and leave the european union on the terms the government has negotiated. the clock is ticking. friday of next week, in the absence of an extension, that is when we will leave without the deal.

parliamentarians are really having to focus on this. david: you leave us with the one certain fact, that deadline is moving. thank you so much for being with us today. alix: coming up, one of the worst first quarter in recent history. how revenue banking's described it. this is bloomberg. ♪

♪ coming up in the next hour, an exclusive interview with j.p. morgan asset management ceo. ♪

."is is "bloomberg daybreak the european union finding google 1.7 billion for thwarting advertising rifles. they investigated -- fining google 1.7 billion euros for thwarting advertising rivals. roadshowe the lyft has been a raging success. the ipo for america's second largest ride-hailing service is oversubscribed at the current price range. that means investors will likely have to pay a premium when it starts trading next week. the 71has closed billion-dollar acquisition of 21st century fox's entertainment assets. now employees are bracing for thousands of pink slips. promising bob iger

cost savings that all but a sirs -- all but assures job cuts. alix: thank you. we turn now to wall street beat. first up, one of the worst first quarter environments at ubs. the ceo says investment banking revenue fell year-over-year, but he is ok with the result as long as it is a one-off. at risk --k for jobs 10,000 frank for jobs at risk -- frankfurt jobs at risk. joining us now is peggy collins, who leads bloomberg's u.s. investment coverage. this is quite something out of mr. ramadi. m&a is down. it is ugly. reporter: that is one of the

things that jumped out to me about this story about our colleagues in europe. one of the things a lot of these giant banks have done since the financial crisis is lean more on the wealth management business because it was more of a steady stream of revenue, but at the end of last year with all of the volatility in the market, a lot of wealthy clients have the ability to sit on cash that is one of. the privileges of being wealthy -- sit on cash. that is one of the privileges of being wealthy, you can wait things out. now other parts of the business are really hurting. and: he cited lack of m&a ipo activity, except out of the u.s. so clearly that is going to be a good thing for u.s. investment banks. peggy: i agree. when you think about lyft and potentially uber later this year, it is really focused on the u.s. david: ubs is really known for its wealth management. that has really been its core

business, and that is valued at 9%. it is really going to hurt them. peggy: they have been one of the front runners in reaching across the world. alix: i am looking at deutsche bank and job cuts. on one hand, if you had brexit come all of the bankers go to frankfurt. now you have the potential deutsche bank/commerzbank merger with dental he can thousand job cuts. peggy: it seems like but the story is saying is they could get head on -- they could get hit on two fronts. frankfurt was supposed to be one of the beneficiaries of brexit ,f it was a organized brexit and with this merger we could see 10,000 job cuts. david: i'm not sure it is apples to apples, either. they are talking about the retail part if they actually put commerzbank together with deutsche bank. alix: that is a really good

point. the flipside, it seems like deutsche bank is struggling so much it might bolster both of those banks. david: and there are government officials saying they are not sure they like that so much. now it is not as clear as we thought it was 48 hours ago it will happen. alix: sure. you have constituents saying i don't want to lose my job. but how would you possibly compete in that environment? they have 8% market share at the end of the day after they combine. ,avid: let's turn now to csla bought by a chinese company. now the ceo for a decade has stepped down and there are various executive changes, which is not too surprising when you have a new owner.

peggy: it certainly seems like people are asking questions about whether or not this merger as a test case for whether china can come in and help bolster a big brokerage globally, whether or not that will actually work. some of it seems natural for a merger, where oftentimes you have an executive who, after a few years, steps out. david: i don't know whether it is fair or unfair. clsa has been very strong in research. question is, does china like research?nt peggy: they may have also changed the compensation structure. alix: also, you have to think a culture clash, too. merge, butenough to this just seems very challenging. peggy: exactly. it seems like he is not the only one who decided the new culture may not be a fit for him.

david: many thanks to bloomberg's peggy collins. coming up, we are going to talk some baseball. one major league baseball star is on his way to signing a record-breaking deal. this is bloomberg. ♪

♪ reportedly trout close to signing a record-breaking $430 million deal, according to espn. he's an amazing baseball player, two-time mvp, ranked number 16 out of seven years. but he's not the only one that's been -- number one six out of seven years. but he's not the only one. we had player after player. one thing that is booming is professional sports. alix: but there is inflation.

[laughter] david: there's one boxer in there. the rest is major league baseball. you have to go way down the list come all the way down to $139 million, to get to football. alix: really? i was going to say, where is the football and that? that is interesting. there is more controversy, too, around football than baseball. david: you know who is doing well? the agents. morgan'sing up, jp fixed asset ceo will be joining us. this is bloomberg. ♪

♪ alix: pebble takes the stage. the stage.ell takes

fomc wraps up its two-day meeting. and fedex says trade uncertainty slowing global growth and brexit contribute it its lowered forecast. and bayer loses its first phase roundup trial as stocks plummet. david: welcome to "bloomberg daybreak." i'm david westin with alix steel. the come addition enforcer in europe has completed her appearance down -- the competition enforcer in europe has completed her appearance now on fines against googles, but also commented on the introit phenomenon. google has said -- the android phenomena. google has said if you have an android device, you can have a search, which she has applauded.

alix: google might be just the first. david: we also have spotify going after apple. they've filed a complaint saying you should take a look at that because you make it more difficult if you've got an iphone to get to our service then it is to get to apple streaming. alix:. interesting david: it is far from over --alix: interesting. david: it is far from over. markets, caution on the fed. s&p.on the david: a little bit of tension there. a decisionnounces this afternoon, with the focus

being on a change on future increases. here ahead of that decision is taylor riggs, and from washington, michael mckee, who has a look at the key things to watch from the fed today. taylor, let's start with you and positioning. taylor: first let's take a broad look at the economy and how we are setting up for jay powell's comments later today. we are getting real-time data. unfortunately it looks like the economy is slowing to about 4/10 of 1%. that means we are going to get a downward revision perhaps to one rate hike instead of two because of slowing growth later this year. we are also looking at the five-year five-year rake evens -- breakevens and inflation. we are still at about 1.9%, so getting to that 2%, it seems the fed will tolerate a little bit.

that is something we need more clarity on from jay powell later today. and the dot plots, i don't know if it is a distraction or use right now. as the dots have come down, we did see the 10 year yield rise. without we would get more hikes, but the dot plot has really stabilized here. you have a 10 year yield in a trading range of about 22 basis points a quarter, the narrowest of any calendar going back to 1965. not a lot of volatility or movement today. david: now let's turn to mike mckee in washington. this is not the first time you've looked at one of these decisions. what are you looking for today? michael: there's three things you want to look at. the dot plot's number one in the minds of investors. will they bring it down, suggest that there will be a one or zero rate moves this year? probably more likely it will show one move this year because

it only takes seven numbers moving their dots all the way down to zero to get that kind of result today. second thing we are going to be looking at is the forecast. what will they say about inflation? they will have to mark down a little bit to a justify the patient stance, but if you look at what is happening with inflation forecasts, wall street pessimisticren't as as investors should be. the blue line is the breakevens taylor was talking about. the market is beginning to see a little more inflation out there even if economists are not, so where does the fed come down on that? finally we will get the balance sheet. that is the big question of the day for a lot of people. do they tell us where they stop, how big be balance sheet is going to be? do they give any indication of what is going to be on the balance sheet, and when will they stop? will they taper into an end this year?

so three different possible things to keep an eye on today. david: thank you so much. we look forward to hearing you at about 2:00 today. alix: joining us is chris wilcox, jp morgan asset management ceo. detention in the market is 2800 and the s&p and 2.6% on the 10 year. what do you make of that? guest: i think what we are going to see today is nothing, basically. but i think obviously every time there is a fed meeting, we learn something. i think the fed at this point is nervous enough about growth and some of the macro threats out there like trade to stay on hold for some time and to take a dovish stance or be patient, as i think they've repeatedly described it. also, there's really nothing to suggest that inflation is going to go out of control anytime soon. if anything, the mood from the fed has been they would be

slightly enthusiastic about a little bit of inflation. i think there's some really important reasons for that. within the fed -- i am not going to call it a generational battle -- but you definitely have two schools of thought. one would be the traditionalists who essentially still run the place, and who are probably the key decision-makers. in their mind, you would like to see what they call normalization. normalization is important because it gives you ammunition in your toolkit to deal with future crises. you think of it often in a nominal rate context, and you generally grew up in a world where no matter how difficult it is to believe it, you still think inflation is ultimately the bogeyman. the moment you see growth give you the opportunity, you are trying to get nominal short-term rates up, and you are constrained because of the way you've grown up in thinking about not wanting to see the

yield curve invert. the other thing you've learned over the last 30 years is that an inverted yield curve meant a recession. the second school of thought thinks the world has changed. inflation is dramatically higher or lower than people have previously priced in, that we are in a normal real interest rate to deal with inflation needs to be much lower that historically. they don't think there is anything unusual about the idea you should use quantitative reasoning -- quantitative easing is a monetary tool. david: they've basically got the markets thinking there are no hikes. if anything, it may go down. if they don't do anything to bring down -- do you think they will do anything to bring down optionality? guest: i think they are pretty happy with the job they've done because they do not want to

dramatically surprise the market and create the instability that comes with that. historically, other central banks have reveled in doing that, not least the european central bank at times. but the fed, i don't think, is one of those. the dot plot is showing us they want to guide the market in a stable fashion. david: we have to break one piece of news right now on the bloomberg. apparently prime minister theresa may has now said she wants a brexit extension to june 30. that is what she will seek from the eu, an extension to june 30. we just had on a member of her government saying they want a short extension, not a long one. at the same time, he said there is something we'll introduce in parliament to ask for a long extension. down --ndber cow shut -- would that represent a many foot enough

change that they could vote on it -- a meaningful enough change that they could vote on it? david: great point. alix: chris, what do you make of brexit? guest: are you asking me because i'm a brit? david: no, because you are wise. [laughter] alix: put on your investor hat and not your brit cap. absolutely no question that the country is very divided, and politics reflecting that are in deep turmoil. my view is a little different on this. to some degree i think we spend the whole time focusing on the u.k. and the impact of the u.k. i think that is distracting us from one of the more important aspects, that one day brexit will be done. we may not know exactly what it is going to be, but it is going to happen, and it will be what it will be. the u.k., depending on your

economic viewpoint, will either be worse off, better off, the same, whatever it is. but the day it is done, we need to refocus back onto europe itself. if we look at europe, we see some really disturbing things. on the economic side, you have a short-term growth challenge. you see germany dipping into negative territory again, and we seen the announcement from ubs this morning which is probably reflective as well. but aside from that, you've also got the longer term question, which is you've got a monetary union which has no fiscal union. when we look around the world for similar successful monetary unions, the united states being the most obvious one, it has a large federal government with massive fiscal transfers between regions. that is going to have to be addressed. alix: chris wilcox will be sticking with us. coming up, fedex international

salesfalter, cutting prospects on uncertainty of trade. the u.k. sees brexit extension to june 30 according to prime ministers theresa may as questions continue in parliament. this is bloomberg. ♪

♪ fining: the eu google for forwarding advertising rivals, imposing a total of 7.6 billion euros in penalties. google is making efforts to avoid more fines links to other cases.

bmw is warning earnings will fall well below last year's level in a plan meant to offset the trade dispute an unprecedented spending on electric vehicles. bmw says pretax profit will fall by more than 10%. shares of fedex tumbling in the premarket. the package delivering service cutting annual profit forecasts for the second time in three months. fedex has been hurt by slowing growth growth -- slowing global growth. that is your bloomberg business flash. david: thanks so much. staying with fedex's earnings miss, the cfo cited global growth concerns as a reason for cutting sales forecasts. "i can give you a lot better answer then i can at the moment, but we had to plan both ways."

chris wilcox of jp morgan asset management is still with us. i will put up a chart that shows where the stoxx 600 is in europe. you said earlier we have to get past brexit and look at europe again. how much of it is dependent on china that the cfo just referred to? chris: there's been a lot of statistics that show trade dropping, and i think the fedex story is along those lines. there's definitely real concern about trade, and that is driving some of the things we are seeing. but what i would also say is worth paying attention to is structural changes in the economy. we find in a world with more technology that some of the primary input is no longer necessarily labor, which is what drove the boom in trade over the last two decades. some of that reduction in physical trade is a reflection of, in a high-tech world, people can bring some of those manufacturing capabilities back

home, and labor cost differences no longer remain a primary thing. the question would be how much of that is structural change and how much is localized change associated with the current political and economic environment. alix: when are we going to know that answer? guest: i think it about 25 years. -- i think in about 25 years. there's no taking away from the fact that getting to a trade deal is highly important for the western economies, and that is true for the u.s. and europe. david: at the same time, does this inherently put europe at a disadvantage to china? governments and institutions and structures have to respond to a very new world. i won't hold up the united states as an example of this, but it seems like europe is included lee sporadic -- is increasingly sporadic. chris: firstly, going back to the previous discussion we were having, it is very clear there

needs to be significant structural and economic reform in europe. i think that the brexit crisis has distracted people away from focusing on that. it's been a really great narrative for the europeans. if brexit is bad for the u.k., which has been the generally accepted view, by definition the counterpoint would be that being in the eu is good. but i think as we get back to focusing on that, we are going to see some of those real structural changes needing to be addressed. alix: something i feel like has been sort of missed is what is happening in france. those pictures of the protests by the yellow vests are truly staggering, and they are not going away. i year ago we would have been talking about macron and merkel, how they are going to have a nice fiscal union and banking you're in, but that is completely gone. chris: we've really only checked about -- only talked about the structure. remember, macron is a populist

politician elected with a party that basically didn't exist before he formed it, and now is facing the same protests established parties would have done before. if you go to spain, you have the catalan situation. if you look at the religion shipped between the eu and some peripheral countries like -- the and poland relationship between the eu and some peripheral countries like hungary and poland, some of those are not in line. and write at the heart of europe, the one thing that always matters is that merkel is somewhat less powerful, and merkel and micron are not -- and macron are not on the same page about the future of europe. alix: chris wilcox still with us. -- did youw that mas know that macron was skiing saturday during this protests?

david: the optics on that are not good. we have one of the more interesting prime ministers questions sessions in parliament that i've seen. the prime minister is saying that parliament has indulged itself on europe for too long. it is time for it to face the consequences. she is really dressing them down, as it were. she has also said they do not have to hold -- they should not have to hold european elections while the thing is pending. she really is giving them a tough time. alix: but it seems like maybe there's a thread here. the u.k. doesn't hold elections it doesn't get a deal done, will be ejected on july 1. so she is saying you need to give us until july 1. david: yeah. we might ask, what makes us think you will get that deal done? alix: she does say we are going to have a vote at some point on

that. coming up, bayer losing its first trace -- first phase trial on the claim that it's weedkiller causes cancer. this is bloomberg. ♪

alix: prime minister theresa may very emphatic in her prime ministers questions right now. opposition leader jeremy corbyn is demanding a second referendum. does that mean republicans to vote on the deal if it goes through? thed: that's right -- public gets to vote on the deal if it goes through? david: that's right. seeing when we have a deal, we go back to the public and say do you agree with this deal. if they reject the deal at that point, what is the default? what happens? alix: your guess is as good as mine. if you have an extension until

june 30, that gives you another time limit. chris wilcox here of jp morgan asset management. if you are an investor in europe right now, how do you wind up looking at -- how do you hedge these geopolitical risks? you still see sterling trending around 1.30. how do you understand the market psychology? chris: i think the lesson in my lifetime in the markets has always been that in the short run, markets over under's mate -- overestimate these events, and over time they become less relevant. brexit has maybe a different angle because for the u.k., it is definitely introducing a structural change, so it is not the same some of these more discrete geopolitical events. you can argue it has a different impact. if you look at the u.k. though, the companies on the u.k. exchange, people are puzzled why

hasn't the u.k. stock exchange sold off more. the answer is because the u.k. stock exchange has a very high concentration of companies that do business outside the u.k., and the weaker pound, even though it is a little stronger at the moment, is obviously inflating their earnings. if pound turns, those equity prices hold up ok. david: have those companies of just it -- have those companies adjusted their terms of trade at this point for the world that it doesn't matter? chris: i think the chaos around all of this stuff means people probably haven't adjusted as much as perhaps they should if there is a complete no deal, but they are probably ok in a scenario where we get some kind of deal through. there's the whole charge of this business that it probably doesn't make much difference at all what happens with brexit from their point of view. alix: how do you separate noise from reality in these circumstances? chris: as investors, we stick to our investment processes, to the

deep research we put into understanding the valuation of companies. we believe that we are investing money for our clients on a sort of 3, 5, 10 year basis. alix: based on that, where is the biggest misconception in the markets you see? i'm not sure that there's an and norm us misconception in the markets. it feels to me that the market right now is relatively well priced. europe, my that in view is the misconception has been that the focus on the u.k. rather than on continental europe, so i think that is the case. the big debate in our industry, the word or phrase that you hear all the time is late cycle. are we late cycle? what does late cycle even mean? i think that the question of that has to be determined that we are going to find more

information about this today from the fed, the very unusual policy we've had for over a decade from central banks. the central banks have clearly changed this cycle because this cycle is a lot longer than previous cycles. as i said earlier, i think there are people who believe there are some things that have permanently changed. they would say that technology has moved on and demographics has moved on. alix: leading us perfectly into our next conversation, chris wilcox sticking with us. alan rissman of deutsche bank saying to keep your eyes on fx as the u.s. deficit balloons. we speak to him next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. two things happening in the market for it caution before the factory a flurry of brexit headlines to dow jones futures

up by 23. average tends to be a bullish signal. signals hit in europe on the buyer news and the news they a trial first phase of and monsanto weedkiller causes cancer. the other factor is brexit. you have sterling down .5% therate the point to -- 2/10 spread in the u.s. remains flat. all of these headlines. theresa may once an extension to june 30 and once the deal to come through but does not want to vote on eu elections. said we would like cap extension to june 30. she wants to vote on her plan again. she is not giving up.

she does not want to have parliamentary elections. jeremy corbyn says they should have a referendum to confirm any deal. we welcome a bloomberg executive editor from london. it is a fairly interesting prime minister question time. >> it is. theresa may is trying to get control on the timeline. she is saying to europe i will come to you on the summit friday and seek an extension until the and bring her deal back to the u.k. parliament and get that through before july 1. she does not say what will happen if that does not happen. what would be the result is the u.k. could crash out of the eu. she is saying or will try to keep the reins on this timeline, please help me out and give me something. the question is is europe willing to give her something further for her deal. david: thank you so very much.

no list an update on what is making headlines outside the business world. viviana: bmw is warning profits will fall well below last year's level. the german automaker is launching a $14 million safety plan to offset the impact of the trade war and spending on electric car. bmw says profit will fall by more than 10%. story coming out of indonesia's investigation into the first crash of the boeing 37 max crash last october. came to thepilot rescue when it began driving. the pilot was sitting in the cockpit. he diagnosed the problem and told the crew how to disable a malfunctioning flight control system. the next day, when investigators caught an identical function -- malfunction said the plane crashing into the job is the.

the plate -- the plaintiff -- the decision will not a are closer to it settlement. global news -- global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. david: for more on that big buyer story, brooke sutherland joins us. still with us is chris wilcox of jpmorgan. this is the second suit. there seems to be a pattern. brooke: that is what investors are worried about. there are 11,000 lawsuits alleging the roundup weedkiller is calling cancer. this is a product bayer acquired in its acquisition of monsanto. not what you want to see happen

after you spend that much money. thosehose $11,000 -- 11,000 lawsuits are expected to result in a $5 billion settlement. now bayer stock is down significantly more than that. that raises the question of could bayer be a takeover target? david: hindsight is perfect. is there a question about whether they properly evaluated the rest? -- the risk? these claims were around when they did the deal. didn't they have any sort of indemnification clauses in place? they claim the weedkiller is but the results of the lawsuit you wonder whether they would've done more due diligence. alix: when you have bayer down 11%, how's that bleed through to the active versus passive world?

chris: having exposure to a market cap waited index will not help you identify these kind of risks ahead of time. predicting the future is something that is extremely hard to do and i do not think there any professional investment managers who would claim they had that skill. what is more interested in the buyer case will be when we get to the turning point the market will almost certainly overshoot and become pessimistic. in the end, this company will get through it and go back to its basic fundamentals and active managers will be able to identify that turning point. market cap waited passive investor will still be reducing exposure. that is where it plays in. david: a basic rule in law is you do not want to take to a jury a big chemical company against people who claim they have cancer. it is not a good situation. brooke: especially in california

where there are strict environmental regulations. butgreat news for bayer when you talk about the settlement value, bayer stock is down significantly more than that so are perhaps people overshooting this? david: chris wilcox of jpmorgan will be staying with us. alix: modern monetary theory is no longer a fringe theory. the u.s. budget deficit soars. here's a prominent economist and executive. >> it is a long known fact that the u.s. federal government budget is on an unsustainable path. >> the budget deficit is a problem and it is not coming down. >> i'm a big believer that deficits do matter. i am a believer deficits are going to be driving interest rates much higher. >> the idea that deficits do not matter for countries that can borrow is wrong. >> you have to shut down your

foreign exchange markets. have you exchange? people will be trying to fly out of your currency. >> modern monetary theory will not take care of this problem. >> that is garbage. alix: the issue is we are already doing mmt light. alan ruskin wrote mmt promises a free lunch paid for by complying ,entral banks could worryingly we are closer to practicing mmt light then commonly assumed in the u.s.. here is alan ruskin, deutsche bank chief international strategist. take us through your findings when you look at what mmt actually is. alan: it is seen as a fringe theory but when you go back in , you had a large fiscal

expansion seen as needed. it was -- you had qe that followed in its wake. it was not a case of the monetary authorities and treasury talking hand-in-hand to get that monetization. monetary policy was following a .ig fiscal expansion you have seen that same pattern in japan. a huge blowout in fiscal deficits and they were ultimately -- a large part of it is money finance. not necessarily the monetary authorities and the fiscal authorities completely coordinating, but the factor that is what is happening. david: it sounds like a perpetual motion machine. the government borrows money and the central bank buys it up. what stops it? alix: the natural -- alan: the natural consent -- constraints on inflation. central banks of the not that

good at creating inflation. they are remarkably good at creating asset inflation. you get all of the income , the income distribution distortions from this kind of activity. not desirable for a lot of people that have pushed the mmt theory. alix: if you look at this, is mmt another structural factor you have to put into the market versus going to be a cyclical thing? chris: this debate is an important debate but i would not say now that it is part of the mainstream thought process about the economy. in a world where you see a lack of demand, the government stepping in in a more keen see in way trying to fill that gap is what we have seen through tarp and things like that, there are clearly big differences between different economy's

abilities to deploy the tools. the u.s. has the world's reserve currency. it is less impacted by what it does on the outside. if you start to reach the limits of inflation, you have to say inflation will be one of the limiting factors. david: one of the things that is constrained is bond prices. other people want to buy our bonds because they have worse alternatives wherever they are. the other questions i allocate capital. if you can generate this money, is it being invested in productive purposes? is this going into infrastructure are just going out into the cosmos? the best way that capitals allocated productively and efficiently tends to be by the private sector. it depends whether you are financing large public deficits, which in classic theory will crowd out some of those private investments in those efficient allocations of capital, or

whether it is being used by the private sector and encouraging the private sector. is fallingate sector short, as it was during the crisis, you can see a role where public spending does not crowd out. if you're in a more normal environment -- alix: what strikes me is what is happening in france, in the u.s. political environment, both sides of the aisle are talking about mmt. that is more of a mainstream thing. it will get bigger before get smaller? alan: it could get a lot bigger. you have to consider the starting point in the u.s. is terrible. we have a budget deficit of 5% of gdp. not asking for fiscal stimulus in any orthodox sense. if you got a new president, what you seeing her for the last three administrations is the first year is when you can get anything done. the timing of the fiscal stimulus should be at the wrong

time. you can add more fuel to the fire in the deficit. it is going to run into all the issues in terms of how eufinance that. the fed will not immediately finance that. the fed is going to be back in there again responding to what is going on the fiscal side. situation.mmt-lite it is not surprising to see populist politicians would be attracted to a theory that says the normal restrictions on economic policy might be lifted. david: populists on the left in the right. that is one thing they can agree on. chris: they can both agree that infrastructure would be good. alix: it does raise a point. inflation,ve not had not actual inflation, that has created a structural issue within the economy that needs to

be fixed. that is what everybody is gravitating towards now. chris: to take on the point in terms of the private sector, not all deficits are the same. if the private sector surplus starts expanding to offset the public-sector deficit, then the external accounts will flatline and that is what we have seen in the u.s.. the current account has been steady. the exchange rate has not been flashing red lights to suggest there is a big problem. if you saw the external deficit blowout, bigger problem at hand. chris: that is what you've seen in japan. private sector balance sheet improve while the public sector has gotten worse. the country has a single balance sheet your -- a single balance sheet. david: many thanks to alan ruskin and chris wilcox. stay tuned to bloomberg tv for our coverage -- the fed decides.

that is at 2:00 new york time. 2018 was a rough year for hedge funds. how the industry fair this year? kate holleran joins us and follow the lead. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up the next hour, black rock global fixed income cio. it is time for follow the lead, a deep dive into stories making headlines and moving markets with key insights from industry veterans. today we are looking at the hedge fund industry. 2018 was rough year for hedge

funds. returns were -4.5%. only fixed income relative value posted positive returns while long/short equity funds drastically underperformed. for the hedge fund outlook we welcome kate holleran, barclays head of u.s. capitol. you have this terrific outlook surveying what is going on with hedge funds. what were the top issues for you? kate: 2018 was a challenging year for the industry and it was .otable a decline led by performance and net outflows. investors were frustrated and disappointed with performance. it is important to note that when we did have outflows for 2018 they were not as a result of 2018 performance in isolation. a've been observing continuing trend over the last couple of years when there has

been a rotation away from traditional equity and strategies that have provided better downside protection, higher ratios and more persistent evidence of alpha generation. things like equity market neutral come and fixed income relative value. david: since 2018, what we know about 2019? how is it likely to be different than last year? kate: a lot of expectations for performance rebound. we are close to wrapping up the first quarter. we have seen a strong rebound and rally in risk-based assets and a notable improvement in terms of the environment being conducive to out for generation, notably january. alix: something that david didting out was lower fees not necessarily generate better returns and we have a chart that

shows that dynamic. can you walk us through how you understood that? every year in the barclays study we take a look at these and what i thought was notable this year is there was not a discernible decrease. what we are noticing, what the report showed us was that investors who paid beyond the median fees, but higher fees had better returns. proving the thought that you get what you pay for and we also saw evidence of this in the survey of 2017. david: it might be a chicken and egg issue. kate: right. that goes into another theme we saw in our survey, that of consolidation. we also saw differences in performance and dispersion of performance for investors with

more concentrated portfolios. the sweet spot there was between 11 and 20 managers. both during the case for bottoms up manager selection rather than going for the cheapest available. david: what sort of consolidation are we seeing in the industry and how much is merging as opposed to co-investing? wordswe are seeing two emerge. larger asset managers are driving a team of consolidation. we also see the emergence of that other world of product specialist. people giving a capacity constraint differentiated return stream with groups that have a defined edge. alix: what regions are seeing the most activity? kate: we observed strong in our investor universe of looking at asia. underexposed and

looking to change that over the coming months. alix: kate holleran of barclays, thank you very much. coming up on this program, theresa may continuing to answer questions in parliament. maylatest is that theresa says the brexit extension is a matter for the eu council, while jeremy corbyn is calling for voters to be able to reject the deal. this is bloomberg. ♪

alix: here is what i am watching. brexit. a lot of headlines trickling out as the prime minister questions continue. u.k. parliament seems to be dispersing. jeremy corbyn did call for voters to be able to reject the deal. it seems like not only would parliament have to approve, which the voters would have to approve which is kind of a second referendum. david: it does feel like one. -- shouldey rejected

pose -- suppose they reject it? then what would happen? alix: your guess is as good as mine, especially when theresa may has rejected a second referendum. theresa may asking for brexit extension to june 30. david: she has written a letter saying please extended to june 30. as part of this, she is saying to not make his vote in the eu parliamentary elections in may. alix: do not vote on that and there is no plan of the deals not passed. deadline the brexit back until july 1 and we will get it done. i just need more time. there you see the guy who started it all, the speaker of the house of commons. sayingsurprised everyone you cannot bring your plan back for another vote. we have already voted it down. as we heard from a member of

parliament, parliament could always overrule him. alix: lots more confusion in the market. short positions on the cable rate. now let's see what is happening in the markets. taylor riggs has more. taylor: confusion playing out on the ftse 100. it is near the highs. that is not a lot. -- there is some clarity or deadlines the markets are getting clarity on. key deadlines -- the u.k. needs to decide by mid april it will participate in eu elections. you had a lot of brexiteers threatening to design -- to resign if they participate in the elections. not want a nine or 12 month extension. theresa may said it has been 2.5 years. there is not a ton more we can do. another key deadline, we know they will leave the block with her without a deal on july 1. a 1.31,d recovering to

1.32. whooke to a few economists said their value for the pound looks like 1.35. it looks like the pound might be undervalued but they do not think u.k. equities are undervalued. seeing little fair value their and undervalue, perhaps, in the pound. alix: thank you very much. table withing the the flamboyant type. coming up, bloomberg markets with jonathan ferro. rick rieder of blackrock will be joining. this is bloomberg. ♪

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

up, it iscoming federal reserve decision day. investors looking for officials to forecast patience. trade talks entering final stages. concerns emerged china is pushing back against u.s. demands. fedex cutting forecast for the second time. close --rowth will slowing growth will -- slowing global growth. futures soft, down .1%. muted price action for ato-dollar, unchanged 1.1354. yields sub to 60 at 2.59%. investors setting a high bar for a dovish fed. >> dovish. >> market is already pricing a dovish view. >> we will see how dovish the fed is. >> the market went to a dovish