opposite of what we saw yesterday. the pound is weaker. u.k. lawmakers set to vote on rifle deals. is that political uncertainty hitting the pound? when the pound drops, we do see the u.k. do better. a very up higher because exports heavy sector. as the market opens, we are seeing some mild gains from u.k. stocks. a lot of miners in the u.k.. any kind of town drop will help them but the dovish ecb, the dovish fed is helping shares today. ibex of higher by 1/10 of 1%. we do hear from mario draghi in a little bit. let's go ahead and head over to frankfurt and listen in on that. say how much i appreciate the interaction with all of it. and with some of you even personal. , this interaction

has been important, remains important in our ongoing reflection on how to design monetary policy. gratitude express my on behalf of of the governing council, the ecb staff for your attention, and your perceptive understanding in these last eight years, but even before. thank you. form of mying to the speech. year has seen a loss of growth momentum in the euro area, which has extended into 2019. bys has been predominantly pervasive uncertainty in the global economy that has spilled

over into the external sector. economy hasdomestic remained relatively resilient and the drivers of the current expansion remain in place. remains intorisk the downside. modesty -- monetary policy assessmentflect this . in the face of a weaker growth outlook, they help maintain a policy stance that we managed to reserve last year that we rotated our instruments from net asset purchases to forward guidance. to policy thereby continues accompany the recovery on its path towards our inflation objective. expansion tohe

slow down in 2018 as the cycle matured and retreated towards potential. as the economy weakens in the second part of last year, it was not yet whether we were witnessing a temporary departure from this scenario or a more lasting deterioration in the growth outlook. the drivers of the deceleration back then appeared to some extent to be idiosyncratic and short-lived. theting to the effect of standards in a euro industry and normalization of world trade from its very strong growth rates in 2017. momentumloss of growth will be more broad-based and persistent if it is to

materialize. were, if external demand weaker and second if this were to spill over into domestic demand. meantime, the first risk has by and large been realized. the weakness in world trade has continued. which has significantly affected the manufacturing sector. reachedoods in january its lowest level since the great on the back of rising uncertainty about trade disputes and a slowdown in emerging market economies, especially china. result growth and extra euro there -- area goods were negative in the end of last year for the first time since january 2016. and industrial production fell by 42 point -- 4.2% year on year

in december, the largest decline since 2013. before recovering somewhat in january. indicators such as new export orders which have historically been closely associated with industrial production remains in negative territory. so, we are now seeing a more persistent deterioration of external demand, but a soft noth -- patch does foreshadow a serious slump. during the euro business cycle expansion since 1970, there have been 50 soft patches, defined as a to quarter growth slowdown that only four recessions. euro area -- when the economy went through a soft

patch. the strength of the domestic economy was able to shield the recovery from external uncertainties. whetherkey question is with monetary policy continues to support the expansion, demand component typically affected most a weaker global environment is investment. ecb internal analysis shows that the more exposed the euro area listed firms are two foreign markets, the more sensitive they are to uncertainty when making their investment decisions. signs thatare some external demand may be affected by investment by a manufacturer and value chain within the euro area. extra and intra

euro area trade slowed steeply last year. areaas in 2016, intraeuro trade was robust to the external situation. and extra euro has not occurred since the start of the global financial crisis. raeuro area intermediate and capital growth were hit particularly hard, with capital growth exports registering their strongest contraction since the sovereign debt crisis. the further rising global uncertainty. therefore lead to a deceleration in trade and investment. but for now, expectations for

investment remain relatively robust. although professional forecasters have slightly downgraded their projections for investment growth this year from around 3% to around 2.5%. the fundamentals are in place for investors to read that it's global growth stabilizes. stands in the long-term maximum, financing conditions remain very variable. corporate leverage as a percentage of total assets has fallen to levels last witness in the early years. although, rose coordinate -- corporate indebtedness as a percent of growth value-added stance above the precrisis level. suggestst surveys also

some recovery in business sentiment. while consumption is typically less affected by external developments, its growth rate has slowed over the last year. higher uncertainty may have played a role as reflected into the rise in household saving rates over the course of 2018. again,n drivers where idiosyncratic factors related to the global economy with specific factors in france and italy. the most important issue for the consumption outlook is the labor market. since higher employment has been a major driver in consumption in the current expansion. so far, the labor market has been resilient to the growth slowdown. while employment growth moderated in the second half of last year, and 2018, it was

significantly higher than would be expected based on the static long-term relationship between employment and gdp growth. as a result, real disposable income has remained resilient and households assessments of their own financial situation, which is a good leading indicator of consumption, remains positive. employmentnce of the consumption relationship helps explain why even as the manufacturing outlook has worsened, services have remained relatively robust. services is the most labor-intensive sector and is associated closely with consumers expenditure. there are lags between changes in gdp and employment.

while the remaining and expansionary territory, it has decelerated since the middle of last year. slowdownd the growth turn into a more persistent phenomenon, employment and consumption are likely to be affected. all in all, the current data suggests that external demand has yet spilled over significantly into the domestic demand. but there is reason in the last month and uncertainty remains high. this is why our medium-term outlook remains that growth will gradually return to potential but the risks remain tilted to the downside. the outlook has also been buttressed by the preemptive reaction by stabilization policies. fiscal policy in the euro area has become mildly expansionary

with the aggregate fiscal stance expected to be minus 0.4% of gdp in 2019 after five years of being broadly neutral. it has been effective as shown by the continuing easing of financial conditions since last december and even previously. since june. hasweakening growth picture naturally affected the inflation outlook as well. our projections for headline inflation this year have been revised downwards and we are now -- we now see inflation at 1.6% in 2021. slower growth will also lead to a more muted recovery in underlining inflation than we had previously expected. ,eflecting the weaker outlet

market-based measures of inflation expectations have edged down recently. measuresmarket-based have mainly been driven by declining inflation risk premiums, volatile component of overall inflation. in the genuine inflation expectations. while a decreasing inflation -- inflation risk premium may suggest that market participants assigned increased to lower the expected outcome so future inflation survey-based measures have remained relatively stable. we therefore remain confident that the sustained convergence of inflation has been delayed rather than derailed. meaning that we expect inflation to reach our objective at a

later date than we previously foresaw. this view is based on our assessment of the resilience of the labor market and therefore wage growth. farwage dynamics have so withstood the growth slowdown. growth in can suck -- in compensation fell slightly in the last quarter of 2018 from 2.5% to 2.2%, but remains just above its long-term average. grewlabor cost growth in the same. period driven by falling productivity growth, reflecting the resilience of employment growth to the economic slowdown. question and one currently being asked in many advanced economies is why these labor costs pressures are not already being reflected in rising prices.

hasrlying inflation moved broadly sideways over the last year, repeatedly falling short of expectations and staying below the levels recorded before 28 -- 2008. academic literature based on u.s. data has responded by casting doubt on the link between labor costs and inflation. in particular, at short horizons. studies find no conclusive results on whether empirically labor costs and to precede or follow prices. this has led to a debate as to whether cost models from which is to prices can still accurately describe the inflation is process -- inflation process. there are number of forces that makes it more complex, not least

the effects of globalization and digitalization. staffesearch by the ecb finds that unlike in the united states, the structural conditions will pass through from wages to prices remain in place in the euro area. over the. 2018, the1985 to continued link between labor cost and price inflation in the four major euro economies and across the three main sectors. on strongest is in the services sector where wages account for 40% of the cost. that is important for the current inflation outlook, given the resilience of services to the growth slowdown. delayingars to be today is the fact that absorbing labor costs increases by

squeezing profit margins. this reflects two cyclical factors. first, the euro area is coming out of the prolonged period of low inflation which historically leads to a lower pass-through. priceason is that high this version is narrower when inflation is low. implying that if an individual firmware to raise is prices, it would attract the attention of consumers and lose market share. firms are therefore more reluctant to pass on cost increases to consumers. the second factor is the weakening activity that is taking place in 2018. typically passed the more strongly through prices when demand a stronger. so the fact that the euro area has recently experienced a

negative demand shock is likely to have held firms back from raising prices. the delay in pass-through may be explained by an additional factor which is lower important inflation over the past two years. this is being reflected since late summer 2018 and the growing discrepancy between the growth of gdp deflator and core inflation. the gdp deflator has followed a more pronounced upward trend, to 1.5%from 0.6% at the end of last year. one development that may have contributed to lower imported inflation was the appreciation of the euro exchange rate by around 8% in nominal effective terms over the last two years. suggestsnal analysis that this had an impact on known inflation in 2018, especially

for durable goods. pass-through the wages through prices is likely to be moderate until these various factors have played out. but, that are still reasons to believe they will unwind over the medium-term. our monetary policy will remain accommodative and will respond to any changes in inflation outlook. the affect of exchange-rate appreciation have now reversed. demand should recover so long as the downside risk to our outlook do not materialize. and, with stronger demand, firms should be able to rebuild margins. toeover, if the economy were slow more than expected, the risk to wage growth may be contained since the end of 2017. wage growth has been driven less by wage and more by negotiated

wages, which are more persistent and react more slowly to cyclical label market conditions. negotiated wages for 2019 have to a substantial degree already been set by previous negotiating rounds. now, we come to monetary policy. substantial accommodation is still needed to secure the path of inflation convergence. pastis reflected in our monetary policy decisions. in parallel to winding down net purchases, we strengthen the guidance and interest rates.

and lower investments. this has allowed us to rotate the instruments used to set the policy stance while leaving the stands and self broadly unchanged. frameworkd guidance means specifically designed to accompany the economy by facilitating needed adjustments in policy stance as it provides. second, the date provides extra information to focus rate expectations over the near-term. third, guidance is tied to the guidance on rates, adjustments to rate guidance automatically entail a change of the reinvestment horizon in the same direction. reinforces the impact of a

flatter expected rate path by compressing the premium component of long-term interest rates. we'll continue monitoring how banks can maintain healthy earning conditions while net interest margins are compressed. and if necessary, we need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating the side effects, if any. banksaid, low profitability is not an inevitable consequence of negative rates. ecb analysis finds that the best-performing banks in the euro area in terms of return on 2017y between 2009 and

share three key features. they have been able to significantly reduce their cost to income ratios. they've embarked on large-scale investment in information technology. and they have been able to diversify their revenue sources in a low interest rate environment. at its last meeting, the council decided based on the weaker outlook for inflation to extend the date-based leg of our guidance at least through the end of 2019. that in turn implies we will continue to keep the very sizable stock of assets bought under the asset process program unchanged for even longer. decided to also

launch a new series of targeted longer-term refinancing operations in order to preserve favorable bank lending conditions and maintain the efficient bank transition of our policy. these decisions ensure that the policy stance remains accommodative in the face of weaker growth outlook. and the calibration of the remaining parameters will reflect the evolving macro economic conditions. our current reaction is well-designed to respond to further delays in inflation convergence. wesuch a situation, just as met in the march meeting, we would ensure monetary policy continues to accompany the economy by adjusting their rate forward guidance to reflect the new inflation outlook.

but, the commitment to our objective also implies alertness to future risk and readiness to respond to them should the medium-term outlook continue to deteriorate significantly. ecbhis case as well, the will adopt all the military policy reactions that are necessary and proportionate to achieve its objective. we are not sure of instruments to deliver on our mandate. thank you. [applause] anna: that was the ecb president mario draghi addressing the ecb in frankfurt. he finished on an interesting line. the ecb is not short of instruments to meet its goals. other interesting lines. in terms of how weak the economy is, the economy is relatively

resilient. there is risk to the downside. he also talked about some context. the soft patch does not necessarily foreshadow a serious slump. that is interesting in terms of the extent of the downturn we are seeing in the euro zone economy. he also says the economy will respond to any change in the inflation outlook and the ecb may need to mitigate the side effects of subzero rates. he certainly was suggesting there were positives in regards to have a negative interest rates. he certainly reiterated that. he went on to say that the ecb may need to mitigate the side effects of subzero rates. this means something on the cards that can make things easier for the banking sector. many in the banking center moaned about interest rates. he did and with a nice line about the ecb of instruments to reach its goals. a lot more to come on bloomberg tv from westminster.

the leader of the house talking about the plan for the government while votes take place. more on brexit coming up. this is bloomberg. ♪

welcome back to bloomberg markets, the european open. here are your headlines. mario draghi sees risks to the downside. the ecb president calls for continues loose policy that includes negative rates. key lawmakers show signs of backing the prime minister's brexit deal. but would the cost of victory be her resignation? and dovish terms. urging patience while new zealand's central bank suggest they could clone -- join the global shift against higher rates sending the kiwi dollar tumbling. welcome to bloomberg markets. i'm anna edwards in westminster.

a process of understanding what it is that members of the house of commons would vote for for brexit is going later on today. theresa may is trying to bring her deal to the house for the third time. let's get a first word news update with debra mao. apple has dodged a ban with its fight with qualcomm. day, alier in the separate judge said that apple had infringed a different qualcomm patent. olderommended a certain model of the iphone be banned. china has suspended the airworthiness certificate of the boeing 737 max. they need additional certification before determining if it is safe to fly. this is one day after the ethiopian airlines flight crash.

president trump says the central bank should immediately cut by 50 basis points according to the new york times. he defended his view that the fed was wrong to raise rates in september and december. he called the latter hike in explict bull. he told the new york times that he won't be a sycophant for president trump. zealand bank says the next move will likely be a cut, a shift away from higher interest rates. we are now basing for -- bracing for a 25 point cut by august. the u.s. central bank signals it may not raise rates at all this year. the uk's gender pay gap is not explained by tenure, location, or roll according to new data from glass door. 90 percent of the wage gap could not be explained by observable factors. it could come down to workplace bias. lessill workers and 5% than their male counterpart when

figures are adjusted to reflect job characteristics. than 2700 more journalists and analysts in more than 120 countries, this is bloomberg. debra mao joining us with your bloomberg first word news. but get back to the stock market. the first half hour of equity market trade. dani burger has all the details for us. dani: renault is trying to start nissan.th and fiat has gotten a lot of attention when it comes to corporate takeovers. up 4%. they are wrestling for first place in the stoxx 600 with norsk hydro. norsk hydro have losses this week, totaling 3% monday and tuesday. the markets are saying it may

have been overdone. optimism that they will be able to reopen their operations, some of the mining operations after a cyber attack. billionaire mike ashley putting a price tag on his takeover bid for the company coming in at $81 million. it is also putting a price tag on .5 a share. that is where the close yesterday. anna: dani burger with your movers this morning. us get back to the markets. christina is joining us from our markets live team. you heard what mario draghi said. any surprises? he talked about the risk to the downside and the resilience of the euro zone economy. are we taking away something dovish? what surprised you?

>> there are really no surprises. he's not the type of banker to stir markets especially at a fragile time of risk sentiment. he said the resilience as well as the risks that are present on the horizon, all of that says to me that these have to be maintaining optionality. he does recognize that there are risks to the downside. they do want to keep that option for normalization. perhaps in 2020 the data takes a turn for the better. at the moment, we have recent numbers in terms of sentiment for pmi. and we have numbers from germany this week. all of it is still pointing to

downside risk for manufacturing in the euro area. we will see a lot more of this type of messaging. i guess he was trying to give us an context about how weak things get. he talked about the stocks pack, not necessarily foreshadowing a serious flow. but what about the banking sector. the ecb needing to mitigate side effects. you have to assume that means talking about the banking sector little bit. ratess negative interest onto stimulus to the economy -- aren't a stimulus of the economy like they thought five or six years ago. >> it is something they brought up time and time again when explaining some of their less than stellar results.

he was insisting that negative rates are not a factor behind profitability. the banks will probably disagree with that statement. rates in europe remain negative, particularly on the german curve, the shorter end of the curve, we have seen bank profitability continue to languish because of other credit factors. >> talk to us about a language you for from other central bankers today. some has adjusted they will be cutting rates in the future. has the prevailing narrative been dovish? like that is the general direction a lot of the central banks have gone, especially since we have heard from the fed and we saw the dovish pitted.

it speaks to this idea of global policy divergence, really. they really will have a hard time going awry -- going away from the path the fed has set given the correlations between the short rates curve in major developing economies. we have seen rates in the u.s., pricing as soon as this year for the fed. that is where sentiment lies. we have seen markets doing the same thing when you look at the short end of the rate curve. it is hard for traders to kind policymakers diverging from each other when you had such a strong dovish signal from the fed. and you've heard u.k. policymakers do the same,

following suit as well. >> christina from our markets life team, digesting what we heard from the ecb and other central banks. , we will hear why one of the world's biggest iron or miners sees breakneck expansion in china. how does that fly in the face of global slowdown? andrew forrest is next. this is bloomberg. ♪

>> there is a maturity issue that we can have there. >> there is a maturity issue that we can have there. this would be about 20%. anna: welcome back to the european market open. 0%. anna: welcome back to the european market open.

firms and chinese governments are saying.

taken with a grain of salt. countries have been spying on each other since i was a boy. you have to leave businesses out of it. knock yourselves out. doing it for centuries. , america, and australia only a level playing field to compete properly to serve our customers best. was it in terms of trade tensions. back to brexit now, live in westminster. the u.k. parliament has decided to take control of the brexit process at least temporarily. it is preparing to vote on rival plans for theresa may.

hasthing the prime minister not been able to do. how will this work? will be up to the speaker of the house of commons to decide which are going to be voting on. the chosen idea will be put to a ballot and the members will decide among as many as they like. the results are due to be announced later on tonight. parliament will then reflect on these results and on monday, the plan is to take a closer look at two or three of the ideas that proved the most popular among lawmakers, a meaningful vote process. there is a lot to talk about here. .et's go to frankfurt protests continue in the background as ever. good to have you with us.

because of the indicative votes process, will this add confusion to the pound? >> i think it will add to the confusion. if you look at the list of options that a been put forward by various mps, there is an astonishing breadth of deal, anything ranging from no deal to second referendum to common market to point out. and i think there is a real chance that the results tonight will show how deep the divisions in parliament are and that there will be no clear majorities for any of the options currently put on the table. to that extent, it does happen by tomorrow and we will be no than we were today in terms of market strategy. >> anything that could be a

logjam would look like chaos. what is the worst case scenario? by that i mean a weak pound. >> i think that we could go well below 120. deadline ando the you get to this deadline and realize last minute that you haven't got an agreement. that no side was able to push and in with their plan that case, you have an edge cliff scenario. that is the absolute worst case scenario. parliament that would do everything in its power to keep that from happening and pushing the u.k. towards a new election, of course.

we got the sense that it moved we got the: -- anna: sense that it moved across markets. is it sort of pushing the idiosyncratic concerns around brexit to the sidelines from a global perspective? >> absolutely. i think the market is sleepwalking into this. there are other risks that we have to deal with. currency being the most dominant one, but there is definitely a sense that investors are very optimistic. maybe even a little bit naive in some ways that we're looking at a scenario where everything will be well but no one really knows how that is going to happen. so we have very low volatility.

that goes across asset classes. it increases the risk of a very violent reaction if something does go wrong. taught thatve been if the going gets tough, banks will be holding their hands and that is what investors are still very much relying on. anna: thank you very much. please stay with us. it to a look at some of the stock movers this morning. .ccusations of money laundering this is bloomberg. ♪

anna: this is the european market open. a busy morning. everyone around talking about brexit. at the moment, this is european equity markets are slightly to the upside but a little bit of a move to the downside. let's get to individual stock movers. dani burger has that story. it's hard to imagine there are individual stories with so much macro news going on. but swedbank has issues with money laundering that might be growing more serious.

swedbank might have misled u.s. investigators. courts are saying that there might be ties between swedbank and paul manafort it was trump's former campaign manager. is down 1.7%, erasing gains from yesterday. it had positive trade updates. but jeffries coming in saying it is not impressed. returns, jeffries saying that that is just window dressing. growth is still not there. saying that lack of margin is very concerning for the spanish retail operator. and dunbar, a good day for autos. anna: dani burger there with details on individual murders -- individual mood -- individual movers. frank for, mario

draghi said officials may need to reflect on the matter as he struck a dovish tone. >> the drivers of the current expansion remain in place. the risk remains tentative to the downside. anna: what stood out to you about what mario draghi had to say this morning? he talked about the risks to the downside and also talked about theioning banks from effects of negative interest rates. >> the ecb has been changing its tone in recent months. the ecb would be looking at potential rate hikes later this year. down, andy turning indicators still fairly weak at the moment, there is no suggestion that the ecb would be looking at this.

it has really changed sentiment. matt: thank you very much -- anna: thank you very much, joining us. up next is bloomberg. ♪

francine: mario draghi at the

ready, the ecb president says the central bank should prepare to soften the impact of negative rates. and key lawmakers show signs of .acking the brexit deal but could the cost of victory be her resignation? and the san francisco fed president urges patience while new zealand's central bank joins a global shift of higher rates sending the kiwi dollar tumbling. but afternoon if you are watching from asia. francine lacqua and tom keene in new york. it is about macro monetary policy. tom: really attention point for central bankers this morning. the headline is simple. not only negative rates but more negative rates that we have seen over the next few days. we also have to have a look at the impact for the banks. we will have a full roundup and what it means for european banks.

>> apple dodging and in court been with a fight -- in a fight with qualcomm. the evaluator day patent for a battery saving feature. judge said that apple did infringe on an earlier qualcomm patents. parliament is preparing to vote on plans for theresa may's brexit deal. it could soften britain's departure or cancel it altogether as the risk of not leaving rises. pre-brexit conservatives say they could shift to support the prime minister's deal. but several indicate the price could be her resignation. outlining a plan to address allegations of sexual harassment. it is setting up an independent whistleblower hotline and laying forpotential lifetime bans inappropriate behavior.

a bloomberg businessweek article revealed a deep-seated culture of misconduct at the london insurance market. these reported 10 days ago or 10 years ago, i don't care. it is not acceptable that any woman should not feel safe. >> china suspended the fororthiness certificate the 737 max 8. the agency needs to review a proposed modification to determine if the plane is safe to fly. a day after the ethiopian airline like crash, chinese authorities granted the fleet. -- grounded the fleet. 2700 journalists and analysts in over 120 countries. go to the data but this is important for germany. commerzbank is out with their annual report. executives. for the but it is a slightly in your report.

everything is slightly higher in group profits and slightly higher in annual results. slightly higher in revenue. and it is slightly in germany. francine: and it is slightly interesting to look at the m&a plans, tom. that is what anyone wants to talk about when it comes to commerzbank and if they will merge with deutsche bank. tom: the tan is gone and i don't know what to do. francine: moisturize. tom: i'm scratching my way through the morning. to the data right now, negative using sterling as a proxy for brexit. let's go right on to the second 11272.with euro mix in the 14.76. and a seattle slew of negative yields. this is the difference in yield

between the tenure and the three months. it is not a vanilla curve. it is a negative rate. there is a -10 year yield that is down to -.04. and i put the u.s. 10 year huge perspective as well. i'm happy that you are doing the yield because investors are trying to figure out the economic outlook against this decisive turn. i don't look at the new zealand dollar very often. tom: very good. we're still looking at the commerzbank to see any key ideas. it's go to the bloomberg right now. it is the difference in yield between the 10 and the three-month spread. -- the 10 year and the three-month spread.

this is a little bit of inversion in early 2000. maybe a little longer time here before the financial crisis. the trump election. a steeper yield curve. and down we go to the new curve, flattening. it is unusual to see the three-month yield higher than the 10 year yield. most people associate the inversion of the tenure spread as an impending sign of recession. but there is more than one indicator. this is basically bloomberg's risk on, risk off indicator which combines 18 indicators tracking equities. and while it is off 2019 highs, it remains elevated among 2018 lows. the european central ready to

soften the impact of negative interest rates. >> the drivers of the current expansion remain in place. remains to thesk downside. francine: now we will talk about central banks. the asset management chief investment strategist, david, they give for joining us. flashou look at these signals or alarm bells, should we be worried that recession is coming in go or do you make excuses for almost every single market? market is concerned, rightly so, about global slowdown in growth. it.o draghi said i think the market is getting ahead of itself and effectively starting to price in 30% to 50%

probability of the u.s. and global recession within the next 12 months, and indicated by the partial inversion of the treasury curve. i think the market is getting ahead of itself. this cycle has come to an end. francine: you own a lot of the periphery bonds. does it make you change your view on that? have that view on european banks as well. and i thought his message was quite positive. that negative rate is not only hurting banks, but impacting the transition. for banksat is good and good for the periphery. think that we might get a

tearing of the positive rate which would be very supportive of european banks and equity. but from my perspective, debt as well. tom: what is your perspective of all these negative rates? you can't take a derivative of a logarithm. i learned that a million years ago. of thisrate of change new negative rate moment, how bad is it? or is it something manageable by the banks? >> it is something that i think is sending a negative signal and having a negative impact on broader sentiment across the european economy. the importance of consumption as a bedrock of continued growth. , seeingnegative rates the bund yields go negative has

an adverse impact that. clearly negative rates in the flattening of the yield curve is negatively impacting the ability of banks to expand the balance sheet. i think this is a negative development that needs to be addressed. not only on the income side but the idea of the dynamics of the balance sheet is usually under discussed as well. bring it on over. let me show you the sausage making that we actually do here in frankfurt, germany. this is the annual report. i am scrolling for you. we just do word searches. maybe i will stand corrected later but it is removed from the discussion of the merger. and this is commerzbank talking about business as usual.

restructuring the head office to improve the banks performance. we will continue. stay with us on brexit. this is bloomberg. ♪

the on are: this is bloomberg surveillance. let's get to the bloomberg business flash. the security and exchange commission agreed to pay was a blowers 200 $50 million that provided information to help the agency when a settlement with -- whistleblowers $250 million that provided information to help wincy when a settlement -- a settlement. huawei dodging and eu ban.

the u.s. is pressuring european allies to bar huawei equipment after concerns that the tech giant might be forced to spy for beijing. that is an allegation that the chinese embassy denies. and investigators looking at suspicious transactions. that coming from swedish .roadcaster it swedbank says it cooperates fully and communicates clearly, correctly, and with the best intentions of all relevant authorities. and that is the bloomberg business flash. francine: the house of commons is trying to break the brexit deadlock. londong from 7:00 p.m. time, they can vote for every option they support. the aim is a divorce agreement that could get a majority, something the prime minister has .ot been able to do parliament will take a closer

look at two or three of the ideas that prove the most popular amongst lawmakers. edwards, anchor of bloomberg european market open. various look at the options, is that confusing the international audience? you don't need to know blow-by-blow unless you are a pound trader. will we be wiser tomorrow morning? or would it be just as foggy? anna: we hope to be a little wiser, don't we? whether parliament will coalesce around one option remains to be seen. they will be voting on a host of options and i will try not to confuse the international audience unnecessarily. they's like labor plan for a customs union, a second and referendum -- a second referendum. all things will be voted on by mp's and they can vote for as many as they want.

it doesn't mean that anything they desire to back -- decide to back will come to pass. it is not binding. the house of commons said they are taking this process very seriously. they are not going to be bound by this. but they are trying to bring a meaningful vote on theresa may's existing deal. tom: you are a saint trying to keep up with this. davis who isavid in the middle of the brexit debate. this is in the telegraph. i guess he is pro-brexit. the vision of the norway plus wrecks it is the worst of all worlds. this is polar opposite to what we were yesterday. , and spain would demand to retain their fishing rights in british waters and thus lose the united kingdom,

one of the most symbolic issues of the referendum. gibraltar to be reopened. it would not be so much as norway plus but eu mninus. carry on brexit until an edwards has her first gray hair. what does david davis mean by eu minus? anna: that's not on the ballot paper, i think it's just his way of saying it is worse than what we have now. pushing a few buttons, emotional connections. fish, gibraltar, all of these things that have been thrown around a lot. davis,u hear from david two different size -- sides of the conservative party. right across the tory party and the labour party, they have had entrenched positions for a

while. it will be interesting to see how much we see mp's come away from those entrenched positions. option is favorite not what is interesting but what will be interesting is if they can coalesce on anything. if it looks like polar, that place to theresa may's hand may givehe -- it support to her deal, something that they can coalesce around. tom: -- francine: thank you so much, and edwards. hourly, minute by minute. if you are a market participant, do you just assume that no deal is off the table and you are waiting to see? or do you look at every motion

and every amendment? i think it would be dangerous and very brave to try to trade sterling assets on the basis of hour-by-hour. i think the market has made the a no deal is now very unlikely. i think a no deal is unlikely, but i also think that there is some complacency. parliament does need to coalesce , annd a positive vision alternative to theresa may's deal. theclock is ticking and u.k. will be leaving on april 12. francine: what does it mean for yield? .avid: i don't like yields i think in most scenarios, they move higher. if there is a long transition or some sort of brexit outcome, it

will be back on the table. then there will be some sort of short-term flight. and then we get a premier look at assets. tom: what happens to united kingdom banks? we're looking at negative rates and focused on the germanic question. what happens to the world of barclays? david: we do actually have exposure to u.k. banks. that is why we have used sterling as a hedge to some of that exposure. i do think that the major u.k. have ample liquidity and operations that even in a disruptive scenario, those banks will be very solid.

i think for some of the smaller challenge u.k. retail focused banks, there will be pressure on their business models and more pressure on their fundamentals. but i think the major international u.k. banks -- it is not good news of a disorderly brexit, but they will come out the other side. francine: david riley will stay with us. up, james morris, conservative party vice chair, we'll hear what some of the brexit hardliners want and what they would vote for. , 6t is 10 a.m. in london a.m. in new york, and this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine in london and tom in new york. we're talking about the impact of negative rates. foundriley saying that he comforting the fact that mario draghi seems to be aware and addressing some of the concerns out there. theall, when you look at european banking, are we in consolidation? does it have to start with a deutsche bank commerzbank merger? david: europe is fundamentally overbank, so there does need to be consolidation. the reality is that it is proving very difficult to have consolidation across border.

thatne of the barriers to is the regulatory landscape. you have to hold additional capital buffers. problem isart of the that europe itself hasn't pushed ahead enough with banking unions. there are the positive insurance arrangements. but you are right. we do need consolidation. fundamentally is finding itself overbank. really, it relates to that sort of kind of banking and regional banks. francine: so it would not make sense? david: it can potentially make sense for those institutions. those shareholders and stakeholders to determine that.

i don't think that it would solve the problem, both of banking and in germany. it does need more progress in terms of consolidation. tom: david riley with us, you will continue with us on the market and international relations of the moment. as the managing director from shanghai and china, it is an important and timely conversation. we will do this out of asia. please stay with us. switzerland, the 20 year yield almost to a negative interest rate. stay with us. a beautiful new york. this is bloomberg. ♪

tom: bloomberg "surveillance." our first word news in new york. viviana: president trump's pick for the federal reserve said the

central bank should immediately cut rates by 50 basis points. viewen moore defending his that it was wrong to raise rates in september and december and called the latter hike inexplicable. he said he will not be a sycophant for president trump. the global in or market is likely to have export issues. a billionaire cautioning producers could face constraints and boosting output. >> i think there will be a supply deficit in our operations are massive. you just cannot turn up or down the dial that easily. you guarantee that deficit? i cannot. viviana: the kiwi is tumbling after the central bank says the

next move is likely a cut. traders are bracing for a 25 basis point cut by august following in the footsteps of the u.s. federal reserve. the u.s. bank signaled at may not raise rates this year. the uk's gender gap is not explained by role. be of the wage gap could not explained by observable factors and could come down to workplace bias, female workers earning on average 5% less than male copart's. -- male coworkers. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much. it is always an important forum. the island off of vietnam and the south china sea at the

north, and west of manila. it is always timely and important, and made more so by the gentleman from princeton and johns hopkins. min.is zhu thank you very much. the trade conversations have been part of the discussion as well as the slowdown in the chinese economy. our next guest is the former deputy managing director of the imf and as president of financial research in china, zhu min. what is your outlook for global growth, given the concerns about the yield inversion, the week data? zhu: global growth is slowing down. roughly around 3.5%, 3.4%

and next year will continue to slow down. we have to understand that after the financial crisis in the past 10 years, growth rates are lower than before the crisis. we are in a moderate growth environment. peak and wewas the are gradually coming down. i think that is the big richer. it is just a slowdown, i do not think at will lead to recession. the parts of economic growth are still quite solid. tom: we saw the data out of china in terms of industrial profits down 4%, the weakest number since 2009. does it seem to you that policymakers will have to inject additional stimulus? policymakers think

need additional stimulus because policy is quite strong, it just takes time to see the impact. this is 2 trillion in tax cuts and we will see that in the third quarter and into the fourth quarter. looking at the budget, there is almost 2 trillion four social security support, so they are supporting social security and pension. those are quite strong. also there are infrastructure investment issues. the margin is neutral. i think the policy should take some time. you are looking for all the parts that are still quite solid. i look forward to seeing growth pickup in the third and fourth quarter. overall, growth may be a

slowdown and loss because of the structure change. continuing to put deleveraging tasks on, growth will slow down. it is pretty solid. tom: you do not see that there is a possibility or likelihood of a benchmark rate cut either pboc this year? zhu: that is unlikely. we still have 12% on the reserve rates, a little room to cut. up all your rules and the reserve rates, i do not think that is a risk. tom: if we get a trade deal that does not see the removal of the tariffs, will it have a material impact on the prospects for china's economy? zhu: you mentioned partly one thing, the tariff issue. i think that is a very important

issue. we hope we will have a trade deal. i think both sides are working extremely hard. we are into the eighth and ninth rounds so that is positive. on the trade issues in the market opens, issuing neutrality's, we are moving along structural and political issues. the one thing that is very , no tariffs on china exports or imports to the united states, that is the issue that started the whole thing. if you put these issues on the table on top of the whole thing, that would be difficult to move forward. tom: do you buy into the argument that the trade war has helped the capitalist? zhu: i do not think so.

the chinese way, yes there is a trade issue, but we have to do what we have to do. we will continue to reform, to jinpingd basically xi that wed 11 key issues very much need. the foreign bank shares today are only 1.7%, lower than 15% -- 15 years ago. i was completely wrong. dutch equity markets are less than 2%. dutch equity markets are less than 2%. tom: how significant is the inclusion of chinese government bonds in the bond index from april 1? zhu: in theory, they will being -- bring a trillion of capital

outflows into the market but it depends on the details. accounting standards, legal systems, but basically it is very positive news. the chinese bond market this year has been good and will continue to be good across the whole year. , former deputy managing director of the imf speaking to us here. francine: great interview. tom mackenzie have plenty more from the forum in china throughout the day. coming up, the impact of trade tensions on luxury retailer with michele norsa. this is bloomberg. ♪

♪ is bloombergs "surveillance," tom and francine from london and new york. for the better part of the decade, chinese tourists have been on a feeding frenzy for luxury brands, but executives have been hounded about high-end chinese shoppers who generate one third of global luxury sales. , a's get to michele norsa former chief executive officer of ferragamo, now an industrial partner. we thank you for giving us a little bit of your time. ravi whoined by david was talking a little bit about the italian bonds. bonds. when you talk about luxury overall, is it more difficult now than five years ago to make money in china? it is quite different

because not only the market was moving altogether it is quite ie direction with different speeds for different companies, but now it is a market of winners and losers in profitability. it is a big advantage for the large groups because they can get that are deals for leases. conditionst easier to extend globally. these changing business ways. small companies, relatively small companies are facing a difficult set. francine: what does it mean for global big brands? are there too many luxury brands? michele: i think there are. there are large brands, european

and american. if you think about italian brands in the range of 800 to $1.5-- $800 million billion, they are in a difficult situation. you have to communicate in a different way and richer market in different ways. it is a moment where things will become more different. this go back to the strength of china and their appetite for luxury companies, or is it industries consolidating? michele: -- david: you are always faced with factors and trends. has been a cyclical slowdown in consumer demand in china. has a global, spillover effect and in some sense being felt in europe.

i think that will prove temporary and for the higher value added, china is still a fantastic market. tom: wonderful to have you with us, and i would like to congratulate you on ms. sony -- oni, the most dangerous store in new york city. the back room of ferragamo on fifth avenue was the most dangerous room in new york city. is there a risk of becoming too expensive, pricing yourself out of the market? michele: i think it depends on the land laws in new york and the big cities. the cost of leases have become too high. if you look at the profitability of fashion companies, the gross profit is frequently decreasing. you have an excess in discounts,

excess in lease costs, so you need to recover somewhere. i think it will be more and more the trend of increasing prices every year by 2% to 3%. there is a need to reconstruct the magic. tom: is there a change in the behavior of the luxury shopper? are they the same as 10 years ago or is there a new luxury shopper you need to adapt to? michele: they change automatically. you have a continuous decline of local consumers. york, 60% to 70% are travelers and you have an incredible switch in ainge. dutch age. -- age. the younger age group in china is coming in larger numbers. is also 10 years

ago, we had probably 10% chinese or not even. now we represent globally between 40% and 50% if you consider the travelers. it has been a significant change for the company. tom: we will come back, michele norsa with us. getting francine ready for her trip. from ferragamo is a chic look for you. francine: my fashion stylist, tom keene. tom: you will love them. we will continue this discussion on luxury and italy. this is bloomberg. ♪

♪ this is bloomberg "surveillance." salesforce is being accused of profiting off online ads for sex workers. 50 women say the company knowingly supported the backpage.com portal. they say salesforce provided customized database tools to

promote prostitution. the women describe themselves as survivors. tesla's new chair is defending elon musk's tweeting. says he uses twitter wisely. he took over the chairman role as part of a settlement for the sec after a tweet on taking tesla private. misled u.s.e investigators about allegations. they cite confidential documents obtained. they say they cooperate fully and communicate clearly and what the best intentions without authorities -- with all authorities. tom: david riley is with us. we have been looking at the markets on the new negative interest rates. the joy ofebrate

acquisition of luxury with michele norsa, a former chief executive officer for ferragamo which barely describes his contribution within italian luxury. thrilled you could join us. that dangerousss street at the bottom of the spanish steps in rome. correctly,onounce it the most dangerous street in the world. how has gucci changed that street of luxury in rome? madele: i would say gucci the evolution in the luxury market in every kind of way. they started from product, they moved to communication, they changed to retail. they became kings of web.

when you visit a store, you still find part of the old gucci because you still have a strong on, of classic bags and so but then you are like alice in wonderland. you find stuff that is so completely different from what you expect. classic items and this new evolution, a very talented way of running business. do you need bergdorf goodman? francineed the stores lacqua shops daily and london? do people like you still need luxury department stores? michele: yes, first of all because it is never good to radicalize your business completely.

once you are total retail, you are running a higher risk. you need to compare to a counterpart with whom to discuss. -- covernnot discover the united states without the department stores, one in new york, two in miami, one in los angeles. the rest of the united states has become difficult to reach, and the department stores are getting good control of a nation. soncine: why are italians bad at retaining luxury companies? it seems they are sold off to the french. michele: this is a process of generation. luxury in france was 20 years earlier than italy, so there came a time when the french companies started getting together and the groups who

built french companies. now whereit is coming you have designers and entrepreneurs. group, anot in italy a fund, a bank with a vision and the capacity to put together italian groups. italian groups are reluctant to sell to a competitor in the same region, to the chinese. best buyer ise the french group. francine: we were talking about italy before. you own quite a lot of italian debt. better? eda do we have a confusing political system. they have such big luxury brands. why does that not translate to gdp growth? david: italy actually has more

global brands than the united kingdom, has got very high quality design and value added. the challenge has been firstly, a large and inefficient and burdensome public sector. that is an ongoing drug on the potential for it -- drag on the potential for italy. medium-sizedto enterprises and being able to ability andthe willingness of banks to lend, there is big structural issues which have helped -- held italy back from realizing the potential. francine: do you worry about the economic situation? michele: yes, i would say there is a concern. i think now we are crossing a river but once we have crossed after the elections, we will

face definitely a tough step. it will be taxes and the redistribution of government -- power in the government. this will be the beginning of a new time. we do not know exactly how long this will last. is north of 60% of the voters are not voting for the party. --: michele norsa and daily david riley, thank you so much. next, paul sankey. this is bloomberg. ♪ so with xfinity mobile

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customize each line by paying for data by the gig or get unlimited. and now get $250 back when you buy a new samsung galaxy. click, call, or visit a store today. ♪ tom: this morning, evermore negative rates. the effect upon the commercial banks.

your stock market is draghi, powell, and company lose freedom. speaker pelosi and democratic with the cost of medicine. in london, there is no company. there is simply just brexit chaos. this is bloomberg surveillance live from our world headquarters in new york. i am tom keene and in a fractured london, francine lacqua. give me the polling on the prime minister. as she make it to the weekend? francine: we understand, and this is an angle we have been exploring, that one way of getting her deal through is to tell the hardliners, vote will me and i will step down. it is speculation. parliament will take control and we will see votes to understand

the way forward. her job is on the line but has been for about 18 months and she has survived. tom: it is a "surveillance" original, forget about canada plus and norway plus. what britain needs is italy plus. francine: controversial. we need more than 30 seconds to discuss it. maybe over our dutch a beverage. -- a beverage. viviana: apple dodging one import ban in its fight with qualcomm but faces another. the u.s. international trade validated and patent. voteament is preparing to on rival plans to theresa may's

brexit deal that could soften britain's departure from the e.u. or cancel it. as the risk of not leaving rises, brexit supporters are indicating they could shift to support her deal. lloyd's of london outlining a deal to address allegations of sexual harassment, setting up an independent whistleblower hotline. it is laying out potential bans forbands for -- inappropriate behavior. instances these reported occurred 10 days ago or 10 years ago, i do not care. it is simply not acceptable that any woman should not feel safe. viviana: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg.

tom: it is the mother of all roll up's, maybe this is where your future, my future, we will have the same doctor and hospital as the mergers continue. this is st. louis, 47,000 employees. withwill mate with tampa some 12,000 employees. in at $17 billion. the continued merger within health care, there is no nice way to put it, 21% up on wellcare of tampa. the interest rates, and we will fold this over to your equity portfolio, futures flat, curve steepening. the euro gets my attention, finally weaker euro.

with the vix 17 into a better bull market. the negative interest rates, the u.s. spread, not the 2-10 but the treasury note is a -10 basis points. that is a substantial flattening over the last 24 hours. the german ten-year is jaw-dropping and that should be read on the screen -- red on the screen. what has my attention on the back of that is the new zealand dollar sliding more than 1% after the central banks joined the shift against raising rates. withare drifting along u.s. equity futures. tom: it is bonds. what we care about is the equity markets. is withtin adams

bloomberg intelligence and provides equity strategies. wall where a measurement now? worry measurement now? gina: it is really high. is inversion of the curve another component of that wall. the curve first inverted in december and that created turmoil for stocks. we are seeing eighth 10 year inversion -- a 10 year inversion. many are hanging onto the concept that this is a late cycle indicator but not an eminent recession indicator, and investors are squaring off. some believe we are in recession and others staunchly argue there is no recession insight. that is creating angst for investors and it results in this

wall of worry to continue to climb. francine: what would be a great indicator in stocks to look at impending recession? gina: there are a lot. you need to see the trend reverse. the trouble investors are grappling with is last year we had a 20% correction. we normally have a 20% correction in the early stages of an economic recession or just preceding one. this is why investors are in a confused state. did the 20% correction proceed a period of weakness? it remains to be seen. if the equities turnover to new lows, it is an indication the may -- we are entering a new phase in the equity climb out of december lows and it will

probably be a little more difficult. tom: i do not to micromanage the date and time of a merger between deutsche bank and commerzbank. they are enjoying a flatter yield curve, if not negative rates, lousy rates. is this an opportunity for them to find stability and profits or not? gina: i would argue not, mostly because the stage in the cycle is wrong. tom: where do i want to be? your claim to fame, you have never called everybody up and said, go to cash. where do you hide out? gina: our sector scorecard suggests the odd combination of utilities and real estate reflecting the lower for longer rates. higher dividend yield is very attractive as rates rally. is: the moonshot on buybacks

a moonshot. is that sustained? gina: it will support some of the other sectors. tech and industrials are sectors where you will see earnings are improved. buybacks give me back money as shareholder. buybackseople positing as financial engineering? gina: they are, and they are not necessarily negative. it does not necessarily need to be a black or white argument. there are other more effective uses of capital according to investors. if you look at how stocks perform following dividend announcements versus buyback announcements versus m&a announcements, investors clearly prefer dividends. when you look at the price

reaction, it is a better use of capital to declare dividends and persist with that because investors are rewarding that. tom: do you have an opinion on mr. mueller? gina: we will just throw that in. kevin cirilli cannot avoid mueller. they have to figure out what to do to move forward. theme for the democratic party and speaker pelosi is health care. you are knee-deep in this. does it play with the public of america or is it just a party in search of a theme? kevin: i think it does play with americans for different reasons on both sides of the aisle. president trump, on capitol hill with republicans saying shortly the republican party will be known as the party of health care. talking with republican staffers in congress, they were scratching their heads because they are in short of where exactly the health care plan

was. coming from republicans, it was a study in contrast because they are saying they will have a health care plan but not releasing details, on the same deal wasthe green new voted on and shut down in the senate, but no details on the progressive front either. francine: talk a little bit about the idea that donald trump still sees a conspiracy in the molar probe. -- mueller probe. as his base energized? kevin: yes, they believe him and they are energized. at the white house yesterday reporting, and on capitol hill, the feel and the mood in the halls of the white house and congress are very celebratory. it is as if there was an election and they won. that truly is the vibe amongst

the president's supporters. it is as if a cloud has been lifted. in terms of polling, we will have to see. the president is heading to michigan to campaign where he is largely expected to reiterate the comments he has made. on the issue of investigating the investigation, lindsey graham, republican from south carolina who was traveling with the president on sunday back from mar-a-lago to washington as the story broke, he has said game on. put someonee to like bob mueller to investigate the investigation. tom: kevin cirilli, thank you so much. swiss franc up to new strength versus the euro and a $17 billion transaction on wellcare and 17 of st. louis.

louis.ene of st. they are calling it a premier medical merger. we will have more on this throughout the morning. stay with us worldwide, this is bloomberg. ♪

♪ this is surveillance," tom and francine from london and new york. time for a brexit update from westminster with anna edwards. we are asking whether theresa may will pay the price and whether she loses her job or steps down to get her deal. anna: yes, indeed, key question

for the conservative party as i am joined by james morris, vice chair of the conservative party and has campaigned for brexit. good to have you with us. you have not voted against this process. themuch should we read into results of these indicative votes? the government says it will not be bound by what commons decides but andrea leadsom says they are listening. mr. morris: i think the government wants to engage constructively with this process. it will be interesting to see what comes out of it. the proposals that are voted in a majority, they have to have some grounding in reality and they have to be negotiable. the truth as we sit here right now is the best option is the withdrawal agreement negotiated by the government with e.u. thatnk it is important for

withdrawal agreement to be considered again by conservative colleagues as being the best way of us getting to a timely exit from the european union. anna: you backed theresa may's deal. she will discuss -- address the committee later and you will be in the room. will others put pressure on her to name her departure as the price for supporting her vote? .r. morris: that is speculation questions about the future of the prime minister are secondary. what we are facing, it is coming down to a choice about what is the best way to honor the results of the referendum and create certainty for jobs in business? the danger of the process -- we are engaging with that constructively -- is it leads us to a further period of uncertainty which is bad for business and the economy. parliamentoice for

is how we honor the results of the referendum, and the best way is to support the prime minister's deal if it comes back. anna: has it may be left too late? the rest of the tory party may be seeing the up wins of a softer brexit. mr. morris: i think it has got a chance of passing. a lot of my colleagues are beginning to realize something that many of us said when the withdrawal agreement was first brought back, the danger of not supporting it will be chaos and uncertainty we are currently seeing and parliament. the way to get certainty is get the withdrawal on time and then we can move on to a discussion and further negotiation about the future trading relationship. we must get to the exit point to honor the referendum results. anna: as part of that drawing

the line and moving on a new leader to the conservative party? in the 1922e heard committee, they have been calling for that. mr. morris: it would be crazy in my view for the conservative party to be plunged into a leadership conference -- contest when it is imperative for the people of this country that we resolve this issue about brexit. it is not about the prime minister or individual political careers. it is about delivering on the referendum and making sure we get to the exit point at the same time as creating certainty for business and the economy. , u.k.james morris, mp conservative party vice chair joining us in westminster. francine: thank you so much. we are getting some breaking news about sweden.

a grip oning to get the money laundering scandal battering its oldest bank. aboutare questions raised the impartiality of those investigating. authorities -- the swedish authorities are reading the bank. -- raiding the bank. this is bloomberg. ♪

♪ "surveillance." francine lacqua in london, tom keene in new york. there beginning to see financial ramifications of the two airplane crashes for boeing. the story develops out of dallas, texas with southwest air as they begin to calculate the first quarter cost. picked on everything -- revenue, unit dynamics that go from single digits to think about 1% growth. adjustments at southwest and the stock down 3%. francine: let's talk about the european banks, sweden trying to get past the money laundering scandal. the swedish eco-crime authority was raiding the headquarters of

swedbank. banks.us on when does sweden get to grips with what is going on? >> it is a bit of a drip feed for information. the news that swedbank is being raided, someed -- of the key shareholder findings laundering, ity is kind of a drip of information. the sooner there could be clarity, the better for investors. francine: what are investors thinking about today? negativeey laundering, rates, or the consolidation between deutsche's and commerzbank? elisa: on the money laundering side and the allegations coming through reflect the fact that it

has been fragmented oversight of that part of banking. angst have been slipping through the cracks consistently -- beings have been slipping have been things slipping through the cracks consistently. draghi did not quite say how he would look at negative interest rates. tom: what does deutsche bank at the wall in london look like in five years or five months? do we have an idea of what it will look like? would a lot of observers argue that whatever happens with commerzbank, they would need to shrink that investment bank considerably, potentially exit the u.s. entirely or scale it back. whatever happens with commerzbank, that appears to be something they will have to tackle. we will be hearing more of the

next few weeks how that deal will come together, if it comes together, and whether it will come with other parts of the sold, likeat are their asset management business. that could affect the outlook for investors and asset sales. tom: going over to the balance raised, elisatal enoughzzi, cannot say for her work. coming up, sharon boeing at the eleven o'clock our. this is bloomberg. ♪

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for the several -- federal reserve says the fed should cut interest rates by half a percent , stephen moore defending his view that the fed was wrong to raise rates. he called the latter hike inexplicable and tells the u.s. he will not be a sycophant for president trump. trying to move past fraud allegations but unable -- criminal probe in singapore. the company views the issue is closed and says everything is on the table, and the market now has full transparency. >> yes, there have been some findings and we are addressing them. i think we already have implemented very strong additional oversight measurements. strengthhe says their

should come back into focus. shares remaining 25% below where they were before fraud claims surfaced. kiwi tumbling after the central bank will cut. a global shift away from higher interest rates, investors are bracing for a 25 basis point cut. the u.s. central bank signal that may not raise rates at all this year. notu.k. gender pay gap is explained by 10-year, location, or role. could not bege gap explained by these factors and could come down to workforce bias. female workers on average learning -- earning 5% less than male counterparts. 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 am viviana hurtado. gina martin adams with us looking at the entire sphere of areequity market, and we thrilled to have onset paul sankey. set paul sankey. notesught his research and your eyes fall out of your head. if i have researched and it is loaded with micro data, what is the one talking point? would be around sanctions or not, we just do not know. everyone is excited about the gasoline market and we do not know whether the price will get high enough. significance is you

have a confidence in price. do you guys have a confidence in the market and yet you do not know? paul: we have a big friend in the saudis. they are producing below 10 million barrels a day and have their foot on the market. they will run through sanctions. tom: will it affect their fiscal policy? is it so important that the royal family's fiscal plan is affected? paul: they are saying they want 7280. historically they have not -- 70 to 80. the risk as they lose control to the upside if we get these sanctions. francine: there seems to be a difference with what equities are doing and the actual commodity. gina: i am glad you brought it

up, just the price action last year you had phenomenal gains in energy prices followed by a crash. stocks went nowhere. they traded sideways relative to the market, down certainly when the broader crisis was following. it is somewhat similar this year , even though energy stocks have rallied back and let to gains at this point in the market, that rally is not enough considering the gains in oil prices. as energy investors in the equity market are sitting in disbelief that we are going to see consistent gains, durable gains driven by demand in oil prices, this is the situation we have been in for several years. what we have been trained to look for is demand.

the supply-based movements in oil prices have not translated to energy equity gains and they more than likely will not translate into energy equity gains over the long-term. there is a lot of volatility based on supply. lowtually, we will reach a but energy continues to contract with the shares of the s&p 500. francine: our chief majors of oil investing enough? gina: they are, but there was enough capital spending recovery to suggest investment is still consistent. they are restrained relative to 2011 to 2014 where investment was excessive and not durable for the long time -- term. there was enough to scare off the equity investor.

what are they doing with this cash? buybacks were all the rage last year. so efficacy was very low investors are frustrated. tom: i want to bring up a chart i have done for years, and approximation -- paul sankey does not have this is a tattoo -- it is oil adjusted for inflation and rising incomes in the united states. adjusted for all of this, oil is back to where it was in the 1970's. explain why i need to invest in oil if it has been a gross commodity to deflation. paul: the market wants to go tech and tech will affect the demand and supply for oil. there is a secular issue with lower prices. tom: make the case for bigger intermediate oil investment. should we buy a stock here or

there? paul: yes, because the tech effect is overstated. we are still seeing one and a half million barrels of demand growth. by the same token, i have lunch with a senior golf source yesterday and i was just out of the exxon meeting, they believe in investment as referenced in lower capex. there is a likely good -- likelihood it could go higher. call tol sankey's support total return. paul: if tech will get you eventually, it must, the 20th century was driven by oil and the 21st century will be driven by electricity. the effect is overstated. the companies have to return cash to pay people for the risk

of owning the stoxx in a ks in at age -- stoc twilight age. francine: are you telling me we have been promised too much from renewable energy? paul: it is all about tenor. the best performing sector in oil last year was refining. why would you buy a refiner at the end of the oil range -- age? they can return cash. it is controversial with the mp's, to pay people a good return for owning a stock so that over the next 10 years you make the next 20 years irrelevant. if you can get to a 10 plus percent annual cash return, which is then the capability of many of these companies, you do not care about 2029 because you are owning an option on the future of oil which may have a great future.

oil is essentially liquid solar power in high energy dense form. it is easy to produce at low cost. it has a terrible public relations image but it is naturally occurring and environmentally friendly will not treat it right. it has a big public issue with regard to it being spilled. the fact that it is liquid solar power. us, gina sankey with martin adams, thank you so much. the conversation of the day on economics, absolutely brilliant on gdp slowdown and on a fed losing their degrees of freedom, in the 7:00 hour. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." as we broke moments ago, swedbank headquarters rated by dadesh prosecutors -- ray by swedish-- raided prosecutors and may have misled the u.s. about suspicious transactions. swedbank tells us they are cooperating. bay -- by wellcare. the goal is to expand in the market for government-sponsored health care. while way dodging and e.u. been as the bloc is laying out a

strategy to ensure the 5g network is safe from cyberattacks. this over concerns the tech giant could be forced to spy for beijing, an accusation they deny. that is the bloomberg business flash. francine: we are getting news withgermany has sold bunds negative yields for the first time since 2016. financial repression that we talk about quite often, is alive and well after a decade of monetary stimulus. investors shopping for investment grade debt are being greeted with below zero yields in 1/5 of the market. tom: stay on that chart, that chart is exceptional. that is the german 10 year yield is the important number

-0.06. to get there is truly an extraordinary moment, talking about the finance of the global economy. sankey.oined by paul i cannot say enough about his acuity and -- in analysis. let me go to a chart, adjusted for inflation and rising western world incomes. 86, wery is after opec are back to the 1970's. all of this centers around the cliche of it is a financial thing that happens to do oil. is that still true and will it be true in the future that these are financial companies doing hydrocarbons? paul: i do not think so. that was exxon's reputation into the 2000s when it was a financer of megaprojects.

they are the biggest growth player in the permian and that is about technology and horizontal drilling or fracking, and productivity gains. tom: what does the greater middle east and all of our stereotypes, what do they do about that technology metric? paul: it is a challenge, and what opec is doing, saudi is under 10 million barrels a day of production. they have the capacity to produce 12 million a day. they are being forced to go to low levels of production relative to capacity. francine: how much do we understand the complexity of shale oil in the u.s.? some asian refiners are turning it away because maybe there were some metal components. atthere an average price

which they can break even in u.s. shale oil? paul: now they are talking $40 and below for breakeven. this is an incredible revolution and there will be some teething problems. we have just started exporting oil and now we are exporting 3 million barrels a day. , you that it is so new will get some teething problems that are not that big a deal against the mega thinking. to go back in a 40 or 50 year since that is how long u.s. oil production was growing. overwhelminge is and the stronger dollar is very dramatic for the middle east. it is time to think big about the scale of the shift we have had. francine: is it more difficult to refine some of this u.s. shale oil? paul: no.

it has lower sulfur and breaks down with less heat. the issue is that the industry has spent 30 years planning for heavier oil. we are in a situation where suddenly with the sudden sanctions on venezuela and the secular decline, suddenly there is too much light sweet for what they were expecting. that is not that big a deal, because you can turn a heavy refinery into a light sweet but you cannot turn a light sweet into a heavy sour. all the factors are in our favor. the capital discipline and strategy of refiners means they are being slow to respond because they do not want to spend a ton of money and find out they do not have as much light sweet as they thought. tom: there was a guy at their

sterns named lawrence kudlow -- bear stearns named lawrence kudlow. he made a big deal about the lifting cost of oil bringing us to a perfectly competitive microeconomics. blended lifting cost that establishes the microeconomics? ,aul: it is the same or lower three dollars or four dollars a barrel. in the shale, it is more like $20. tom: back up $20 or $30? paul: it is higher. essentially lower long-term productivity and shorter investment cycles. the main change is whereas previously you were forced into products -- projects that were 30 years, now you have 90 day full-year cycles.

paul paul sankey joining us this morning. coming up next, we speak with maria giese. we will discuss her documentary "this changes everything." we talk equality. this is bloomberg. ♪ this is bloomberg. ♪

♪ "surveillance," francine lacqua in london, tom keene in new york. a commitment to equality, we hold meetings and summits on the broader discussion of informing all of us on equality. where the prism of that is so great as in hollywood. we are thrilled to have with us from the bloomberg equality summit, maria giese, and activist inequality in the hotbed of hollywood. you survived awards season. what would be the sequel to what we have observed the last two

years on equality in film? maria: my hope is that the andel will be beyond me too will bring us back to title vii, equal employment law. to have a conversation about this subject, you need to look at hollywood and american entertainment media is not being a bunch of private businesses, but as being the communication center of one of the most powerful nations in the world, the propaganda center, the storytelling center. if women are shut out and unable to participate equally, then we are excluded from our cultural narrative. tom: i happened to be watching "casablanca" last night, and there was ingrid bergman band from hollywood because she had an affair.

the newancient history, history is in hollywood, you need to get equality done. how do you do that at the sunset tower hotel in some lawyer's or movie producer's office? maria: equality and entertainment media in the united states is not an inside job. we need hollywood and our industry to help, to move the numbers up, to care about this issue, and to hire more women. opportunity ist protected by a law called title vii, and that law currently does not function in hollywood. the reason is if you want to invoke that law, it is a civil rights, part of the civil rights act of 1964, if you want to invoke that law because you have been discriminated against individually or as a group, you

will get whack listed. that -- blacklisted. that law cannot work. you are out. that means women cannot speak out using that law. it is not an effective law. to solve this problem we need to make the law enforceable and that starts with our federal government with legislative change and reform to the law. francine: when you look at representations in front of and behind the camera, is it changing? has it made strides? maria: we have seen extraordinary change in a lot of ways. these are exciting times. gina davis has been doing extraordinary work for equal representation of women and girls on the screen since 2004. very little had been getting done for women behind the scenes.

took11, beginning of 2012i the battle to my union to find ways to challenge the systems and systemic discrimination against women directors. i ended up being able to instigate an investigation inside the aclu and it went to be part of the eeoc. there is a federal investigation going on. tom: i want to get you on again to talk about at the margin, how some of these women are doing with blockbuster movies. thank desh please stay with us through the day. -- please stay with us through the day. ♪

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applications for the market. u.k. prime minister theresa may takes a backseat as the house of commons prepares to control brexit for a day and vote on new proposals. and a baird analyst says risk is already priced in for boeing shares. the faa answers to congress. welcome to "bloomberg daybreak." i'm alix steel, alongside lisa abramowicz. lisa: this is quite a day for bonds. an interview says the fed should immediately cut rates by 50 basis points. the market thing is agrees with him. wirp if you come inside