♪ >> u.k. lawmakers had another go at finding a way forward for brexit. we have full coverage at westminster. we talk about turkey's president, who was losing key elections. jump as chrysler sales they are said to be exploring a european venture. ♪

>> welcome to "bloomberg surveillance." i'm francine lacqua at westminster. good morning, good afternoon if you are watching in asia. we have full team coverage on brexit and all the main stories. but first of the markets with nejra cehic. nejra: good morning. we are seeing a clear risk off valley in today's markets after the pmi data out of china, the stoxx 600 up almost 1%. this is after the first quarter, which was the best for global equities since 2010. that 10 year yield hits the december, 2017 low last week. we are on 2.44 handle, 10 basis points higher than the low. to round out the risk picture, dollar-yen retreating for a third day citigroup saying we could see quite a bit of volatility. we will get signals not just on china, but the u.s. and germany

economy. job data at the end of the week, they are recommending some trades on volatility, picking up to hedge against that in dollar-yen. let's get the bloomberg first word news with city on a heart auto. >> chinese factories stabilized in march, easing one of the biggest concerns for the global economy. manufacturing pmi rose into expansionary territory, jumping the most since 2012 with new orders and export orders rising to the highest level in six months. pmi also returned to expansion for the first time in four months. ruling partyogan's losing control of turkish cities in a series of local elections. early results show the opposition leader in the capital instanbul, but across the rural interior the ak party largely stood its ground. more election news, ukraine's leader will face a runoff next

month against a comedian according to early results from the first round of the presidential election. comicws the 41-year-old got just over 30% of the vote against petro poroshenko. 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. this is bloomberg. thank you so much. u.k. lawmakers are taking back control again to debate alternative brexit plans, likely to discuss options including a customs union and a conservatory referendum. that is after theresa may's plan suffered its third defeat in parliament on friday. so how should investigators play it? we are joined in westminster by christian taylor, head of economic research at barclays. with us, the partner in chief investment officer.

thank you both for joining us. let me kickoff with you. if you are right now a market trader or pound trader, how do you look at the political uncertainty? you don't act much. anotherthe story of buyer, it can go the way of consensus and that would obviously show the way for the couldment, but is also end probably will exacerbate the uncertainty. i don't think today will be the -- itreement will arrive will be yet another day where they will say they will want to do something but there will be no consensus. for most of us, approaching markets with the expectation of opportunity, today is the day where you hold back and anticipate what could happen in the next few days.

francine: what is your take? it is unclear whether we will have much thought about what happens, so what happens to the economy and investors coming into this country? >> first of all, what does one do as an investor, one has to be cautious. this process is extremely difficult to predict. there have been many who thought you could see some kind of a british rally as it turned out to be a softer brexit, but many of them have been disappointed so far. what it looks like is that the british consumer continues to be supported quite well through a healthy labor market and savings. we continue to be surprised how well the economy has held up, but for investment, the outlook continues to look very uncertain, and we see it in the numbers. our longer-term outlook for now is relatively cautious. we think growth will continue to slow. francine: is there anything you

like on the curve, or do you expect it to flatten? >> i think the latter. there's no yield -- expectation of the long into moving. the short-term will remain anchored, even if there was to be better news from parliament. i will predicted very much highlighting the media curve growth expectations, and we will -- i say that because the evidence is holding up nicely but it is also true that consumers are fickle, they can change their mind quite quickly. the impact on housing markets will be a dramatic and the collateral effect on private-sector consumption would also be quite dramatic. consumer ishat the not throwing in the towel yet

but it is also very true that it is not very sustainable and if things cannot work then we will likely get them. francine: a question to you, what is better? is it the general election, a long delay, or something else? >> i think the market would like to avoid and no deal brexit. i'm not even sure what is decided would be the best. they would tell you certainty is best. beyond that it is hard to tell. i think fewer people believe that the bank of england will be able to raise rates and at the moment the downside risk will be the upside -- even if we get a limited,he upside is

because people realize that even in a scenario where we crash out, it remains very complicated and uncertain where we go. francine: all right. you both say with us. green as, a sea of local equities are higher this morning, as fresh china day that eases investor concerns. we will talk markets in global growth next. this is bloomberg. ♪

♪ economics, finance, politics. this is "bloomberg surveillance." this is francine lacqua in westminster, bringing you updates to brexit.

we are just getting breaking news out of hong kong. the hang seng index entering a bull market and we are looking at the mood -- certainly there is a risk on factor, a little bit of a lift the market after the concerns about yield inversion. first let's get straight to the bloomberg business flash. aramco is the most profitable company on earth according to an account published by rating agencies. apple anded the u.s. exxon mobil, with net income just over $110 billion. the saudi oile giant the fifth highest investment rating. deal, isf $4.6 billion expected to be completed in the fourth quarter of the year, this after a sweetened bid.

it owns 46% of the shipping company. shareholders previously voiced their support of the takeover. fiat chrysler are reportedly discussing a way to share investments, to build cars in europe. bloomberg has learned any eventual partnership will likely include collaboration on new electric cars. the partnership could eventually develop into a wider combination, but right now the focus is limited. and that's the bloomberg business flash. much.ne: thank you so european equity futures are higher after chinese manufacturing data eased concerns about the global slowdown. in fact, global equities are coming off the back of the best corner since 2010. investors are anticipating that more policy support for major central banks will help prop up growth. let's get back to our guest.

all, we saw the yield curve inverting, we saw a couple technical levels being touched on the american indices. is there an impending global slowdown or not? >> what you saw coming out of china is very much what we had expected and hoped for. we thought the gloom was overdone and think there's good reason to believe that we will get a rebound like we saw in 2017. we do expect better data to come in the coming months. i think china was a start with the pmi, and we are hopeful that u.s. data will get better, and ultimately even europe. that should be enough, if you safe haven much bonds have rallied, and how much people have shifted. we think that should be enough

to support equities as well as emerging markets. >> do you agree? was the bloom crude overdone? >> i agree, but only in the short term. i think it was to be expected for central banks to prop up , on the back of a significant slowdown. intonk it pushes further next year, a potential deceleration in the u.s. followed by a recession. i do think that it's a significant u-turn, signaling not only that things can be good but that while the possibility of a macro recession is much lower, the cost of capital is still pretty low and we are not in this exuberant position. i do think that it will be very

difficult to sustain profit margins and earnings in a much lower economy. higher whenerror is global growth levels are left to be lower. i do see a profit recession this time next year, which will have a significant rating. >> do you see a profit recession? we always expect it to continue -- what if they come to an agreement? >> we do think there's a risk. stability is domestic growth but it has not ultimately thed we do thinka --

that there is more than a fly in the ointment. >> if you look at your base case. is this on the assumption that we have a sustainable trade deal in the u.s. and china, or does that make no difference in your forecast? the first is that trade relationships are an electoral politic. heon't think it is something feels strong conviction about, trade, wet comes to have to look at the cycle and we are still about two years away from the next time. tensions with china will slow down and it could be this time next year before they read excel or eight. he willnd thing is that

live or die come election time on the bank of where the economy is. this suggests that the rhetoric will soften and that you could see a trade deal with china over the next few weeks but i don't think it will be sustainable. will be where we were several months ago. francine: understood. thank you so much. you both stay with us. coming up, we focus on erdogan, declaring victory in the local election, but the opposition winning key cities. we will bring you the latest on turkey, next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i'm francine lacqua in london. we must look at emerging markets and president erdogan's losing party, in a series of local elections. the opposition has taken the lead in istanbul and in the capital of ankara. the president is paying the price after the economy dipped during the global financial crisis. we will get more on turkey and emerging markets. we are joined by the emerging markets portfolio manager. always great to see you. thanks so much for coming in. what does will be have seen in turkey mean for the turkish lira? >> thanks for having me and good

morning. i think we have already seen this morning a little bit of a weakening in the turkish lira as a result of istanbul. i think we should continue that these elections -- realistically these are municipal elections so turkey will not have presidential elections until 2023, over four years from now. early to read into the constant criticism and concludes in, but i think for markets in general it is nice to have this election behind us so we can focus once again what matters. the turkish economy and the reserves. i think all eyes are really on the depletion of turkish reserves and how much of that had been used to intervene in the lira. change the way in which the president deals with the economy? will it strain his populist stance? >> hard to see that happening,

simply because even though there ankara, it isf unde difficult to see a change of policies. the president and economic minister have to deal with an economy in recession which has been going on since the financial crisis in august of last year. is what is the impact on his political machine in the cities, and as a result, we have to see how that plays out for the next two to three years. i think markets are happy to see that we will probably move away from this sort of intervention in offshore markets witnessed , which created a significant freeze of disruption. but at the same time there is the path which seems to be for a week lira as we see continue to noise istanbul.

because of some of the things the authorities set aside before the election, it is almost impossible for foreigners to short the currency. are you expecting those measures to be put in play? >> is probably less of a need for that, i.e., there seems to have been an effort to maintain u.s. stability ahead of elections. will seeunlikely we the near-term repeat of the measures now that the elections are behind us. we are trying to understand, what is the likelihood that this noise finds its way into other emerging markets? i think looking at the chinese ifa that came out yesterday, anything, it has been a real positive for em and you could say it is a carte blanche for kerry. em,e is some event within but at the same time, a broader narrative looking into chinese data and they will pick up

further stability and pick up in china. i would say the broader backdrop ,emains very constructive without these individual hotspots in disruptions. francine: overall, what is your take on emerging markets? you have the hang seng in a bull market now, we could see a lot more buoyancy in emerging markets overall. what tends to happen is the equity markets react very quickly, bond markets tend to take more time, and we tried to take the longer view. looking at the chinese data, there is a lot of positives, near-term positives, i.e. this pick up. the question becomes how does this play out in the next six to nine months. between the dovish fed, which to us moves us potentially to a longer economic cycle, and the positive chinese data, the

higher likelihood of a truce between the u.s. and china, we think recovery will continue. we are seeing higher social financing numbers. we are seeing $150 billion of stimulus, and we think that will continue to bear fruit in the second through fourth quarters, providing a very stable environment. francine: thank you so much. next, we will learn a bit more about central banks. we go back to what we heard from but also the dallas fed chief tells bloomberg he doesn't see any rate hikes this year. we bring you that exclusive interview next. this is bloomberg. ♪

♪ finance, economics, politics. this is "bloomberg surveillance," i'm francine lacqua in london. breaking news out of u.k. coming up shortly. we are here at westminster

trying to figure out what the next step for parliament is, what the next step for the cabinet is. we are expecting news out of the u.k. what's interesting is that earlier today we had german manufacturing data that was a little bit worse than expected, and it comes amid concern. u.k. data which hasn't come out yet -- let's get straight to the first word news in new york city. >> the conservative party is preparing for the possibility of a snap general election. the party is still deeply divided, though, over brexit, 12 days before the departure from the eu. he deputy party chairman -- -- the start of a 20 month process today. the parent company of bloomberg

owns the brand of bond index. president erdogan is losing key of -- losing control of key turkish cities in early election results. it is also a in cities along the mediterranean coast. across the rural interior, the ak party largely standards ground. 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. this is bloomberg. francine: thank you. we are just getting breaking news from manufacturing pmi, better than expected in the u.k. for the month of march. economists are forecasting 55.1. we will look at pound volatility against the dollar. the dallas fed president, robert kaplan, says he sees u.s. gdp 2%wing this year at 1.75% to

but is not forecasting any rate hikes. he spoke to kathleen hays in an exclusive interview. plot, andt, in my dot i have been saying this for some time, i didn't have any rate increases for 2019. it doesn't mean that i couldn't change my mind. it means as i sat there in the march meeting, that was my base case for 2019. but it is always subject to change. what my main goal is for monetary policy right now is that we are flexible and we are patient. i want to see how growth is going to unfold for the next several months in 2019, and based on what i see -- and for me, i look not only at the economy hard data about corporate earnings reports and a whole range of factors in the

market, particularly the fixed income markets and treasury curve, and based on all that, as we get through later in the second quarter, i want to be flexible to have a policy where we can move appropriately. i don't know where that will be at, but i think we are well-positioned to take the appropriate move based on how the facts unfold. >> what would be a trigger for you, to say it looks like it is time to think about cutting rates and pull the trigger? >> for starters, i have set our base case at the dallas fed is that gdp growth will be below 2%. confidencesome because we have been saying all itough 2018 that we thought was going to slow meaningfully. it turned out to be a little but ifthan we thought, there was evidence to suggest that growth would undershoot that forecast -- there's a

number of uncertainties. leaning, welus is have european growth decelerating, issues with china. we have a long list of uncertainties. i started to believe the growth prospects would be below that base case forecast, then i would start thinking about, what does that tell me about substantial policy? what i have been saying for the last couple years, i don't think the fed should be restrictive in monetary policy in our stance, and i also felt we are getting to the point through 2018 -- i'm not sure we need to be accommodative, either. haysine: that was kathleen speaking exclusively to the dallas fed president, robert kaplan. let's get back to what the markets are pricing in and talk more about the federal reserve. our guests are still with us. what do you think the fed can get away with? --t does it mean

i think the fed will not be able to get away with much. we are seeing a pretty significant deceleration, a lot more aggressive than the fed's expected, or it never would have happened. the negative implication is that beyond this period of celebration for markets, which can last another few weeks, the inevitable implication in the medium to long-term is it reduces the fed's ability to deal with a recession when it happens, not if it happens. this year the cycle hasn't finished and at some point we will see a recession. while the u.s. economy is not going to go into recession anytime soon, inevitably at some point to there will be some or we could see a

situation where earnings expectations are so high that in a low growth environment the room for error in terms of profit margins in earnings in general is a lot lower. i don't think it is very good news for the u.s. economy but it does confirm that the fed will qe will goe and that from being one of the extraordinary measure into something that very much resembles the japanese story, whereby quantitative easing is used almost as a matter of fact every time it is down in the economy. news foregative good market investors. francine: where do you see the biggest value, and is it all about monetary policy? >> we think it is stuck where it is now, in particular after the

very sharp u-turn the fed has done from december, january, where they were discontinuing the balance sheet runoff. the fed should discontinue the balance sheet runoff by september and it will shift the ,ortfolio away from agency debt and probably will stay on hold as long as they can. political pressure is building up and we are more optimistic on the u.s. economy. we see it slowing, but above trend for this year, and we think that combination is a combination that suggests a bonds over what is market price for recession. francine: they should be a lot more amenable in 12 months. if things turn out very well

they may try to squeeze one in but i think the next move will be a cut. francine: what does it mean for the european central bank? first we have someone who will have to replace mario draghi, and the situation seems a lot more difficult to deal with. >> yes, certainly. in europe, not only are you levelg with a growth which is a lot lower than the ones in the u.s., but also you are dealing with the inherent political uncertainty and geopolitical uncertainty of theng to deal with difficult set of countries. mario draghi would have no other option but to continue to kick the can down the road, which has big implications for the ecb to distort assets. they are caught very much between a hard rock -- i think

ultimately equities offer significant value, but it is time, perhaps, to reconsider as we go through the inevitable bump of brexit in the next few days. when you look at places around the world, is europe the trickiest? >> it is. one is that we- talk about the ecb, the ecb cannot do anything anymore, there is a reluctance to embark on fiscal stimulus. then you have a big risk around trade. china is taking up but everything around manufacturing is very weak. one thing we haven't talked about his trump turning to europe with regard to car tariffs, he could make a decision by mid-may. then certainly you have this potential feedback between politics and the precarious situation in italy, where after

the european election we still have a situation where italian debt could rise in terms of credit and that will have implications for banks. these three risks continue to loom over europe, which makes it difficult to be overly constructive. francine: thank you so much. the partner and chief investment officer at capital christian. parliament takes control again. u.k. lawmakers vote to agree on alternative to mays brexit plan. and car giant's are set to be exploring ventures in europe. we will explorer bloomberg scoop. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i'm francine lacqua in london. let's talk about brexit. we are here in westminster, and will probably be here quite a lot this week. u.k. lawmakers are taking back control while they debate alternative brexit plans. they are likely to discuss options including a customs union with the eu and a conservatory referendum on any brexit deal. that is after the plan suffered its third defeat in parliament on friday. so can lawmakers come together to find a preferred way forward? joining us today is benjamin maker. thank you for joining us once again. it seems like the way forward is more muddled than it was when i last spoke to you. how do they sort this out? >> theresa may is facing a constitutional crisis, because today mps in the house of commons we believe will support the customs union and that is

very problematic because remember, it is directly contradictory to the conservative party election manifesto, which was seeking not to do such a thing. francine: support for a customs union, she goes back to the eu, she keeps the withdrawal agreement, and says we are not renegotiating, but then she gets a political declaration about a customs union. done deal. >> we already know that huge mps from her party spoke, and if she were to come out in support, in favor of what they will vote for, there would be mass resignations. that could crash the government and hang the power of parliament in the country to jeremy corbyn. so there's a big majority in parliament and she could say that it doesn't matter. >> that's the constitutional crisis. she will have to choose whether or not to support the remain faction or parliament which

would like to see a customs union, or contradict that in support hard brexiteers within her own party, led by boris johnson. they would prefer to see the u.k. leave with a hard brexit. francine: so what are the chances of a no deal brexit? there's no appetite for that in parliament, but it is unclear what would happen -- theresa may says it is an option. >> and there is a lot of default options around but that is the strongest of them. members of parliament do not want it and they expect the eu to offer an extension if she is willing to call for a second referendum. francine: that would be a long extension, and would mean the u.k. would have to put together snap elections. >> quite possibly, and that is why it's called a constitutional crisis. francine: who are we looking at if theresa may was toppled? who was the next leader of the conservative party? boris johnson?

i think michael gove as a temporary prime minister is .ossible, francine: what are the chances of a general election? >> highly likely, because i think that could be the only way to clear it, and if she were to come out and support the customs union, the mass resignations would seek to move it forward. if she were to defy the will of parliament, she would then be seen as dictatorial, and that could seeker a general election. --ncine: >> that's a good question. so many of them have been split on this issue. -- heave been tainted commands a large majority of the

backbenchers, and there's no standout candidate. it a long extension attached to the referendum or general election? >> i would say that's possible. theresa may doesn't have control, and we need the european union to take control and i fully expect that this will be more formalized. extensionoffer a full tied to a referendum, and they are gambling on their results and we have seen a remain option. francine: i heard that it is not the eu's problem, they have to ask for an extension. >> and that's the improvement, but the problem is the u.k. is very good at saying what they don't want but poor are saying what they do want. they have no idea what we want, because in the house, theresa

may doesn't know what she wants. francine: thank you so much. coming up right here on "bloomberg surveillance," plenty more from westminster. we will have a bloomberg exclusive, fiat chrysler said to be evaluating a partnership. we will bring you that story next. this is bloomberg. ♪

♪ francine: economics, finance, politics. this is "bloomberg surveillance." let's get the bloomberg business flash. >> saudi aramco is the most profitable company on earth according to a look at the firm. it easily surpassed apple and exxon mobil. moody's says last year they generated net income of just over $110 billion. the agency gave the saudi oil giant its fifth highest investment rating. deal is expected to be completed in the fourth quarter of the year after a sweet bid wins the support of a

new foundation which owns 46% of the shipping company. shareholders previously voiced their support of the takeover. a legal firm accuses the investigating prosecutor of -- this comesorms as allegations of money laundering against the bank grow. last week sweden's oldest bank fired a chief executive and they are now being investigated by financial supervisors in sweden and estonia, and by authorities in the u.s. facebook is urging regulators around the world to agree on standards governing online content to avoid the patchwork of different companies. the push comes from government scrutiny of facebook around the world. and that's the bloomberg business flash. nejra: thank you so much. now let's turn to the auto sector. persia and fee at chrysler are reportedly exploring a partnership to build cars in europe.

bloomberg has learned the company is holding parliament are discussions to collaborate on a development of a super platform, the basic underpinning of a vehicle. the joint venture would be seen as an attempt to reduce costs in the highly competitive region. joining us, the milan bureau chief for bloomberg news. great to have you with us. talk us through the timing and the rationale of the steel. -- of this deal. >> good morning. is facing austry tech revolution which may change forever the landscape of the auto industry. heavy investment is needed in fornext 10 years electrification, and it is quite arer that all automakers seeking ways to share investment because no one alone is available to invest as much as the next five years.

daimler, and now we are hearing that they are having discussions. nejra: so there are several speculations about m&a in the auto industry -- does it all come back to this issue of sharing technology? >> i mean, there are a couple of reasons. first of all, the auto cycle is sales, we have seen in the last few months decreasing, defusing the other sidend on the we are facing a tech disruption. those changes are the most radical in over a century and why is the reason everything in the auto industry, every shareholder is reviewing ways to find partners. nejra: interest on this

partnership that we are reporting is being explored, what is the detail around back in terms of timing and when things might happen? the people we spoke to said preliminary talks may be announced by the end of june. we are also hearing that eventually this partnership could mean that the carriers and forplore a big deal sure it is not a focus for fiat chrysler. they have been quite vocal on the fact that he is looking for a big deal and they seem open to discuss more partnership, especially in the european industry. nejra: thank you so much for joining us. bloomberg's milan bureau chief, great to have you with us. let's get a check on the markets. carmakers of the best-performing

industry in today's session after we got that better-than-expected pmi out of china. risk assets rallying, u.s. futures pointing higher. dollar-yen on 1.11. cable also higher in today's session, with weakness in the lira following results from the election. president erdogan losing, oil extending its best since 2009. wti at $60.72 per barrel. bloomberg "surveillance" continues in the next hour. this is bloomberg. ♪

? ♪ francine: parliament takes back control again.

go. lawmakers have another at the brexit deal before the day hits. the turkish president losing key cities in the election, the lira extends its decline. and fiat chrysler shares jumped amid the big story of the european venture. good morning, everyone. good afternoon if you are watching from asia. andcine is in westminster, we are looking at all things brexit. tom: it's interesting is the seriousness here, a perfect monday morning at westminster, how serious this moment is. i think that is maybe lost in the media translation. francine: when you live in wedon, there's trickle-down, are not spending enough time on that. we are getting some euro area data, that will be viewed in the

second. inflation a little bit lower than expected. plenty more from the market but let's get straight to the first word news. lawmakers will try again to reach an orderly and to the u.k. divorce from the european union. today they will seize control of parliamentary proceedings in a bid to scrap the prime minister's brexit plan. the proposal already has been rejected three times. lawmakers are trying to come up with one they can support. over to turkey now, the president's national alliance lost control of on kara and other key cities, plus the opposition pulled ahead in a close race and the largest city of istanbul. turkey has been hurt by a recession. critics accuse him of running an increasingly authoritarian system. over to the ukraine, it is no joke, a tv comedian with no political experience took a big

step toward defeating the country's incumbent leader in an election runoff. c-130 percent of the vote in the first round. president petro poroshenko received just only 17% of the vote and the runoff is set for april 21. in asia, factory activity shows signs of stabilizing in march. the official purchasing index rose by the most since 2012. the pmi indices for china and south korea also rose but they are signaling contraction. 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. tom: thank you so much. it's not just about the politics of the united kingdom but there's much more going on in the markets.

let's take a look at the big over 26,000 has my attention, with the s&p having a substantial move. the turkish lira really has my attention, falling apart on election results. we will give you much more information as we go through the day. francine: i'm looking at stocks in europe, evidence of a better mood on the market. hong kong entering a bear market. this has to do with china's a globalring data, and we areowdown, looking at the political situation, on whether they will have a customs union or find a way forward. we can see the pound trading sideways. you have this gdp pmi on

april 1, and that lower inflation data in europe. francine: we should probably take a moment to repeat what we heard at the top of the hour. inflation for the month of march slowing, this goes back to the fact that we have been asking ourselves over the last couple weeks whether europe is becoming more like japan. on to brexit. u.k. lawmakers are taking back control again as they debate alternative brexit plans for the second time today. they are likely to discuss options like a customs union with the eu and the confirmatory referendum on at zynga brexit deal. that is after brexit maize plant suffered its third defeat on friday. the president at euro intelligence knows europe like no other -- i don't see a straight way forward. the clock is still ticking.

what do you think? >> it is bifurcating in many ways. i think tom was right to say that this is a really important week and one cannot really exaggerate the importance of what is happening. the indicative voted will tell us whether brexit will be softer or not. we shouldn't obsess with all the details, whether it's the customs union or a single market. headlines,asically any of these headlines will take years to negotiate. but we have to think, will it be a softer brexit than theresa may is? if the yield suggests a majority as a customs union which stands a shirt and chance then maybe brexit will have a majority. francine: when we go through a constitutional crisis, if there

was a choice between sticking to her party, which could be a no deal brexit, and a customs union, which left it was completely rolled out, what does she choose, or does parliament go ahead without her? >> i don't think parliament can go ahead without her. becausenot easy to do it takes several weeks to pass a vote of no-confidence and to replace the prime minister will take several weeks. make andes for her to it could swing in both directions. if there is a parliamentary majority in favor of a softer version it will be very hard for her not to do so, even at the risk of splitting her party. her party is split anyway. tom: thrilled to begin monday with you, because you more than anyone i know pays attention to no deal. as a foreigner -- that is very

loud behind us -- they have the megaphone. wolfgang, i see a mass polarization over what no deal means -- the end of the world as we know it, the leadership of siemens writing on the effect of europe multinationals, and other people saying it is nine months -- what is it going to be? >> it is closer to the latter than the former. no deal will be massively disruptive. it is possible that medicines won't arrive in that people will die. can't exclude that. the long-term economics, hard to say. suggest settling economic projections. it is an outcome to be avoided.

outcome,a desirable and when i say it is likely it's not because anybody wants it, although there are some people who do, but it's because the options of the u.k. anti-e.u. might have no alternatives, and people misjudge each other, and that has been a prominent feature. there was the separation of the elites in germany, all the while there was reunification. what is the separation right now in the united kingdom of the elite and the people? this and i don't follow that narrative. it's a divided country. 52-48, pollsm was are pretty much the same. country is divided into those who want to be in the u.n. and those who do not.

if small and trying to force its will on to the country and if that were the case it would have been defeated. we when it had brexit by now when we are already two days over the limit. francine: is there someone who can unify the country? is jeremy corbyn the person? >> among the current candidates, no one can. theresa may is in many ways -- we thought of her originally as being more unifying. if you look at the list of potential successors they are likely to be more divisive. there isn't anyone on the right , brexitd unify happening in failing, the possibility of brexit and other countries simply moving on, but all of them will take time and there is no unity ahead.

francine: we will have plenty more from westminster and up next we see the boom. the hsbc global head of fx strategy. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." let's get the bloomberg business flash. a takeover will create a european powerhouse in logistics and freight forwarding. rivaleed to buy a swiss in a deal worth $4.6 billion. it represents a 43% premium from january 15, the day before they first offered.

the world's largest oil producer is preparing for its debut. dollar bond offerings. bloomberg has learned today that saudi aramco will begin its roadshow. moody's and fitch has given it their fifth highest investment grade rating. the company could raise about $10 million. proceeds will be used to help by a majority stake. the ipo range for network international values are up to $3 billion. shares will be listed in london, dubai's biggest bank owns 51% of network international. and that's the bloomberg business flash. thank you so much. francine lacqua and tom keene in westminster, a perfect day here in london. we start strong with a wonderful always eager

to talk with you, particularly after nine days since the shanghai banking corporation. congratulations to your entire onm on the optimism you had december 24 last year. take us back to just before christmas, the world was falling apart, and hsbc got the call right. what did you do? , steveoked for equities was looking for lower for longer in bonds, and we were dollar positive. apparently if you are against the consensus you will definitely be wrong. tom: the consensus is the opportunity to trade. is there an opportunity to do anything this morning, particularly with sterling? >> with sterling, it's quite tough.

you have to make that choice. the problem with sterling is that it is a combined probability of two different events, but only one can happen. we have to move one way or the other quite violently once a decision is actually made. francine: that's quite optimistic. >> they are either going to leave without a deal or we are getting some kind of a deal or delay or something. but there are, three things -- we leave without a deal, theresa may's deal, or a delay. you can talk as much as he wanted only one of those things can possibly -- francine: what does that mean for market traders? do they have to hedge? hedge,ink you have to you have to ask yourself which one will hurt you. you have to ask yourself which one will hurt you most and you

have to hedge against that. francine: what happens to sterling in the event of a no deal brexit? -- wet i'm saying is of dealere is some kind and it should go back toward a fair valuation. view, take a 50-50 sterling is pricing out. either one could happen. but the whole thing about brexit is all currencies are compiled but you never go to one and zero. guardian,"g in "the the nostalgia of united kingdom that used to be. if we go to 1.10 sterling, that assume ayou just structural wealth destruction in the united kingdom if we get that valuation? weekm talking about next

it is i know is that exploring against the dollar. tom: it has to hold onto something. >> i don't know about the long-term. if you have there could be tariffs but the devaluation will more than offset any terrorist u.k. manufacturers would have to pay. modern economists are very stable. we have central banks, fiscal eurozone, wethe would be talking -- they can have shocks because the central banks are ready for its but what if they don't have the tools? england has more tools than the ecb but i would be more worried about the eurozone. they are really running out of options. the bank of england can still

cut interest rates and they can monetize that. positive, and it reflects downward -- that is why we are floating rate ratio. francine: two central banks come together likely men's, or is it a completely different scale? >> you would find that there and peoplerangements would be looking at financial situations, and there would be -- there would be a path. megaphone andhe we will go back and say we are on air, be quiet. [laughter] francine: david bloom of hsbc,

you both stay with us. coming up, the former u.k. secretary of state joins us, 6:00 a.m. in new york, 11:00 a.m. in london. this is bloomberg. ♪

♪ everyone.morning, francine lacqua and tom keene in

westminster, an absolutely perfect united kingdom day. we have heard our guest in conversation, a crucial week for the prime minister, the nation, and global wall street. the brazilian dollar, the hsbc call. america has looked at does the royal family play any part in this debate over brexit? the drama here is on thursday, we see it on netflix -- does the royal family get involved? >> one of the wild fantasies is that at one point in the final moment, the queen will walk into parliament and dissolve it. it didn't end well for the royals before. procedure,form of

the prime minister can use it to suspend parliament for three days and to stop all legislation. that's a fairly aggressive, extreme act. i don't think it has ever been taken, at least not in the last hundred or 200 years. i don't know the history. -- thet's the only way other possibility is that the not to signbe asked legislation, but none of that is likely to happen because you will not get legislation done in 10 days if it is against the governments will. these are extreme scenarios that might have had a reason at one point but at the moment we have a much more concrete -- want to -- what happens to euro-pound? >> if we get some kind of the wolfgang,eard from

you would be much more worried when things are turning down in europe when they are turning down and don't have ammunition. stall, the only ones that have been pushing that , everyone else is going back to fair values. if we get some kind of delay, you get euro-dollar at 1.10. francine: does the european election change anything for the populism in europe? numbers, saw the pmi we saw the german number come out, the final number today, revised down. tom: is germany and recession? >> germany must be on the brink, depending on how you look at the numbers. in terms of the quarter gdp fallout, i suspect it must be close. youmore qualitative way,

would probably not characterize it -- employment is still looking good but there are still some optics forward-looking indicators,. it looks to me like stalling growth, definitely a slow down, but it looks to me at the moment like not a full recession. italy is real trouble. tom: because we are going thursday. us, davidunch with bloom of hsbc. we will continue. don't forget at 10:00, in the united states, christopher element of the california state teachers retirement system. stay with us. this is bloomberg. ♪

tom: good morning, everyone. from the green at westminster, this important week for the united kingdom, francine lacqua and tom keene.

and with our first word news is viviana hurtado. on brexit warning from jean-claude juncker. he says the european union's patients could run out, sing london mosque make an agreement on a decision within hours or days. three times, british lawmakers rejected a proposal from prime minister theresa may. china's making goodwill gestures before trade talks resume. beijing is extending an extension of tariffs imposed on american cars. it is also including sentinel on a list of controlled substances -- fentanyl analyst of controlled substances. -- fentanyl on a list of controlled substances. president trump is saying we illegals,no more

strengthening his stance to closing the border. what a moller, a solider, and honduras are having assistance cut for not stopping there citizens from migrating. salvador, andel honduras are having assistance cut for not stopping citizens from migrating. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. francine: president erdogan's party has lost control in some parties. group showson poised to take control of ankara. our bloomberg is reporter. how will this change president at a one's -- president erdogan's policies? -- the president

was not on the ballot box the what is significant is the fact that it is the first election since turkey changed from a parliamentary system to a presidential one. it was a test of erdogan's popularity. what we need now is some editorial, economic reform. that is what investors are looking for. some economists fear he will go towards populist policies instead in order to get short-term economic gains. when we look ahead -- we are still waking for the final count in istanbul -- we are still waiting for the final count in istanbul. it is a very important city. like they looks president's party has already lost ankara.

this would be a huge loss. what a means for the time ahead will be seen. the next elections are scheduled in four years time, so president erdogan will have time to get things back on track. nom: thank you, simin demoka with us from istanbul on the turkish elections. wolfgang munchau of eurointelligence and david bloom of hsbc. e.m.'s are e.m.'s. story? unique david: this idea that you just whatgh-yield and e.m. -- is e.m., what does e.m. mean? they are idiosyncratic stories. what is interesting is it kicked

off volatility. in one day, we saw brazil sell off, so there is a little contagion here or there. it is a very idiosyncratic story at the end of the day. tom: is something like lire and opportunistic -- lira an opportunistic place to go? or is it just grinding weakness month after month? david: the big thing is inflation. if you tell me any country has double digit inflation, that currency needs to sell off as me sell off at least as much as inflation. when you look at 2%, 3% inflation, we can talk about other things. the question in turkey is will inflation remain in double digits? it is anything like argentina, but the question is will they take hold of the

inflation story? francine: at the same time, we saw authorities stopping foreign investors to be able to short the lira ahead of elections. will we have more measures like that? david: i do not think it is necessary. they do change things around a bit, but that is note from to any other emerging-market, the way they react when currencies come under a lot of pressure. francine: do you have a favorite emerging-market currency? david: we do not have favorites, but we quite like india. we saw a little selloff, but we still have the bond. if you find some assets you like, you can still buy them. this geography, the silk road and the effect of china, india, what is your take on the visit of president xi, that pageantry that we saw last

merkel, andon, younger -- juncker? wolfgang: the chinese are playing a very intelligent game. you mentioned the new silk road. ambitious,ery long-term, and very intelligent investment plan to link the eurasian continent members together. it is not meant to threaten the e.u. it may have that affect, where it splits members are close. between members who are dispensed in the network and numbers who are not. germany is turning more protectionist against china. so you will see italy as the biggest country signing up to this. china is becoming one of the biggest investors in italy.

you cannot blame italians. they do not have much investment going on. tom: this is one of the surprises of the first part of 2019, the unique this of italy ofllo unique -- uniqueness italy policy. francine: and when we were covering the e.u. leaders summit, there were talking about brexit, how leaders were dealing with china. wolfgang: there is no policy. they are starting to develop a policy on the 5g network, which is almost certainly too late. the more important thing is how do we deal with chinese takeover of european companies? china will establish footholds in places like article or italy and use those footholds -- like portugal or italy and use those footholds. francine: what about china?

is it a renminbi story? david: will when you put the tariffs at 10%, that was a larger renminbi story. at the moment and this year, we have a pretty stable renminbi. we go to something strange and outlandish last year, that renminbi should not be stable. tom: are we in global recession? i do not think we are in global recession, but the industrial side looks like it is in industrial downturn. the services numbers are good. but if you look at the industrial side, anything to do with a motorcar -- tom: that has to do with trade, one of our teams here in the united kingdom. david bloom and wolfgang munchau here with us. it is an extraordinary moment

for the united kingdom. we will continue hear from the westminister green. and thep, jon ferro 9:00 hour. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." let's get the bloomberg business flash. shares of easyjet are falling. the carrier is being cautious in its outlook for the second half of the year. easyjet is seeing increasing softness in ticket prices in the u.k. and across europe. of russia's largest

airline has been killed in a plane crash in germany. natalia fileva was chairman and a major shareholder in s7. engine planesingle that went down while approaching an airport near frankfurt. two big names in european auto making mate joint forces. psa group andned fiat chrysler are exploring a reduceship that would investment costs. psa, by the way, the french company that makes peugeot cars. francine: thank you. we will of course keep an eye on any kind of consolidation or joint venture in the car there. inflation in the your area unexpectedly slowed. meanwhile, the menu venturing --

sector iscturing weakening. how is europe's weakening economy impact elections? we are back with wolfgang munchau and david bloom. first of all, is the ecb really the weak spot? they just do not have the tools to deal with the downturn. david: no, sweden, so dylan, japan all have the same problem. owth and no firepower as a central bank. that is why i like the dollar. you can criticize all sorts of policies, but it is the best of a bad bunch. --% for one year in the u.s. trump is notsident chilling out and does not want a higher dollar. david: but he pays taxes, and

--n he does, it gets it pays me, because i've treasuries. tom: this is all come back to the president of the united states' desk? is this about the president and his unique mercantilistic policy? wolfgang: i do nothing at is the case. the reason the u.s. has positive interest rates has to do with the fact that u.s. had significantly better fiscal policy after the crisis. normalization that has taken place. we got trapped in a low inflation world. tom: how do you get out of it? wolfgang: i would not start from here. [laughter] but the ecb has no tools. we need fiscal policy in the euro zone. the rules are stopping economic

growth at the moment, the way the rules are applied. germany has significant fiscal space at its disposal. it is legally not in a position to do so. anyone inoesn't england want to be arch brexiteers? if the physical structure is a failure, why should england be part of that? david: in a way, in the sense that we had -- most times, we did not have these fiscal rules we are talking about, so we are not bound by that in a certain sense. so i do not think that really matters. the question is monetary policy was the big problem, they missed the chance to raise rates. the u.s. did and the u.s. has firepower to cut rates, do all sorts of things. that is why i like the dollar. do not bring everything back to brexit. wolfgang: i do not think they missed the chance for a raise rates to early --

i do nothing they missed the chance. they raised rates too early. when it comes back to your dollar call, what is the chance of china stopping buying treasuries if the trade war escalates? david: it is a trade situation. it is not about investments, the capital accounts. they want to sign a deal. i think there are scare stories but about. i do not put much credence on that kind of story. francine: and has europe become like japan? david: you could ask it the other way around. japan may be in danger of becoming like europe, in the sense that europe is becoming your reference point for a stagnating economy. i've seen the euro zone -- this is why i continue to worry about the euro zone. peak of the the

economic cycle with interest -0.4%.at this is not just the ecb. it is a reflection -- tom: i am glad you bring this up. it needs to be addressed every hour of "surveillance" every week. the duration of negative interest rates in europe is untenable, isn't it? david: we had it in japan for a long time. it took 20 years to say maybe it is not a good idea. so what is untenable we do not know anymore. we can look at gdp ratios, all sorts of things, i do not think we know what is untenable anymore. tom: i do not want to get you in trouble with bank consolidation, but do you look at a great financial role up in europe because of the negative rate regime? david: the question goes back to the one is will they relax fiscal rules and have a big

fiscal push? they can do it. if germany gets desperate enough, perhaps they do it. wolfgang: i believe it will not happen. the germans have put this in their own constitution, so it is not a policy issue. it is a legal issue. is more likely situation debtors. are question marks around italy that has no growth but a 3% deficit this year. consensus toes or consolidate that. italy is trapped here there are no good solutions for italy. they cannot leave the euro zone. it is not possible either. it would be too disruptive. and that is without the currency. is only thing that can give

the stock of debts. there half to be some workouts. the eurozone has no mechanism. if it allows that mechanism, either through debt neutralization, through bleeding some investors, then that would work. otherwise, the social and political tensions were just increased. francine: thank you. wolfgang munchau and david bloom. coming up here on "bloomberg surveillance," a full round up of what is happening in exit and italy -- brexit and italy. this is bloomberg. ♪

tom: we say good morning to all of you. francine lacqua and tom keene this week in london and, we hope, in italy as well for a conference. right now at the u.s. mr. green. just to our right, you're left, is the jewel tower of another time and place, middle medieval england. that is where the cap the gold. wolfgang munchau of eurointelligence, in charge of

gold and all of euro zone, and david bloom, who looks at gold through the windows as well. hsbc had a paper out on gold. david: we just had a conversation on debt and some views on italy. if you look at switzerland, sweden, norway, they have increased gdp 15% to get growth going since the crisis. question marks are the more you eat's. tom: a lot of people are on this call. goldis the catalyst to get out of the range? when we see what the ecb has got to give us. we have a meeting coming up -- they have no firepower. there is nothing much they can do. this kind of situation will cause gold to drift higher.

we expect a move to go up, and while the dollar has been writing, gold has been doing well. very unusual. francine: if there is a deflation problem, what happens to gold? david: it does well. how do you fight inflation? with more debt, more qe? print. hard to francine: so where do you stand on deflation? david: -- deflation isright unlikely. we are seeing low levels of inflation. what we not yet understand is whether -- we have these models in our heads that inflation has the 2% or around 2%. it may be that the equilibrium rate is lower than that. is not growth but inflation. frankly, i do not have the focus

of where we are. us is the behind london school of economics, with the book that basically said once over up, there is no such thing as general equilibrium. what are you watching within the so-called equilibrium of the financial system? wolfgang: what i am watching for at the moment are signs of instability. we have reasonably performing economies. i am not that worried about the global economy as a whole. i am looking at instability in the system. i am looking at banks, sovereign debt. these are other things that are threatening us. but i do not think we have a general meltdown. tom: is a floating rate exchange coming to the rescue, is at the bottom line as we compensate? david: we saw it in china last year.

if we do, as we said, get a no deal, we will see sterling falling. that is the system working. david bloom with just -- and wolfgang munchau of eurointelligence, with his amazing analysis. coming up in the next hour, a conversation -- from westminster , please stay with us. and we are watching the elections in turkey. from west minster, this is bloomberg. ♪

tom: this morning, deal or no deal -- a great britain

profoundly divided on the fear and joy of abruptly leaving europe. we are at westminster. republicansn, explained to their president that if he does not stop, it will become an all democratic capitol hill in 2020. i, we are onand speaking terms. it is april fool's. francine lacqua and tom green from the green in westminster. april fools' day today. and for prime minister may, it is a deadly serious week. francine: it certainly is. it has probably been a deadly serious month. we have indicative votes today. parliament, right behind us, could vote on a customs union that would fly in the pie minister's plans. does she risk her conservative party?

those are questions we keep asking. tom: particularly for american audiences, why does this way down on global markets? we see it with diminished pmi's. and with the new york city briefing, our first word news. viviana: british lawmakers will orderlyn to reach an exit from the european union. today, there will be proceedings in a bid to scrap the prime minister's plans. in turkey, president erdogan's nationalist alliance losing control of ankara and other key cities. plus, the opposition pulled ahead in a close race in the largest city, istanbul. turkey has been hurt by a recession. ofogan's critics accused him running an authoritarian system. in the ukraine, a tv comedian

took a big step towards defeating the incumbent leader peed in the first round, volodymyr zelenskiy won 30% of the vote. he has tapped into the ukraine's lack of progress since a pro-european revolution five years ago. president your person go received just under 70% of the vote. oroshenkont petro p received just under 70% of the vote. and the pmi indices for japan and south korea rose, but their reading signal contraction. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. tom: thanks so much. let's get to the data check. equities, bonds, currencies,

commodities. and a lift to the market is what we have seen, first day of the second quarter. s&p futures up 23. real movement in oil as well. a risk on field in the market. next screen, if you would. the vix showing a bull market. 13.82 on the vix. talk about sterling. and the turkish lira weaker today on the challenges that president erdogan is having. francine: i am looking at pound, head of an indicative vote later today. friday left the prime minister at an impasse. there is talk of a third general election in four years. it seems to be gathering steam. do the megaphone. tom: the megaphone guy out back. i have to go back and go "we're on air right now." francine: we really need a big

megaphone, because that looks cheap here we do not do cheap on "surveillance." parliament looks for a way forward on brexit. lawmakers expect all options, including a customs union, single market, and referendum. in while, jean-claude juncker says patients with the u.k. is being lost. so what is the megaphone that theresa may is trying to pass on to parliament? does she need a customs union deal, or does it mean her choosing between a customs union deal or splitting her party? >> it is a difficult call for the prime minister. if parliament does agree -- and on favoringif -- the customs union, which lost by six votes last time it was tried, it is a dilemma for the prime minister.

all this weekend, we have had pro brexit members of her cabinet threatening to walk out, because joining the customs union means no independent trade policy for the united kingdom. cast your mind back to the campaign in 2016. that was a big part of the pro brexit argument. so if she goes to that, she is ripping up a huge part of her policy and really risking splitting her party. but is it the only way forward? if that is the case, she will have to accept that if she is going to avoid britain crashing out of the european union 11 days away. francine: so i will ask two things. first, is no deal almost out of the question? or is it on the table as default? it seems the chances of general elections is gathering steam. is that really what may happen? david: that is right. if you talk to any of the

analysts around this or people tracking this, myself included, it is still so hard to tell. to i've been speaking lawmakers, a lot of them saying privately that an election is increasingly likely over the summer if parliament continues to be deadlocked. this question of no deal, looking at the market, the pound -- morelittle, but the than half of ms. may's party voted for the option when it was given to them last week. it may be on the ballot card again this evening. all mp's still voted for no deal. and if nothing can be agreed by the end of next week, that is where britain is heading. tom: one of the stories beneath the headlines that our exit team is covering is about the death of a labour party member in

southern wales. there is an important election now, and attests to the two-party system here. story, that conservative and labour certitude is at risk? david: if we indeed get a general election, how is this hold brexit trauma that westminster has been through, how will it play out in the country at large? have split off from the two parties forming what they are calling change u.k., forming themselves into a political party. could that be the beginnings of a big movement that really does create a new force in politics come away from the traditional two party system. isknow ms. may's government unpopular. we know jeremy corbyn is no more popular. they are still in net in the polls, despite everything that

has happened. tom: david merritt of bloomberg news, thank you. and to all of our brexit team, many of them coming in later because of so much political drama at parliament will be in the evening and late into the night as well. we are now joined by jens todvig, who is spectacular speak to. his important of a near decade ago on the strength of the euro, the permanence of the european experiment. --s nordvig with exotic data exante data. and there was a wonderful article talking about the threat of brexit to all multinational business. do you look at brexit, the politics here, as being a threat to the confidence that is needed to invest? jens: i think we have actually heard that over the last couple

of months, that cfo's and ceo's across europe are saying brexit uncertainties are one of the reasons i've been holding back on investments. that is already playing out. should not be underestimated. i argue that even if we feel that this brexit uncertainty will be resolved if we have some clarity from the u.k. parliament in the next couple of days, it is not a degree of comfort in the corporate sector that will be so elevated that things will go back to normal. here,has been damage done and we should not forget that. was question on the turmoil of a europe without a physical plant. wolfgang munchau was just talking about how messed up the fiscal story of europe is. is that an immediate need to jump start growth?

do you look for europe to get its fiscal act together in 2019? jens: if you take a step back and think about what are the remaining issues in the euro zone structure, it is the lack of fiscal capacity. we can see it clearly now. we have a situation where the ecb is very close to being maxed out. anothered to deliver round of stimulus at the last ecb meeting, but when we look ahead, what does the ecb really have left? we already have negative interest rates. they do not want to do qe again have their -- after having just ended it. fiscal policy is really what would be the most effective way to deal with a downturn. and there are some countries that have done something. we have summers bonds to the protests in france. -- we have some response to the protests in france. so he is not coordinated,

has less impact on confidence. that is the missed opportunity here. talk to me a little about brexit. if there is a no deal brexit -- i do not know if that is a 20% --nce or lower in your eyes move hard brexit would markets dramatically. i do not think there is any doubt about that. the probability of people attached to that event is low. it is not priced at this point. the bigger question is whether the brexit process would have broader systemic issues to the euro zone. the experience we saw after the vote was a good example. funny four hours of panic. we had a very outsized move in u.k. assets, including sterling.

but we did not have anything that looked like a financial crisis dynamic in the euro zone over all. i think that would still be the case in the sense that this is mostly a trade stock -- shock, but it is not something that would put key banks into jeopardy. so that is a different perspective from systemic. jensine: thank you, nordvig of exante data. coming up, we speak with lord andrew adonis, for more u.k. secretary of state for transport. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from westminster. to italyur way thursday for an economic debate on the riverbanks, but in the meantime, let's get back to brexit. debate a brexit plan for the second time today, likely .iscussing a customs option planis after theresa may's suffered its third defeat. we are thrilled to be joined by andrew adonis, former u.k. secretary of state for transport . it seems we are almost in the midst of a cause additional crisis. does theresa may have to choose

between her party and the will of parliament? lord adonis: it is pandemonium at the moment. it may look calm behind us, but behind that, inside those buildings, is more politically -- politicking and more i've seen in my political lifetime here the reason for it are two reasons. we have a government and parliament which have completely fallen apart. it has never happened in modern political history. brexithave the proposition that is imploding for you the problem is it is still supported by the prime minister. where things are moving towards is a long extension of a negotiating period, this thing called article 50, that i reckon will probably be another year. that will the whole thing on hold as we sort it out. if you try to make sense of all of the pending oni him -- pandemonium going on, it is

being put on hold in a messy way. francine: in the meantime, we have to organize elections. help palatable without the? about --is: not polite how palatable will that be? lord adonis: not palatable at all for theresa may. , where there parliamentary majority is coming out as long extension. to fightwe have european elections, so be it. extension, that she will be resolved. i am confident of that. how it is most likely to be resolved by a second referendum. tom: it is wonderful to have you here today. your father was an immigrant, a waiter, and all the good that

has occurred within your academic career and public service. the question is where is your labour party? you are an expert on labour history, going back to at least william gladstone. abdicating hisn response abilities for labour? lord adonis: there is a difference between the leader and the followers. the labour party as a party is pro-european. todo not actually need choose our leader now, because he has moved. we will vote tonight. in the vote sticking place in parliament tonight, the labour party will vote for a second referendum and against a no deal exit -- brexit. tom: here is what i have learned is every cabdriver routes for arsenal, and they are all scared stiff of your labour leader. arsenalnis: i'm an

support as well they are a great team. and they are jeremy corbyn's local team. you have to separate out the isson of jeremy corbyn, who anti-fema -- this countryin regard the european union as a capitalist conspiracy. but the overwhelming majority of labour party members is pro-european. tom: in the next five days, how partyou take the labour over to the general election where you actually win? lord adonis: we will not have a general election. the one thing both parties will agree on in the immediate future is no general election. wants in jeremy corbyn

general election. lord adonis: it will not happen. we have had two motions of confidence, and the conservative party has held together without a single conservative mp rebelling. -48ncine: what if we get a 52 remain? it seems that will be problematic. would you have a third vote? lord adonis: the reason parliament will vote for referendum is a combination of people like me, who believe we should stay in the european union, and a large number of my colleagues. this is a life vote. we are paralyzed and cannot make decisions. so we need a referendum to break through the logjam. that there isieve a referendum, like 1995, where we had a long period of debate. but it does not matter what the majority is. provided we stay in, that is

the end of brexit. the idea we would have another -- francine: but what happened to people who voted to leave? lord adonis: i am an experienced politician. meetings.ssing brexit most people voted for brexit were not voting about europe. they were voting against profound discontent at the way this country being governed. austerity, the state of public services, real wages down on 10 years ago, the fact that their own lives have gotten worse. the proportion who actually care passionately about europe. it is tiny. vocal, but tiny. tom: we have the same debate in the united states. that the republican party has become a party of a few. do you perceive the tory party as a same way, that they have become so narrow? lord adonis: they have become so

narrow because they have become obsessed and overwhelmed -- tom: then why can't labour win decisively? lord adonis: we have an issue on the inside. we have an uncompetitive political system. that is part of the reason we have brexit. but our democracy is a great democracy. both partiesexit, moved dramatically to the center. the conservative party, which is historically not an ideological party, if they lose the referendum on a brexit issue, as a party, they will not obsess about europe or long. tom: we greatly appreciate it give the former united kingdom secretary of state for transport. coming up, we continue with morgan stanley. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine live from westminister, covering all things brexit today and possibly the day and the date -- the next day and the day after. tom: risk on across all asset classes. futures up big as of friday. pmi's coming in a little soggy. stay with us. this is bloomberg. ♪ so with xfinity mobile

i can customize each line for each family member? yup. and since it comes with your internet, you can switch wireless carriers, and save hundreds of dollars a year. are you pullin' my leg? nope. you sure you're not pullin' my leg? i think it's your dog. oh it's him. good call. get the data options you need, and still save hundreds of dollars.

do you guys sell other dogs? now that's simple, easy, awesome. 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. the biggest week in television is almost here. xfinity watchathon week. starting april 8th, enjoy free access to the best shows and movies from hbo, showtime, epix and more. what! whether it's more jaw droppers, standing o's upon standing o's or tv's biggest show stoppers. get more into what you're into. get ready to watch with xfinity x1 or the xfinity stream app. xfinity watchathon week. free starting april 8th. boop! francine: this is "bloomberg surveillance." tom and francine live from westminister, today covering all things brexit. we have that vote with prima

getting back control. now the turkey and president party losing some key cities. party is poised to win the capital, ankara. this setback shows erdogan is paying the price after the country fell into recession for the first time since the global crisis. we are back with jens nordvig of exante. when you look at all the things to do with turkey, how do these local elections actually impact the way you look at turkish lira and assets in the country? jens: i think everybody who is involved in turkish markets saw last week that the efforts to control the currency reached a level we have not seen before. just getting the election out of the way is been as resetting the machine and getting back to more normal on the currency. we essentially had a situation

where, last week, it was not possible to carry short exposure in turkey. that created all kinds of turmoil in local markets. we will likely get back slightly more normal. obviously, that does not mean the trends have, but we had extraordinary dislocation in the market because it took extreme steps to rein the currency in pa hopefully, that will be the end in.hat -- rein the currency hopefully, that will be the end of that. francine: i was going to ask you about that. are we done with that? jens: i would say the implications of essentially shutting down the offshore funding markets are pretty significant in that a lot of investors will have local currency assets they manage by having that ability to fund them offshore. if they do not have that ability, they probably really want to get rid of ash probably

one -- rid ofobably want to get the assets themselves. that is not what the turkish government wants. that does not mean the currency will be in a bullish trend. it just means we will have a more normal situation in the market, where the different markets are operating as they should in a convertible currency. tom: as you know, it is about stock and flow. bathtub, andr in a that is turkish lira. how are their reserves? is there piggy bank good or is it depleted? jens: the turkish foreign exchange has been very low for a long period of time. that means, when they have instability in the market, and are trying to do something to stop weakness, they do not really have the intervention tool at their disposal. it is not like the chinese, who

can use their currency reserves are a long time. turkey does not have that option. the only real option they have is do something like a structural reform announcement, or they can raise interest rates. dogan is not a fan of having high interest rates, it does not look credible. so the one tool they have is on the mind. but that is the two of the have to go with if they want to stabilize this currency. having high interest rates. it is that simple. tom: jens nordvig with us from exante data. right now, let's get to the first word news. from new york city, here is viviana hurtado. viviana: china is making goodwill gestures before trade talks resume. beijing is extending its ascension of tariffs imposed on american cars. it is also including a fentanyl on a list of controlled substances. the u.s. is in favor of the move.

president trump is repeating his threat to close the border with mexico. the president says u.s. attention areas are maxed out and "we will take no more illegals." the u.s. state department is moving to cut aid to central america at the president's request. guatemala, honduras, and el salvador are having assistance cut for not stopping immigration. an march madness, michigan state upsetting the top seed. 68-67 to win a slot in next weekends final four. the spartans play texas tech. the other semifinal will be virginia versus auburn. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you so much.

bracket.lames goes my right now, we go to kevin cirilli, our washington correspondent, on the news in washington. -- still, it is about the president of the united states. it seems to be great turmoil within the republican. what is the president's week look like? kevin: first and foremost, the chinese from your is set to arrive monday in washington, d.c. for the resuming of u.s.-china trade talks. meanwhile, at the southern border, that could be a volatile situation, not just domestically but also economically. finally, the nato summit. there will be a lot of geopolitical undertones in the second half of the week on the president's radar. tom: this time is different.

certainly, you mentioned the border. there seems to be a different tension in washington. our republicans on capitol hill on the same page as the president in terms of immigration? kevin: no. republican from texas, a rising star within the republican party. on the policy front, they agree with the president, but in terms of tactics, they still have questions, in particular about shutting down large portions or ports of entry along the southern border would mean. beyond that, it is a domestic political issue, but it is just as much, if not more, a geopolitical one as the president of the u.s. tries to pressure governments in south america and latin america to come to the table, to say this is not a congressional avenue path, this is a geopolitical path for them to do something. i asked the congressman what he

would like to see other other men's -- other governments do. essentially, admit there is a problem and tweak policy to adjust it. francine: i think there are a lot of reports on golf and chea tog -- i am not really up date. but are we stuck talking about the mueller report in washington? kevin: not until april. early april is when we anticipate the release of the mueller report, about 400 pages worth, including appendices or tables and charts, to be released to the house and senate judiciary committees. democrats are saying that is not fast enough. what is interesting is republicans i speak with say they agree with democrats. they want to see the mueller report released. there is really no disagreement in the polls. people want to see the report. it is best a matter of time. it has only been a little more

than a week. it is 400 pages. it was a 22 month long investigation. ultimately, it will be released in early to mid april. francine: thank you so much. kevin cirilli, our bloomberg chief washington correspondent. coming up, we have plenty more on brexit. tom crean -- tom keene off to our queen victoria street to do radio. and a little later on, we will see how the vote goes this evening and whether we have a constitutional crisis on our hands in the united kingdom. coming up, we speak with the kentucky governor. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua here at westminster. the dallas fed president says he sees u.s. gdp growing this year. anyhe is not forecasting rate hikes this year. he spoke in an exclusive interview. plot,id not, in my dot have rate increases for 2019. it does not mean i couldn't change my mind. it means that, as i sat there in the march meeting, that was my base case for 2019. but it is always subject to change. is for my main goal monetary policy now is we are

flexible and we are patient. i want to see how growth is going to unfold for the next several months in 2019. based on what i see -- and for me, i look not only at the economy hard data, i look at corporate earnings reports, look at what is going on in the markets, particularly fixed income markets and the treasury curve. as we get through later in the second quarter, i want to be flexible enough and have a stance, policy, where we can move appropriately. i do not know where that will be yet, but i think we are well positioned to take the appropriate move based on how facts unfold. kathleen: what would be a trigger for you to say this is time to think about cutting rates? robert: for starters, our base case of the dallas fed is that gdp growth will be a little below 2%. in the neighborhood of 2%.

some confidence, because we were saying all through 2018 that we thought growth in 2019 would slow. it turned out to be a little slower than we thought, but if there was evidence to suggest that growth would undershooting that forecast. there are a number of uncertainties. fiscal stimulus is waning. we have european growth decelerating. we have issues with china. we have a long list of uncertainties. if i start to believe that growth prospects were going to be below the base case forecast, i would start thinking about what does that tell me about policy? what i've been saying for the last couple of years is do not think the fed should be restrict in ourestrictive monetary policy stance the but we are getting to the point where i do not think we need to be accommodative either. our kathleen hays

speaking exclusively to robert kaplan. we are back with jens nordvig of exante data. when will the fed actually be able to hike? jens: it is a matter of whether they are considering vote hiking. last week, we really moved to price fairly soon, so at the peak of that pricing, we had 30 basis points of fed price cuts this year. the has come back a little since then. in terms of timing, a lot of fed see,ials really want to essentially, data for the first half. the first quarter itself is going to be distorted by the government shutdown that to place. that number is going to be hard to interpret. really want to see more data than that. that means they need to wait for q2 as well. that gets us to september.

that is the first meeting where they can make a real reassessment. is important what is going on between now and then. the one thing that is important, in addition to the u.s. data mentioned, is what is going on globally. we have pronounced fears about global -- francine: we talked about that very thing. we have seen a lot of red warning signals. inverted yield curves, it negative rates in europe, the german bund. does that mean there is a pending recession? or is it different? jens: i am glad you asked that question. if you look at what has happened in global bond markets, we have had a dramatic decline in global bond yields. it is not just the short and -- end being repriced.

it is also the long end of the bond market has rallied dramatically in the u.s. and europe. so how do you interpret that? it has a lot to do with the fact that the fed has been sending this different signal about what is the equilibrium real rate over the cycle. they think that is now lower and have communicated that area that has been a shock to the market. it is more that then the data coming out and saying do we have a global recession around the corner? i think the chinese data over the weekend is a good example. maybe that data is bouncing. if that data comes more through, that will calm key policy makers, including the most dovish folks at the fed, who have been concerned about what the global data is saying. francine: but do you believe that chinese data? does it suggest a good omen, or could it be a one-off, and actually, we see more debt out

in china? something that could to balance to a world recession. or it is not a recession but a significant slowdown? jens: i would mention a couple of things that complement this chinese data picture over the weekend. oil prices are grinding higher. industrial metals are at the high end of the range we have seen over the last nine months. service pmi's globally are holding in at a respectable level. it will be important to see how they come out in the u.s. this week. overall, there is a lot of indicators, in terms of global growth, that do not look is asterisk. there is a big question mark still around china, but there has been a disconnect between how dramatic the moves and interest rate space has been, and then broader signals that do -- do notashers to me

look disastrous to me. francine: thank you. coming up, we have plenty more from brexit. we will be here throughout the day at westminster with the indicative vote. what happens after if parliamentarians want to stay in a customs union? this is bloomberg. ♪

viviana: this is "bloomberg surveillance." let's get the bloomberg business flash. shares of easyjet are following pay the -- already falling. easyjet is seeing increasing softness in ticket prices in the u.k. and across europe. the airline blames macro

economic and unanswered questions about brexit. the world's largest oil producer is preparing for its debut dollar bond offering. today, saudi aramco will begin its roadshow. moody's and fitch have given our aramco their fifth highest investment grade rating. the company may raise about $10 billion. proceeds will be used to help by a majority stake in a saudi corporation. thank you. now more on saudi aramco. joining us now is dimitri. so we have this deal with a saudi aramco. how does that change the dynamics of possibly the most valuable company in the world? deal makesy, this saudi aramco more integrated in industrial and petrochemicals. the company will more resemble

international oil majors. meanine: what does that for your thinking on where saudi aramco goes from here? dmitry: what i want to say is a high proportion of the company's income will now come from petrochemicals, and this will less exposed to fluctuations in oil prices. francine: so does that mean that, if they were likely to continue with the ipo, that saudi aramco will have a more stable footing from investors? dmitry: yeah, i think so. actually, if we look at how companies, different companies, international oil companies

around oil prices collapsed several years ago, companies with that level of integration into downstream and petra, goals -- and better chemicals saw -- and petrochemicals saw less loss of earnings. this deal should make the company les exposed to the fluctuation in oil prices. francine: what makes you worry about saudi aramco? we already looking at a glimpse in this financial world, and one of the things that caught some analysts' attention is it does not generate as much cash for barrel as other leading oil companies. will it ever? it's a look at the company's -- if i look at the company's profitability, this is competitive and broadly

comparable with international oil majors. this is a function of low-cost our production and also tax which was to reduce taxes on the company, from 85% to 50%. this already helped profitability. this deal should improve profitability further. so i would say growth is comparable. dmitry, thank you. dmitry marinchenko of fitch ratings to talk saudi aramco. in the meanwhile, we are at westminster. i am looking at pound. it is moving sideways. but there is a little move to the upside, little risk on a feeling.

this is what i am looking at. stocks in europe are up. futures indicate a stronger start. treasuries flipping with evidence of a pickup in china's manufacturing seem to be easing concerns of a global economic slowdown. looking at oil as well. we were talking about oil and saudi aramco. oil pushing higher. it is all to do with the u.s.-china trade talks. they should resume this week delegation leads a to washington later this week. "bloomberg surveillance" continues on radio. they will be talking about brexit, tom in london for the week. this is bloomberg. ♪

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welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. i can customize each line for soeach family member?e yup. and since it comes with your internet, you can switch wireless carriers, and save hundreds of dollars a year. are you pullin' my leg? nope. you sure you're not pullin' my leg? i think it's your dog. oh it's him. good call. get the data options you need, and still save hundreds of dollars. do you guys sell other dogs? now that's simple, easy, awesome. 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. ♪ david: chinese pmi's come in

stronger than raising hopes that the world's second-largest economy may be stabilizing. coming up of a strong first quarter, markets look for any indication of what is to come as some big players take expectations down. and einstein said it was the definition of insanity. parliament votes fora fourth time on theresa may's brexit plan -- votes for a fourth time on theresa may's frexit plan. -- brexit plan. welcome to "bloomberg daybreak." that you are quoting albert einstein on insanity. it is april fools' day. david: i learned that that was the day they sounded apple. lisa: they did because they were such pranksters. steve wozniak and steve jobs were both in their 20's. david: