>> putting the brakes on brexit. theresa may confronts a long delay after parliament fails to decide. global equity rally pauses after gains. s&p futures .2 a lower open. crypto awakening. ofve $5,000 after months calm. ♪

tora: welcome "surveillance," from london. global equity rallies taking a pause, after struggling for direction. moving yesterday, highest since october. u.s. futures downside. 10 year yield jumped up nine basis points yesterday. .58% today. no clear on where we go on brexit from here. goldman sachs positive on the pound, saying it is one of the best opportunities in developed markets. catch the exclusive interview after 10 a.m. london time. first world news now. >> the british prime minister

hosts a cabinet meeting to hash out a way forward, expected to last five hours, after u.k. parliament failed to agree on a new blueprint for brexit. it rejected all options put forward to replace the unpopular deal, although i customs union with the eu -- a customs union with the eu was the most popular. stepping up criticism of trade practices after xi jinping sought to ease concerns on a trip to europe. the eu calls the country a partner but also an economic competitor and rival. back imfanning to pay loans early. early repayment of extensive loans is a long-standing ambition of the greek government, as it seeks to bring down the cost of debt

refinancing. reserve bank of australia keeping cash rate at 1.5%, expected by money markets and all but one economist. the central bank is waiting to analyze the impact of a fiscal injection. the nation's budget is due to be released later today, expected to dish out $9 billion aussie, in a bid to win back voters ahead of an election. lion air, the first airline -- ryan air, the first airline to become a top 10 polluter in europe. the findings underscore the airline industries growing contribution to greenhouse gas emissions, since 2005, pollution from airlines has risen two thirds . global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much.

global equities taking a breather following three sessions of gains. better expected data out of china and the u.s.. the weakness is expecting to continue. us, great to have you both with me, thank you so much for joining. let's talk about this. stephen, should we be looking more into the pause today or the strong rally yesterday? background to the rally --, we were is speaking earlier about whether the price is correct. on december to fourth, bad news was embedded -- december 24, bad

news was embedded. perhaps there was upward momentum coming through in the chinese pmi's show a modest re-acceleration in global growth. believe it will be better than expected. does the credit rally also have scope? >> we think we have a cyclical rebound, within a structural period of slower trending growth. some economies are close to what nification,all japa growth keeping a dovish stance. we have seen more central banks moving to that stance after the bank,he european central

the rba changed their forecast on growth last night. markets,ral banks, em so on. in this environment, credit is a good asset to own. if you think about japan, there were little defaults. growth is positive. it is not surprising to the upside. pmi's about 50. kick the can. it gives you good yield. central banks keep the backdrop low. nejra: credit gives you good yield. globally or areas where you find it better than others? alberto: some markets have recovered quickly. the u.s. high-yield market is back to where it was at the beginning of last year. europe, more opportunity, because investors still fear europe, including the elections

and brexit. they have shied away from buying back european bonds. higher risk premium in assets need to be held for three to six months, cash bonds, compared to derivatives, which have moved back quickly. if you don't have fear of commitment, credit can give you high single digit yields with potential for good amount of capital appreciation. in europe and em. nejra: if you don't have fear of commitment, i like that. what does the earning picture tell you? just the earnings? stephen: one of the strange ,hings about the january rally earnings were continually cut everywhere around the world. do the cuts prefigure further

cuts? growth -- earnings not good for earnings prices. i agree with alberto. he has described the situation well. cyclical recovery taking place, low growth, with that, there is scope to have a positive year in europe. that feeds my conviction that equities are digesting the rally and can go higher. nejra: should you be getting less defensive in an equity portfolio? stephen: tactical view, what you would need is the yield curve to steepen. treasury yields are moving within a well-defined range. a lot of the decline you have seen in markets around the world's to do with that sense that, the deceleration growth last year was going to lead us

straight into a growth event. in fact, if you have cyclical upturn, that could be the yield curve steepening, and you should not be too defensive. nejra: already the three months 10 year is no longer inverted. we will discuss that more. you're staying with us for the hour. plenty coming up, including none of the above. u.k. lawmakers reject all options as the stalemate continues. what is next for theresa may. plus, surging back to life. three months of cryptocurrency calm ends as bitcoin surges. this is bloomberg. ♪

nejra: this is "bloomberg surveillance," i am in london. let's get the bloomberg business flash. 4% below the $72 ipo price, the number with which lyft closed the second day of training -- trading. this kind of drop is not unusual. facebook fell below the ipo price on it second day of trading. from s&pcredit ratings for wells fargo. .his was recorded at a- tim sloan gave into critics after a range of scandals. wells fargo is looking for a permanent replacement externally. boeing needs more time to finish the software fix for its grounded planes.

linked to has been two fatal crashes in five months. the upgrades will be ready for weeks. any changes will face a rigorous review. that is the bloomberg business flash. nejra: the latest on brexit. theresa may expected to confront senior ministers today with a long delay option, after lawmakers failed to agree on plan b, rejecting all options but forward to replace her deal. none commanded a majority. the stalemate leaves the prime minister with no clear idea on what to do next. her cabinet meeting this morning comes 10 days ahead of a potential no deal brexit, the default option if there is no plan agreed on.

david, great to have you with me . i will ask you the same question. what happens next? daivd: you will have the same answer. this epic cabinet meeting this morning and we don't know what she will propose or what will be hashed out. all options are unpalatable. does she try to tack the government to soft brexit? her own cabinet had to abstain last night. a couple votes for the customs union. where they allowed a free vote, there may be a majority for the customs union. we know how talks at that would side of therexiteer party or is there something more dramatic about to happen? snap election? put this to another referendum?

those options need a long extension. brexiteers.also for heated debate, i am sure. we will get a read out later. all the options are difficult for the prime minister. nejra: a plan to vote on the indicative wednesday and theresa may still planning to bring the meaningful vote back again. how could we see a different result with the indicative votes? david: we may see them narrowed again. the fewer options there, the mp's willbility the go to one option. we saw tactical voting still in different allegiances amongst mp's who want a second referendum. it is still hard to see -- they are just talking majority. they are talking a stable majority. it is anything but stable. may seemingly going to

come back for a fourth attempt at getting her deal over the line. willoughby unchanged? -- will it be unchanged? will it offer parliament a stronger say in what happens in the future partnership, where we would decide on a customs union? that is where she is hoping she might peel off a few more votes in the opposition. when you look at the numbers. dup are not budging. her own party not budging. is sterlingto, credit the one area globally you may be more cautious on? alberto: we have not seen risk premium priced into both the currency and credit markets. we have last year, a wider spread, wider yield for u.k. banks, u.k. corporate's. this year, everything has traded

normal. we are not a big fan of the moment, given uncertainty. most likely it could be a customs union or further extension. two extreme risks. cold risk of hard brexit. the economy would suffer. hot risk of spending, if you have new elections in the labor government wins, that means more issuance of guilt, wider yield -- gilt, wider yield. there is no reason to buy unless there is panic. we have sold most of our u.k. exporter. are you taking the opportunity to short certain corporate's, u.k.? alberto: we don't think there is an extreme event. in case of hard brexit, the boe would ease. in that case, we don't think we would have an extreme tail event

for the economy. in case of panic, long-term investors are ready. markets are complacent at the moment. nejra: speaking of complacency, the pound. best g10 currencies this year, down today, but goldman seeing a big finish for brexit, saying it is one of the best opportunities in developed market currencies. ,tephen: one of the things undervalued -- [indiscernible] -- looking at the 15 year valuation framework, there is that opportunity for selling. you would likely see monetary stimulus. the important point is, you cannot necessarily relate what 2016, to a no deal brexit. we remained a fully entitled

member of the customs union and the market and we were trading at a more competitive rate of exchange. in the event of no deal brexit, you would not have that cushioning. you would be relying on policy. nejra: would you be buying u.k. equities? we tell our clients, we view this as a risk event. i don't think we should be making aggressive positions with client money on the basis of a possible outcome. risk, whichever way the dice falls, we will not be harmed either way and then we can come up with strategy for benefiting. alberto,ephen and staying with us. our thanks to david from bloomberg news. crypto awakening. bitcoin surges, above $5,000.

what is driving the move? find out, next. this is bloomberg. ♪

nejra: this is "bloomberg with life in" crypto. highest and's november. -- since november. eddie from the

cross asset team in london. we have come up from the high. what sparked the rally? eddie: it is like the immortal undead. nobody really knows what triggered it. there is speculation. people are talking about cbo closing the futures contract, which reduces the amount of venues you have two short bitcoin. --to short bitcoin. you have seen in the past, a rally. there is a bit. it is a bit of a mystery. we have seen sentiment turn positive. unusual is is more the lack of volatility we have seen in the past three months.

what was behind that? eddie: ahead of the move yesterday, people were talking about a drop in volatility as a potential sign that we could see a spike. bitcoin does not like to stay put for a long time. whether the move was up or down was unclear. there was expected, low volatility of the type we saw in the last two months is unusual for bitcoin. a breakup was expected. nejra: above $5,000, nothing compared to levels we saw at the back of 2017. any signs we could get back to those levels? eddie: it is very early. we had a big move overnight. move is not small, even for bitcoin. it is a long way off. the one positive sign for bitcoin is we have seen momentum

build over the past few weeks. since months, first time 2017. we have seen momentum build. people are more interested again. nejra: great to have you with us. up next, europe's powerhouse powers down. we will focus on the outlook for the regional economy. this is bloomberg. ♪

nejra: on finance and politics, this is bloomberg surveillance in london. the eu brexit negotiator is

addressing the foreign affairs committee in brussels. some of his comments coming through saying that a no deal .rexit is now very likely but also brexit has monopolized the eu agenda and the eu's future is more important than brexit. he said he was struck by the house of commons monday vote. we have seen the commons not agreeing on a plan b alternative to theresa may's stroll deal. withdrawal deal. just some comments coming from mechel bamier. wrecks oil is a dancing on fresh evidence of the opec coalition result to cut out of it. power blackouts in venezuela further squeezed oil that has rallied 45% this year.

that is due to the effectiveness of the saudi led cuts. chevron's chief executive says prices are probably where he sees them for 2019. >> supply and demand have become better balanced and we have seen some strength and prices. i would say that we are in the ballpark right now of what we would expect for prices with volatility over the balance of this year. >> china reportedly named a new chairman for the $900 billion sovereign wealth fund. chung has been tapped to lead the body. flaws in theising driver assistance system and

includes a hack that a group says could lead to cars entering oncoming traffic. over half ofeans the car sales are now electric. is a top 10 polluter in europe. a company that doesn't run any qualifier power plants. oft is the conclusion transport and environment, a brussels-based research group. thefindings underscore commitment to greenhouse gas omissions. pollution from airlines has risen by about two thirds. local news 24 hours a day on air and on tictoc on twitter powered andore than 2700 analysts journalists in more than 120 countries. nejra: europe is cementing its position as a global laggard. manufacturing shrank by the most in nearly six years this week led by germany.

that contrast led by a brighter picture in asia. am --o have the u.s. i usim coming out of the u.s. here.ests are where would you start to see the signs of a turnaround in europe? of theave seen signs turnaround from the credit numbers. i think itthing is needs some kind of recovery in emerging markets. and there are signs of the pmi yesterday that we may need to see that as well. clearly confidence has been threatened in terms of trade. you could discern an outcome in which you get a positive outcome to the trade talks or you get for the stimulus by the chinese authorities.

alleviate.e should in issues of them the car sector in europe, you have a number of things going on there. the omissions testing last year is somewhat of a military cycle. and transitioning from traditional automotive hybrid or electric. in list giving you access to car sharing. giving you access to car sharing. the last wild-card is whether president trump, having sorted out some kind of a deal with china turns his attention to european autos. when we have spoken before, you said investors are generally mispricing the risks in europe. is that still the case? >> i think so.

one of the traits in the market is to short european equities. having said that, in europe, you have both risks being priced in and the potential for some positive risks. arenegative rents -- events a hard brexit or a bad outcome for the european elections. this will be an easier trade. the pricing out of these negative rates. union orming a customs being a wake-up call for centrist governments. but not the victory of populist governments. -- there is a stimulus in china or even on the positive side the fiscal stimulus of european governments. this is a bit harder because we think that china has the in the nation to do something but it is

of 10 yearshe size ago. we have the ammunition in germany but we don't have the leadership and the willingness to re-accelerate the economy. from a cyclical downturn to a cyclical rebound. pmi will go to about 50 but not to the levels we saw them in 2017. growth will stabilize at a medium level around the trend. call it 1% in the eurozone if we are lucky. when would you find the best opportunities in european credit? high-yield? the lower part of investments? financials? >> think about the potential for europe and china. in equities you want a stable high dividend company.

, mas they give you a good yield. the strongest banks. ,he want emerging markets positive growth. the role to become more dovish. and you want real assets. assets that will protect you from the qe environment from central banks ending up easing even more even though it hasn't worked very well so far. assetst gold or other that are hard to protect you from the debasement of currencies. nejra: i know the interconnection between the eurozone and the global economy is strong. but if you are an investor wanting to be invested in eurozone equities, do i want to stay away because the eurozone economy is looking week? are you missing a trick there?

>> europe is one of the most international equity markets with revenues generated outside the eurozone. people look at domestic european growth and say it is really under pressure. he european companies realize that a long time ago. they have invested outside europe as well. what happened last year is there was a slight double whammy that domestic growth was under pressure. but so was global growth. we saw the negative revisions and downgrades to the profitability estimates. they've madee that the correct decisions and that disposition of capital, those earning streams can be very productive. fora: thank you both coming. stay with us. and we so have more coming up. including, there will be a

recession but when? and how far can we trust the yield curve to predict? and don't miss our exclusive interview of jean lemierre. that is at 10 a.m. london time. this is bloomberg. ♪

nejra: this is bloomberg surveillance. curve is noyield longer inverted. it may quiet the debate on the timing of the next recession for now. but as long as the curve stays flat, there is a heightened risk of volatility. is here to explain this to us. the yieldher or not curve does a good job of telling us there is a recession and what time it is, that is one thing up for debate. but one thing it is pretty good at is telling us where volatility is going to be. essentially, there is a really strong correlation between the yield curve and what the vix does. i don't have it here for you yet, but what essentially

happens when the yield curve is really low is we have a fear of recession. these are really well correlated. the vix in the blue following the yield curve over here which i have inverted for you. if we are afraid there is a recession coming, it makes volatility go higher. the vix will follow. but the positioning of the market is something that should give investors pause. speculative investors to be they are the most short since 2009. below zero is going to be a general short position. enough the it brexit or trade. you have a whole swath of traders that are forced to cover these.

that could cause a huge explosion in volatility. us.a: thank you for joining recessionsk of actually been pushed out further by this qe infinity? >> last year, we had markets pricing almost a fully fledged recession. the older treasuries was pricing in roughly a 20% to 25% default grade over five years. what we have here is most major having a thought in the u.s. china trade relationships. and a bit of a rebound. the risk of recession has been pushed out.

the cycle is longer than the markets fault last year. an economy that has installed structural issues. the same issues that generated the 2008 crisis. both public and private debt is larger. there are existing imbalances in the economy. in some areas, the overhangs have been reduced. but overall, the problems are still there. this means is that it will be hard for the economy to sustain a higher interest rate. they have no choice but to keep interest rates low for a longer time. example, labour government in the u.k. or a new president in the u.s. could push spending higher. means the yields are above

the inflation level. to be careful about what you buy in the credit market. with yesterday's nine basis point jump taking us to 250, just a blip in the environment. >> they are trading in that range at two for your slightly below. pointed to the potential of a fiscal stimulus. one area is the infrastructure deal. that is another potential boost. if you move up within that range , that is a better environment. how much higher doing it

see yields move if we are not there already? >> at the top end of that range, you start to think about diversifying to the backend of the treasuries. it diminishes to the lower end increases to the upper end. in the credit markets as well, we think about this surge and were talking about some of your preferred areas to look for that. i'm wondering if china was also one of them. i wonder if you have made the parallel of japan a vacation in europe and china. japanification in europe in china. china. is that some are look in the corporate sector? >> it is an interesting environment to look for long duration. but it yields very little now.

the battles, it means other countries in asia will eventually be dovish. given what is happening in china, we like to have duration in indonesia and australia, for example. it is a dovish path and russia also if sanctions are not too harsh. and there are places in latin america that can benefit from a dovish fed and a more stable growth environment. pmi in china is above 50. we have emerging market growth and european growth going down. substance in the emerging market part which makes us positive on key and local on em local bonds.

if you see this as a robust and also european credit in euros is interesting for us. nejra: great to have you both with us this morning. up next, the cuts kick in. four months of lower production from opec see crude prices continuing to search higher. we will look into that next. this is bloomberg. ♪

on finance and politics, this is bloomberg surveillance. bloomberg business flash. here is video on a in new york. the idiotic: a rolls-royce engine has caused a to ground to planes. they brought up the issue of premature blade deterioration and removed from service the boeing aircraft. they may need early replacement. the big four accounting firm should be forced to work from their auditing business according to u.k. parliament committees. lawmakers propose an absolute cap market shares of

the big four. they control more than 90% of u.k. audits. planning to raise about $5 billion three dollar bond sales, $3 billion from the retirement that. debt.irement the company missed on earnings by the most in a decade. it is your bloomberg business flash. thea: oil is adding to biggest advance in more than two weeks today after fresh evidence of the opec coalitions result to cut output. add to that a deepening crisis, -- how much of this is being driven by saudi? is a drop in opec production

and the saudi's are lowering production even below what they agreed in opec in an effort to rebalance supply and demand. and so far, they have been successful. the price of oil has had a very good quarter between january and march with isis moving higher. -- with prices moving higher. it is also rapidly dropping due to the political crisis. how much higher can we go after the best quarter since 2009 in q1? $70.e price is probably any that to balance the budget. is iran where the u.s. needs to continue buying iranian crude.

and we do not know what the white house is going to do. the other one is famous well aware production is rapidly falling. we see lower production numbers in april because of a political crisis that is deepening? what about the impact of shale? >> it is looking like a weaker impact over these couple of years. in china, we are seeing lower growth for demand and oil imports. mark.a bit of a question in part, because of bad weather in the united states, we had terrible weather in north dakota. it was very cold down there. we have low prices and investor to countfor companies

on spending. what we will probably see is an acceleration of growth because new pipelines are coming. and it will allow companies to increase production. prices have gone to the point where it will make a lot of economic sense for these countries to increase spending. great to have you with us. let's check in on today's stock movers. >> rolls-royce under pressure this morning after singapore airlines is grounding to planes to the rolls-royce engine issues. one of the biggest gainers on the stocks this morning, it is a massive lossr last week. on top of that, they are having some management changes this morning. allegations of money laundering. soaring after the first full

year of net income. this will be at the upper end of their range. nejra: some of the stocks to watch on headline level, we are a global equity rally. the stoxx 600 not doing a lot in today's session. see a bit of a negative return to u.s. futures. edwards onoins anna the london said. we will be talking to the chairman of bnp paribas. the show.me in equity rally send the 10 year treasury yields moving lower after hitting a 250 handle yesterday. this is bloomberg. ♪ want more from your entertainment experience?

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a five-hour meeting with the the prime minister's cabinet staff that need not attend. government implodes and sterling resilience. there will be silent as those on missa grateful market down 2% from record highs. and there is a way to bank in europe and do it right. considering the chaos of the germanic banking experiment, we jean to bnp chairman lemierre. i'm tom keene from the korea street in london. off edwards demanded a day from the stresses of brexit. it was so emotional to see the gentleman from the conservative party standing all by himself with great emotion, literally walking out of the room. nick resigning from the conservative party saying

that he could not stand with his own party anymore. he blamed them for the lack of compromise. he says he will found an independent conservative mp. there are options for parties and the u.k. tom: absolutely extraordinary with all of the brexit expertise in the cold of the winter over at westminster yesterday. a beautiful day. let's give you a brexit update. viviana: anna: -- prime minister theresa may will confront her cabinet with a potentially explosive plan to delay brexit by months. andiament rejected options they were put forward to replace or unpopular plan a week from friday. the u.k. is due to leave the european union and may's cabinet to consider delaying brexit by the end of the year or later.

president trump could be provoked. main sticking points include the role of climate and the environment. the eu still unhappy that the u.s. pulled out of the paris climate accord. and president trump paying a political u-turn on health care. he says republicans would wait until after the 2020 to hold a vote to replace obamacare. his late-night tweet coming after proclaiming republicans had a new plan. this is also a sign that health care will take center stage in his reelection campaign. oil finding its best rally in a decade. new evidence of opec's supply cuts are feeding into the bullish outlook for prices. outlook falling in march for the fourth straight month. futures rising more than 2%. onbal news 24 hours a day

air and powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. currencies and commodities walking in. applauseittle bit of off of to a short narrative in the equity markets. it is the euro. oil elevated the back story no one is paying attention. 13.5 for you, it would almost be not yet calm in the market. today, otherstem are weakening. we will talk about this town in a minute. up --ne: i will pick

anna: i will pick up on that in just a moment. you would not expect the euro to spike up much. it is a perceptible moved to the upside as a result of that. , it is of the weakness really, if you think about the risks involved, down by .4% overnight. -- whichalk about with central banks cut first. tom: this is too much information in the morning. let's get to the latest on brexit. theresa may is expected to confront her most senior ministers today as they discussed the explosive option of a long delay from the european union. lawmakers failed to agree on a plan b for brexit. they debated for alternatives to theresa may deal but none pushing themajority

eu further into crisis. the stalemate leaves the prime ministers no clear idea on what to do next. the cabinet meeting comes 10 days after a no deal brexit. joining us now with his insight is global strategist and a great time to speak to you about all things u.k. but still with some of the outcomes that are possible. do you think markets are complacent about the risks? >> complacent is not the right term. the see of gct series on positioning data on the bloomberg terminal. positions on sterling has collapsed. he dominant group has collapsed. the wings of the outcome, the deal and the softer brexit stay

and remain delay. left.rexit we expected is make a binary bet, there is more upside to sterling than downside on a very soft brexit relative to no deal. will let you decide which is more probable at this point. it's hard to make a case with these outline possibilities have taken on such life as their own. can you see the bank doing something softer? the manifesto crosses a red line. the problem for her pushing something is that she has this cabinet in the conservative party that is divided. as long as the parties vote along party lines, we make no progress at all. ever round and round in

decreasing circles until someone gets off the fence. i think the market is that nervous that the inevitable outcome is that we have to go back to the people in some form or we need to have a big delay. what do you do then? aggressivecult to be and short. the cabinet in session, a five-hour meeting. being very careful about what he says, driving the dialogue forward. i have about eight questions on currency i have to go to the struggle. in parliament, mentioning arsenal taking out newcastle. going back and forth, life goes on. life goes on if you are watching arsenal.

is this going on in the united kingdom even with all the song and dance? >> if i am talking to carmine you fax germany, they have a real day-to-day problem moving stuff around. tom: what about the euro? the chairman of bnp paribas is coming up as well. do have a euro call? -- do you have a euro call? when the friction will kick in? >> we had the tightest quarterly range in history. tripping over the bottom of that range right now. people have a huge level just below here. if we don't ban anymore, we will accelerate. we have also just seen the widest gap between the pmi and europe since the early 2000's.

the fibonacci people is a movie that will be out memorial day. 2001 as well. to not too big on talking financial supervisory authority it really in denmark matters. thise joined the sour -- hour as well. this is bloomberg. stay with us. ♪

tom: good morning, everyone. anna edwards is in for francine lacqua.

we are in the heart of the city. gene knows the city and knows finance across europe where he is chairman of bnp paribas. we're thrilled he can be with us this morning. we will begin the one-hour conversation and will have to leave it to a number of minutes. the question for me which i saw at davos and even more now is the chronic nature of negative interest rates. is this an experiment that has failed? how is bnp paribas adapting to the reality of negative interest rates. >> i would not say that negative interest rates policy has failed. in the given context, we know it

is the cost crisis context. without this, i would seem more harshness and difficulties. and understand the decisions that are, in a nutshell, continuing the policy that is decided in the past. we know this, but monetary policy decided to be not in the banking sector and we have to adapt. we reduce cost. we have a business model that can cope with this, but we need to adapt for sure. tom: you were front and center on the negotiation with greece. we're seeing a germanic banking work out. what would you like to see occur among the troubled german banking system?

>> this is a good question but a question i will be very careful about the comments i make. we operate in germany. and i needzable bank to remain neutral. only point is that i would like to insist on is that the eurozone deserves strong and efficient large banks. able to compete in global competition. to theng value added sector in europe and outside europe. more of the banking sector is restructured. i hope this is what we see today. anna: we are days away from the april 12 deadline of brexit that looms. we are today that the eu can't mitigate all the effects of a hard brexit. what worries you were -- most

about the no deal brexit? >> we have been in this situation for some time. and we have taken into account the various risks. we have a flexible view about what may happen. and we have various plans to adapt to difficulties. we shall continue to serve the client. i do not fear massive disruption in any case. probably, i would take a slightly different view from the sector. large companies i think are ready. they have made stocks and they are ready to face those situations. midsize companies may not have the resources to do the same.

and there may be less prepared for a hard brexit. continent and in the u.k. other]g over each anna: you have been investing in the u.k. are you concerned that you might need to move investment elsewhere as a result of brexit? >> know, they are two different questions. one is how to face brexit. and brexit is in a situation that we need to face in the financial sector. i think we are ready. the business in the u.k., on that point, we have taken the view that we should have increased what we do in the u.k. to support the sector in the u.k. dealing with business on

the continent and elsewhere in the world. we do it for many countries, one not in the u.k. -- why not in the u.k.? the first quarter was particularly tough in trading. how is the first quarter at bnp? >> you know what has happened last year. for corporate banking activities, especially in the global market. where does it come from? everywhere indity the world and the corporate sector needs less protection against volatility. volatility can happen in a very harsh way. it means less protection and less business, lower business. and the risk of heart volatility.

and we will see quite the same situation now because of the monetary policy decided by the fed and the ecb. what we see also is probably some degree of restructuring in the investment banking activities. i think banks are adapting to these circumstances. we think about the results of the activities of the banks, and probably 2019 will be different. tom: let me ask you a chairman question is one final question. this has to do with china, of course. bnp paribas with a century long heritage of work in china. how does bnp paribas and how do you personally perceive the trade discussions between andident she -- xi president trump?

has that messed up the economic world right now? >> i agree with you. this is a serious challenge. i remain positive for bond growth in the world. at the end of the day, i remain positive talking with clients. i can see there is a positive .rend the main factor can be the trade negotiations. there is no conclusion, there is a harsher discussion. can make one comment. it trade is about dispute and competition. the fact that there is a dispute is part of life. it has to be fixed in an orderly way. what is probably more serious than trade is technology. we begin to see a debate about technology and that is more and potentially disruptive. findsut then if the u.s.

mercantilist or neo-mercantilist strategy, does that harm mr. macron in france? >> canan you repeat -- european the beginning of your question? tom: if president trump generates a unilateral mercantilist trade strategy, does that help or hurt france? >> trade strategies should be multilateral. you cannot fix the trade debate by yourself. you need partners. it trade is about partners. and balance over time. that somee normal

partners are upset. and it has to be fixed. that to fix the trade debate, you need to hopefully be free. fixedlly it will be between the u.s. and china. way in a fixed this rather orderly way? or is it unilateral? thank you so much. paribas.erre with bnp we'll continue to give the open updates on the brexit debate. coming up this chief executive officer jeffrey solomon. this is bloomberg. ♪

with tom anna edwards keene this morning in london. francine lacqua has the day off today. your naked body is on the cover of the guardian. is that appropriate? it is on page one. protest inlimate case you missed that. as if u.k. politics were not complicated enough. there was a climate protest of naked bodies in the house. let's not talk about that. let's talk about the european economy.

will it cushion the negative interest rate on banks? >> they will talk about doing something to soften it up a little bit. yard halt.00 the driver has to come out of the back at some point. the euro won't go up without some fiscal action. tom: this is so important. we will rip up the script on this and come back. all story dovetailing it's of the dynamics we have seen. steven manger of hsbc. stay with us from our studio in london. this is bloomberg. ♪

♪ keene and anna edwards in london. we are going to be remote from the cabinet meeting today, but

they turned down our attendance an hour or so ago. right now, anna with a news breaking -- briefing. cover all euposals concerns to explain that. trying to tie up these two businesses, in an effort to win antitrust approval for their deal and they believe they have met the eu concerns with the joint venture, making it easier to do. tom: right now in new york city with our first word news is viviana hurtado. viviana: the chief brexit negotiator says each day a u.k. exit from the bloc becomes more likely. rejectedrnier

alternatives to theresa may's unpopular divorce deal. a week from friday, the u.k. is set to leave the eu. the ministers are likely to be asked to delay brexit. boeing says it needs more time to complete the software fix for its jet. boeing says the update will not be ready until "the coming weeks." is delaying delivery of two f-35's to train turkish pilots because of turkeys plan to buy a russian missile defense system. the move incompatible with the purchase of f-35's, they want turkey to buy the patriot missile defense system. it has gone from bad to worse for people living in venezuela's capital. a power crisis is stretching into a fourth week and it is

impacting water pumps. the government blames attacks on the electrical grid by the opposition. the government is ignoring accusations of mismanagement and incompetence. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. u.k. starling fell as lawmakers failed to agree on a plan for brexit. nine commanded a majority, pushing the eu split further into crisis and it may leave the prime minister with no clear idea what to do next. she will host a cabinet meeting, what they know deal brexit just 10 days away. michelxit negotiator barnier continues to speak in

brussels and he hopes the brexit accord will win u.k. support. schick andis nina kit juckes is still with us. barnier talking about the need in his view to pass this deal. is it still possible? nina: i think theresa may is indeed trying to bring her deal back for another vote. the cabinet meeting which was meant to be five hours has been delayed. the cabinet meeting will be much shorter today. i do not know how she has the numbers to get it through, but the withdrawal agreement, what she has been negotiating with the eu, stays on the table no matter what. does not matter if it is a new prime minister who was a little labor prime minister -- a label

-- theinister -- labor irish border issue and eu citizens rights are issues the u.k. cannot avoid no matter what. anna: michel barnier just wrapping up his conversation in brussels. deal more likely we see no or a request for an extension? nina: the only options on the tape bowl -- table art theresa may's deal, no deal, or revoking article 50. parliamentarians have made clear they will not pass a no deal brexit. it is all well and good for parliament to say, we do not want a no deal brexit, but unless they take the need -- legal measures to prevent that and if not the

u.k. crashes out in 10 days. tom: i was thunderstruck once again last night that we did not see what we would see in america. said he 1, 1968, lbj would not run again. why doesn't she resign? americans are just baffled we did not see that last night or weeks ago. nina: in many ways, this is a clear indictment of how we government is -- week the government is. she is literally too weak to resign. tom: i do not get it. resign inhe were to the conservative party were plunged into a leadership contest, i can assure you all hell would break loose. so by staying -- and she has said she will go after her deal passes -- by staying she is the

glue holding it together. anna: they have been calling for her to go that they do not want a coronation. they want a full leadership contest which takes months. tom: let's go to something stable like english football. a manager screws up and resigns or whatever. at: it takes 24 hours to put new one or temporary one in place. tom: they could figure this out. kit: we cannot figure out the important thing. we have to get something through a group of mps who can only agree about what they do not agree about. tom: agreed. kit: so changing the figurehead, unless the figurehead has presidential power, we don't achieve anything. tom: they could go through three or four new prime minister's. here to go onar to the new?

nina: a lot of people who are calling for her head made a strategic misstep. i said, we are not going to back iur deal, until she said, will resign after my deal gets through. they said they will back the deal and there are not the numbers now to get the deal through parliament. her deal is the poisoned chalice. the conservative party who want to become the next prime minister do not want to be the ones to get her deal through parliament. i want to take over once the deal has passed so they can blame her for the failure. kit: we could have elections. it is far from clear that we get anything other than another hung parliament that cannot make a decision. true that. this is the mess we have managed to create. anna: looking at the breakdown of the votes last night, the

independent group, which has been cobbled together in recent against ay voted number of soft options, customs union and single market and all of those. they are holding out for referendum two. anotherossibility of referendum going away? nina: it is astounding, these andle quit labour conservative parties because they want no brexit. on both ends, it is becoming more extreme. hard-core brexiteers are also voting repeatedly down theresa may's deal, the only thing that would ensure that u.k. leaves. tom: there seems to be clearly brexit exhaustion. everyone goes to the next

interview. what is the distinction you will look for in the next week or so? nina: the big problem that this country faces is that the fundamental choices that the u.k. has to face, whether there is to be a deal or no deal, still have not been addressed by politicians. we might enter an extension where we have a general election. none of that matters. it is the fundamental choices that are on the table and inevitable trade-offs are not addressed. if you look at how polarized this country is, that will not happen. anna: wondering how the cabinet survives today, whether we receive resignations and from which side. armstrong stephen will be speaking to bloomberg at

7:30 a.m. in new york, 12:30 p.m. london time. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." whole foods is taking another step to reshape its pricey image. the grocery chain will lower prices on hundreds of items this week. the latest price cuts average about 20%. amazon bought whole foods to catch up to walmart and kroger grocery sales, but there are about 10 walmarts for every s -- whole foods. criticsn giving into

and stepped down last thursday as he struggled to deal with a wide range of scandals impacting wellsnk, s&p lowering fargo's credit rating. elon musk praised the work of -- one of theund hacks could lead the electric cars to enter into oncoming traffic. hackers were able to control the steering system using a wireless gamepad. that is the bloomberg business flash. anna: thank you. tied to moneybe laundering allegations from sweat bank drew sharp -- swedbank drew sharp criticism and questions. he is a member of the executive board at credit bank, the

largest lender in denmark. we heard last week many political parties are working to strengthen denmark's money laundering laws. this is a little bit late. one correction, i am not a member of the executive board anymore. what happened in the danske bank case was deplorable by any standards. we are now dealing with it. all of those wish we can rewrite history, but nobody can do that. the steps we have taken now and the danish government is taking with a broad coalition in will take us far down the road, including building the strongest framework in europe.

anna: is it right to do this at a national level? there is argument we need more pan-european regulation on this front. coordination among european countries is always good, but most of what goes on in terms of money laundering and trying to prevented is at the national level. it is a question of a national value change in terms of money going into banks, and eventually passing on from the banks the activityon, suspicious reports to the financial intelligence who deal with them and go on to prosecution and other police work. we should not overestimate what can be done at the international level. --should focus on improving improving our international status. anna: you have not considered something can sit -- similar to

u.k. regulations, unexplained wealth order. is that something you could consider? jesper: i am not familiar with the u.k. concept. denmark isused on in for things first and foremost, building the lines of defense and having them stronger, which is where the banks come in. the second thing is requiring the banks to be more forthright and if they are not forthright, and having a law that punishes them for not providing us information. making the banks more liable, something akin to the u.k. senior manager regime. finally, strengthening us as a supervisor so those are the steps we are taking. i am not familiar with what you mentioned before.

tom: one of the great ideas here is that the bad guys always want to launder money and will always find a way. do you have any confidence that we can substantially diminish or eliminate money laundering? don't: as you say, i think we can eliminate money laundering. we can make it more difficult and reduce it, but we have some pretty serious criminals. in other areas of criminality, they are likely to go on and find new ways. our job is to make life more difficult for them. putin? you blame mr. is it a national ether that says -- ethosoney -- 8000

that says get the money, or is it the leadership of russia stopping this? jesper: i think it is more than the leadership of russia, but also the environment in russia plays a large role. it is clear, a scandinavian culture having trust and confidence clashes with the way business is being done in russia, and we have lessons to learn. independent of russia or some other place, we need to up our lines of defense and standards so these things do not happen again. anna: given what you said about the difficulty in tackling money laundering, we are often guilty of trying to regulate for the previous crisis. stillreas of weakness exist in financial services? is it smaller banks? jesper: clearly, smaller banks are more exposed because the

larger banks now know this is deadly in terms of risk, so the smaller banks are more at risk. money will find new ways to flow, like water. on top of the money laundering issue, we should not forget as regulators that there are many other risks. cyber risk is one of the things that keep me awake at night. we are fighting on several fronts and should not think if we get it right on money laundering, we got everything right. tom: jesper berg, thank you so much for being with us what the danish supervisory authority. we you have got much martyr talk about. i want -- much more to talk about. i want to talk with kit juckes about the correlation and the market. later, director general of the world trade organization at the eleven o'clock our in new york -- the 11:00 hour.

this is bloomberg. ♪

♪ we welcome all of you worldwide from our studios in london, francine lacqua off

today, anna edwards giving wisdom throughout "surveillance." kit juckes with us. i want to bring up a chart, it is perfect to speak to him about. the market 35% round-trip on the dow, down we go from the climbs of the summer last year. upding the boat, leveraging december 26, and going back up. you and i have never seen anything like this, but does it correlate with the kit juckes world? kit: two things have happened, the chinese decided to stop weakening their currency and stabilize the world. they stabilized the dollar. itssecond is the fed made tilt back and said, i got your back to the market. in terms of what it does with risk assets, credit spreads have

tightened. tom: can the equity markets prosper because fixed income yields down? kit: i'm surprised by how strong the equity market has been. if we went back to 2006, the curve inverted in january and the tight point for the credit spread was over a year later because investors, easy money then, they just needed to put money to work. anna: for this risk appetite to continue, what is most important, that china stimulates its economy or that we see a rate cut from the fed? what are you watching for? help.oth of those would the flipside is not heading into recession while we sit and economyhether the u.s. will grow at 2% or not. in other words, how soft

landing, no landing, fine. the minute we get back and see significant signs of economic downturn deepening, we think the fed is behind some curve or cannot cope and it is game over. you read much into those? kit: there have been three significant inversions and they have been followed by recessions. in significant inversions have not. this is so far insignificant. the recession came a long time after the curve inverted, so what do you do if there will be a recession next year? we cannot on it a year early. tom: single best fx trade? kit: norwegian krone. oil and rate hikes, please.

tom: thank you. kit juckes, a diverse moment with politics in the markets. we will do that in the next hour, pretty cool, kit juckes from society general. we move on to steven major of sbc -- hsbc. hsbc on fire. in the united states with their equity call, get into the stock market a number of months ago, we have an update from steven major. i am not sure prime minister may is in a meeting with her cabinet. this is bloomberg. stay with us. ♪

♪ tom: this morning, there will be

a five hour meeting of the prime minister's cabinet, staff need not attend. why doesn't she just resign? there will be silence from those on the sidelines. will they miss a bull market? go to cash. there is a primal scream as america's great midwest ask trump's washington for help. this is bloomberg "surveillance." i am tom keene with anna edwards. wonderful to have year. weekdid you observe last and what i thought was just thundering silence and quiet on that floor? the supporteek was within the conservative party for a no deal brexit. when i was interested in last night as the voting from some

who opposed brexit altogether but did not back the soft options because there is a referendum. stood up to. corbin address right after the good -- the vote, the exhausted prime minister, the people of labour assembled behind him. anna: the labour party represents two different constituencies, one that is pro-brexit and one that is very much remain and they have been trying to hold their party together as the tories have. tom: we will go right into an analysis with our top people. with our first word news, here is viviana hurtado. viviana: theresa may will confront her cabinet with a potentially explosive plan to delay brexit by months. she will hold five hours of crisis talks after parliament rejected options put forward to

replace her unpopular plan. a week from friday, the u.k. is due to leave the european union and the cabinet is likely to be asked to delay brexit. a delay in trade talks with the u.s. has provoked president trump's unhappiness what the european union. the main sticking points include the role of climate and the environment, the eu still unhappy the u.s. pulled out of the paris climate accord. president trump said republicans will wait until after the 2020 election to vote to replace obamacare. this political u-turn is a sign health care will take center stage in his reelection campaign. oil extending its best rally in a decade. chinese manufacturing data and opec supply cuts are feeding into the bullish outlook for

prices, the cartel cutting in march for the fourth straight month. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: data right now, let's get through it quickly. equities, bonds, currencies, commodities, bull market a little pause with futures negative two. oil, $62 arican barrel. the vix maybe not where it should be. strength, kit juckes was wonderful, euro at the bottom, and an important point, sterling resilient, is that true? anna: relatively resilient if you think about the possibilities of no deal. i will not dwell much, because i

gave you too many numbers last time. ftse 100 is a bit weaker. weaker andd is a bit the ftse 100 is up. we are absolutely thrilled to have emma ross thomas with us. i want to bring up this chart, this is the facsimile, because her chart yesterday, this is the facsimile. available on emma ross thomas' desk as she figures out brexit. what kind of chart are you doing this morning? emma: if we look at the destination, the idea of a long extension and general election take up the greatest amount of space. you mentioned no deal earlier.

steve barclay, a brexiteer, last night stood up and said that no deal was off the table. whether that will persist, there is a risk. almostly for now, it is negligible not to vote -- and up in a long extension. one of the things we have been talking about this morning is what will the conditions be that the eu lays down for this long extension? increasingly reluctant to have this exit country tagging along for months, getting in the way of eu business, so what will the conditions be? what we saw in parliament last night, where does that leave us? extensionlikely is an to be granted if it is sought? , the chiefarnier

brexit negotiator laid out the conditions for a long extension this morning in reaction to the eu. any request for a long extension has to have a clear reasoning, and this can either be a political process in the u.k.. ofdid not clarify what kind political process. they also said the u.k. could ask for a long extension to hold an election or another referendum, but they cannot ask for a long extension to renegotiate the brexit agreement. the agreement is there and it is up to the u.k. parliament to approve it or not. these are the conditions. also importantly, there is another condition the u.k. has to participate in the eu elections this may. europe theappens in

day of a no deal? well, brussels says it is prepared, but there are clear warnings from all sides, from the commission and eu member states that preparation does not mean there will not be major disruption. that is why everyone says they are still working to avoid this disruptive outcome. what the eu keeps saying is the ball is in their court and it has been negotiated, and u.k. parliament has to negotiated. anna: the eu commission is saying the eu cannot mitigate brexit.cts of a hard looking at the various scenarios , i have no deal in there.

they talk about bad effects to the u.k. economy. it would be difficult to see a government standing up and voting actively to bring about something they knew or suspected would be so negative. emma: also remember that theresa may last week had said she will not do it unless parliament votes for this and it is clear there is no majority for that. any kind of brexit will divide the conservative party, but to drive the u.k. off a cliff, the effects of that vote, every manufacturer, it seems like finance, financial market, a lot has been done to prevent a cataclysm, likewise in aviation, but not manufacturing. anna: small business is not ready. tom: we do not editorialize, but the head of our brexit team is wearing black. emma, thank you so much.

we will continue, steven major with us from hsbc. an important interview, a new call for lower rates. nikos, thank you so much in brussels. this is bloomberg. ♪

♪ this is bloomberg "surveillance." more problems for rolls-royce. grounding twoines their engines were deteriorating faster than expected. rolls-royce has had this problem since 2015, and will speed up a development of a replacement part.

citigroup is buying residential mortgages and unsecured loans from british bad banks. almost three months of calm in the cryptocurrency market have come to an end, soaring to the highest level since november, breaking through $5,000 before falling. traders could not find reasons for the gains. last year, bitcoin plunged 74%. tom: thank you so much. there are some times houses get the call right, but there is no house that is simply on fire in there calls on economics, bonds, and equities. we have steven major of hsbc, the global head of fixed income research who says yields will be lower. he was correct. our lower yields a sign of

prosperity? price up, yields down, equity market booming, does that mean prosperity? steven: it does for those invested in the right products. the answer to you as it is not good, it cannot be good, the fact that we have to have low rates for longer. it is not good for ordinary people. it is probably only fueling the divide. it seems the assets are doing well, and who would have thought equities and bonds and fx all going in the same direction. is it good for ordinary people? probably not. tom: when you look at the yield call you made, it is not only the vector but the persistency of the call. do you assume financial repression forever? steven: we has always -- we have always had a two-year -- two hands off.

we have resisted the idea. others have been talking about four. it is a japan scenario and i get tired of talking about it. 20 years at zero in japan and any person that denies the similarities is found wanting. each year that goes by, i find more evidence in terms of debt and demographics and technology supporting the structural view of low for longer. we have these kinds of cyclical patterns that could be at the moment, things are a bit that are than last month, but that does not inform the forecast for the 10 year treasury. we need to know what will happen over the next 10 years. i think much of the industry seems to be looking at the noise and the incoming data on a day by day basis and we are trying to look through the noise.

andy wilson ofo goldman sachs asset management and he said the hurdle to a cut by the fed is relatively high. you do not think so because you have cuts in your forecast. why do you think the hurdle is as low as it is? steven: i focus on what is priced in. the curve in the forwards have steepened 30 basis points in the past six months, so the hurdle is already high. what is interesting about this is the next easing, if and when it comes, does not have to be a rate cut. it could be qe. just because the previous pattern and sequencing was rate cuts first and qe second, who is to say that is repeated? we do not know. we are assuming rates will be cut, but the fed has signaled

the balance sheet will not be shrunk as much. by their actions, they are a buyer of treasuries and perform them to the mortgages. -- referred them to the mortgages. fed, ben bernanke left the he has been writing about the unconventional policy methods. future easing does not have to be a simple rate cut. anna: what do you think of the way the fed thinks about monetary policy around interest rates as separate from the rate policy? he makes a distinction about the use of them. how do you interpret that? steven: intellectually, it is good to have separation but when they do qe, there is a big grab for duration. they are swapping high duration for low, and there is a strong signaling effect for the market

today, and going forward. the presence of a large balance sheet means the fed and central banks have skin in the game, if you like. it is kind of underwriting the lower for longer view because they are hardly going to hike against themselves. the biggest issue on the street. tom: the great fear of the people opposite you as we will see an abrupt drop in price and higher yields, with an emphasis on the word "abrupt." will you have time to manage your portfolios? steven: you have six months of low inflation and it might tick up in six months time. a lot of people want to buy own weakness. last week, when the yield was 2.14 said they would buy what it was 2.15. looking at the yields today,

this could be one of the last chances to buy. if the fed is on hold for a few months and the move some stage next year is down, then you want to be long. do you buy now or wait for bonds to cheapen? anna: thank you. page, we will be back with his thoughts and will get the latest on the u.k. politics story. we are monitoring developments as they come from downing street. this is bloomberg. ♪

♪ tom: bloomberg "surveillance." looking at the politics, early jockeying for 2020, a beautiful sunrise behind the capital and library of congress in the distance. it is peaceful and calm in washington. anna edwards is not in london. it raining yet in london? these are our pictures of london, a bit like other days. let me get to some headlines on a brexit note. a spokesman for theresa may speaking at 10 downing street, saying she does not want a long brexit extension. it is clear no deal would cause

disruption according to the spokesman. he also says may is determined to get her deal over the line. he is still opposed to a second frexit referendum, which does not suggest -- brexit referendum, which does not suggest much. tom: joining us are steven major and david page. what is the resiliency and strength, the present state of the united kingdom economy? david: it is looking not bad at the moment, but that is highly dependent. what we have seen as an impact of uncertainty. .2% growth in the first quarter -- fourth quarter we think it will come in around that level. it is entirely dependent on what happens and what looks most likely is an extended period of

uncertainty, which will not give the lift. tom: a gentleman from siemens wrote a story about the need to get this fixed for eu and u.k. multinationals. what is the urgency to business to get a solution? david: it is massive. the big impact on brexit uncertainty, nothing has changed fundamentally. what is bearing down on the economy is uncertainty and it has probably stripped about eight percentage points of growth since the referendum was announced. the u.k. economy looks like it has lost around 2% or 2.5% of gdp and most of that is on business investment. we need that relief. if we saw theresa may's deal pass through and you saw the u.k. enter an orderly transition

exit, then we expect to see an uptick in business, something that spurs the bank of england. it is a huge if and it certainly does not look like the most likely outcome. if you see protracted uncertainty as we go through perhaps a 12 month extension or longer in the u.k. continues to bubble along with complete uncertainty. anna: you wonder at what point do they try to start and make decisions any way out of the limbo. the survey saying u.k. firms are the least likely to invest in eight years as brexit bites. brexit endlessly for years, coming up to three, four or five. what do you see substantially affecting the gilt market, or is the gilt market watching lower

for longer takeover? steven: it is much more than that. gilts have had- a low record yield for the long-term. through all of this noise of brexit, the gilt market has been looking through the noise. the risk of whatever is going to happen is clearly felt in sterling. that is the thing about being a true sovereign. sterling and credit takes the risk. hsbc, andn with us of david page, stay with us. ♪ so with xfinity mobile

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only one trudy involved. --negotiated it wet the u.k. with the u.k. we managed to find legal responses to all the answers arising from brexit. brexit has an apple lysed the european -- monopolized the european agenda. i believe this energy and time has to be devoted to a positive agenda. merkelthat chancellor said at the beginning of the process, the future of the european union is far more important than brexit, and i agree with that. responds fromer brussels. an important week next week for the european union. i am tom keene in london, anna

edwards in today -- in new york, anna edwards in today. let me get your observation of what we will see next week. the pros like you are focused on the 12th. anna: the 12th is the date that anything, the u.k. leaves the european union with no deal. before we get to next week, angela merkel is going to ireland. this is interesting. tom: "game of thrones." anna: there is a good deal of pressure on the irish, will they have to choose between reserving the -- preserving the peace order the market? does or the market? tom: what about the dup? anna: there are not that many. they fit with the tories on much of the voting. they have always been pro-brexit.

tom: dup in northern ireland. here is viviana hurtado. viviana: more time to complete the software fix for its grounded 737 max jets is what boeing says it needs. linked prevention system to two fatal crashes in five months, boeing says the update will not be ready until coming weeks. jamal khashoggi's children have been given housing and monthly compensation by the saudi government. his two sons and daughters will get more and could get tens of millions of dollars each as part of so-called blood money negotiations. that will take place when the killers' trial is finished. caracas,ps in venezuela are now affected for a fourth week that is causing

people to scrounge for water or wait in long lines to fill barrels. nicolas maduro is blaming it on attacks by the opposition, and ignoring questions of incompetence. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much. steven major with us and david page. i am tom keene in london with anna edwards. let us turn to the american economy, to the choice, and this folds in to steven major's call for low interest rates. first quarter growth is moldy. how does it get better through the year? >> clearly what we saw was a big drop in consumption and that is why we will see this number come in at around 1.4% annualized.

also, there's some pickup from government spending which has been impacted by the shutdown. we know from the budget that we should continue to see that. we do expect to see a visible slowdown in the u.s. economy this year. we are forecasting below-market consensus and that reflects a fiscal phase. you still have fiscal stimulus supporting the economy but not as much as last year. there is a deceleration coming through, but 2.3% is not bad, short of trust -- president trump's 3%, but not a bad number. move towe get the major two point 1% on the 10 year yield, what does that do to dollar dynamics? steven: the dollar can still be

strong. i know the temptation is to focus on the cyclical dynamics and look at rate differentials with that is only part of the story. there is a big flow dynamic seen dollars getting sucked into america in all kinds of assets. that forecast is for year end 2019 and it has been consistent to have a strong dollar and a bullish bond forecast. david and i are still aligned on that. at some stage, we might go our separate ways. at the moment, we are both bullish. anna: if we continue to fret about the global economy or , that canret again still be dollar positive? steven: i am glad you bring in the global economy because i

sense a great deal of parochial focus in the u.s. -- what has happened in europe and china over the last year, we have lost one big figure. europe is 1/5 of the global economy compared to a year ago. the expectation of growth is less. that feeds into the fed's reaction function. tests, theank stress fed looks at those. we are much closer to an adverse scenario than people realize, so the global economy matters. maybe china and the u.s. have picked up, but i'm talking about years at a time. the global economy is not in as good shape as it was a year ago. anna: how much does that rely on the pboc and other actors in china to do more? how much are you assuming the pboc will have to do?

but itthe stronger data did not seem to silence those calling for more action. david: we have to remember that china has put through -- not just in terms of the last fiscal stimulus but blanket income cuts. the key point for china was the turn in total financing at the start of the year. that is the point where the easing and stimulus worked its way through the system. historically when we see the pickup ending, we see a six-month lag before we see a stabilizing in economic data. stephen, the global economic activity has been really week. -- weak. we think we see stabilization by the middle of the year. some signs of acceleration over

the second half of this year into 2020, and that will keep the fed on hold for longer than the markets considerate. tom: let's go mathematical and talk fat tail risks. the german two-year is back to a negative 2.60. that is an ugly number. what are the ramifications of the new negative lower rates? before,if we look at and five years time is about plus 40 in germany so this is a money allusion. negative rates take the curve very steep. we are minus 60 for two years. therelicy rate is -40, so must be a scarcity of government paper. i would be worried about that -60. i would not be surprised if this year it is a bit higher but it might just put greater flattening pressure.

closeea of 10 year bunds to zero is what we are getting use to. you have about 40 basis points on paper in five years time. that is the cheaper on fair. anna: we will talk more about europe and the ecb. pagen major and david staying with us. coming up, muhammad ali arian, elian's --hief -- alianz's chief officer. this is bloomberg. ♪

♪ tom: good morning, everyone. tom keene and anna edwards, thank you for being with us from london. too much going on. our single best chart, i'm going to bring it up now. it is not really a chart. this is one of the great functions on the bloomberg. a is pretty obscure and little difficult for tv, but this is what pros look at when they look at the five-year forward rake evens. -- forward breakevens. i brought this up for you. explain to our audience what the five-year forward is on the bloomberg. steven: that is the market's estimation of what the inflation for five years will be, starting

in five years time. it is also something central banks use in their policy guidelines. the targets for central banks will be to have those numbers depending on their objectives, close to 2% and 2.5% in the u.k. when you have the forward breakevens below what central are,' inflation targets everything else being equal, they are on the cheapside. you can find some opportunities. cheapan inflation looks and u.s. inflation as well. without having a view of whether inflation goes up or down, the valuations look quite attractive compared to the central banks' target. tom: bring up the chart again going into that function, ilbe.

this is the german five-year forward and it goes to anna's question, we have a huge leg down in disinflation. anna: we have a viewer question for you, whether you think negative deposit rates are a structural figure -- feature or whether with a new leader that could change? if we see a test when we see a new president of the ecb, will that change? they talk japan, about the reversal rate. this is based on an academic paper a few years ago. you get to negative rates where it becomes damaging and the banks do not lend. it depends on the proportions of deposits to wholesale funding a bank has. it looks like the euro zone may be approaching that level. i am not predicting any kind of removal of negative rates

anytime soon, but not -- do not be surprised if the ecb is looking at it. of negativeoval rates at some point in the future is possible. anna: how will we see the slow removal of negative rates? will there be a tiered structure? mario draghi referencing the negative side effects that the negative interest rate has on the banking sector. would the ecb hoped they have the space to remove this policy and it would not look much like tightening. they have been doing some damage for some time in the euro zone and the ecb would love to remove it, but it is difficult to manage. how does it raise rates if it thanks at could imbalance the stimulus against the backdrop where core inflation is 1% and things have dropped markedly.

that is something they hope might mitigate the damage being done to the banking system. we know the ecb is still discussing this and it is a thorny problem they have gotten into an do not know how to get out of. tom: maybe it is like brexit. is this simply we are afraid to clear markets, to take the medicine after the financial crisis? david: much of what central banks have tried to do is alleviate that, reduce the amplitude of the financial crisis and they have been largely successful. european policies have been constrained across the board. gradual got this increase of negative rates inflation. in japan, we have got lower inflation expectations.

it looks like it is becoming a feature of europe and the fed is wondering if you will see it in the u.s. as well. tom: we are all completely focused on the politics of brexit and what is going on in washington, but the speed of change in the last six weeks is extraordinary. mind, thisthat in will be an interesting time -- and one of my earlier programs -- tom: in one of her earlier properties. anna: the question of the day on the markets live blog -- which will be the first of the developed market central banks to cut interest rates? we were talking about this in asia on new zealand and australia. where do you see the cut to interest rates coming first? steven: you are probably quite close to it in london. it depends on the outcome.

it is a difficult thing to forecast. it depends. you are probably right to mention australia. one, frome is without an investment point of view, you have just seen record low australian yields. rba, looksk like the like they are trying to roll back the previous hawkish and us and getting ready to be dovish. it seems to be a bit of an ugly contest, who can be first to cut rates. it is a good question. we are definitely at that point now where the next move for the big developed markets looks like it is down. we may have to be patient with this one. tom: very good, steven major of , and thank you so much david page of accent investment management as well.

miserable -- misra, look for that in the 9:00 hour. at queen victoria street in london, this is bloomberg. ♪

♪ this is is bloomberg "surveillance." whole foods says this week it will lower prices on hundreds of items. the price cuts will average 20%. tozon bought whole foods catch up to grocery store -- grocery sales in walmart and kroger. the s&p is cutting wells fargo's credit outlook after the abrupt up archer of its ceo. tim sloan struggled to deal with a wide range of struggles. s&p lowering their credit rating from stable to negative. elon musk praising the work of hackers who found flaws in the driver assistance system. one of its hacks could lead

electric cars to enter into oncoming traffic. they were able to control the steering use during a wireless -- using a wireless gamepad. anna: thank you so much. tom has made his way to the radio studio to bring you the next hour of bloomberg "surveillance." -- citing the impact of rising commercial tensions and tariffs, how long will those last? let's discuss with marty schenker. david page is still with us. at what point does it start to make sense for trump to have some resolution, have something he can point to as having been delivered by the trade tensions and standoff? marty: he has sort of set a high

bar for himself. he said he wants a deal with china. he does not want just a good deal, he wants a great deal. i think politically, he would love to be able to announce they have cut a deal with china, but i do not think there is any deadline. he really is going to try and push for fundamental change in china. time.maybe that takes what kind of time horizon do you have, when you look at the trade tensions, they have morphed. they are about intellectual property and security. what kind of timetable do you have? the next few weeks and months or is it a much longer time horizon? david: we think it is much longer. we may see an interim deal or a summit over the next couple of months, but that will not be a resolution to this crisis.

we will not walk away and see the u.s. and china friends again. we think this continues over into the presidential election cycle. from the market perspective, markets were worried about an increase in tariffs. we now know they are off the table for now and there is no timeline to come back. i am sure we will see some announcement that we do not get a pickup in those tariffs. i do not think the tariffs already on china will be removed and this seems like a simmering cycle that continues. our worry as we move into the presidential cycle, trade becomes more political. the trump administration is worried about impacts on the economy. this year, we will expected to be relatively benign. anna: how is this playing out with the trump base? is this something they want to

see built into 2020? marty: i do not think they are hugely concerned about the trade war. they support this president no matter what happens. donald trump is trying to change the narrative away from the health care debate. he tweeted last night the republicans will not come up with their plan until after 2020. he is trying to change the narrative away from what is a losing proposition for the gop. anna: marty schenker, thank you so much. ford page, thank you joining us so early in new york. that is it for this hour of bloomberg "surveillance." we will have much more, this is bloomberg. ♪ so with xfinity mobile

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strong start in the second quarter on encouraging numbers out of china and the united states, but is there enough to keep going? parliament still doesn't like any of the brexit alternatives as prime minister may goes to an all-day cabinet meeting, up against a hard brexit that no one wants. and we talk with the head of ford's european operations about and a possible trade war with united states means for his business. i'm david westin, here with lisa abramowicz. today.eel is off again lisa: we are watching lift bankshares -- we are watching lyft shares. this is an important indicator for other unicorns set to go public this year. we should bring you some breaking news. we are getting earnings from