nejra: good morning. this is "bloomberg daybreak: europe." stories, new top consensus, futures climbs. job data from the u.s. compromise, theresa may and jeremy corbyn try to forge a brexit deal. could battles in their own derail talks? when the chips are down, samsung drops the most in four years.

good morning. welcome to "bloomberg daybreak: europe." news, bankaking chairman has decided to leave. the current deputy chair becomes the new chair. we will bring you more details as we get it. equities we saw u.s. hit a six month high, six consecutive days of gains, and futures look to another day of gains, up 0.1%. yield, this week we have seen a number of the big houses, goldman, morgan stanley, credit suisse to mention a few revising forecast. tenure -- their 10 year forecast. the dollar ahead of the jobs

report. we look to the number in .ebruary currencies.t focusing on trade talks, we are seeing some strength. 0.1% on the front foot, up . theresa may and court jeremy corbyn will continue talks. to question the final deal they come up with, some are saying tore is significant downside the pound if the talks go wrong. crude steady today. at $52 a barrel, in the longest run of weekly gain since 2017, up more than 3% this week. salyts in asia, juliette in singapore has more.

a couple of big markets closed. how is the action looking elsewhere? juliette: all the chinese china, taiwan, hong kong out of action. we are seeing late trade in japan, up by 0.3%. starting april with a gain of 1.6%. sterling is being sold off for a second session, we had the post budget rally. a little coming in latter in the week pretty flat. a solid gain in singapore. the longest winning streak since october 2017. positive momentum on the back of trade talks between the u.s. and china. samsung is the major stock to watch in asia today, pretty unchanged. it didn't come through with its biggest fall in profit in four years, it had been flagged last

month and priced in. the jewelry manufacturer in india up by 1.5%. growth over the course of next year. japan post surging in tokyo on news of share buybacks. it is up the most sense 2016 in the tokyo session. nejra: juliette saly in singapore, thank you. i want to bring you more context on the chairman deciding to leave the group. the deputy chair of becoming the new chair. onse lines coming through swedbank. the chairman stepping down. it is amidst the laundering scandal that has plagued the bank. it will take time to restore

confidence in swedbank, and the recent developments are regrettable. that's turned to trade. china and the u.s. making headway on trade talks. president xi is saying there is progress.l president trump agreed a deal would be monumental, but adds they have some way to go. president trump: intellectual property protection and theft, talking about certain tariffs, and elements of them is in discussion now. we have a number of things, we have agreed to more than we have left to agree to. nejra: joining us now is jane foley, head fx strategy, senior currency analyst, rabobank and emmanuel cau, head european equity strategy, barclays bank. happy friday.

has been progress in the u.s.-china trade talks, but it seems there is a lot left to be resolved, enforcement, the existing tariffs. you get the last 10% of negotiations, that is the most difficult to negotiate. the northern island border for instance. if you scratch beneath the surface, if you are talking about intellectual property, that is important. how will they enforce that? how will they police it without china giving something up? ,here is a larger discussion this is not just about trade in agricultural commodities, it is about the u.s. and the west trying to take a measure against china's growth as a military power for instance. the chinese military base in west africa is not going down

well with the u.s. more thanout a little just trade, and for that reason, both presidents want to have a big signing ceremony, but they want to claim some success. it is likely tensions will reemerge in the future. this mean fores global equity markets? we have seen rally pause, rally pause. barclaysut a note at sang do not sell the rally yet. how much rational have to do with trade talks? emmanuel: we think the prospect from aade deal will inket standpoint get things the right direction. we thinkncertainty,

, and anyntiment progress on the trade issue will be a positive development. saya: it is interesting you sentiment is cautious. we have a chart that supports that, the confidence index that drops to an all-time low in january and has bounced back slightly. it shows investors are decreasing their long-term allocation. this is about action as well as sentiment. is that another reason investors should be adding to the rally now? yes, this is a strong market. we are saying volumes behind the havens adding to safe and a lot of money to bonds. as an asset class, outflows

yesterday. safe havens, quality growth positions are seeing and a resolution of the trade, seemrogress on brexit, we to have the capacity for investors to join equity markets. dollar versus fx markets, what does that tell you about appetite? jane: the dollar has been relatively considered, over the last six months, it is more dovish. if you look back a week or two and what that was telling us, there are significant concerns and yet the dollar is well supported which suggests it is behaving as a safe haven. again, to me it is an

interesting juncture because if indices,t stock market and if you came from the planet is strongly year-to-date growth, and yet we have a lot of concern about the growth in the world economy, the slowdown in the u.s., china, europe, japan. what does that mean? i think there is a trade-off, i think markets and investors have been nervous about world growth. if that were to worsen, i imagine the dollar will remain firm. and emerging markets quite vulnerable. nejra: what is your view on emerging market equities? emmanuel: we decided to add emerging markets last year, and we think it is improving.

we have seen [indiscernible] there have been significant returns in the past few months. [indiscernible] china will support the economy. it is a sign of chinese activity. china has to drive the growth recovery. issue, we see a lot of negativity in emerging markets. data, anyen trade of trade uncertainty would be significant for emerging markets. nejra: you see a little continuation of the global equity rally.

20 is not 2016. jane foley, head fx strategy, senior currency analyst, rabobank and emmanuel cau, head european equity strategy, barclays bank stay with us. jamie dimon says the u.s. needs to consider serious issues no matter what it meant for the economy. he weighed in on the economy. it supports not the tariffs, but the issues, the ip being beyond what you would consider normal warfare in trade. barriers, those are serious issues that japan, europe, and america all know are true. lighthizer, i think and mnuchin have done a good job. we do not want a soybean deal.

that does not fix the problem. europe and japan want us to do this, i was not in favor of the tariffs and the threatening, but facing the issue. you have to deal with the whatever that, means for the economy. , think both parties want it but it is not a bad idea to say they have to or they do not have to nor do we have to. pulse on theour u.s. economy, you see the data from credit card companies, what do you think the state of the u.s. economy has? do you worry about a recession in the near future? >> not really. china will go to 6% because they can, they can micromanage. because it is state-controlled, they can do monetary policy,

fiscal policy, bank policy, you higher, you train, you build the road. i think it will come to haunt them. in the next couple of years, they will hit their targets. japan is doing 1%, europe is doing 1%, brazil is turning the corner. it is chugging along. nejra: that was jamie dimon, ceo of j.p. morgan. let's get the first word news from debra mao in hong kong. debra: theresa may and jeremy corbyn are trying to forge a deal on brexit. they face opposition within their own parties. the prime ministers own cap is split over what to do next. the idea of a second referendum is one of the options on the table. created capitalism has destructive social gaps that could lead to another revolution , they have reinforced education

, assets and income according to a new essay by the billionaire founder of the world's biggest hedge fund. keepys the bottom 60% falling further behind the top 40%. amazon is reportedly ready to take on apple air pods, the company is planning for the first alexa wearable earbuds that could be ready as early as the second half of this year. the headphones will let people use their voice to order goods, access music and other information on the go. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. debra mao in hong kong, thank you. we are asking the question, it is jobs day, is the deteriorating u.s. labor market a prerequisite for a fed cut? reach out to us. coming up, we will speak to

former italian prime minister, after miss that interview 7:30 a.m. london time. when you are traveling to work, tune into bloomberg radio live on your mobile radio device or on dab digital in london. this is bloomberg. ♪

nejra: breaking lines coming through on brexit. the eu proposing to offer the u.k. a 12 month brexit

extension, according to the bbc. we are seeing reaction in cable, the pound gaining. let's check in on the broader markets. in asia, china and hong kong closed. then sei asia index is pretty flat. risk onei we are seeing in today's session. it u.s. equities on a six-month high, up zero point 2% on futures. some optimism coming through the progress we are hearing on trade talks, the 10 year yield moves up. .he aussie, up the dollar not doing a lot. brent a little lower. oil going for a fifth weekly gain. there is debra mao in hong kong. news breaking a few moments

ago, swedbank's chairman has stepped down at the height of the money laundering scandal. is being investigated for having potentially committed fraud, on top of multiple probes into laundering. 75% ofzos will retain his amazon stock after his divorce. this element eighth investor concern that his control would be influenced. bezos will continue to be the largest shareholder. he retains 4% of amazon. in the securities and exchange commission has two weeks to work out differences. this is about his posts on social media. a u.s. district judge says the

sides should reword the deal to isid ambiguity on what musk and is not allowed to post. samsung has reported operating profit drop, the most in four years. it has been buffeting membership prices. 60% in the quarter, they issued a rare warning last month that it will be short of estimates. that is your bloomberg business flash. concerns over a protracted slowdown in europe is being fueled by economic data. a double blow yesterday, a factory slump followed by a forecast for 2019 predicting the weakest growth. equity is set to cut its forecast. jane foley, head fx strategy, senior currency analyst, rabobank and emmanuel cau, head european equity strategy, barclays bank are still with us. we were talking earlier about

with global equities, you were advising not to sell. with european equities, are you taking a position on europe versus the rest of the world, or more reallocating within europe? emmanuel: both actually. the sentiment and positioning on european equity markets is negative. news on the economic front, the political front, but , weaknessthe activity in europe, chinese uncertainty and political uncertainty. we are seeing sentiment that could improve. believe global growth will be subdued.

we think the european equity market, we expect [indiscernible] positioning.ive in we do not want to pay for risk. commodities, insurance companies. we want to have positioning but play selectively improving activity momentum in europe. nejra: would you agree what he is saying, the data turning around in the second half, and them occasions it may have? jane: it would be nice, but that is not what we are seeing. since the start of the year the markets have had to come to year weat this -- last had a negative gdp. were saying this could be temporary, we have more regulation in the auto sector.

there was a dry summer, low water levels. we were told it would be temporary. then in q4, it was not so temporary. in q1, we have a complete itture up to march, and yet is looking sour. if you look in the manufacturing sector, in germany it might be an recession. the overall economy, some economists think germany could fall into recession. there is talk about that. italy fell into a technical recession and the second half of last year. you have the european parliamentary elections in may. opinion polls are suggesting the far right could get 30% of the vote and that could be a concern for investors as well. nejra: we have to talk about earnings. revised.t showing eps

what is your outlook for the eps growth differential between the u.s. and europe? cautious,we are very we come from a strong basis in 2018. [indiscernible] tax cut had a strong --t year, and we do not [indiscernible] nejra: emmanuel cau, head european equity strategy, barclays bank thank you for joining us. jane foley, head fx strategy, senior currency analyst, rabobank stays with us. we will hear from the national , larryc council director

kudlow this afternoon. we speak to the chairman of jp morgan international. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." on a headline level we are seen ready muchia index flat. a couple markets closed. here is the first word news from debra mao in hong kong. debra: european council a 12dent has proposed month brexit extension according to the bbc. this comes as theresa may and jeremy corbyn try to board jay divorce deal, but they face opposition within their own parties. the risk ofwarns

leaving without a deal. >> a hard brexit would be a bad recession, not so great for europe. it will not affect america that much. it is a bad idea. debra: china's vice premier has held a new consensus when it comes to trade. this came after a meeting at the white house. president trump talked about a monumental agreement, that may be some weeks away. the idea of assigning summit with president xi to finalize a deal. julian plans to expel assange from its london embassy according to wikileaks. it has a plan in place for his arrest. asylum afterranted he refused to be extradited to sweden.

he feared facing trial in the u.s. for publishing secret government documents. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's check in on the markets. dani berger. a little bit of a mixed picture to end the week. the tilt is toward risk on, does that have to do with trade optimism? there are some hints for trade optimism, china, hong kong closed. we take our direction from other markets. japan up higher 0.3%. one market not playing along with australia, that may be currency affect. aussie dollar rallying is a benefit from the trade

negotiations. the fluctuations in emerging-market currencies, the riel lower today. political turmoil there hitting the currency. mentioned goldman, jp morgan, other houses calling for higher yields. we are seeing that throughout the markets. haven assets take a breath today. one that is not moving much even with the positivity is the yen. this is one month volatility near a five-year low right now. becomes a major player in the fx market, volatility looks more like the low rate than their record low equity volatility that we have been seeing. traders have more to digest from the day, including payroll data from the u.s. later today. nejra: thank you.

number of houses have cut their 10 years forecasts. turn to you, the 10 year yield in indio rising yesterday, but in the equity market, the nifty trading within its high, how sustainable are those gains? >> is interesting. anticipating cutting the rates and sounding dovish will add ammo to the bulls. in today's session they are doing ok. contrary to what has happened, we have good trading today and the highs are holding on. in all probability they will cut

rates. the currency weakened significantly. the one thing that came to my [indiscernible] tooctation is if it gets populist it will be negative for the currency. nejra: thank you to you both. as we approach the jobs report, with the recent lull stateside, was it just a blip? yes, according to economists. in some sectors, there are not enough workers to hire. the view from vanguard is, expects job growth to rebound from last month week numbers.

-- employmentrom to 165 thousand jobs. gains to them by health care and services. expect a more normal number below 200 k for march. steve whiting points out u.s. employment data were exaggerated in both directions in january and february, we expect march employment data to rebound to the average near 160,000. debyour voice to the ate. we will hear from larry kudlow, national economic council director this afternoon, do not miss that. but that another voice into the next, jane foley, head fx strategy, senior currency analyst, rabobank. the way bloomberg economics frames this is that february was

a fluke or a founder, which is it? jane: probably a fluke. today's employment data, there is a related component. looking at the comments you put up, the market consensus seems morey we will have two levels. assume it is logical to if we look at the average for in9, the average gain payrolls would be lower than 2018. we have a slowing u.s. economy. payrolls growth will reflects that as well. be a: would a week report major blow to risk appetite? jane: probably because we had a week number last month, and we have had this debate about curve inversion. consecutivet two

weeks, the market my think there is more value in this talk about aression than many people assuming. it would be a major blow. it is not about the payrolls number, we need to look at the inflation component, that has been interesting. rates have pushed higher, but if you look at wage growth compared to previous economic cycles, it is weaker. this is not just a u.s. phenomenon, it is threatening the g10. nejra: today we are asking, is a deteriorating u.s. labor market a prerequisite for a fed cut? jane: i think it is part of the same picture, it is an important component. in that context, yes. you have to remember in the context of japan and germany, the labor market can be a backward looking component. if it is firm that we might be

struggling, do not cut workers at the first instance. people are trained and have skills. we are seeing weakness coming through in manufacturing. does that mean in three to six months time we will see more weakness in manufacturing data? i am not just talking about the fed, but europe as well. we haveiven everything discussed, where you think the next move is, the 10 year treasury yield, if it comes in weaker than expected, we could see that curve drop act to the march low. , a number ofhad houses revised down their 10 year yield forecast. credit suisse sees the 10 year yield ending around 2.5%. goldman sachs of shape there's

to 2.8% from 3%. hsbc seeing it down. been on the bullish side for treasuries. the weighted average of 2.96%, down from 3.29% from december. we end the year higher than where we are now? while, it hase a been going lower. we are of the view that at the end of next year we could see a technical recession in the u.s. as well. that coincides with that view. the movement on rates, we have been anticipating. theoes depend on what economic data does say. we are anticipating it will slow

, and more bearish indicators in the u.s. data. it will be interesting in the next few weeks and months what we actually get. nejra: if you are expecting the payroll data to slow, are you expecting it gradually? why i think the payroll data is very interesting. a few months worth of data does not make a trend. from that point of view, over the next quarter the data will be extremely interesting. the fed have already made noticeable returns from where we were in november. in november the market was happily anticipating a few interest hikes this year, and that has been reined back. despite what you said about expectations for recession

in 2020 and the 10 year yield ending lower, you think the dollar will stay supported. that is more relative trade. jane foley, head fx strategy, senior currency analyst, us.bank stays with let's turn to samsung, worst operating profit in four years. slowing smart phone sales and chip prices. story.et the talk us through how significant this mess is -- this miss is? is quite significant. this is a 60% decline in operating profits for samsung year-over-year. the last time something like that happened was more than four years ago which indicates the downturn in the memory chip market is continuing, and we do not seem to be seeing the end of it yet. hopefully, a lot of people believe the memory market will

rebound eventually in the bottom half of this year. there is a lot of data, people want to buy the memory chips, but they are holding off for now. the sharet about price reaction? how is that reflecting how investors are digesting this news? interesting is the share price of samsung has been up since the start of this year despite the gloomy prospects about the memory chip market, which indicates a lot of people expect that these data centers are going to review and by memory chips from samsung once they have worked through the stockpiles of unused chips they have in their inventories. the share price is going to go back and continue to go up, there is a lot of optimism

despite the terrible numbers we saw. nejra: thank you for joining us. bloomberg's technology reporter sam kim in seoul. theresa may and jeremy corbyn face-off against their parties, the latest on brexit, next. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe."

let's get the bloomberg business flash from debra mao in hong kong. debra: elon musk and a securities exchange commission have two weeks to work out differences over how the billionaire executive posts on social media. violated andmusk wants contempt of court. the judge says the sides should reword the deal to avoid ambiguity on what musk is and is not allowed to post. samsung has reported its first operating profit dropped in four years. falling memory chip prices and slowing smart phone sales, in theng income fell 60% quarter. samsung issued a warning last month that it would be short of estimates. chairman has stepped down at the height of the money laundering scandal. beingollows the ceo

forced out last week. swedbank is being investigated for potentially having committed fraud, on top of other probes into a money laundering case. debra mao in hong kong, thank you. as brexit uncertainty continues, u.k. companies have to plan for all eventual outcomes. heathrow ceo spoke to francine lacqua. >> we are preparing for a no the worstt, that is case we can see. francine: stockpiling? >> there are some things we are stockpiling were we need vital supplies in the airport. used for a patdown, swabs, things like that. we have been working with the

government and the eu and u.k. so they understand what the .arriers will be for aviation they have done a good job with aviation. they understand it is the enabler for any other trade. heathrow, the biggest airport in the u.k. is important to european nations as well. there is an agreement in place that planes will keep on flying even in a no deal brexit, that is a big step forward. francine: do you have a idea how security for passengers will work? >> that will remain -- no major changes. even in the case of a no deal. about are being pragmatic how we make this work. even in a no deal brexit, the airport journey will have little

changes. you can book with confidence and expect to travel with ease. there may be additional passport on the european and than the british end. the u.k. wants to be sure we are open for business, and we are supporting them to do that. francine: insurance tax-free? ifthat is a secondary issue people get duty-free shopping in the u.k. we are focused on making sure passengers and planes can keep on flying, and that will be the case. that was the heathrow airport ceo speaking to francine lacqua. theresa may and jeremy corbyn are locked into talks as they try to find a path forward. on thed referendum is table, but both leaders are facing battles within their own party's the possibility of a new public vote.

the bbc reports that the u.k. has been offered a 12 month extension. stirling is gaining on the news. jane foley, head fx strategy, senior currency analyst, rabobank. seen sterling gain ground, i number of people are still skeptical that the talks between may and corbin will dispel the brexit fog. high.lity remaining and that it will take a decisive announcement on the deal and extension to inspire traders to go all in on pound strength. how are you positioning, all in or wanting to selloff, or waiting on the sidelines? sidelinesing on the is the most pragmatic solution. the interesting thing about sterling is it is one of the best performing because it currencies.

even so, it has performed well. sterling wants to be supported, the consensus is there will be a deal even though we are at the five minutes to midnight frame time. overnight is supportive, it was said that there is a possibility of a flexible delay. rather than the u.k. prime minister approaching for a few more weeks, he said, if you do not get something through parliament, you can have a longer delay. if you do, we can shorten that. theresa may does not want a lengthy delay. nejra: that would be a good outcome for sterling. goldman sachs saying one of the best opportunities in developed markets right now is the pound. is it the best opportunity?

reflects the that consensus deal. the consensus is there will be a deal, and we know there are strong risks. eu, we need them to be so pathetic at this point. especially on wednesday with this emergency meeting of leaders. we had the vote in parliament that theresa may has to go ask a foreign extension, but it is up to the eu if that will be granted. we willreviously said consider an extension if you come to us with a proper framework about what you are going to do in that time. between theant parties to have a new plan, how they can use an extension without messing everybody around for a few months. nejra: we spoke about your call on dollar strength against the

g10 currencies, does that include the pound? pound, it is quite binary. if there is a deal, sterling will go up, and if not it will go down. that said, we should avoid talking about the political circumstances. that could he rode some of the gains. nejra: let me take you to this chart of europe sterling, we have been talking mainly about cable. ,t has been stuck in a range not moved as much as cable. what is your call? jane: it is quite binary. sterling could be trading on the horizon, i wonder if that is an optimistic view. general talk of a election, and if there is one,

we are likely to have a hung ly,liament and potential the tories could be the biggest party in the government but still unable to run a majority gav government. we could potentially have a corbin government. that could be messy for the markets. helm, given his promises of renationalization, that could be a negative scenario. next few months, the pound could look a little shaky if those politics turn sour. nejra: thank you for joining us. jane foley, head fx strategy, senior currency analyst, rabobank. jane will continue the conversation with us on bloomberg radio. coming up, progress in trade talks. china hails a new consensus with

the u.s., but how soon will we see a deal, and how will markets react? do not miss our exclusive interview. this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in london. i'm a rich a hitch. this is bloomberg daybreak: europe. asia and u.s. futures climb after washington and beijing hail progress in -- jobs data in the u.s., as well. theresa may and jeremy corbyn try to forge a brexit deal, and donald tusk could propose a 12 month extension. samsung chips are down, profit drops the most in four years as chip prices slump and smart phone sales slow.

good morning, everyone. welcome to daybreak: europe. 7:00 a.m. in london and an hour till equity trading. we had the painful number on german factory orders yesterday which pushed the 10-year bund yield below zero. industrial production month on month, 0.7%. better than the prior negative reading. it comes in that are than expectations. in terms of industrial production year on year, down 0.4% again, better than the prior reading and coming in better than expectations. perhaps this might give a reprieve to the euro. we might see an edge higher in the tenure bund yield. 10 yearr bund yield -- bund yield.

yesterday, we saw u.s. equities at a sixth straight day of gains. the stoxx 600 closed .25% lower. not getting huge amount of direction. ftse 100 and dax flat. slightly toever so the upside. i talked about how we saw yields move lower. we were back in negative territory and we stay there at the moment but as i said, we could see the 10-year bund yield edge higher. that is indicated by the futures. we could see a similar picture in btp's and in the 10 year treasury yield. we are two basis points on the 10 year treasury yield. we bounced back from the low at the end of the march at a 2.35 handle. a lot of the houses out there, all revising down their 10 year

yield forecast for 2019. the bloomberg weighted average sees the yield ending at 2.96% at the end of the year. dani burger has more for us. a couple of big markets closed. talk us through the details. dani: with china and hong kong closed, we are seeing optimism. turning higher. a lot has to do with positivity in trade talks. a sooner conclusion to trade talks would allow traitors to not have to worry about the volatility picture so much. you can see -- would allow traders to not have to worry about volatility so much. samsung was driving down the index. some fluctuation in currencies. we will get up at any moment and then we are seeing the long end of the curve. moving bonds yields higher, now at .5.

we are seeing australia, the aussie dollar today is moving higher after the china trade news. let me get into the currencies. up point 2% versus the u.s. dollar. the central bank governor saying they will put their rate on hold. too many uncertainties when it comes to the global outlook. in thailand, one of the biggest declines in asian currencies. they are heading into a long weekend so we are seeing traders take risk off the table. they don't want that volatility to hurt their positions as they enjoy those three days off. nejra: dani burger, thank you. china and the u.s. make headway. president xi jinping is pushing for a rapid conclusion but an agreement may be some weeks away according to president trump who agrees a deal would be "very monumental, but adds they have some way to go.

-- to go." intellectual property protection and theft, talking about certain tariffs. it is important that elements of the tariff, that is in discussion right now. we have a number of things but we have also agreed to far more than we have left to agree to. isra: joining us from paris the european economist at bank of america merrill lynch. great to have you with us. thank you for joining us. at bankamerica merrill lynch, you have argued that trade could easilyainty explain a drag on growth of around 20 basis points so far. how much of a bounceback could we see in global growth if we do get a trade deal anytime soon? >> the way we would look at it scenario, our assumption is we don't get an

escalation of trade wars. we have a trade war in our base case. if we get rid of uncertainty, we get our base case. europe isn we have in if we get a china-u.s. trade deal, that would help in terms of uncertainty on that aspect but we still have the other relevant, the auto sector and e, the trade deal does not provide a resolution. we are watching that closely but trade deal would make some downside risks disappear and we get our baseline -- put a prior -- higher probability on our baseline but in terms of bounceback come you probably wouldn't expect to see much compared to where we are in current expectations already. nejra: right, and you mentioned the risk of an escalation between the u.s. and the eu, so talk to me a little about how

that might affect your outlook for the eurozone economy, as we have been getting some weak data. the data out today from germany, perhaps giving a little lift to sentiment but yesterday's numbers were painful. evelyn: yes. we have done the calculation by looking at global policy uncertainty linked to trade policy. we argued what we had seen until february was costing 20 bips mainly from the u.s.-china trade. if we got a raise in auto tariffs, we argue we could lose bips of euros area gdp. it would mean we get stuck into a potential growth environment in the euro area without much upside from here. rid of autoo get

tariffs, for us in europe, that would be a considerable hit. the current weakness is a combination of multiple factors. the uncertainty on the one hand but on the other side, we see actual weakness in slowing demand traction outside the euro area. frome chinese imports germany, for instance, being relatively weak on the three-month comparison. provide some hope, it is a step back in the right direction but there is quite a bit of way to go. in terms of german data this morning, the headline industrial production index was good, .7 month on month. if you look at the details, the manufacturing within that, the exportersis producing was less strong. if you look at the factory orders yesterday, they were on track for another roughly 3% fall in the first quarter of this year, which is not really

good from a demand perspective. you can have these temporary deviations between orders and production, but orders in the end give you a hint on where demand is going. i think we are not out of the wass yet and if that confirmed from china, we would see for the return of that in euro area data with a three to four month lag. we are still stuck in an environment where uncertainty is weighing. nejra: ok. evelyn: we wait to see confirmation of the improvements. nejra: yes, and what is your outlook for china in terms of the composition of the slowdown, because that also matters as well as the headline number? is whatyes, that experts are telling us, what we get from europe. our expectation -- for now, we don't know.

how the improvement in the chinese pmi will feed through to consumption or investment. i would say if china really bolsters consumption rather than investment within the euro area, it is not necessarily germany who would benefit the most. german manufacturing is very much geared to the global cycle, which is why we are hurting from the china weakness. others such as france, for instance, are much more balanced so their share of versus moremption exposure is resilient. evelyn herrmann, european economist at bankamerica merrill lynch. today, we are asking the question on mliv, is a deteriorating u.s. labor market a prerequisite for a fatcat? you -- fed cut?

you can reach out to us on your bloomberg. the other way of phrasing the company, -- question, will the fed to ease even if the economy is strong? theresa may and jeremy corbyn face-off against the room parties today. we will have the latest on brexit next. this is bloomberg. ♪

nejra: 7:14 in london. 45 minutes from the european equity market open. i'm nejra cehic in london.

let's check the markets. u.s. equities hit a six month high yesterday and futures pointing to another gain today. if we get back, seven straight days of gains. the 10 year yield up two's basis points. european futures struggling for direction. the euro, moving sideways. 112.31. the 10-year bund yield goes above zero. up two basis points industrial production data came out better than expected demand cable up .2%. saying he donald tusk will be offering a 12-month extension to theresa may. we will talk brexit but the german government will keep a stake in the combined entity. should commerzbank and deutsche bank merge. annmarie hordern has the latest on the story.

annmarie hordern, thank you so much. having a little technical difficulty there, but debra mao is standing by with a business flash in hong kong. will retainbezos 75% of his amazon stock following his divorce from mckinsey bezos. this eliminates investor concerns that it would influence his control over the company. he will continue to be the largest shareholder of the e-commerce giant. 4% ofzie bezos retains amazon, making her the world's fourth richest woman. the exchange commission have two weeks to work out differences over how the billionaire made posts on social media. they want him found in contempt of court. a u.s. district judge says the sides should read -- reword the deal to remove ambiguity on what

he isn't allowed to post. samsung has reported its first operating profit drop in more than four years. the stock has been dashed stock has been buffeted by slowing smart phone sales. dropped in thee quarter. samsung issued a warning last month that the results would be short of estimates. that is your bloomberg business flash. nejra: debra mao in hong kong. corbyn may and jeremy are locked in talks as they try to find a path forward on brexit. a second referendum is reportedly among the options on the table but both leaders are facing battles in the room parties over the possibility of a new public vote. reports that european council president donald tusk is a 12-monthe u.k. extension. sterling, gaining on the news. joining us on the phone, m ross emma thomas.

extension but with some flexibility. if the u.k. managed to pass a brexit deal five the 22nd, they wouldn't have to take .art the u.k. government is getting this done so the government won't have to face the british public three years after voting to leave, you've now got to vote for parliamentary elections. the bbc says donald tusk is behind it. others say the idea has been kicked around for several weeks. it isason the pound likes it postpones the cliff edge but for the economy, it means the uncertainty is prolonged. next week, we've got a summit on april 10. will takey what may

to the summit. extension donald tusk is talking about, there needs to be a clear path ahead. we expect a lot of noise into that summit about some of the most reluctant eu members saying what is the path ahead? there might be a bit of noise marketsht freak out like suggestions the eu won't grant an extension. what we hear from brussels is they will grant the extension but the question is how it will be framed. nejra: i like that, flex tension. lots of words coming out. brexord i have coined is haustion. evelyn herrmann of bank of america merrill lynch is still with us. how different is the prospect of a short or long extension to your base case of the impact on u.k. and eurozone growth? evelyn: again, not much really. our base case is we get a deal

done. if we get a short extension or a long extension, the data is very small. -- the delta is small. a short extension seems to be difficult to achieve. european leaders seem to have suggested that. with the european election coming, a short extension is not really an option. a longer extension, you could argue, could extend uncertainty. it would be protracted and hence, it would probably offset the positive you could get from some kind of deal. an extension, we are left in the same place we are now. what would change our base case is if we had a no deal solution of brexit. nejra: what you are arguing is this a symmetric risks and the

upside of a deal compared to base case is limited. moment doesn'te seem to be pricing in significantly the risk of a no deal, but if we were to get that, what would be the impact? that's a question for our strategists. i think everyone agrees a no deal brexit would mean a weaker pound. what that means for the economy is probably a sizable shocked. we have quantified back from euro area perspective. and is where my focus lies, we argued if we went to a no deal brexit, the combination of high uncertainty, probably higher tariffs, higher administrative costs for non-pick -- nontariff barriers and the impact on growth could 170 pips.by it could be painful for the euro and u.k. economy too.

for the u.k., it is difficult to quantify the impact. nejra: let's shift to the ecb from the bank of england. we are looking to the meeting next week. you say the rate scenario is becoming binary. what do you mean by that? it means that a lot of things have to go right in the euro area for us to return to above potential growth in the second half of this year. earlier,sed trade wars the china-u.s. one, but the auto terraform. -- tariff one. we need a brexit scenario that is not painful or no deal. those are the main elements we need to see materialize from a euro area perspective. if we get there, the ecb -- if

we get to a scenario in which we growth, to potential the ecb is probably keen on hiking at the end of the year. this is the base case forward guidance and where they have signaled they would like to be. they are keeping things and hoping to get this through. if we don't get stabilization, then we are in a different situation in the euro area. stuck in the scenario of at best around potential growth. inflation dynamics would look different, etc. probably need to think about how to help the economy and if you cannot stimulate the economy enough, you need to keep the current stimulus in place for longer. forward guidance would need to be extended for a substantial period of time. probably signaling that we won't see any rate hikes from the ecb in the current cycle.

that is why it is getting increasingly binary. nejra: in terms of providing support to the economy and banks, with negative rates in place, the 10-year bund yield is in positive territory today for mario draghi is likely to be asked questions about this next week -- if the ecb introduces and talks about tearing at some point, will it be affected by -- accompanied by rate cuts and if so, why? evelyn: in our scenario, no. we think if we were to discuss a scenario in which the ecb has to keep interest rates at the current levels for much longer, that is when we need tiering. for us, it is really an instrument to accompany a low rate for a longer scenario rather than opening the door for -- the bar for rate cuts is high

at this stage. we already discussed whether the -40 pips deposit rate is a pain for banks. if you cut it further, you could keep the rate had nine is 40 via tiering, but you would still have to cut rates. why would you do that? lots of central banks in the past and small european ones have done that for foreign fx. if you look at the 2016 ecb and of bank of japan effects cuts to their deposit rates, it was small. the yen and the euro tended to appreciate off the back of that. that is why we can get the moment, the ecb is not considering tiering in the context of a cut. in the context of much extended forward guidance. nejra: makes sense. evelyn herrmann, great to have you with us. european economist at bank of america merrill lynch.

now we head to the shores of lake como where it is shaping up to be a beautiful day. annual finance workshop. joining us, francine lacqua. who better to lead our coverage from this glamorous event? what is in store? rancine: a lot about finances and the global economy. it is really quite difficult when you look at some of the kerryes italy is facing yesterday, we had the amazing scoop saved when you look at growth, it was going to be a 0.1% instead of the 1% predicted. what does that mean for the budget? we discuss that with two former prime minister's and we talked to economists. we figure out what negative yields mean for european banks. we tried to figure out f intech and what they could do with a merge and how unicredit

could come in. we talk about recession risks. it is almost like being on "surveillance," but with this beautiful view. much more from italy throughout the day. this is bloomberg. so with xfinity mobile

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anna: welcome to "bloomberg markets: the european open." we are live from our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: today the market say buy the rumor. japanese shares and u.s. equity futures head higher after trump hails the granddaddy all trade deals. the cash trade is less than 30 minutes away. . anna: a new consensus. stocks in asia