mario's dovish streak. ,taly barely grows this year and banks struggle to prove profitability. and what is in a delay? eu leaders reject prime minister theresa may's plea for an extension. and saudi's historic bond offering. saudi aramco sells $12 billion in debt with yields lower than sovereigns. david: welcome to "bloomberg daybreak." i'm david westin, right here with alix steel. earnings are starting. alix: finally. good.ks some secondso have quarter outlook beating analyst estimates. alix: these are pretty solid numbers so far. david: as you know, they had a pre-release of numbers last

week. people were really concerned about the guidance going forward. you can see they are up over 3% right now on the free market -- on the premarket, delta airlines. alix: the question becomes for the overall market will earnings be an excuse for the market to rally higher, or will it confirm the rally we've already had? s&p snapped eight straight days of gains yesterday, yet we seemed to have some optimism heading into the ecb and into fomc minutes. dollar still weaker over the last two days. bonds go nowhere. crude participating in that wisconn valley, up 6/10 -- that risk on rally, up 6/10 of 1%. imf effortste the to take sentiments down. it is time now for the morning brief. we will get the european central

bank's rate decision, followed by a news conference with ecb president mario draghi. also this morning, u.s. cpi data for the month of march. 's will testify for congress together for the first time since the financial crisis. afternoon, 2:00 this the fed releases minutes from its march meeting. now, for bloomberg first take, we are joined by peggy collins and michael mckee. start with the ecb decision coming up. michael, i will put up a chart that illustrates the problem. mario draghi wants to get to 2%. it is not only getting to 2%, they are going the wrong direction. draghi has the same

problem that jay powell has, that inflation is not rising right now. so what do they do?they have a lot of risks facing them right now. not the least donald trump and another risk of a trade war. brexit, we don't know what will happen with that. and just a general slowing in the economy there. he's got to figure out a way to stimulate the economy without the traditional methods of qe. he's got a tough balancing act today. alix: it feels like he has an extra tough job in that he also has banks that are hamstrung, so they don't want to lend. peggy: that's a great point. we seen european banks continue to be and battered by a myriad of issues, including money laundering. the question is whether he will come out and try to deal with that as well. as mike said, he's facing a lot

issues,se -- a lot of including expectation that trump is pivoting towards europe in terms of tariffs. michael: they have negative rates. could he go more negative? i brought a chart that shows no. they are hurting back profitability, and this is a big issue -- hurting bank profitability, and this is a big issue. tiering, according to bloomberg's reporting, they are not going to do. ,he long-term lending operation there's no demand for loans, according to ecb data out yesterday. david: they may just talk about fiscal policy at some point. [laughter] david: coming on this hour, we will bring you the ecb policy decision, followed by mario

conference.ss alix:alix: are second-story is what happened with that saudi aramco bond offering. it raised about $12 billion. this is what happened. suffering yield in saudi arabia ended up falling because there were so much demand for saudi arabia -- for saudi aramco. you view this as an oil call, a search for yields, or adding something into the markets, so you have to rebalance? peggy: i think it really zeros in on the search for yield. investors globally have been looking for yield, especially in emerging markets. here you have a company that has and it gotcash flow, a lot of press leading up to it. investors look at it as a potential win for them. we have a terrific story on the bluebird today profiling the aramco ceo, talking a little bit about how they said to the world, we are coming, and got a lot of backing for it.

. david: you've got jay powell saying we are not going to raise , the ecb saying how low can we go. house bonds -- how are bonds? michael: i am not a bond expert, but it seems like there's a lot of event risk for this. you've got the saudi prince trying to use this to redo the country. he's got a war in yemen, problems with iran, u.s. shale producers pressuring his oil price, and he literally got away with murder. everybody have's sort of forgotten about that. they have to make this work for 30 years, and still pay all the little princes and things like that? i wonder if this is pride for that risk -- is price for that risk. alix: no it is not. [laughter] alix: my question in the market is where does the money come from to buy this bond? does it come out of other

assets, or is this new money on the side? peggy: investors have had a lot of cash for a while because people have gotten more and more concerned about valuations in the stock market and on the pe side. i think some of this is shifting from cash, but potentially some areas where investors think they are paying high valuations. david: let's go to our third story, which is brexit. how long is this extension going to be? theresa may says we want a short one. donald tusk wrote a letter to his fellow people at the eu saying we should access -- we should discuss longer-term extensions. theresa may keeps asking the same question and getting the same answer. they say no, we are going to have a long one, which may mean her tenure. michael: the conservative cardi -- the conservative party is

getting tired of theresa may. this made that clear. does a very good chance they are going to dump her and move on. the question then becomes, move on to what? we will be talking about this for quite some time. it would probably take two or three months to organize an election. this becomes a campaign issue, and the second referendum because a campaign issue. we could be a long way a way from any kind of resolution. the only good news is the u.k. economy data was better-than-expected today, and now they will have some certainty for at least nine months to a cure that if this works out. alix: some of the headlines coming out, may says the u.k. government wants to honor the referendum result, and the best way to leave the eu is with a deal. good thing we know that. [laughter] david: at the same time, we've got kinsler merkel coming out and saying ash chancellor merkel

coming out -- we've got chancellor merkel coming out and saying you better get used to a long one. peggy: europe is saying we don't want a series of cliffhangers. and allows them to say we've got a new deadline, not just an extension and another extension. for consumers going into the easter holiday, this gives them a bit more certainty. david: what we are watching now is the prime minister questions time, going back-and-forth with jeremy corbyn with jeremy corbyn, her counterpart over there. it seems like she's spending an awful lot of time in question time. alix: german chancellor merkel also speaking, saying the u.k. must remain instructive in eu decisions until brexit, speaking to the bundestag before the eu summit. when you take a look at pricing risk, you mentioned saudi aramco .

is anywhere in the market pricing some kind of brexit risk? michael: no, and that is interesting. we've always wondered why they othert moving at all, but than sterling with its brief pops up and down, they've got a whole new set of options to price in the possibility of a second referendum. theresa may doesn't want it. the idea that they have to be constructive is kind of interesting because there is a among month some -- move some real conservatives over there to say we've got to stay theme eu, but let's block because we are mad at them. let's alltask saying and tusk- and t -- saying we've got to be nice. some breaking opec news.

32 million to some barrels a day, a staggering number -- 732,000 barrels of oil a day, a staggering number. david: it was basically cut in half. alix: and you are not really seeing the oil price were biked -- price respond to that so much. coming up, more on today's ecb scission -- ecb decision. this is bloomberg. ♪

♪ is "bloomberg daybreak." internalrtedly held talks on selling its hbo europe network. times" says no formal discussions with potential buyers has taken place. at&t acquired hbo in a deal for time warner. now the company is trying to reduce debt. wealthy investors are paying big premiums to buy word stock on private markets, valued at about $16 billion in some sales, more than double the valuation of last year. 's lack is asked -- slack is expected to list shares in june or july. bloomberg learning as soon as tomorrow, investors could get their first look at detailed information about uber.

this month the ride-hailing startup will kick off a road show. that is your bluebird business flash. alix: thank you so much -- you're bloomberg business flash. alix: thank you so much. who cares about profitability? [laughter] david: it would be a valuation of like $120 billion. alix: with that, who needs profitability? david: there was a report in the bloomberg that it may upset the s&p, people selling their stocks to buy over. alix: that makes sense -- to buy yber. alix: that makes sense. the euro area economy lost more momentum that expected. zoneroduction in the euro

was disrupted by new emissions standards. how does mario draghi address all of this? joining us from boston is megan greene, man u life chief economist. how it is mario draghi address that today? >> to be fair, i don't think he's probably going to address much of anything today. i think we will have to wait until ecb staff projections come out in june to see any real details on the tltro's the ecb has announced. ofre has also been the idea mitigating the negative impact of rights on banks, but that has split the governing council, so i think there's going to be a lot of debate before we get any details on whether tiered deposits are going to come into effect or not. david: what does this mean for global growth, if anything? can mario draghi affect growth? >> the ecb is pretty limited on

its tools and what it can do at this point. i agree that we are likely to see any new information out of the ecb. what we still won't hear about is anything about draghi's there's a lack of what they can do at this point -- replacement. there's a lack of what they can .o at this point europe has a slowed down more than many expected, which does make me nervous about what we can do if there is a surprise, andi am are optimistic certain other economies. david: do we think that europe is due for a rebound? >> i think there are certain elements of the slowdown that were temporary. we saw a pretty sharp reduction in exports from europe. we are assuming some of it is temporary, but we are not clear the last thing i

would say on that, the second half of the year you do have some growth acceleration, or at least stabilization. alix: which goes to your point, megan come on things they are not going to discuss. it mightb were to tier ease some of the pressure on banks, but is that a thing they should do? >> i do think that would be smart. i think that would help. will that turn european growth around? i doubt that. but i don't think the ecb will do anything about gross today. but they have the most powerful tool in any central bank's toolkit, which is the tltro's. thanks got paid the deposit rate if they borrowed from the ecb and lent to the private sector. they can unhook the tltro's from

the deposit rate. they could provide a tltro rate -150 basis points. they have a much better bazooka than anything like quantitative easing. i think they are the most innovative monetary development policy we've seen in the cycle. david: i'm going to put up a short that show pmi's for europe, china, and the united states, all trailing off. haven't interest rates been pretty low in europe already? is that really holding back growth? >> it has been more of a demand than supply issue in terms of credit, but that was the case for the first few tltro's, and yet somehow the pickup was pretty significant. i think the first few really turned around europe's economy. i think tltro's where the difference.

i am some pathetic to that argument, but if you make loans cheap enough, the demand us crop up. alix: if that is the case, that says to me that europe might not be a value trap down the line. other thing is loan demand is really weak. if we look at the u.s. 10 years ago, people saying why hasn't capex gone up. i think there's a little bit of a catch 22 here. even if you make loans really cheap, companies aren't going to borrow when they already have a lot of debt to invest in growth, unless you have demand for the products. i do think there is a risk factor of expecting to supply to solve the problem. i guess i would step back and say we recommend people recognize that the zip code of the headquarters doesn't tell you where the company operates. you can find really good investments in europe and globally.

you just need to know what the long-term profitability is. greene and ronald temple will both be staying with us. as we said earlier, theresa may said she was to have an agreement, and says the government position on a second referendum hasn't changed, but members of parliament could propose a brexit referendum, so she seems to be opening the door just a little bit. we looked into -- we will continue to cover that as it develops. coming up, aramco's blockbuster bond debut. what it means for saudi arabia and investors. that is coming up next. this is bloomberg.

♪ blockbusteraramco's bond debut is off to a great start, trading higher than sovereigns in the secondary market. the world of credit investing

is seeing an insatiable demand for guild. -- for yield. so when you couple the largest cash flowing company in the world with a bond issuance that pays a reasonable return, the credit investors flood to it -- flood to it. alix: is that how you understand the strong demand, as a search for yield? or something else? >> definitely i echo that also aen's comments, but bond offering at the world's most profitable company, that bond will also be included in so , so fixed income benchmarks a lot of investors have to own it. that is why you see some movement there. david: if you are a sovereign wealth fund, is this good news or bad news? this overwhelming subscription, is this saying this is a robust

market, or the world is really getting risk off? there's not a lot of real belief in a lot of growth. >> this is good news for wealth funds. it is a way where it is proving there is demand for government linked companies, and that these sort of bonds fit into a portfolio. alix: do you feel like this demand will cannibalize, or more, ipo's or bond offerings from the middle east. >> you did see an impact on the yield there, so it will increase -- [indiscernible]

-- whether it is from the government or corporate's. alix: thank you so much for joining us. later today, i'm going to be speaking exclusively to the only female ceo within the energy world, and one of the best are mere assets within the permian. they don't have a lot of wealth in the permian, but they have the majority of the best wealth in the permian. the energy industry doesn't have a lot of women ceos. alix: coming up, we speak to rick mcveigh, market access founder and ceo, about the demand for bond trading. this is bloomberg.

♪ alix: this is "bloomberg daybreak." we snapped an eight day winning streak for the s&p yesterday, yet you do have a bit of a risk

on feel in the markets. s&p futures up by 3/10 of 1%. we also have some positive news out of the u.k. gdp rose in february. maybe this first quarter will not be as bad as we thought. mario draghi,. dovish to the rescue. and the bond market, that leads to a weaker dollar story as the bond market pre-much goes nowhere. haveuestion i continue to is what is actually priced in? how much more dovish can mario draghi sound? will that justify the market or disappoint the market? david: there's not a lot you can do. alix: tune in. nothing is going to happen. [laughter] david: if something does happen, that is going to be big news. viviana hurtado is here with the first word news. viviana: british prime minister theresa may could face a backbench at home

after her request for a brief exit delay has been rejected. eu leaders could postpone a departure for up to eight year, one more political defeat for may. isorney general william barr investigating claims of anti-trump by s at the fbi and u.s. justice department -- anti-trump bias at the fbi and u.s. justice department. republican lawmakers claimed the russian investigation was tainted at the start by officials opposed to the president. carlyle group expects the u.s. and china to sign a trade deal by this summer. the private equity firm says it is long-term bullish on the chinese economy. the ceo says the trade dispute has not had a material impact on the firm's businesses. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: big banks, beware.

this is a rise in electronic markets for corporate credit pushing out the banks that have been in the middle of those deals for years. joining us now to discuss is richard mcveigh, the founder and ceo of market access. lp has ar, bloomberg bond trading platform of its own. good morning. the idea is equity has migrated to electric bond trading. what do you notice in terms of growth and how much trading is happening on your platform? guest: fortunately the growth is now very evident. we've been a public company now for a very long time, but over the last 10 years, what of the fastest-growing financial services companies in the public rockets in the u.s. -- in the public markets in the u.s.

out, we are starting to follow the path of other asset classes as it also starts to move towards all tall trading. alix: what percentage? guest: if you look at our largest market in u.s. corporate bonds, we've been running around trading9% secondary reported to trace. within that, about 30% of our volume is done through all to all protocols. david: are there structural limitations on how far it can go? other people in the markets say stocks are different from bonds. there's a whole community to's to stocks thaty bonds don't have. guest: where we see the limitation is on highly seasoned

verythat don't trade often, and the investor trying to move through the market. i believe the large banks are secure in their position and will continue to have a role in intermediation. topmarket share for the five banks has stayed pretty constant over the last five years. the problem is the lack of depth and breath in liquidity beyond the banks. david: has a position of banks been undermined somewhat? guest: as you know, the capital requirements went way up for the banks post regulatory reform, so it is much more expensive for them to maintain risk on their balance sheet. so they delivered their balance sheet -- they deal ever -- they sheetsd. their balance

alix: have you seen anywhere in the bond market where this has been tested? guest: the fourth quarter was a really interesting test because it was a risk off environment, and high yield spreads were blowing up through the fourth quarter. we set new records in all to all trading. we delivered the highest quarterly savings to our investors ever. gets even more challenging, it adds even more value. our chinese bonds included? guest: we would expect to add chinese bond trading to our global platform soon.

there is a new form of liquidity for the bond markets. namedmanagers can now their own price. if there is a bond that fits a portfolio manager's needs, they can name their own price taylor: that is new taylor: -- their own price. that is new. . they can trade with anyone around the world. most, and arguably important, the all to all environment allows new bridges meant to come into the environment and compete. that is new capital and new liquidity entering the space. what kind of sizes are the traits that happened on your platform? guest: there's a whole range of trade sizes that go through the system. we do plenty of block trades through the day, but the majority of electronic trades in the u.s. corporate market tend to be $5 million and under.

the average size for the home market is below $1 million, which speaks to the fragmentation of the market. what you are seeing, investors are getting more and more comfortable moving the trade size up. alix: really interesting. thanks very much. great to catch up with you. david: still with us, megan manulife and ronald temple of lazar. we had a fourth quarter that was this on trading, and maybe first not doing much better. how big of a threat is the automation of bond trading to be big banks? ronald: i think it has been going on for the last 20 plus years. i started in the 1990's myself, and you've seen a gradual evolution of the industry. i think you've also seen major investment banks take advantage of some of the electron of acacian to reduced cost -- the

electronification to reduce costs. if we look at the near-term earnings for the group, we firsttely have had a weak quarter. i'm not looking for anything terribly exciting this quarter come about what i think is interesting is zooming out and thing you get about the long-term prospects of these banks. i also think about the context of the congressional hearings today around banks. banks are much stronger than they were at any point during my career. precrisis come of the largest banks were levered 24 times 21 now they are about 12 to 13 times levered. the industry can go along with these trends. alix: it also begs the broader question, what kind of demand

are they going to wind up seeing. you've got people saying we are going to have a recession at some point. it sounds like a broken record. alix: in a downturn, the banks could have trouble. not only may they not be able to provide liquidity given the electron of acacian -- the if we getication, but a typical credit cycle, i think a downturn could be made much worse. i think any additional liquidity provisions we can offer would be really helpful in trying to mitigate that. ronald: i think megan is absolutely right. we have seen the banks pulled back quite a bit from having that liquidity. we don't know what their roles

will be in providing that, so that will be important to watch. again, it argues in favor of having other channels to the market. david: i can't possibly know where things are going in terms of the kutty. -- of liquidity. i do know there is a presidential election coming up, and the democrats are going to do the best to tell banks they are going to rein it in. banks i would agree that are in better shape than they have been in decades in the u.s. our banks are much healthier than european banks, but for banks to have to rein it in even more could be onerous in terms of regulation. that could also provide a headwind in the next downturn. alix: thank you. stay with us. coming up, we are moments away

from the ecb policy decision. markets watching what they will say about the slow down in the euro area. don't miss it. this is bloomberg.

♪ viviana: this is "bloomberg daybreak." coming up in the next hour, of u.s. bank's chief equity and global strategist. ♪ viviana: this is "bloomberg daybreak." a rare negative recommendation on apple. downgrading the company to

reduce from hold. he says it could take sometimes for the digital services apple announced recently could generate returns. of the analysts, only two say it fell. a class-action lawsuit against boeing over the 737 max, saying they put profit and growth ahead of safety and honesty. the 737 max had been grounded worldwide after two fatal crashes. that is your bloomberg business flash. alix: we are just about 45 seconds away from the latest ecb rate decision, with that press conference happening about an hour's time. the s&p snapping its eighth day winning streak yesterday, and now a little bit of a rebound. futures up by 2/10 of 1%. still a weaker dollar story. to be thes going

reaction function of the euro on -- thed of ecb news reaction from the euro on any kind of ecb news? crude participating in the risk on rally. bonds pretty much going nowhere. ecb leaves right policy unchanged at 40 basis points, and see them resin through at least the end of 2019. we thought it was going to be september. david: and continue to reinvest the qe debt for extended time after the rate hikes. david: for more on that we want to go to berlin for bloomberg's matt miller. what was a big surprise for you? reporter: so far i haven't

really seen any big surprises. we knew they were going to hold the rates steady through the end of this year. we didn't expect any change in the deposit facility. really come of the change we are expecting are just the language when they talk about the help they can give to banks that need , and anything on tearing. -- on tiering. if they even mention it today, it will be a surprise. i've talked to a number of analysts, we don't really expect that number to say much about tiering. there are a number of governors on the board who are firmly against it. david: there is something in the headlines that says they specifically make no reference to tltro's.

we don't expect them to have details in this meeting, but i think some market participants would like to hear about it at the press conference. pepper those questions at the press conference. banksttom line is some could be getting loans that they will be paid to accept. paid funding by the ecb. from the downgrades to the imf to the concern about a bigger budget deficits, they are going to weigh on the ecb and difficult to brush off in today's press conference. still with us are megan greene and donald temple.

-- and ronald temple. we talked earlier about these tltro's. if they are going to help, what are they waiting for? don't they need to help now? megan: arguably they don't need to be breaking the glass and lever. the emergency if you look at u.s. and euro zone inflation, it looks much better in the euro zone then in the u.s.. they don't really have to pull out all the stops, but if they do, i think tltro's are h -- our how to do it. matt that there will probably be a slight subsidy from the banks, although i think they are trying to wean the banks off of the tltro's. it will be a subsidy, but less so that the last one until we

get the real science of a downturn, and then we make it something more positive. alix: when we take a look at euro-dollar and rates, what is going to lead it? is it going to be the market in 2020,n two fed cuts or the ecb more on hold and looking at tltro's? is that theink it markets are too dovish about the fed. d markets have priced in with certainty one rate cut by the end of 2020, and i think there's two rate0% chance of cuts. i think the u.s. economy is stronger than the market implies. the dot plot still shows one more rate increase. it will be interesting to get the fed minutes to see what the discussion was in that last fed meeting about the summary of economic projections and expectations from the voting members. i think you are more likely to get the catalyst from that

expectations. they probably just pulled a little bit of a goldilocks. had they come out and announced incremental stimulus, the reaction might have been wait a minute, what are we missing? if they had done anything on the opposite side, it would have been very unwise. waiting until june might have been the right call. that we are going to get cpi data out of the united states. as you look at whether the market is too dovish about the it lookot, what does like from cpi and other indications of inflation? megan: i think core cpi will come and write about 2%, right around the fed's target. of course, inflation isn't the only thing the fed is looking at. unemployment is another figure, the jobs market which rebounded

in march. financial stability looking pretty strong. i think the markets have the fed wrong. i don't think there's much a chance of two rate cuts this year. the we will find out is why fed painted themselves into. a corner alix: at the same time -- themselves into a corner. , you havehe same time goldman stepping back because they were dovish. ronald: i am glad the fed actually backed away. when you go back, every speech was hawkish. i thought it was a risk to the economy, the fed going overboard on tightening. i just think the market is expecting cuts. i think the market is probably on hold. maybe there is a 35%, 40% chance the fed is finished with the rate cycle, but they are not

going to be cutting. it will be interesting to see any conversation in the minutes to see why the administration did a 180. but let it filter through. let those conditions air out a bit. of manulife greene and ronald temple of lazard, thank you. coming up here, we are taking a -- live from new york, this is bloomberg.

♪ clsa got bought by the big chinese brokerage firm. they got culture clash in spades. the ceo step down. the fellow -- stepped down. the fellow who was supposed to replace him stepped down. the head of research has stepped down. apparently they said they are going to save some money, and people don't like that very much. alix: when you wind up merging companies in the financial world, how does that work. if you merge them, how would those cultures even wind out playing out in terms of what you value? david: it is always a culture clash. we can talk about it with the bb&t acquisition as well. but they say they want to be as big its goldman sachs globally, that is a real corporate clash.

alix: and you have to wonder if it is a unicredit/commerzbank thing. regionals trying to buy cross-border. that is really interesting. david: i've seen it personally. it is the hardest thing. alix: how do you d integrate it, at the end of the way? david: partially because it takes too long and the rivals build up. alix: coming up on the program, deutsche bank's chief u.s. and equity global strategist. we are just about 40 minutes pressrom mario draghi's conference. this is bloomberg. ♪ want more from your entertainment experience?

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>> if you wish to leave, you may leave. >> i don't understand what you are saying. >> if this is the way you want to treat me, i will rethink whether i voluntarily come back here to testify, which i've offered to do. alix: congresswoman maxine waters and treasury secretary steven mnuchin exchange harsh words. we speak to missouri congressman maxwell cleaver. and no surprises, ecb keeps rates on hold. euro keeps cool. mario good draghi -- mario draghi's news conference on deck. david: welcome to "bloomberg daybreak" on this wednesday, april 10. we've already heard from the ecb. they are not changing anything. that puts the pressure on the news conference. alix: did we expect anything from tltro's? there is optimism that the ecb

will come in and help profitability for these banks. david: and you know at the press conference they will be asking him. i entered in the beginning of the press conference." we can do a drinking game on how many times he says that. in the markets, it was kind of a risk on as we head into the fed minutes as well. the s&p snapping an eight day winning streak yesterday, but now up. the euro holding onto its own, up by 1/10 of 1%. oil, opec said venezuelan output fell to 730,000 barrels a is falling onrket supply, not demand. what that could mean could be really interesting. david: it could be a quick turnaround. alix: something we are looking

oo, -- david: because we have no ammunition left from the central banks, it could last a lot longer time. in the meantime, goldman sachs say let's look at 12 months and take the odds down that recession will happen. alix: because of the fed. david: exactly. and giving up some of the ammunition you might use if there is a recession. it is time now for a morning brief. we will hear from ecb president mario draghi at his press conference following the rate decision that was out just 15 minutes ago. we also get u.s. cpi data for the month of march. at 9:30 this morning, ceos of major banks will testify before congress together for the first time since during the great

financial crisis. holdingnce committee is a hearing that it says is holding banks accountable. friday will be the beginning of earnings season with the banks, like jp morgan, reporting. for an overview, we turn now to bloomberg's taylor riggs. taylor: quite a bit of dispersion, like you said. first, within the year in targets for the s&p 500, a 900 point range between the low and the high target. on the upper end, eight bank -- deutsche bank's high-end target is 3250. yesterday the market closed about right on average for where analysts see closing.

earnings-per-share growth really should start to bottom out, most strategists are thinking. you are looking about a 9% drop in profits this quarter. that should rebound this year, and looking at a 15% gain in the first quarter of 2020. alix: thank you so much. a debate that goes on in the our earnings strong or heading towards recession? >> i think we will definitely have an earnings recession. >> we talk about the the possibility of an earnings recession. we are pretty close to that now. >> we are looking flat this quarter. we see small business optimism come back.

we see the consumer stay healthy. and if we see earnings in the right places, you want to see that kind of lift to the market, and that could catapult us further forward. >> if that recovery takes place, i think the fed is ok to do nothing. i thinkturns into an l, the fed will need to cut rates. >> i just don't think it matters. what will matter is that the gross margins in the back half of the year are not going to be good. alix: joining us now is deutsche bank's chief u.s. equity and global strategist. we have you as the biggest bull on the street. guest: i think there's a number of reasons to believe that. number one, what i would say about earnings and the first quarter are that the bottom of consensus sees negative earnings growth, so -2.5%. i think it is very important to

keep in mind that u.s. earnings tend to beat the average beat. that is pretty sizable, about 3.5%. you build that in and you are talking about typical earnings imply positive 1% earnings growth. i would argue none of that is really news. it is really about what is going to happen going forward. the two sets of points i would make is that, as we all know, global growth has slowed quite a lot. of course, if global growth starts to pick up, earnings are going to rebound break here. that ifalso point out andlook at q4 earnings drivers, u.s. the

areth, global growth, which earnings, we are well below what those drivers would have's just -- would have suggested. earnings slowed a lot more, to the tune of 5% or 6%. the big question is why did that happen. look over the last 20 years, you do get these sort of idiosyncratic increases and declines, but they tend to go .way there's a big drag for the dollar in q1. that should go out as the year progresses. david: first quarter last year was a tough one to compare it with. could earnings get a benefit just because the first quarter

has been strong? think it is really q4 of last year. you pointed out that the base lookrs a lot, but you can at seasonally adjusted earnings. -- in, wetle doubt look at a lot of of statistics like gdp and the like. therefore, as the year progresses, the fourth quarter number is going to be very favorable because the pace is very poor. david: thank you. coming up, wall street goes to washington. we speak with representative emanuel cleaver of what we can expect from big bank ceos appearing before congress for

the first time since the financial crisis. that is coming up next. this is bloomberg. ♪

david: the house financial services committee holds hearings today in which the heads of major banks will appear again together for the first time since the financial crisis. with us now is congressman emanuel cleaver, a democrat who represents-- who missouri's fifth district. let me ask you what the goal is for the congress, and for you specifically. a lot of banking analysts say this is more about headlines than substance. let me quote just from one.

"the main thing for investors to keep in mind is the hearing is likely to generate headlines for the sector, but unlikely to result in policy changes." is it about policy changes or headlines? all, andver: first of foremost, there is no human being who would intentionally avoid going to the doctor for more than a decade. in a sense this was a checkup. we should be doing these checkups at least annually. it brings all of the attention when we call the banks together, and many of the same critics would be all over us if something happened to the economy based on the failure of one of these banks that were regarded just too big to fail and say we weren't doing anything, we weren't monitoring them, we weren't giving the many

checkups. so it is a checkup. i don't think anyone is trying to get headlines. david: fair enough. so you see it more as the oversight responsibility you have. you aren't expecting real policy changes coming out of these hearings. rep. cleaver: no, i don't anticipate any policy changes. bigger,big banks are and a collapse would cause even greater problems. too think that we need question them about a better way in which they could deal with are too small to bank. for example, these banks are collecting aliens of dollars in service fees. i'm not suggesting they shouldn't be compensated for service fees, but they are racking in billions.

i think we need to find out many of the things they are doing now that cause a problem in the future. to fail to do this could result in catastrophic consequences. i think we are fortunate in many ways that we haven't had a problem since the bailout. i was here on the committee on the day we received the news we could be headed into a recession, maybe even a depression. so i want to find out what the banks are doing. david: you represent a good part of kansas city and have lived in that community a long time. would they be looking to these big banks like bank of america and goldman sachs are city banking, or is that more of a local and regional bank issue? rep. cleaver: i think we have a lot of people who since the great recession, went into the local and smaller banks.

we had tond, when collapse, we had roughly 70 have hundred banks in the company. today we have only about 5000. i don't want to go to the big banks. they don't know me. but the big banks are not going to get smaller, and frankly, some of the smaller banks are struggling because of dodd-frank. we put dodd-frank regulations on .ome of the community banks david: that is really helpful, congressman. thank you for your time. i appreciate it. --x: still was a sunset,

still with us on set, binky chan dha of deutsche bank. guest: i am long and overweight financials. the way i would put it is, number one, it is by far and away the cheapest sector in the .&p, and number two, our rates we've hade first time a scare in the economic recovery, and my baseline view is that's what it was, growth scare. we should turn back up. alix: do you have to have a steeper curve? do you have to have higher rates for that conviction? guest: for banks, no. theuld argue that it is rate that matters, not the yield curve. i would argue take some of the

k-sensitive s, and there is a very clear relationship with the level of rates rather than the yield curve. take the other end of the spectrum, take the financials, and the relationship is really much more with the level of yield rather than the slope of the yield curve. it is sort of the market price rather than the margin. keep in mind, the financials do a lot of things tied to the level of rates, not just the traditional interest margin. david: does the stance of the fed help or hurt? it appears it will be accommodative forever. what does it do to trading revenues and interest? isst: by long-standing view

a little bit out of consensus. it is that accommodative monetary policy not only in the u.s., but also europe and japan, that are really hurting. a normalization of , andest rates as a tax when u.s. interest rates were at zero, the tax was a couple of percent of gdp. if i look at europe, we are talking to percent to 2.5% of gdp. in japan it is about 4% of gdp. biggestsay the world's stealth tax we have seen ever put on. the market narrative is that this is stimulus. if i coded by another name, no one would call it stimulus. [laughter] with the value that

financials provide, it leads me to energy. energy is so cheap, and yet equities still cannot pace with the underlying oil price. i wonder if it is the same for financials. they are cheap, but the way you are going to value them is going to change. guest: energy is at the point of becoming interesting here, but it really depends on your view and where oil prices are going. if you look back over the last few years, energy has massively underperformed oil prices, and that is because if you go all oilway back to 2014, when prices collapsed, energy ,arnings tied to oil prices energy earnings were always pricing in that oil will be back

up to $80, $90 come at we still haven't had that level yet. stocksreading, energy are basically too expensive. we are at the point where it is becoming that valuation gap given the underperformance. the debate would be where our oil prices going to go, and i would say the most important is whetheril prices we get a decline in the dollar. david: financials and energy maybe an interesting valuation. is tech overvalued? guest: not by our estimates, and if it is, it is by two or three percentage points. when you are doing portfolio allocation top down, you don't pay attention to two or three or more. you pay attention to the bigger

disconnects. may fileming up, uber as soon as tomorrow for its ipo, which looks to be the largest u.s. ipo this year, and may rank in the top 10 of all time. this is bloomberg. ♪

♪ now for thetime bottom line, where we look at three companies worth watching today. delta came out with earnings that beat earnings-per-share, but also just as important, said they have some pricing power and see pretty strong demand right now for travel, which really gives them the ability to raise prices. their stock is up 2.7% or so in premarket. alix: let's hope they are hedging all of the jet fuel. i am going to talk about apple. hsbc lists apple as a cell. a sell only -- as a

rating. saying the new services will not entice new users to come into the ecosystem. david: the third company we are watching is uber, of course. with more, we have brooke sutherland. we have an ipo, i'm told. brooke: we are expecting to get more details targeting a may ipo. i think what investors are really going to be looking for is how do uber's financials stack up to lyft? is the growth rate sustainable? there's a lot of questions not only on the numbers, but on the

way uber defines some of these metrics. david: it is a lot bigger than lyft. brooke: a lot bigger. par with honeywell, united technologies, companies that have a lot more revenue and profits. it is also about double the size of gm right now. alix: you make a good point. that is a very good shift between the old and new economy. honeywell makes stuff, but uber is a services company. can these services companies that take a to get profitable placed the same type of that please that make stuff. these industrial companies, when you are in these

maturing growth markets, you are expected to put up some cash flow from that. alix: the question becomes, if there is interest in it, does that cannibalize from companies like lyft, or new money coming into the market? do you want to sell something else to buy it? is interesting because lyft ipo was oversubscribed. investors bought into that knowing that uber was coming down the pipeline. i don't know that you have to own one or the other. i think that is going to be telling as far as when we get the financials. who do you have more faith in? who do you believe is a little more transparent on the price front? alix: thank you very much. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. about 30 seconds away from the latest read on inflation.

equity future still in the green. the dax also climbing .4%. the ecb meeting did not talk about tltro's. in other asset, a weaker dollar story. from ating a nice boost tighter supply and tighter market from opec. the cpi dropping right now. year on year basis better than estimated. if you back out food and energy year on year, it comes in right at 2%. staying in line with what the fed is targeting. you also have a month-to-month asus of .4%. energyit looks like an will be supporting. joining us is michael mckee and still with the good -- and still with us is pinky china. hadha.ky c

michael: it does put a floor on the numbers. we feds idea is eventually will feed into the core. that does not seem to be happening. as long as they can accept the fact they will not be raising rates and the markets will believe them. then this is a neutral number. aside from the fact they are on hold and will not be doing anything for a while. one inflation number is not going to change many people's views. alix: it matters if the central bank thinks it matters. the dollar index still at the lows for the session. fell 1.9%, the largest of 1949. they change the calculation for apparel prices. change -- they used

to go around and people would shop and look at the prices. in this case they have made a deal with the department store. and they'rex, putting in all of their computerized sales into the system. prices will be measured. there's a feeling that the old system did not catch sales. alix: interesting. binky: i would say two things. it is important to keep in mind -- we will that start the ecb meeting and a second about monetary policy and what it will do for inflation. then you look at the pce, a lot depends on how we are measuring points of inflation. it is not clear to me that that

is what monetary policy should be aiming and spending massive amounts of stimulus to try to generate when it depends on -- the smallcratic things have a large impact. alix: thank you very much. cpi coming in lighter than estimated year on year. we do want to head over to frankfurt. mario draghi holding his news conference. let's listen in as he describes growth. mr. draghi: at least through the end of 2019. in any case, for as long as necessary to ensure the continued sustained convergence of inflation to levels below but close to 2% over the medium term. we intend to continue reinvesting in principle

payments from maturing securities purchased under the asset purchase program for an extended period of time past the date or we start raising the key ecb interest rates. in any case, for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation. standserning council ready to adjust all of its instruments as appropriate to ensure inflation continues to move toward the governing councils inflation aim in a sustained manner. termsles on the precise -- details on the precise terms of targeted long-term refinance operations will be communicated at one of our forthcoming meetings. in particular, the pricing of three operations

will take into account a thorough assessment of the bank based transmission channel of monetary policy, as well as further development in the economic outlook. in the context of our regular assessment, we will also consider whether the preservation of the favorable implications of negative interest rates for the economy require the mitigation of their possible side effects, if any, on bank intimidation. the information has become available since our last meeting confirm slower growth momentum, extending into the current year. there are signs some of the idiosyncratic domestic factors

dampening growth are fading, global headwinds continue to weigh on euro area growth developments. uncertaintiese of related to geopolitical factors -- protection and vulnerabilities in emerging markets are leaving marks on economic sentiment. furtherame time, employment gains and rising wages continue to underpin the resilience of the domestic economy and gradually rise in inflation pressures. however, an ample degree of monetary accommodation remains necessary to safeguard favorable financial conditions and support the economic expansion and thus ensure inflation remains on a sustained path toward levels that are below but close to 2%

over the medium term. significant monetary policy stimulus is being provided by our forward guidance on the key ecb interest rates, reinforced by the reinvestment of the sizable stock of acquired assets , and the new series of tltros. let me explain our assessment in greater detail. starting with the economic analysis. 5.2%area real gdp rose quarter to quarter in the fourth -- rose by .2% quarter to quarter in 2018. incoming data continue to be week, especially for the manufacturing sector, mainly on account of the slowdown in external demand, which has been compounded by some country and

sector specific factors. as the impact of these factors is turning out to be somewhat longer-lasting, the lower growth momentum is expected to extend into the current year. the effect of these adverse factors is expected to unwind. the euro area expansion will continue to be supported by favorable financial conditions, further employment gains, and rising wages. , albeit somewhat slower expansion in global activity. the reasons around the euro close -- the euro growth outlook remained tilted to the downside, on account of the persistence of uncertainty related to geopolitical factors, the threat of protectionism, and vulnerabilities in emerging

markets. according to euro stars estimate, euro area annual inflation was 1.4% in march 2019. after 1.5% in february, reflecting the decline in food, services, and industrial goods price inflation. on the basis of current futures , headline oil inflation is likely to decline over the coming months. measures to underlie inflation remain muted. labor cost pressures have strengthened and broadened and make high levels of capacity utilization and tightening labor markets. looking ahead, underlying inflation is expected to increase over the medium term,

supported by our monetary policy measures, the ongoing economic expansion, and rising wage growth. turning to the monetary analysis , growth increased to three in january.m 3.8% looking for volatility monthly flows, growth continues to be backed by bank credit creation, notwithstanding a recent moderation in credit dynamics. the narrow monetary aggregate remained the main contributor to money growth. the annual growth rate of loans to nonfinancial corporations rebounded to 3.7% in february from 3.4% in january, reflecting a base effect. looking through short-term

volatility, the annual growth rate of loans to financial corporations has moderated in recent months, reflecting the typical reaction to the slowdown in economic growth. at the same time, the annual growth rate of loans to households remained broadly unchanged at 3.3% in february. the euro area bank lending survey for the first quarter of 2019 suggests overall, bank lending conditions remained favorable. measures,ry policy including the new series of tltro's we announced in march, will help to safeguard favorable bank lending conditions and continued to support access to forncing, in particular small and medium-sized enterprises. cross check of the outcome of the economic analysis

with signals coming from the thatary analysis confirmed an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation levels that are below but close to 2% over the medium term. to reap the full benefits from our monetary policy measures, other policy areas must contribute more sizable he to raising the longer-term -- more sizable he do raising the longer-term growth and reducing vulnerabilities. the implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural employment, and boost euro area productivity and growth potential. , theding fiscal policies expansion a euro area fiscal stance and operation of

stabilizes -- stabilizers are providing support to economic activity. countries were government debt is high need to continue rebuilding physical buffers -- fiscal buffers. theiries should enforce efforts to build a more growth friendly composition of public finances. likewise, the transparent of thestent employment european union's fiscal and economic government framework over time and across countries remains essential to bolster the resilience of the euro area economy. of theng the functions economic and monetary union remains a priority. the governing council welcomes the ongoing work and urges further specific and decisive steps to complete the banking union and the capital market union. we are now at your disposal for questions.

>> mr. president, you mentioned in the context of regular assessment you will consider whether the preservation requires medication of possible side effects from negative rates. you made comments to similar events at the conference recently and it has marked other speculation you might be on the cusp of introducing a tiering system. i would like to let you know -- i would like you to let us know whether that is on the menu. you also mentioned we will get the pricing of tltro's in the forthcoming meetings. we saw the bank lending survey yesterday. in your assessment, in terms of the loan growth and loan demand, does it give any indication for the conditions that could underpin the incentives for the

next tltro? thank you. mr. draghi: to the second question i would answer it is too early. if you read the statement i just we give the -- the governing council gives the criteria upon which this twossment for the tltro's and tltro's three and the mitigation of possible side effects will take place. the conditions under which the analysis would be carried out, and it is does give conditions. we take into account a thorough assessment of the bank-based admission channel monetary policy as well as further developments in economic outlook. we are looking at both things. right now, it is too early to decide about both. i would say the governing unanimous it is not

-- but there was consensus on the need for further analysis on both issues. that is -- that includes the first question. and the way we look is well specified here. we look at the functioning of the financial intermediation channel, the assessment of the bank-based transmission channel, as well as further developments in economic health. we have to see how the economic outlook will turn out between now and the next monetary policy meeting. way, we will be having the new projections. thank you. >> claire jones, financial times.

there seems to be a marked deterioration in the five-year on five-year inflation swap rate that suggest markets are being more concerned about your ability did the inflation target. in the past, the measure was a trigger for the expansion of qe. how concerned are you about this this time around and how would you intend to react the fall continues -- the second topic, we have had remarks from the u.s. president saying he will impose tariffs on european goods. to what extent are you concerned by these remarks and does it represent a serious risk to the eurozone economy if this comes ?bout your first question

points to the continued deterioration of inflation expectations over the last several months. we had quite a substantial analysis of why this is so. the sliding of the five-year inflation expectations corresponds to a deterioration of the economic outlook. that asso quite clear the economic outlook, especially economic activity slows down, also markets expect less pressure in the labor market. we've not seen that yet. have underlying strength in , and so we analyze

why this is so. the answer is expectations have deteriorated predominantly because of risk premium, or negative risk premium. this is a big difference with 2016. you may remember in the early part of 2016, we had a similar deterioration of inflation expectations. at that time it was not because of risk premium, but it was a real danger of the anchoring. this is good news in the sense expectations are responding to the economic outlook. however, this increasing the negative risk premium might reflect either that market perception that we do not have instruments, and i think we have shown where plenty of instruments. it anything the market reaction to my ecb watch shows we have

plenty of instruments. demonstratedon that markets have fully understood our reaction function. thatecond possibility is the markets may think the governing council will tolerate being lation without deanchored. let me dispel any impression. we remained committing to returning inflation to 2% without undue delay. let me point out another aspect of this. implyflation aim does not 2%. can deviate from our objective in both directions so long as the path to inflation

converges to our medium-term objective. the second question is about the threat of tariffs from president trump to the europeans. we listed the threat of protectionism as one of the potential factors dampening growth in the euro area. this is not different from this viewpoint. we have to see what happens. ,s you've seen in the past between words and deeds, there is often a golf. -- there is often a gulf. even the fact that these threats are being invented with frequency -- are being vented with some frequency has undermined general confidence. there is no question about the fact that one of the reasons for the general weakness in the eurozone, but i believe also

elsewhere in the world is due to weakening that has come from various threats, various vulnerabilities. a combination of effects. also from these threats of protectionist measures. >> am i correct to assume that you did discuss the precise terms of the tltro at today's meeting? the reason i ask is because the june meeting would come just days after you have a new chief economist on board, and much of the preparatory work would have to have been done by a predecessor. you see the governing council putting up any decision on tltro until july?

tieredquestion on the rate deposit issue. did you discuss the merits of this at today's meeting? might we see this on the agenda during your tenure? mr. draghi: we certainly welcome philip lane. he is a great addition to our team. that we put our calendar decision-making on who will be on board or not. let me separate the things. you asked me whether we discussed the tltro. we did not. i said this in the beginning. .e will discuss it details on the precise details of targeted long-term refinance operations will be detailed at one of our force coming meeting.

the pricing of new tltro's would -- i gave youunt the criteria before. merits not discussed the of mitigating measures. i do not want to identify them with specific words and i never did. process where we will analyze all measures, and specifically the two i mentioned in the introductory statement. this analysis is based on the two criteria. that is it. we need further information. further information will come to us between now and june. in a sense, the projections we have in june by the staff of the ecb will be an important part of this information. >> having said that -- mr.

draghi: having said that, philip lane is a fantastic addition to our team. another question for me on the issue of deposit rates. perhaps you can comment on the numbers, which have been given by the head of the german banking association. he claimed european banks are at the --vantage as of vis-a-vis the american banks. the european banks pay around 1.5 ilion on the negative on the -- 1.5 billion negative deposit rates. calculated a $50 billion difference. that is a big his advantage and a drag on the european banking system. what is your reply? mr. draghi: i take note of the -- we asked ourselves how

much is overall profitability of banks being affected i the negative -- by the negative deposit rate? process oflly in the carrying out this analysis. if you compare profitability of our banks. we are talking about large aggregates, to the point of it being meaningless because the way this negative deposit rate affects different banking institution is very different. banks are profoundly different between their business models. in the aggregate, we see the profitability of eurozone banks is by and large like the ones in , higher than in the u.k.,

where there is no negative rate, and lower than in the united states. ecb of course, i did see my speech we look at this, we look at as it says here, we also consider whether the preservation of the favorable implications of the negative rates. ecbmarket reaction to the thath basically made clear markets understood our reaction function and says favorite implications of the economy require the mitigation of possible side effects. we look at that. >> mr. draghi, your forward

guidance has been clear. you never articulated any conditions that would imply a change in that forward guidance. can you give us any clarification on that, particularly on the downside during also, have there been any discussions about whether, if there is a resumption of qe, would equities have to be part of that program, given the limits on bond buying? mr. draghi: to the second question, we have not discussed that. what the governing council did outlook, to assess the which is a weakening -- a toture of weakening growth rate confidence in the inversion of the inflation path based on a series of factors. then reassert and raise the rate

-- and reiterate the readiness to use all possible instruments necessary to cope with the contingencies that, head -- that come ahead. this was, i would say, unanimous. this deliberation to use all of the instruments -- i did say something at the beginning. this is not the right time to to be i do not like this instrument or i would prefer another one. we are not yet their. -- we are not yet there. once we are approaching that point with the information coming about the economy and inflation, we will be better positioned to see whether further action is needed. let's not forget that our indeed guidance has

automatically responded to the ,eakening economic conditions and let's not forget if this forward guidance is chained with the horizon over which we carry out their repurchases of the as you see it says, we tend to continue reinvesting in full the principal payments for mature and securities purchased under the asset purchase program thean extended time passed date when we start raising the key ecb interest rates. whenever the date where we raise ecb interest rates moves forward , so does the horizon over which we undertake the purchases. as long ases, for necessary to maintain favorable liquidity conditions and a degree of monetary accommodatio