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tv   Bloomberg Surveillance  Bloomberg  April 3, 2019 4:00am-7:00am EDT

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francine: theresa may asks jeremy corbyn to help with brexit trade talks in crunch time, u.s. and china resume negotiations. stocks advance. and carlos ghosn could reportedly be arrested again in us prosecutors in tokyo alledge a breach of test -- trust. ♪ francine: welcome to "bloomberg: surveillance."
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good afternoon if you're watching from asia. these are your markets. for the moment, this is what we see 0.7%ng at, you can higher. looking at pound, is up for the third day in a row. at 1.392 and futures also pointing to a higher start. this higher optimism is coming from reports that the u.s. and china will be able to reach a better deal. and the euro area of march services pmi coming in better than expected, 53.3, instead of what we were expecting, 52.7. coming up, we'll speak to banko santander's executive chair. don't miss that interview. from 3 p.m. london time.
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>> the report says he consumed be arrested on reports of allegations related to an improper payment. the global economy is in a precarious position. christine lagarde says there is a quote synchronized the celebration around the world. but that a recession is unlikely in the near term. of that sentiment, slashing global trade growth forecasts. >> those uncertainties are holding back investment so on and so forth. the investment dampen the numbers for trade. to a largest that, u.s.-china extensions are the main source. >> algeria's president has resigned after weeks of mass protests and growing pressure. of the opece thrust member into uncharted territory. it is not clear if his
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resignation will be enough to call demonstrators. crowds in algiers are celebrating, chanting quote this is a start, but there's more to come. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine, back to you in london. francine: thanks so much. theresa may is signaling a change to her strategy. the prime minister is abandoning efforts to build support in her own party, instead reaching out to the opposition leader. the move drew criticism from supporters in may's party who fear it will lead to a closer future relationship with the eu. they also said they will need to seek an extra delay. we'll get more from our u.k. government team. and joining us for the first half hour, chief executive at suez wealth management. stewart, there's so much to ask
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you, so little time. first of all, this feels significantly different, and yes, the prime minister had already done overtures to jeremy corbyn. will he call for a second election or try to help her out? it will be different -- difficult for jeremy corbyn to navigate through this. in a certain way, you can see the parliament numbers being the way they are, the prime minister feels there is no option right now, other than to reach out. from the labor position, how to is tote this policy pursue a general election. there is an opportunity to say that we will not help out at this late stage, therefore trying to push the election. on the flipside, they can be blamed if that scenario for not stepping up, not coming to a consensus. when, in their manifesto, they
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did promise to deliver. it is a difficult navigation for the labour party. do we know that theresa may does not want a no deal under any circumstances? >> i think the indication yesterday is that she will do everything possible to avoid a no deal. that is part of why we have seen brexiteers coming out fairly angrily since the speech, saying why are we giving up the idea of leaving without a deal? some are saying that just this morning. it is quite clear that her leaning is to avoid this no deal and come. of all, for an economist, how much do you look at these politics? it seemed like she had no other choice, but it does not necessarily mean that we are wiser. politics is definitely an
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essential ingredient of any economic analysis. you know, it is just so sad to watch. this is the fallout you get when you lie to the population about these unrealistic economic expectations about how the country could possibly get stronger by cutting itself off from others. clearly, there is definitely more economic growth where people and countries work together, rather than when countries tried to cut themselves off. there is ample evidence of that, from everywhere in economic history. how we can even entertain the fantasy that that could be the case is a mystery to me. francine: if you look at brexit, what are the chances of a no deal and what does that mean for the economy? marie: a no deal brexit would obviously be extremely that. -- bad. can alreadythat, we be impressed that the u.k. has not already fallen into a recession. that is a positive, the
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performance has been more resilient than one could have expected, given all the uncertainty. but there is every chance these numbers will deteriorate, if indeed we crash out without a deal. in any case, there is just no way the economy can do better with fewer, with a smaller global market, right? in any case, there is a significant opportunity cost for the u.k. economy. francine: if theresa may and jeremy corbyn don't find a way forward together, would be very elegant for theresa may to blame jeremy corbyn? what are the chances of a general election? suspicionere is a that, at the end of the day, that is what this is all about. reaching out to form a consensus while, at the same time, holding it in the back pocket that if we
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are in a general election, the conservatives will be trying to blame later for how this has played out -- labor for house has played out. they'll be a tentative attempt at this, at least in the early stages, to reach a consensus. there is always this general election risk in the background that the parties are preparing for. francine: there are so many if's and we are a week away from the second part of that line. are we going to see a long extension, or theresa may be able to get her way, another extension? obviously, the eu will make the final decision on the length of the extension, whether there is an extension. there is also this parallel track within parliament. parliament is trying to legislate to perhaps call for a longer extension. but there are a lot of variables
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that will play out. one thing we do know is that the government wants to be able to go to the eu within the next 72 hours. how it plays out will be very rapid and there will be a lot of moving elements to this. francine: thank you both for joining us. stay with surveillance, plenty coming up. trade talks enter crunched on. -- crunch time. can the u.s. and china strike a deal? and later on, we speak to santander's executive chair ana botin. this is bloomberg. ♪
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♪ francine: this is "bloomberg: surveillance." but get straight to the bloomberg business flash. probing what are may be one of the biggest money laundering scandals in history. but years ago, low-level bank employees were already sounding the alarm. bloomberg learned that compliance workers with deutsche bank flagged suspicious transactions that is reportedly some of the money he banks u.s. subsidiary handled for the estonian unit of danske bank. santander is targeting cost cuts of over one billion euros a year. this comes as the lender holds its investment today in london, announcing they will invest more than 20 billion euros in its digital and tech business. later on, we will speak to the executive chair ana botin. is reportedly nearing an agreement with u.s.
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authorities over allegations the bank provided services to iranian clients, in violation of u.s. sanctions. bloomberg has learned the deal would cost the italian lender about $900 million, but spares it from criminal prosecution. that is the bloomberg business flash. francine: thanks so much it is crunch time for u.s.-china talks, resuming talks in washington today. they have reportedly resolved most issues, but are yet to agree on what happens to existing u.s. duties on chinese good and the terms of an enforcement mechanism. so can they actually hammer out a resolution? joining us now is our chief asian economics correspondent. first of all, can we have this resolved? all accounts, we are getting into the business end of the stocks now, no doubt about that. , both sides said they
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had made some progress. they went through a potential agreement line by line in a bid to get an agreement they can handle up to the presidential level. all indications are that talks , but it will be critical to see if they can get across these final remaining contentious issues and get closer to signaling a firm deal. if not, the risk is they hit a roadblock, and of course, we see a reversal. enda, what are the main stumbling blocks? the critical issues remain, according to our colleagues in washington, concerns around enforcement. whatever deal is made, the u.s. wants to be a to go in and ensure that china is living up to their side of the bargain. it is not just an issue of making promises, but critical that they execute.
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of course, there is the issue of the existing tariffs placed on chinese and u.s. goods. this is something the chinese are pushing in particular. they want something like a reward for good behavior for meeting their end of the bargain. those are some of the issues that are on the table in these current negotiations. it sounds as though they had been progress in other areas. china is willing to buy more goods and there have been concessions. to see if weitical get a positive signal from these talks in washington. francine: thanks so much, bloomberg's chief asia economics correspondent. still with us is our guest. where do you see this going? are they going to find a deal? against --ood guard i would guard against any joy associated with the straight talks, because i think it will only be surface later.
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perhaps not regarding china, perhaps regarding europe or japan. i think that recent statements from president trump on the mexican border sort of supports my argument, that we might indeed get some good news, but to think of the trade issue is going to go away from a market perspective would be too optimistic. francine: what does it mean for europe? president trump find a deal and then go after german carmakers? marie: that is entirely possible. now, since the midterms, the president does not have as much legitimate power since he doesn't hold the majority in the house of representatives. the two delegated authorities the president has from congress is trade in foreign policy. i think that this president will exploit his freedom to the full for the time he is in the white house. francine: is there anyway europe
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can fight back? marie: i think that everybody can fight back by grouping together, and little reference towards brexit. if the other countries grouped together, they can obviously promote free trade without the u.s.. this is a funny contradiction in the u.s. policy, but in a sense, it is encouraging other countries to do more on their own and this trend is already in place. other countries trade much more with asia today than they did in the past and every is less dependent on the u.s.. francine: this is at the margins , but a lot of these trade deals take time. but if tomorrow, or in two months, the u.s. putting tariffs where doesgermany, it leave european economics? marie: there is no doubt that, on any level, few things can
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threaten the business cycle in a country or in the world as trade can. just to give some numbers on that, in the 2008 prices trade volume fell by 10%. in the great depression, trade lines fell by 60%. at the moment, we're still seeing growth in trade volumes, perhaps around 2% down from 4% in 2017. it is still positive, and should flip into negative territory, then yes, we have to think of recession. francine: given what we have just said on brexit and tariffs, what is the likelihood of a euro wide recession? marie: it is low, primarily because inflation is still so low. this is an issue where we have a funny conversation. because of the mandates central he had to, they said extend inflation, but it is obviously better to have 1%, because it means that much of a bigger increase in real wages.
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as long as inflation is low, we can get real wage influence -- increases. as long as the purchasing power increases, it is hard to forecast a recession. francine: unless you are like japan, which will talk about next. up next, america's rough patch. look at the recent lull in economic activity stateside. this is bloomberg. ♪
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francine: this is "bloomberg: surveillance." as we approach friday's job report, let's take a look at what some of our top guests. are saying ubs's paul donovan says that in some sectors, the problem is that there are not enough workers to higher on the nonfarm payroll growth. suggests to expect job growth to decline yet a declining trend in job growth. thornton, employment is bouncing back seen gains driven primarily by health care professional services. while others say to expect a more normal lumbar, probably just below 200,000. and citibank points out that we can expect the march employment data to rebound towards the average of these readings.
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so, this is what you do on your bloomberg terminal, at your voice to the debate. .un whis alternatively, you can message your comments. -- marieh us is mary owens thompson. where are your concerns about the u.s.? marie: in terms of monetary policy, i find it difficult to think that the fed has abandoned its tightening bias, or that they have said to themselves they have totally complete the mission of hiking rates. the economy is still growing above potential and the unemployment is near historic lows. francine: should we worry about
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concerns outside of the u.s. impacting the u.s. and looking at a global slowdown? like the inverted yield curve is actually showing us. perhaps the inversion is not necessarily large enough yet to be conclusive, and it has obviously been engineered by the fed's rate hikes. so personally, i would not read too much recession signal into the current inversion i think that, in general, we tend to underappreciated the strength of thisconomy, particularly is a problem when we look at the annual allies to numbers, which is how the u.s. publishes their gdp numbers. 2019, theps in q1 annualized number 31.1%. -- could be 1.1% and if i'm not mistaken, i think that 1.1% what equates to 2.1%
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year on year. if you go on the annualized numbers, you're seeing a sharp slowdown. if you go year on year, you're seeing an acceleration. this is creating a lots of confusion and making it harder to understand what the fed is up to. francine: marie, thanks so much. up next, global stocks rally and european stocks joined the party after the msci asia-pacific heads for a six-month high. will bring you the very next latest -- the very latest, next. this is bloomberg. ♪ the biggest week in television is almost here.
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xfinity watchathon week. free starting april 8th. boop! economics, finance, politics. this is "bloomberg surveillance." is get to bloomberg first word news in new york city.
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branch -- knowledge an olive branch and a possible way to prevent the deadlock and keep the u.k. from crashing out of the eu without a deal. this moves open the door -- move opens the door and could see the u.k. stay within the eu customs union. trade talks between the u.s. and china resume. of both governments are pushing for an agreement to end the ongoing dispute. the financial times reporting the u.s. and china have not in greed -- agreed on terms of enforcement for the trade deal. has beenlty sensor linked to last october's deadly crash off the coast of indonesia. bloomberg learning it was repaired in a florida aircraft maintenance facility before the tragedy. pilots struggled with erroneous signals and the sensor in the run-up to the crash according to
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a preliminary accident report. beennese woman has arrested for unauthorized entry at mar-a-lago. she was carrying two passports, for mobile phones, and lied to a secret service agent. told officials that she was told to speak with a member of the term family about u.s.-china relations. and your avocado toast just got more expensive. mexican avocado prices surging the most in a decade as buyers weigh the latest rhetoric from president trump, threatening to with mexico.der mexican avocados make up 75% to 80% of u.s. consumption. mobile news powered by 2700 journalists in more than 120 countries. this is bloomberg. we are getting a little bit of data out of the u.k.. march services pma falling to
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51.9 versus 54.3. if a is rally in asian equities that pushed the index to a six-month high. . little bit underwhelming can stocks maintain their gains? the managing director at goldman sachs private wealth management is our guest. the event hosted by goldman sachs had a combined net worth of $45 billion. great to have you on the program. at 70% are looking politics and they may choose to ignore it. what do clients ask of you? question iscommon around the luxembourg global extension for the last decade or so and when recession is going to come. markets were severely rattled in the fourth quarter even though
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we recovered those losses in 2019. there are fears of a slowdown and clients are understandably asking how they can weather that. the views on private wealth management is really relatively constructive. therebelieve that while is a slowdown, slowdown does not equal recession. especially in the u.s. and europe, we will see a round trend for global growth. slowdown does not equal recession. the risk of recession has gone up. it remains relatively modest at 15% to 20%. francine: economists have been very better predicting recessions. i don't know if it's the inverted yield curve or something else you guys are looking at to give us the first of something the tory us in the global economy.
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>> clients are trying to look at a mix of both, as are we. but it is actually difficult to predict the timing of that. with the portfolios that we try we will be able to weather the beginning of the recession. it is difficult to time that reduction in risk and even more difficult to pick the point at which things feel deeply uncomfortable, when is the right time to go back and add risk? to of the analysis points the power of staying invested. do your clients ask you about monetary policy or brexit? asking about all of those things. years,over the last five
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there is a strong bias overdeveloped markets versus emerging markets. robustness of the depth. it has served us very well. within developed markets, we have had a strong preference for the u.s.. it has served us very well. we are hearing a lot of backwards and forwards with the president saying i'm stuck with jay powell but i can't change him. >> when we look at equity markets, we do prefer having that allocation. this long-term wealth planning is really around diversification. weightning a strategic at the moment in order to not time this impending recession, but having enough money to
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navigate those bumps in the road. we advise having that portfolio. as long as you have that, even if we aren't correct in ofdicting the exact point the recession which we see as relatively modest, that portfolio will remain intact. and you don't have to give up the opportunity cost of trying to climb that recession. >> is there a difference in timeline for the way the business is really look at the there is a slight difference in terms of appetite for risk. but you know, this is really a bespoke process for all of our private clients. we use our internal
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infrastructure and the resources we have internally to make sure that each of those clients have a this book portfolio. we are talking about the great initiatives that you are putting together. i think you have been a goldman like 18 years? >> 21 years. francine: do you see women investing more? do you see more female head of offices, investing money and coming into the market? >> absolutely. the theme ofon women not just controlling wealth by generating wealth for quite a number of years. we had our third annual women in wealth forum. what is interesting about the cross-section of women is heads a family, offices, entrepreneurs, tech, fashion, the arts. convene andr us to
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find a way to create a community and talk about some of these technicalsions, and content. they are hungry for technical content and i think they want to be part of an ecosystem. strengthening relationships with that community -- francine: i remember christine lagarde saying that if lehman brothers were lehman sisters, it would have gone differently. >> we did a survey in the u.s. in 2017 and asked both male and female advisors to canvass their female clients and see what observations came out of it and it was really very interesting. 88% of the women were over the age of 50. investment to medium expertise. even if women begin their theycial journey there,
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are very methodical consumers of financial products. they really embark on a process with their advisor to really understand. they are very educated consumers of it. we found from that survey that only 10% of the discussion was investment related. alongside that of the demand for qualitative content, wealth planning, estate planning, generational wealth transfer. it is an interesting dynamic that we came to be in front of. francine: i hope this is the first interview of many. -- managingt director of private wealth management at goldman sachs. looking forward to our interview
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next. to theill be talking executive chair from the banks investor day in london. don't miss that interview from 3 p.m. london time. this is bloomberg. ♪
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this is bloomberg surveillance. i'm francine lacqua in london. envelopeus on the ftse set to enter bull market territory today, rallying 20% from its low point. with ongoing political uncertainty, what can investors inspect -- expect? my next guest is a securities regulator. welcome to surveillance. great to have you on.
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aboutl, we talk a lot turkey, brexit, and political uncertainty. what makes you worry for the next 12 months? >> good morning. what is your biggest risk out there for europe and italy? actually, we have a moment in europe and in the eurozone. actually for the president of the ecb. we have to week that think about the raising of interest rates. especially as it is related to a situation where you have a negative interest rate and a
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of the in terms trillions of dollars of negative interest rate securities. and that is something that we have to face. survive is something that is interesting. it is not the case that they are discussing monetary policy around the eurozone. it to decision,een the bringing it to value, that rate of financing operations. it is something that we think would have an impact on the real economy because it is clear that
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the balance sheet for banks in terms of the interest rate margin, because of this change in interest rate and structure. i think be slowing down of the is amy is something that good decision in terms of the fiscal policy. that moment in time, we could have restriction of monetary policy. it is something that has to be concretely put under attention. what does this negative bond yields mean for european banks? janine need to clear or do they need to merge?
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-- do they need to clear or do they need to merge? >> i think that they need to be supported by convention of the ecb. by receiving a negative interest rate that has been offered, it is clear that this kind of wide.t has been quite if we would start to discuss on forfferent kind of support the deposit facility rate, it is clear that they would focus on discrimination. the big banks are in the country's and they are in the periphery. decision could increase the divergence he of the political cycle and economic cycle within the european union. and it could be hard by a
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different situation. and so there are plenty of random variables. talk to me a little bit about brexit. on theis have an impact relationship the relationship that you could have with china, actually? >> we can discuss a soft or hard brexit. we can just toss a coin. from when the brexit process theted, it just changed relationship between the u.k. and china. it has become the first place for the forex market in exchange
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around the world. the the people's bank of china and the bank of england, it is something that started in credit line. toething like 300 million one. in that circumstance, china is an important saving place. savingsd of all worldwide is located there. and we know the u.k. is an important platform for asset management. think that they are starting a new strategy that could transform the u.k. into the .sset manager foreignan use the currency for central banks.
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theould ease interconnection between the two. existcility does not because we know there is a financial and commercial war between the two areas. it is something that has to be considered. impacted on that relationship and the negotiation between the two subjects. up next, less than a month after his release on bail, could this man be arrested again? the next plot twist in the nissan chairman's legal troubles. this is bloomberg. ♪
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finance, economics, politics. this is bloomberg surveillance. bloombergto the business flash. >> regulators are probing what might be one of the biggest money laundering scandals in history. ago, low-level bank employees founded the alarm. compliance workers flat some
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suspicious transactions that was reportedly some of the money that the u.s. subsidiary handled for danske. they plan to attract $9 billion for them. the firm plans to launch the separate fund this year that will cover a range of strategies . this covers $24 billion in private capital. save's biggest bank will millions of dollars after the lira slumped. they will now play the equivalent of $2.75 billion for the turkish unit that compares $3.2 billion. that is your bloomberg business flash. francine: there has been another plot twist in the long-running
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the formerles for nissan chair. he tweeted that he was preparing to tell his side of the story. , we have sophie jackson in tokyo. with this be a retaliation of carlos ghosn saying that he would go public with his side of the story? hard to say if the timing of those two are connected. prosecutors have not confirmed they are moving that way but the --guage we have seen wrote suggests that it will be in the coming days. it begs the question about why long evensn waited so though he's been on bail for more than a month now. they are saying he is innocent
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of all charges. >> could he be arrested before the press conference? >> he could well be. the details really are that prosecutors are moving towards that risk. the timeline remains to be seen. has he gone to japan i has he gone back home? >> he is in japan. his bail conditions require him to stay at a specific address. sure prosecutors have tabs on where he is at all times. francine: is this like a bizarre plot twist? something that happens often when you look at the prosecutors in japan? or is it very different -- in japan? where is it very different when it comes to this saga?
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>> something involving a foreign national certainly has raised a lot of questions about the justice system in japan and the way that carlos ghosn has been treated compared to a he might be treated in france, for example. thought to have been a prosecutor's radar for some time. takes time. a case prosecutors do press themselves conviction rate. they don't want to take a risk unless they are quite sure they had him. francine: that was sophie jackson and tokyo. this is bloomberg -- in tokyo. this is bloomberg. ♪
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francine: a plea to the
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opposition, theresa may asking jeremy corbyn to help her deliver exit to a softer -- brexit to a softer departure from the eu. china and washington continues negotiations. stocks advance on fresh hopes of a breakthrough. and carlos ghosn could be arrested again as prosecutors in tokyo alleged breach of trust. good afternoon if you are watching from asia. .rancine and tom here in london jeremy corbyn meeting with the prime minister, but before that, we have the showdown at prime minister's questions. the tone and the body language will be interesting to hear from the two leaders. across there right table from each other and it will be interesting to see the tone and behavior that mr. corbyn takes. francine: whether he says we will talk about this or just go to general elections.
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let's get straight to the bloomberg first word news. today, british prime minister theresa may could learn whether her new brexit strategy will work. to get not been able enough votes from her conservative party to get the brexit plan through parliament. corbyn's response to they will offer a clue as to how the talks will go. for the first time ever, voters elected a black woman as mayor. it will be the first openly gay leader of the third-largest city in the u.s.. withgo is struggling budget problems and gun violence. ine details coming out october. sensor on an indonesian
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plane had been repaired in an aircraft maintenance facility in florida. u.s. authorities want to know what a woman with chinese passports and thumb drives containing malware was doing at the mar-a-lago resort. she was arrested by the secret service. go said a friend told her to to mar-a-lago and speak to a member of the trump family about u.s.-chinese relations. global news on air and on tictoc on twitter powered by more than 2700 in more than 120 countries. very good. thanks so much. equity currency commodities have a really extraordinary story right now. we will show some of those through surveillance today and get them out on twitter as well.
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up a solid 16 points. and i know the euro-dollar 112.41. i just have one screen today, but that is the story. have one screen, but it's a pretty good one. you can see european stocks, but i'm looking at yen. the chinese trade deal tempting riskier assets. and i don't look at iron ore very often but it is rebounding over concerns of brazil. tom: let's take a look at her brexit chart. what about brexit with our we are observing here? the white line is nominal gdp in london. the green line down below is the underperformance in nominal gdp of wales. back 10er is going years, london rebounded nicely stunning, absolutely
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the struggles that whales have had. almost japan-like. above is the same idea for new york city. it shows the brexit effect in recent years as well. because we are focusing on brexit, i'm doing something else which is oil. we put a couple of moving averages, the 200 day, the 50 day, and that moving average reaching the 2019 high. opec thinks the supply will be fine. there have been signals that global markets are tightening. a little glimpse into oil. theresa may signaling a change to her strategy. to is abandoning efforts build support in her own party and is instead reaching out to jeremy corbyn.
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those fear that it will lead to a close relationship with the eu. they also said that the u.k. will have to see connector delay. the european and has basically been can't outside of westminster for days. and we are back at westminster tomorrow. it seems like the prime minister didn't really have a choice. the first time that she has tried it. color ourt might expectation of what to expect. she has talked about talking to other parties, gathering members of the opposition. jeremy corbyn was there for a few moments when he realized that other people in the room didn't want to be part of it. a lot of that will did a non- what theresa may is prepared to move here.
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a bloomberg opinion columnist says this is worth bearing in mind. this prime minister moves in increments, not with heart turns. only when she has to end as far as she has two. does this mean a pivot from the tories? corbyn wants jeremy to have the fingerprints all over this deal? a billion tway for theresa may to say i'm reaching out and if they don't have an agreement, she can blame labor. >> it is a way for both of them to share the blame. there is a sense that jeremy corbyn was quite happy for theresa may to brexit and him to be able to say it was a tory brexit, i would have done it differently. now this is a test of labor. they will have to take a little bit of ownership of what is going on here. is this ais -- tom:
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test of labor or mr. corbyn? how alone is he? >> it is a divided party. we talk about how the conservatives are divided, this is a divided party. many of which had been very dislocated. he has been hesitant to come down on either side of the fence ever since the vote. i don't understand how the conservative party response to the prime minister doing in america will we would call a john boehner. john boehner went to the democrats years ago and it cost him his job. it cost him his career. but to the point of corbyn alone, the prime minister is exceptionally alone.
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>> she would be doing something that she knows and we know the conservative party -- tom: what happens one hour after they agree that they will have this traditional trade agreement with europe? >> they traded in december and did not have the numbers. they can't push her out in december of this year. she is not able to be pushed out. italy in 18 hours, politics is simpler. francine: is it? tom: it is. francine: everything is relative. the beauty of italian politics, they say a country is a mess but we have been dealing with it for 50 years. but have had 45 governments in 50 years. anna edwards from bloomberg markets: european open anchor. we will speak with the chair of the banks investor here in london. we will be asking her about brexit and the strength of europe and spain as well.
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don't miss that interview at 3 p.m. london time. this is bloomberg. ♪
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this is bloomberg surveillance. let's get to the bloomberg business flash. ford unveils an attempt to overhaul the money-losing business in europe. the automaker will introduce for plug-in hybrids and two battery-powered models in a move to gain market share. rules are getting tighter. bmw pulling ahead of german rival cities bends. this is a race to be the top-selling luxury car in the u.s.. march because% in
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of surging demand for the x-ray compact crossovers. sales were down 9% in the first quarter. the best selling luxury carmaker in the u.s. cut $1.4 billion in costs as part of a new strategic plan. spanish banks promised to wrap up investment. the bulk of the cost cuts will come from investments in i.t. we will speak with the executive chairman at 10 a.m. new york time here on bloomberg tv. that is the bloomberg business flash. tom and francine? francine: back to brexit and the pound rising as theresa may reaches out to opposition to find a brexit deal acceptable to parliament. to aens up the country softer brexit, potentially keeping the country inside the customs union.
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i just did not see why so much buoyancy in the markets. people will forget about brexit. don't worry, it will be revoked. .e are none the wiser are we talking about? if we look at global equities, brexit is not much of a factor at all. really since this weekend, it was better pmi out of china and europe. francine: i'm thinking of the pound because it seems to be the only market to trade with. >> sterling has strengthened a bit but we have been in the range of 130 to 135 as we inch away., inch the risk of a hard brexit is quite low. it is just when we will have an idea of what the next world is going to be like with this situation. not ay thing is, there's
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lot of variation from our point of view between the different options. macro economically, they are quite similar. leading not all that much. a couple of explainers if you would on the customs union today. the telegraph really made this distinction between the custom mean in and the idea of a new order original custom mean in. -- custom union. when we -- would we see it be normal or different, or would it be starkly different? >> the u.k. is asking for something different and there is no indication that the eu is willing to agree to that. to me, it is an off-the-shelf customs union. and to what extent do you maintain regulatory alignment? have a newent do you
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customs union. we will see how the eu reacts. tom: we will see that in parliament in one hour or two's? francine: two hours. tom: will they be debating the market, and relationship? >> that is the question. it is conventional when in -- to thethat she shifted single market. and i think that is unclear. that is critical in terms of figuring out what is the economic cost of this going to be? for me, modeling the soft brexit, we are seeing something softer than the softest version of the soft brexit. if we get a customs union or elements of a common market, you have something much more sensible. i am wanting to hear the line and i will try to do what
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he just said. the softest of the softest of the soft, soft brexit. francine: that is assuming theresa may is still in charge. what if you have boris johnson in charge? could we go back to talking about no deal? we have no idea -- key part of this negotiation. whatever is agreed, how does it get implemented? the tory party might say that we don't like this and we don't want to implement it. manifesto that a reverses what is potentially about to be agreed to. francine: and we don't know what the eu wants. we potentially know they don't want a short extension. it is either now, go to -- it is either now or go to elections. will push comes to shove,
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they allow a longer extension to avoid a hard brexit? think they will afford that. in france, macron has been more assertive about the potential of what they expect in return. drama on a some wednesday. could either of your houses go long in the united kingdom this morning? the np para bought? -- bnp paribas? >> the asset prices reflect that. tom: that is good enough for surveillance. what about you guys? the end of the world? >> we are long sterling but it is negative for equities. it depends on the market you're talking about. a good outcome could be bad for certain markets. francine: there may be a couple of people in theresa may's "circle" that may decide to jump ship. thank you both for being here. with us.
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prime minister questions is coming up in one hour and 42 minutes. 12:00 p.m. in london, 7 a.m. in new york. in this is bloomberg. ♪
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tom: good morning, everyone. bloomberg surveillance, tom keene and francine lacqua on queen in london. we have some good quests -- guests. we are not ignoring markets.
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really reaching out well over 26,000 this morning, the futures. i saw the story three or four hours ago. and absolutely spectacular new york-based story on deutsche bank. , all this talk of money laundering. we go to frankfurt and speak to steven arons. for everyone in global wall street, this is common knowledge. people running around manhattan ofing to launder gazillions dollars through these banks. how will this be taken by the idea that deutsche bank is participating with these smaller peripheral banks? how will that be taken in frankfurt? it just addsnk another layered to all the questions facing the bank about compliance, about money laundering. it you mentioned danske bank.
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the banking sector as a whole in europe is now embroiled in scandal. deutsche bank is at the forefront of this. and it doesn't make things easier for the bank. people will look at the story very carefully and ask what it means for the bank. tom: and the other idea is that prosecutors and regulators in new york a full-time larkin -- full-time working on money laundering. that is a you decide bank pro. but they have a majority of .erman and u.k. prosecutors how linked are the u.s. prosecutors to the legal system in germany? steven: it is interesting. usually the regulators over here take their cues from the u.s. regulators. if they crackdown, then with a slight lag, you will see the europeans crackdown. it always takes a bit longer. the story in the u.s. will be
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read very carefully by the regulators and the prosecutors in the u.s. if they decide it wants a closer look, the people over here will follow suit at some point. -- if it warrants a closer look, the people overhear will follow suit at some point. francine: but if you are a bank that will be taken over by deutsche bank were merging with the deutsche bank, why would you do that in this day and age? steven: that is a crucial question. we know deutsche bank and top inbank were at the 2016, almost three years ago. one of the big reasons that we reported this, the talks fell apart because they could not put a value on the legal risk of deutsche bank. as you may remember just a few months later, the big doj find because of russian -- because of rbs fraud, it was put on deutsche bank. and now with legal risks facing deutsche bank, they have cleaned
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up the risk. but that makes the equation harder to solve. i think it is something that commerzbank will want to know more about. if you are just joining us, this tremendous story by the bloomberg team in new york about deutsche bank and money laundering through their operations in manhattan. steven arons of frankfurt is with us. steven, you look at all this money flowing in. do we assume that it has stopped? steven: yeah. deutsche bank pulled out of politics in 2015 and ever since ,hese allegations have come up there has been a massive crackdown in europe. it took them a long time to do it, but i think now that people are taking it -- taking a very the look at business, existing business. it you never know, i can't rule anything out. tom: steven arons, thank you so much from frankfurt on deutsche bank this morning. coming up on banking, always good to speak with michael mayo
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from wells fargo, head of the large-cap bank research. this is exceptionally timely. when you look at what interest rates have done and what it will do to the profitability of banks in the middle of 2019 as well. we continue with our view of westminster. again, a very important moment for the prime minister in mr. corbyn that will occur here in just about one hour as well. we look at the data as well and i'm interested in the equity markets. 131 and 75, but equity markets have down futures up 111 as well. so three out of four days, really getting out near record highs. staywith us from london -- with us. from london, this is bloomberg. ♪ want more from your entertainment experience?
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just say teach me more. into your xfinity voice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. welp, someone should. just say "teach me more" into your voice remote
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and see how you can have an even better x1 experience. simple. easy. awesome. ♪ this is bloomberg "surveillance," tom and francine from london. stephen barklay, the u.k. brexit
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secretary answering lawmaker questions. he was talking about a second referendum, the fact that it would take at least a year to put in place. it is interesting to have him answer questions on a day where we do not have any idea forward what theresa may do. tom: going through the motions. francine: she talks to jeremy corbyn later, but we do not have a clear path going forward. now, let's get straight to the bloomberg first word news. talksa: u.s.-china trade back on today in washington. both sides worn a number of sticky points remain, including protection for intellectual property and how to enforce any agreement. president trump said the u.s. was finally getting tough on trade. >> we are standing up to china's chronic trading abuses and theft
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of intellectual properties and so many other things they have done to us. i do not know how you people allowed this to happen for so many years. viviana: the price of avocados --soared after threats of closing the border. mexican avocados account for at least three quarters of u.s. consumption. japanese newspapers says carlos ghosn will be rearrested soon. the new charges are related to alleged improper payments made to when acquaintance. last month, he was freed after almost four months in jail on allegations of financial misconduct. he says next week he will hold a news conference. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. francine: thank you so much.
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crunch time for u.s.-china trade talks. the vice premier resumes talks in washington today. they have reportedly resolved most issues but they are not yet to agree what happens to existing u.s. duties on chinese goods and the terms of an enforcement mechanism to make sure china sticks to the agreement. daniel morris and aaron captain are still with us -- aaron kapteyn arearend still with us. >> what you have seen so's -- so far this year's determination that we will not get anymore tariffs, which is a good thing. gone and i think that explains what we have got so far, that we will have an agreement where we at least keep the status quo. if we want to go up from here,
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if you want gains, not only would you have to see a deal but a reduction in the tariffs. that is the question we have now, will that happen? francine: what is your take on where europe is in all of this? even if there is a deal with china and the u.s., can the u.s. imposed tariffs on carmakers in germany? arend: i think the europeans are hoping this china negotiation drags on and on because they need to conclude it before they turn to europe. it is one thing we are most concerned about and there will be a conclusion of this 232 investigation that says there is unfair competition, and europe will be singled out as the big area where tariffs get imposed. that will disturb the recovery we are starting to see in europe. the moreh is
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predictable, exports or imports? it has beendata, surprising import dynamics more than the president and others focus on exports. >> imports have held up remarkably well so there's a perception europe is weak. there was an enormous inventory squeeze that snapped back early in the year but experts were week -- exports were weak. that is affecting everyone. tom: let me bring up this chart. bloomberg,t we do at this is the magic of bloomberg. francine: let me guess, avocados. tom: this is the jump in avocados. i bring this up to show the amazing ability of the bloomberg show to surge in price of avocados, but these are the unexpected. there is a lot of certitude in
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debated trade and it comes down to micro-surprises. daniel: which points out why it is so difficult to ascertain the net effects of all of this, because we know for all the avocado competitors and america, they will be happy. you have got to balance the gains for some of the producers with the losses for those people who will pay more for their guacamole. francine: mexican avocados make up 75% to 80% of u.s. consumption in california, about 16%. other industry groups, we have been talking about soybeans, one of the byproducts of the u.s.-china trade war. joining us is jean-luc. soybeansot talk about or avocados right now, but what are the main stumbling blocks of an agreement?
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john: the main stumbling blocks are the tariffs. the u.s. wants to keep the tariffs that have been put in after an agreement has been put in place. another stumbling block is how to make sure china makes good on the pledges that signs onto. u.s. wants a mechanism to ensure that chinese -- to ensure that. the chinese are chafing. tom: they have to look at the tariffs as a permanent fixture as well. which tariff is most onerous to china? john: there are actually several tariffs. china needs to buy u.s. agricultural goods and american energy. that make that more difficult is onerous for china. china is becoming less dependent on exports and is more driven by
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imports. the net amount of exports to the , butis at a record high that eventually would have come down by itself. francine: what does the pboc do in the case of no deal? in the case of no deal, i that the uncertainty causes for future economic growth would be the biggest impact. we are starting to see some initial green shoots of stabilization in the economy. if there is no deal, that means the pboc will have to be more ready to step in with stimulus to make sure the economy stays on track. tom: what is the day calendar this week? what is the day calendar in china this week on trade discussions with the united states? focus is on washington
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obviously today. daytime, east coast in washington. meetings with mr. lighthizer and mr. mnuchin. after that, we have another big event in beijing next week, a belt and road forum. global how to foster trade with chinese characteristics, as you would call it. those events work in tandem and should be watched. francine: we need to talk more about the belt and road as china is moving to define its project for the first time. arend kapteynand both stay with us. coming up, a conversation with ann about 10 of santander -- and otin of0 -- ana bp
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santander. this is new york. ♪ -- this is bloomberg. ♪
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♪ we say good morning, bloomberg "surveillance," from london. inwill enjoy italy on friday an important discussion with economic leaders gathering in northern italy. with us are daniel morris and arend kapteyn. what i want to do with guys that write sophisticated notes is deal with an immovable force. chart.p the acclaimed we showed this with the nobel laureate the other day, the
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great depression. the great depression and then a century rise in equities. always arris, there is reason not to be in the market. daniel: yes, and one of the reasons today? tom: i would say there is more than a few. which is your intention? daniel: the thing that is most worrying as you have had an exit rally in the first quarter after a bad fourth quarter. it is in a context where you see continued front warnings from banks. you have walgreens and it is a drip that started notably with apple last december. that seems to be the near-term concern for us, we cannot see equities rallying significantly from here without a turnaround in the outlook from corporations about their profitability. tom: allen grand -- alan
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greenspan would say the equity markets are a confidence builder. explain the confidence metric right now, or dynamic between the greater economy and stock market. daniel: we have survey implied growth where you can take the surveys globally and back out what is implied in terms of growth. that has been cut back over the last month. tom: why are stocks going up? happenedrtly what has as we have gone from being uber pessimistic to pricing stabilization, but we are not pricing for acceleration so we think we are on the cusp of a global acceleration in the next three to four months. the markets are not pricing that. some people are waiting for the negativity to be out-of-the-way. francine: two, three weeks ago we were talking about and of the world recession, yield curve
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inversions. where does that come from? i think it was a complete overreaction from the markets and central banks. the key point on the tariffs as they are level effects that have dissipated so when you look at the disruption in the u.s. in consumer durables and employment, that is coming out. even if you do not reverse the tariffs in place. francine: you have the imf and christine lagarde saying the global economy has lost its agenda. arend: it is a backward looking agenda. we look at annuals, not monfils or quarterlies -- monfils or orrterlies -- monthlies quarterlies. francine: do you agree? daniel: i do. at a minimum, we see stabilization. tom: your comments on how the
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imf look set economics, is it different at any other central banks? can they get out front? -- they have no more information than we do, so they are looking at the same data but in the markets, we are hyper focused on the near-term. tom: in a world economic outlook with 472 phd's all smarter than me, those people are not extrapolating out in time? >> there is no top-down model, it is all bottom-up, and the most junior person on the team does zero forecasting. tom: would you like to join us on the team? francine: a wonderful story to senator kennedy on why they were so bad -- so wrong in predicting recessions. do markets get it at her? >> -- better?
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>> not necessarily. the s&p does not have a great track record and then the last 20 years, it has gotten worse. the key thing is to look at the vintage of the forecast. the imf only does their forecast twice a year in the market is repricing daily so you have to line those up tom:. how do we -- line those up. tom: how do we extrapolate? how do viewers and listeners extrapolate out with confidence? >> probably should not be too confident when one is predicting the future. the lesson perhaps is when we reservations, we probably paid too much attention from them in terms of what we should expect from the markets. if we look at the short-term
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high-frequency data we are getting, that will be a much better indicator of what is likely to happen over the next three months than a forecast from the imf. vix, it ison the extraordinary now. daniel morris and arend kapteyn with us. bloomberg "big decisions," david westin with johnson ateo kevin the 9:00 hour tonight in new york. this is bloomberg. ♪
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♪ viviana: this is bloomberg "surveillance." google says its u.s. workforce has become more asian and less white and male. they released their diversity uport, asian staff making more than 40% of the workforce. gains were reported in women, lack, and latino workers. will be the new chief financial officer.
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positionld the same for the last 12 years of qualcomm. ceort swan was the interim in january and was permanently named to the top executive role. showing the academy awards could be an antitrust issue. they have been warned about potential rule changes that could hurt netflix and other streaming platforms. the government says that may violate laws protecting competition. that is the bloomberg business flash. tom: let's dive into a discussion of negative yields. right now, germany is one of the examples where the two year yield has been negative and stays negative. it is real simple, the yellow line way below zero, and the 10 year yield has rolled over
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teammate -- new negatives. francine: it has huge implications for banks from a monetary transition kind of way. we are back with daniel morris and arend kapteyn. overall, foreign economy, how do you work through these negative rates? economy, howor an do you work through these negative rates? is it damaging that unless you have sustained growth it will hurt? arend: one point to make about the bunds, this is a broken market. the free flow is down 8%. compare that with the u.s. and japan which is about 50%. this market no longer sends any signal. having low yields helps so if you look at credit growth in europe, germany is among the highest and the domestic economy is strong. francine: if you have a huge repricing of german bunds, does
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that impact the economy? arend: it does. the nominal interest bill, you can have current levels of about a 350 point -- 350 basis point increase. we are so low you can afford an increase in yields. tom: do you agree with that? i have trouble with the vector of that that we get higher yields and lower prices. can we really be that calm for 300 basis points, three percentage points of movement? daniel: i think that would be quite disruptive. the odds of that are quite low and i am more concerned about the opposite that what we are seeing is secular stagnation and the ability of the ecb to get the inflation close to target, and it brings up lack of ammunition in the next recession.
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this is so -- tom: profound. said theerence, he domestic economy is good and you are talking lawrence summers. you cannot have both. as the economy of europe away from the financial hysteria, pretty good? daniel: it depends on what your benchmark is. a slown where you had growth rate, europe looks pretty good, but is it good enough? in italy, probably not. arend: part of the dichotomy is the external part of the economy is weak. there is clear weakness in manufacturing pmi's and the other stuff is ok. francine: do you see europe having an inflation problem? back: we will get a bounce and core inflation month, but we
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are not getting momentum in upward pressure so what is a problem. francine: is this something the ecb is looking at so that europe does not become like japan? up to yourhould open viewers and have them tell us what they think. it is probably the most important issue that will be faced by the next head of the ecb. what does that mean for monetary policy when you will likely have someone who is more hawkish than mario was? tom: we spoke to your chairman, i believe it was yesterday, wonderful conversation. let me ask you the question -- is everybody moving to paris? i have not gotten any email. francine: no offer, that is the news. >> we are committed. tom: is everybody moving to
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missouri? paris,rankfurt, to spreading out. francine: where should we move? tom: italy. francine: beijing perhaps. tom: this has been really valuable. our control room is saying india the soonest we can. daniel morris and arend kapteyn, thank you so much. uphave got much more coming to drive forward the conversation on brexit. carsten nickel will join us. on the market, good equity performance. the silliest you now because will join us -- ♪
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♪ tom: this morning, equities up
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21% from christmas eve. god bless us, everyone. to stay in courage stocks for 2019? past, theof elections gop and president are not on the same page. democrats go in the search of vision. conservatives are left out in corbyn says,eremy let's talk a customs union. this is bloomberg "surveillance," live from london and queen victoria street. i am tom keene and francine london.osts us in there will be a hosting of a meeting with prime minister may and mr. corbyn. francine: the rumor is they tried to meet a couple weeks ago but jeremy corbyn walked out over previous people from the
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independent party, so i do not know if today will go different. it is about whether it is in his interest to look like he is helping theresa may or whether he will say it is time for a general election. the most brilliant article for people who want to follow brexit from a more lighthearted point of view, rob hutton writing about what 12 hours on downing street looks like, and it is a lot of sandwiches, hand andwiches, beef, egg, chicken sandwiches, describing the food as adequate. tom: adequate. francine: gets the job done. it is a fun read. tom: i hate to be serious. i have not seen that much of labour party analysis in the last 18 hours or so. with more on brexit, here is viviana. viviana: well her new brexit
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strategy work? theresa may finds out. she has not been able to get enough votes from her own conservative party to get the plan through parliament and has asked for help from the opposition party. corbyn's will sponsor -- sponsored well offer clues. the voters elected a black woman as mayor. she will also be the first openly gay leader. the former federal prosecutor won with 74%. third-largest city is struggling with violence. wasrt on the boeing 737 max repaired in florida. this is the latest detail coming out about the crash in october. the part was installed the day before the deadly crash.
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u.s. authorities want to know what a chinese woman was doing had two-lago she passports and a drive containing malware. she said a friend told her to go to mar-a-lago to speak with the trump family about u.s.-china relations. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. ceeo'sments ago, at out. out -- axios'scoop axios is reporting there is serious condition -- consideration of removing chairman powell and putting in kevin warsh. something on powell and the acrimonious relationship with
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the president, i am sure there will be more discussion on that. equities, bonds, currencies, commodities, one screen with movement. green on the screen with dow futures up. i will leave it at that. francine: i am looking at a similar data point having to do with the china-u.s. trade relationship. a couple of perks on the market, let's look at pound. we always look at pound. budging higher on concerns over supplies from brazil. let's go back to brexit and kick it off, theresa may signaling a change to her strategy, abandoning efforts to build support in her own party and reaching out to opposition leader jeremy corbyn. the move drew criticism from brexit supporters. they said the u.k. will need to
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seek an extra delay to resolve the crisis. joining us now is the silliest jet nokia's -- vasileios gkionakis and carsten nickel. the politics of it all is a little mind-boggling. this was a last chance report from theresa may and the market believes it will soften brexit but we do not know. the reassuring thing is that the prime minister came out yesterday officially rolling out a no deal scenario. if you look back a couple of days, there was speculation on where she was heading. i cabinet member tells us no deal is not something they are going for. francine: what are the options on the table? does the e.u. -- that we have not talked about much -- if the e.u. grabs a short extension for
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may 22, or will they push the u.k. to have a nine or 12 month extension? carsten: not sure why, that will not fly and the answer will be no. short extension, some in the e.u. what favor that to keep the pressure high on the u.k. we are looking at unfavorable conditions attached to a long extension. the 27 leaders lock up in a room and make the decision, so whatever people around the council are telling in brussels is one thing and it will be taken on the highest level. tom: this is more to the political end. what will be the response of labour to all of this? i looked at eight newspapers in london and i am thrilled there are eight including bloomberg, and i do not see much labour party analysis. vasileios: last night when may
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made the declaration, if you look at it on the surface, it seems to be telling you some sort of a clear win for corbyn because he appears to be the only adult in the room because in the end, he was the one pushing for the customs union and telling may that is moving theyds him, let alone that are creating a terrible period for the conservative party in terms of their numbers. you have a function within l abour that they have been arguing for a general election and we do not know if they sit down between may and corbyn is what they will get. i think on the whole, corbyn seems to be winning, but let's wait and see because there are a lot of internal dynamics. francine: i guess the concern is that when you look at jeremy
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corbyn himself and not the labour position, he is probably more euro skeptic then theresa may. carsten: he is forced to make a decision to take one aspect of this, one option, a confirmatory referendum, how will he position himself? he has been trying to evade that question for many months and years and needs to come forward with a decision. we will figure out there is one party more divided than the conservatives. tom: we have to talk about what axios is saying about kevin marsh. how would that destabilize the markets if we get a president trying to replace the central bank had? theleios: you are putting credibility of the economy clearly on the line. no question, that will be
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negative for the dollar and for risk assets. bute are other factors, this one in isolation, negative. francine: wonderful conversation, we will get back with vasileios gkionakis and carsten nickel. coming up, a conversation with of banko, the chairman santander. i will be heading over to do that interview and we will focus on investor day and emerging markets. this is bloomberg. ♪
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♪ viviana: this is bloomberg "surveillance." four are introduce
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plug-in hybrids and two battery-powered models, unveiling their latest models to overhaul its losing business in europe in a move to gain market share. bmw pulling ahead of german mercedes-benz to be the top luxury car in the u.s., bmw sales rising in march more than .% because of growing demand in the first quarter, mercedes sales were down more than 9%. in the last three quarters, mercedes has been the best suddenly luxury car in the u.s. banko sent in their plans to ramp up -- banko santander plans cuts will -- the cost come from investments in i.t. coming up later, we speak with the executive chairman ana botin .
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that is the bloomberg business flash. tom: in london, vasileios gkionakis with us and carsten nickel. let us talk about trade, this idea of the dynamics of exports and imports. let's go to foreign exchange, a wonderful prism to look at the dynamics of the international economy. what does it say about the trade debate? vasileios: if you look at emerging-market currencies, they have rallied since september. each rally has moderated somewhat but they are still on a number up, besides of idiosyncratic stories from political risk. the view that the currency market is taking is that the result onedeal will way or another and there will be a deal pretty soon. as far as this thing is
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concerned, the fx market is taking a relaxed view. tom: and the dynamics is quiet within the markets. what does the yuan do if we come to a settlement? everyone is dollar focused. vasileios: i think in that scenario, we keep on lowering the dollar china -- dollar-china. pretty much everyone was calling for dollar-china at seven but we are trading at 670. tom: a stronger renminbi, weaker u.s. dollar. francine: where do you see this going? the one that has the more to , becauseurope president trump sets his sights on europe and specifically germany. carsten: are you get caught in the middle as you are looking at the flow of global overcapacity.
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domestic political realities where the trade is becoming an issue. the key thing of the medium to longer term, these issues are being politicized. in europe, we use to outsource trade questions and now everyone is taking an interest, so whether you achieve a deal between the u.s. and china, the topic will remain something that stirs up the political conversation. francine: what do you think is right now priced in the markets? they want the yield so badly that they assume there will be positive news? carsten: i do not think it will be that much. i think the market has pretty much priced in that the deal is coming. the market has looked at the way president trump has been behaving. the market assumes mr. trump has got the message as stocks are concerned, which is presumably what he is really concerned about, so the market is priced in a probability of 90% that we
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will get a deal with china. tom: do you believe that? hanoi, 2:00hat in a.m. in new york and that was going to be fixed. vasileios: equities have pretty -- all the losses, it has been remarkable. the move has caught everybody by surprise and now at 67, i think it is pricing in that a deal is done. tom: the political under pending -- underpinning, there has been a lot of talk about the political fragility domestically for president xi. what is a success for china if they get this deal done? a real assessment of domestic policies must tell you this story will not go away, and
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with china continuing its rise over the medium to longer term, the china trade topic will not disappear from the trade conversation in the u.s. francine: is this about trade, is this about 5g, intellectual property theft? carsten: it is about that, but also economic worries in the wider middle classes in rich democracies and a strategic element against the backdrop of china's rise. therefore, this will not be resolved with one deal. francine: do you agree? vasileios: absolutely. i am looking purely from a market perspective where i see there has been a lot of turbulence and the turbulence has been priced out because the markets are fully optimistic. u.s.-chinas between will stay for a long time. china is making a lot of different steps and if you go
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back to the soviet union and the friction between the u.s. and soviet union, i think china has been moving towards adopting itself and learning more about if i may call them, their opponent, and try to adapt to them and fight them on their own turf. they have pretty good chances of succeeding. carsten: how quickly can you adapt the chinese home front? we see the experiment playing out live. francine: tom has a chart. i cannot wait to see. tom: i would suggest the negative yields rolls right into the trade discussion because it shows the artificiality of this financial system over late on the mat -- overlaid on the massive political debate. i agree, the negative yields have come on the back of
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slower growth and surprising dovish stance by the two major central banks. i was shocked i the ecb taking growth -- by the ecb taking growth this year. nonetheless, the market has been confronted with an extreme test increased dosage -- increased dosage of dovishness. tom: vasileios gkionakis and carsten nickel with us. we drive forward the conversation. the former prime minister of australia talks a recession free australia and some real challenges, and maybe on brexit as well. from london, this is bloomberg. ♪
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moment,er a dull bloomberg "surveillance," from london, tom keene and francine lacqua. we will get you coverage throughout the morning on europe report that the president is seriously considering removing jerome powell in some way and replacing him with a former fed governor kevin warsh. francine: we are also seeing reports of the president saying to jay powell that he is stuck with him, so legally, i am not sure replacement is that easy. tom: never been done before.
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francine: regulators probing what may be one of the biggest money laundering scandals in the century. compliance workers for deutsche bank flagged suspicious transactions, reportedly some of the money the u.s. subsidiary handled for the estonian unit of danske bank. how much of a revelation is this? allegations,e new does the scuttle a possible deutsche bank-commerzbank merger? address the merger question and a moment. i think the question is how much compliance and customer procedures were up to the task back in the day. that is the question regulators
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are looking at. that posed a certain risk for the merger because depending on how much if any legal fines deutsche bank will pay, that will change the equation in the talks going on between commerzbank and deutsche bank. on globaly of you wall street, i tweeted out the story earlier and it is a must read. deep in the article is the idea that european deutsche bank told new york deutsche bank what to do. is that the perception in frankfurt? in the midst of watching the european banks and deutsche bank, do they tell new york deutsche bank what to do? steven: i think when you look at deutsche bank, and i imagine with any global organization but particularly deutsche bank, there is always a question of who is in charge. it is new york that is more in
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charge than frankfurt in terms of compliance with people who were like elated who were not were notegulated who able to talk to regulatory issues anyway. deutsche bank has always been a wide conglomeration of different centers of power and that has always been a problem when you talk about compliance and do not have oversight. tom: thank you so much. we will get that story out again on twitter, just extraordinary. radio up, on bloomberg later. this is bloomberg. ♪ the biggest week in television is almost here.
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possible joint plant -- olive branch and's joint plan for brexit. she faces jeremy corbyn during the prime minister's question session. be a clue onwill how talks will go. washington,y in u.s.-china trade talks, both sides warning of sticking points including protection for intellectual property and how to aforesaid agreement. president trump said the u.s. was finally getting tough on trade. abuses andtrading theft of intellectual properties and so many other things they have done to us, i don't know how you people allowed this to happen for so many years. you have been here longer than me. viviana: the price of avocados
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soaring after president trump's latest threat to close the border with mexico, one measure jumping 34%, the biggest one-day gain in a decade. mexican avocados counting for three quarters of u.s. consumption. a japanese newspaper says carlos ghosn will be rearrested soon and the new charges are related to alleged improper payments to clients in oman. last month, he was freed. next week, he will hold a news conference. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you so much. it was bubbling a number of months ago and disappeared but quoting two, axios
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sources that the president is considering replacing the fed president with kevin warsh. after the to 1964 assassination of john f. kennedy and lyndon baines johnson wanting to get the economy going, he went after william martin. an extraordinary report from john swan and ask ceos. on how your reporting upset this president is with the chairman of the fed? kevin: i think the bottom line is that when you look at how the president has gone after the fed board with the arrival of , who could face a domination process in the senate, the arrival of stephen moore onto the fed board the president has a voice to press
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the central bank. even more with the arrival of him is that voice on the fed board. tom: we have never seen this fractious this. a the present year, there is nuance of demoting chairman powell to a member of the board of governors, or what you do with kevin warsh, why would there be a presumption by the white house or president trump the kevin warsh would toe trump line? kevin: when you have seen in the ,ast, fed chairs of yesterday chair yellen and her relationship with the obama administration, she stepped more in line with obama and ultimately went through with her
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independence. when you take a broader step beyond that and look at u.s.-china trade talks come at market priced in their would be some kind of agreement between the u.s. and china, and the debate right now amongst economists within the administration is heading into the political cycle, do you want to get a deal with china and boost the markets or continue to demonize them ahead of the 2020 cycle? tom: i have to admit that chairman powell may be in the last 90 days has done a spectacular job of moving the market higher with the complete shift in lower interest rates. who has his back on capitol hill? kevin: mcconnell. politician who wants to see the fed have its independence. i do not see this as a serious
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threat for chairman powell at all. it is not something i gather is truly a serious threat. it would inject a lot of uncertainty and would have to go through another senate confirmation process through the senate banking committee. i do not see the time on the calendar for that. francine: kevin cirilli from bloomberg. vasileios gkionakis still with us. when you look at the impact president trump could have on the dollar, what kind of dollar does he want and does it make a difference? faceeios: if you take at value what he has communicated, he wants a strong dollar but not too strong. we do not know what that means. i do not believe that he has a very clear view as to exactly what dollar policy he would like to have. however, it is pretty clear that
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-- he would not like to see tighter financial conditions from a higher dollar and higher interest rates and lower equity. i do not think the administration has an explicit preference about the dollar. if we see a rally in the dollar for another 10% from here, i think it will be a big move and will alert the white house. it is customary for the president to start tweeting about it. tom: now for our dumb question of the day -- does the street try to gauge what i president will do about a currency? vasileios: i don't think so. to the extent that the market believes if he is confronted by a completely independent central bank, no. trump may have the occasional intraday impact on the exchange rate lasting potentially a
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number of days, but i doubt it will have a lasting effect on the currency. francine: thank you, vasileios gkionakis staying with us. jack dorsey sits down in an interview, calling for a heavier regulatory hand when it comes to tech giants. stay tuned for that interview. this is bloomberg. ♪
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♪ this is bloomberg "surveillance." google says it's u.s. workforce has become more asian and less white and male. their annual diversity report ofws asian staff make up 40%
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the staff and an increase in black, women, and latino workers. george davis will be the new ceo -- cfo. he has held the position the last six years at qualcomm. inert swan was interim ceo january and was permanently named to the top exact role. u.s.berg learned the justice department warned the academy of motion picture arts and sciences about potential changes that could hurt netflix and other streaming platforms. that may violate laws meant to protect competition. tom: thank you so much. how about a single best chart? we will combine a few things, on the 10 year yield going back
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many years, think eisenhower. we do this with vasileios gkionakis. we go from paul volcker's mega inflation and down we go to powell. what i want to focus on this chart is the volatility that we have seen in the last decade. the percentage changes that stanley fischer would talk about, what does that mean for viewers and listeners that we see a percentage change based on yield? vasileios: i think we have to look at the reasons why and one of the predominant drivers is the fact that we went through unprecedented more than policy responses. it was unchartered territory and the market did not know how to react. this increased volatility may raise uncertain see of the margin -- uncertainty of the
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margin but has been compensated by the fact that the yields are kept lower. i am not entirely sure this slight increase in volatility is having a direct effect. a combination with a very low yield, i do not think it will have a noticeable effect. -- tom: whatident the president wants is confidence. how do we get back to that confidence expressed in the interest rate? is that forcing rates up? what is the way we get confidence? vasileios: as far as interest rates are concerned, that has nothing to do with the president of the u.s. that is the job of the federal reserve on the short end and the long end it has to do with the market. on the whole, the federal
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reserve has done well to start storing confidence because it was really getting shaken. in all fairness, i think it was trump behind it with the initiation of the trade disputes. you had a tightening of financial conditions coming from buttics and trade disputes, the major central banks stepped in once again and basically communicated dovish and -- -- dovishness and i think this has helped. francine: we were speaking to a chief economist at ubs wealth and he said the markets got it completely wrong. if anything, there is an impending acceleration of growth worldwide. vasileios: i tend to believe that. i tend to lead to art -- lean
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towards that camp that does not seek recession. we have so much discussed in version the yield curve. we have to know exactly how it works and how the feedback loop from the inverted yield curve implies recession. historically what you get is basically when the fed goes into restricted territory and pushes the short end of the curve higher, and the market starts pricing in a slowdown, this is when you get the inversion of the curve. the big difference is that the fed has told us it is not going restrictive, and this is a big factor to take into account. francine: this was not the only alarm signal around the world. vasileios: the other thing has been the slowdown in this has predominantly come from the fact that we have had trade disputes between the u.s. and china that seem to be normalizing. your guest made some comments
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about the euro zone. if you look at the domestic numbers, employment and wage growth, it is doing well. all the slowdown in the euro zone has been inflicted from the external sector. to the extent that the external sector will normalize because the trade deal is more likely and the data stabilize, i think we will have some -- tom: the theory is that affecting the external dynamic? the theory over the phillips curve, is it only a domestic issue? vasileios: right, that is a very interesting question. i am not implying these external dynamics will have any direct impact to the phillips curve because to be honest, i do not know where the slope of the phillips curve is. tom: we don't know.
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vasileios: that is the reality. we have seen the pass-through from monetary policy to wage growth but not from wage growth to inflation. this improved trade environment will be enough to stabilize the economy and avoid tipping the global economy to recession. tom: this has been wonderful. we have not done brexit for 18 minutes. in 14ne: we are starting minutes with prime minister questions. tom: the welsh minister heading to london to discuss brexit with may. francine: a great opinion piece saying a lot of change in the shift of the talking gestures theresa may is making to her opposition, but not much has changed. she wants the same withdrawal agreement and a short extension. tom: the greatest credit for the grind of brexit, thank you so
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much. to dash to francine: brexit. tom: jon ferro weights. -- waits. francine: jon ferro will not await you. i well. david westin sits down with the starbucks chief executive shortly. this is bloomberg. ♪
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♪ this is bloomberg "surveillance." tonight on bloomberg "big decisions," david westin sits down with the starbucks chief executive and shares the advice howard schultz gave him one taking the reins, and his goals for expanding china. >> the mission and values are the most important thing, and , howard way to test is had suggested to me in this transition, imagine two empty chairs.
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in one of those chairs is a starbucks partner and the other is a starbucks customer. -- ifurself the question you take this decision, will it make them proud? that is the litmus test, will it make our partners and customers proud? you have to do difficult, hard things, so a lot of times it is not what you do, it is how you do it. we will build a net 600 stores in china a year. there is 300 million people in china in the middle class. that is projected to double over the next few years. they are consuming more coffee and that will continue to grow. over the next three years, we will build starbucks into 100 new cities in china that we are not currently in. every of those cities is larger than the population of los
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angeles. francine: you can watch the full interview with the starbucks chief executive kevin johnson tonight at 9:30 p.m. in new york. now onto boeing and a faulty sensor has been linked to last october's deadly crash off the coast of indonesia. floridaepaired and the aircraft maintenance facility before the tragedy. the pilot struggled with the signals in the run-up to the crash, according to the limitary right up. joining us is benjamin katz. it is incredible that we have not gotten to the bottom of this. does it shift the blame anyway? it raises questions as to whether or not they have sufficiently address the issues with the mcat system and the
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sensor asks about culpability. could boeing have rectified this or does it go back to the company in florida which did the repair of the equipment? that is one of the big questions. francine: this sensor is basically the so-called angle of attack sensor which led to the crash. this was also a new aircraft. was there a problem? do we know anymore more about this relationship? why does the sensor need repairing? benjamin: it is an interesting device that appears on the aircraft that measures the angle of the nose of the aircraft, and the automatic system boeing was using was taking those erroneous measures and dipping the nose of the plane, causing the crash. the problem with angle of attack sensors as it is easy for it to
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be struck by a bird or damaged by lightning. aircraft uses three of these angle of attack sensors because they know how unreliable they can be. on the boeing max, there is only one. what we will find out today is reports from the preliminary black box investigation into the ethiopian crash, which was more recent, which will show that the pilot knew how to address this mcas issue and had followed the procedures. it raises questions as to whether boeing had done enough training and preparation for pilots to avoid this issue. francine: where does the investigation go next? we are left with two crashes in five months. investigators have focused on the sensor. what else will they be looking
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at? benjamin: how boeing and the faa responded. there is a big question mark over whether boeing acted quickly enough and put together a policy or procedure for pilots that was extensive enough, and whether they understood the depth of the issue. the other problem is what happens with the fix? the faa said they need more time, few more weeks. there is now hyperfocus on that automated system, the issue being in the ethiopian crash is that the system turned itself back on after the pilots had made the change and followed the procedure. francine: how has boeing been responding? they have been cooperating. have they given us ideas of what happened or are they just waiting? benjamin: they are definitely taking action after the lion air crash.
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reports from the ethiopia crash have not been published. francine: they are still grounded? benjamin: and will remain grounded until the boeing can get out a fix in the crash of that you the nbn desk ethiopian airline,- ethiopian and whether it is airworthy. francine: benjamin katz, our aerospace reporter. theresa may is due to meet the opposition leader later to thrash out some kind of european brexit compromise. this means the market thanks at will likely keep -- thanks -- close it will likely keep to the european union. ♪ so with xfinity mobile
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d.c. o.d don't forget your fom our earnings fears finally overblown? and u.k. prime minister theresa may blows through her redline to try and team up with jeremy corbyn's labour party to get a deal done. david: welcome to "bloomberg daybreak." i'm david westin. delighted to say back with alix steel. it's been too long. let's start off with boeing. a florida repair shop that works on a sensor that may have caused the crash in indonesia. alix: but they don't have that for indonesia. david: in the meantime, boeing has other problems as well. depending on says they are not cold to take anymore of your


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