tv Bloomberg Daybreak Americas Bloomberg April 11, 2019 7:00am-9:00am EDT
until agrees to a delay october 31 as theresa may gets her second frexit extent -- second brexit extension. some commerzbank executives want to block a merger with deutsche bank. in the fed signals it could move rates in either directions while pricing in a rate cut from the ecb. david: welcome to "bloomberg markets." one person in jail this morning is julian assange. alix: arrested. ecuador said we are no longer going to harbor him, took away his immunity, and boom. david: the president of ecuador after his repeated violations to international conventions and protocols. things went south between ecuador and julian assange. at one point they were going to
appoint him a diplomat, and now they want him out of here. alix: and arrested. david: everybody wants him. he's jumping bail charges in britain, sexual assault charges in sweden, plus united states is desperate to get him since the revealing of the chelsea manning stuff with wikileaks. alix: no surprise the russian day.agency calls it a dark david: he is the one who leaked to the democratic emails during the election campaign. alix: we will watch that as it continues. today we ares, going to be headed towards the ims and what they will say about global growth. pointsures up about four , recouping losses from the other day. still basically weaker for the week. solid 10-year yesterday despite any dovish talk from the fed.
crude getting hit. apparently the iea warns that $70 is tough for consumers. david: it sounds like president trump. alix: as we say a lot, he kind of has a point. david: it's time now for the morning brief. for:30 we get u.s. ppi march and weekly jobless claims. we will hear from fed vice chair richard clarida. at five a plot this evening eastern time, the wall -- at 5:00 this evening eastern time, disney will unveil its plans for an online streaming service, disney plus. alix: no way i can escape disney princesses. david: and it will have star wars. alix: that's good for me. for more, here is gina martin adams and our bloomberg executive business editor.
the news overnight to do with brexit and the extension, donald tusk talking to theresa may and the u.k.. >> this extension is as flexible as i expected, and a little bit shorter than i expected. but it is still enough. we will find best possible solution. please do not wait this time. -- do not waste this time. alix: why not waste it? they keep getting extensions. reporter: some of the companies that are having to deal with this right now, it is just complete frustration. it is just more delays and more uncertainty and frustration when you look at it from a business perspective. david: so the companies are frustrated. is it showing up in the stock price? gina: it is to some degree. broader european markets are up 15%, so there is clear lag in
the u.k. relative to the rest of the world. developed markets, anyway. think that isople good to, but there is a big spread between 10% and 15%. you are starting to see a deterioration in business confidence and economic outlook, which will ultimately affect asset prices. investors find this to be a somewhat uninvestable situation. alix: i am going to take the bullish side. a lot of strategists say i like u.k. assets on a value basis and will someday look to buy. this basically gives the u.k. an look for anen they extension and get it. reporter: maybe, but there is a lot of uncertainty. no one wants to go miller this -- once to go near this right
now until there is more visibility, and now we won't have that until halloween at least. it is going to take some time to get that clarity. david: we were so worried about a hard brexit, and we are not even talking about it. that is good news, right? gina: to some degree. we priced out the worst possible scenarios over the course of the last month. u.k. stocks are up with global stocks. but i also think there's no certainty as to where we are going to go with this, if there is going to be a brexit or not, what the characteristics look like, and delaying it ultimately only increases the potential for economic output to increase. that is the key here. it is not necessarily whether we have it tomorrow or in six months. it is that we don't know if we are going to have it, so businesses can't plan for what they want to do going forward. that is going to continue to push investment into other areas. it is going to continue to push investment out of the u.k. david: let's turn to more
uncertainty in europe, this time in germany. reports overnight that some supervisory board members from commerzbank are going to ask to shut down any discussion with deutsche bank over a possible merger. stock of both of the companies is up. the chairman of the supervisory board said, wait a second, we've got to talk a deutsche bank. what is going on? jackie: this is a big of a limit. it is a big risk for the deal. if this falls apart, you've heard rumors of others coming in from outside germany, but can you get a cross-border deal through? big question mark. this means more flashing for deutsche bank if this doesn't go through. can vote thisard through or block it, so it is a huge development that really puts it up in the air. alix: meanwhile, hedge funds are betting that it is not going to happen either.
shorts for deutsche bank are four times higher than commerzbank. does anyone want this deal? [laughter] gina: that is a really good question. the financial sector in europe is so suppressed in terms of their growth rate that there is some sort of desperation for activity to improve that outlook. however, no deal is perfect, but there are a lot of complaints that this deal is particularly imperfect. i think that is what the general consensus view is, that maybe we can find a better option. maybe there is a better way out of this. there have been a lot of rumors the ecb may cut or do something different. maybe that helps the banking sector a little more and we don't need to lean on mergers. there's just a lot of uncertainty with respect to financials. this is a sector that has lagged persistently throughout its entire cycle. david: is it going to stop lagging without laying people off? when we talk about
consolidation, that means typically you are going to let positions go. jackie: that is what everyone is worried about. that is why this is a big of a limit. they are worried about their jobs on the line, wiping out huge markets. they are going to make a lot of noise to prevent this getting through. alix: well said. we are going to talk about the fed now. the statement after the minutes was several participants noted their views shifted in the direction based on income data and other developments. is this anything different than we knew before? gina: i think this is just confirmation that this is a flexible fed. this has been the story all year. they flexible, patient. they are going to become more data dependent. they are going to be somewhat flexible. so i don't think this is anything in particular very different. it has really been the
administration talking about the need for cuts, so it has come back. is the fed truly an independent organization? can they continue to go along their own task without being overwhelmed by the influence of the administration? i think they've proven in the past that they are, but that is the bigger change over the last two weeks. all of a sudden you do have pressure coming again to cut. reality is that growth is fine, growth is pretty consistent. there's probably also a big case to cut right now. david: what i took away from the minutes is the fed doesn't know any better than we do where the economy is going. is that reassuring or discouraging? jackie: from the companies' perspective, we are starting to see some earnings. it is pretty steady. there are no alarm bells ringing. domestic growth is fine. even abroad, it is better-than-expected. there were some forecasts that companies with foreign earnings
were going to fare less well. that is not really showing up either. so it is not that bad right now. david: gina martin adams and jackie simmons, thank you very much for being with us today. you can find all of the charts we just used and more by running g tv on your terminal. coming up here, more on the halloween brexit delay with sky bridge capital's co-cio. maybe theresa may will dress up for halloween. alix: do some "dancing queen." [laughter] david: live from new york, this is bloomberg. ♪
markets." shares of luxury goods maker lbmh surging to a record third-quarter sales, beating estimates. the key fashion and leather division posted a 15% gain in a bid to spark interest in its biggest brand. in germany, one faction of the commerzbank supervisory board opposed to a tie up with deutsche. they want a board meeting to end negotiations, concerned about the potential loss of thousands of jobs. the controversial tabloid "the national enquirer" is being put up for sale. billionaire jeff bezos accused the paper of extortion. tolier, they admitted killing and burying stories about president donald trump. backed by a fund reportedly pushing for the sale because it is disgusted with the "nquire -- the
enquirer's" reporting habits. david: i had to chuckle at that. they didn't know what the about?er" was that's pretty good. last night, europe's leaders met in brussels and agreed to offer an extension to brexit, but not the short one theresa may asked for. for more, stuart briggs covers this in london. what comes next? reporter: certainly going to accept it. that is not going to say that prime minister theresa may's party is going to be happy about it. frustration is building, especially in the brexiteer wing in her party as each deadline for the u.k. to leave the
european union passes without having left. therefore, the prime minister will make a speech today to parliament, and we can expect some fairly hostile questioning from her own benches. david: but in the end, they will accept it. does this mean theresa may's days are numbered? certainly pressure is building on the prime minister to name a date to step down or arrange a kind of succession process to take place. that is not to say that she is prepared to do so. the latest she said last night is that she still intends to see the u.k. out of the european union. i won't step down until that's done. of course, that's not gone down well with the rank-and-file lawmakers pushing her to step down much sooner than that for what they see as a more pro-brexit prime minister. david: to take us into the
mechanics, it is now october 31. what is the role of the u.k. in the eu in that interim period? for example, parliamentary elections, decision-making. the heartis goes to of why negotiations among eu leaders took so long last night. there is a real fear among some leaders of the bloc, notably french president macron, that the u.k. could act in bad faith in between period full membership and leaving. that said, the u.k. will not be able to veto key decisions during this period. that is more to do with the nature of the european union and how it works than a reflect in of how the government may or may not choose how to act. david: thank you very much. s reportingart bigg
from london. alix: come inside the bloomberg. six-month volatility for the cable rates, nothing. >> nobody cares. alix: is it complacency or apathy? guest: a little bit of both. if using about what europe does well, it is kick the can down the road. unfortunately that leads to political paralysis with regards to brexit. an activenk from investor standpoint, most active investors have written off europe. they don't have a tremendous amount of risk there. they are looking at brexit as a contagion event, but still a mini-contagion event. so when you see these announcements of extensions or
less stability in the process, it really hasn't shaken markets as much of the original brexit vote. david: what about the effect on europe and the european economy? is the contagion spreading to europe? we had mario draghi in the news conference saying the whole discussion of brexit which has is partow for a while of the uncertainty hanging over our continent. how much of this really affecting europe? troy: there's a variety of reasons why european investment has slowed down, but brexit is a part of it. it is hard to make 20 or 30 year investment decisions, it always is, but when you have political uncertainty around brexit or cronow vests, and ma hasn't exactly been a swinging success with his policies, merkel is on the way out. ,here's a number of concerns
and of course with brexit. the u.s. looks a lot better now than it did not so long ago. all of those factors are weighing on markets. alix: i feel like maybe a year ago it would be advantage euro zone. they had the power when it came to brexit negotiations. the u.k. did not. yesterday i found to be really interesting. tuskwanted a year and -- wanted a year and macron was able to get six months even though he wanted three. how do you view something that that? troy: from a german standpoint, they want this to be as smooth as possible. they want the u.k. to be a strong export market. from their standpoint, they want things to go smoothly. the french have less to gain from exports from the u.k. they view it more as a
still with troy gayeski of sky bridge capital. would you like a tie up of these banks? troy: it is always better to have one stronger entity than two weaker, disparate entities that have weaker balance sheets. but as we were talking about, you are going to have to lay some people off. you're going to have to make some tough choices, which really isn't the european way. david: is it that part of the issue as we look at european growth? it is a broader issue about labor reform. the fact is it is sometimes difficult and painful, but ultimately will lead to a more competitive industry. troy: 100%. there's been some mistakes by macron politically with the carbon tax and going too far left on green issues, but one of his big reforms was going to be more flexible labor markets. economistskets and
meaningful hope that france could turn from being the gross languor to something more competitive -- the growth lagger to something more competitive with germany. greece haveny and made hard reforms. until that changes, europe will always be at a competitive disadvantage for capital. you know, i don't know why having control of your largest, most systemically important institution, the way the germans like to roll. the germans own a portion of commerzbank. think it would be more interesting to have commerzbank deutsche bank rather than unicredit.
also thentops have value strapped recently. alix: if we get a tie up, does that make them less of a value trap? until you see sustained loan growth not only in europe, but in the u.s. -- at the bend high-growth and cyclical upside has been very stagnant, 2% to 3% taylor: without stronger growth, which doesn't appear to be happening -- 2% to 3%. without stronger growth, which doesn't appear to be happening, it does not appear you will get that revenue and earnings boost you would think operating leverage would provide. david: but that is fundamental economics because the interest rates are too high. troy: you have a super flat , evencurve, slow growth
slower loan growth in a slow growth economy. if you think of why u.s. banks have underperformed expectations, europe is a similar situation, but decidedly worse. alix: so what is the thing you care about in bank earnings for the u.s.? troy: it would be back to loan growth. our loan loss reserves starting to go up? is there any indication that the q1 soft spot is more dire? those other the things we will be focused on. alix: coming up, flexible fed. officials signaled they have option for where rates could go. state street advisors global economist will be joining us. this is bloomberg. ♪
opening up. dow futures up by 35. boeing still negative in premarket. european stocks higher, helped by the consumer goods base. mh with a blowout, killer first quarter sales. where's the recession in europe there? in other asset classes, a mixed dollar story. the cable rate going nowhere. extension,xit and yet no volatility. the iea1%, part of that saying $70 would help would hurt -- consumption. another kick in the can when it comes to opec. they waited until june. david: there's a lot of news outside the business world.
for that, we turn to viviana hurtado, who's here with the first word news. viviana: british prime minister theresa may now has to explain the idea of a brexit delay to a skeptical parliament. the u.k. and eu agreed to postpone the split until october 31 to avoid a chaotic no deal divorce. mei previously said a delay was unacceptable. her own conservative party is losing patience with her leadership. president donald trump's choice of herman cain for the federal reserve board could be in danger. at least three republican senators say they won't support the pizza mogul. the president has not for mally nominated cain and has suggested he won't put up a fight. police arrested wikileaks .ounder julian assange since 2012 he had been holed up at the ecuadorian indices on asylum over a sexual assault charge.
he feared he was in danger over the leak of official u.s. documents. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. on viviana hurtado. this is bloomberg -- i'm viviana hurtado. this is bloomberg. david: we got a p get what goes on at the fed behind closed doors last month, but that didn't give us much direction. members regarded rates based on incoming data and other develop its. what did we learn from these minutes that we didn't know yesterday? >> i think what the minutes made clear was that the committee still wants to retain and policy actions. wase, new information
regarding what the media appears to assume about labor force participation rate, et cetera. that is one of the ingredients that what was not seen in the summary of economic projection came a bit more clearly from the minutes. they are making assumptions about rising global participation rate, which we are seeing signs of, but perhaps those assumptions are not too optimistic. this lets the economy grow without worrying too much about inflation and wage inflation. where is the asymmetric risk for the fed? i think the fed is more comfortable letting the economy run hot because of this new thinking about how much slack there is in the labor market, and because the second half of the mechanism for
inflation, despite the fact we have seen a pickup in wage inflation, overall inflation is still tepid. so i think the fed keep feels of --table if they wait , it is much less possible. market has been white-hot, and now it has come down to red hot. we have healthy wage growth. , but nothing runaway and yet we have inflation that peaked and rolled over materially. agreeing with your other guests, the upcoming conference, one of the biggest issues we will be debating, as how much more slack is in the economy and how much
longer can the fed run things without having it come back. alix: yesterday when you had big to the -- big bank ceos going before the house, here's what they had to say. >> people talk about leverage lending on the banks with the largest solutions, but there is more important direct lending being done in separate vehicles this not regulated or scrutinized. it is obscured, and it is something we want to have a closer look at. alix: and high-yield markets on fire, and leverage loan prices are rising. troy: this is back to the issue on banks. one of the reasons loans have been slower than people wanted haven't allowed funds to deteriorate. so where has the bad behavior been the cycle? it has been in high-yield bond markets and the private credit
market. a -- all os was last five or -- all of its growth have happened in the last four or five years. with high-yield, at least you have liquidity. if you want to get out, you can. you get a private loan, you are not getting out anytime soon. we don't think it is a systemic risk because the owners are not levered, but it is certainly a .ig risk for investors david: so the banks saying it was a real risk, not a systemic risk. is this something legislators should take a look at?
simona: there was a reason why this topic is on everyone's mind. i think the fed will be taking a closer look at that. i don't know the extent of the urgency for this, however. alix: in some respects it is an enviable problem to have when it comes to europe. we talk a lot yesterday about we about when we get the details for the tltro's. if demand is not there, what is it going to do? watch me -- walk me through the situation in europe as opposed to the u.s. simona: you drive the nail on the head. if they are doing to re-accelerate european growth, i think the real question is what is the problem in europe? is it the high cost of capital, --is it the mek of the man the make of the man. you need to look for other thinks that will
improve business creation, competitiveness, those sorts of things. we are not seeing much of that area in europe, and i am doubtful the ecb can remove the needle. alix: to that point, the markets kind of betting on what you are saying, now pricing in a cut for the ecb in 2019 and a hike later in 2020. is that legit? troy: we've joked over the past couple of years when markets were practicing in a hike -- were pricing in a hike for the ecb. light, no way, right? they could easily hike one or two more times this cycle if inflation starts picking up and the rally stays this wide. we would think it is much more skewed towards cutting,
unfortunately. alix: and a whole different normal with that. thanks very much. great to see both of you. coming up later today on goat bloomberg commodities," i will a cio and -- david: citigroup veteran investment bank chief jamie foresee is going to be retiring. this, i think, is a surprise. promoted in november, and it was reported going to be the successor for james corbett. alix: the ecb is said to have
questioned the logic of a deutsche bank deal. going back to our earlier conversation, who is for the deal? if the ecb is going to question that logic, what does it say about that actually getting done? david: we will see what the chair of the ecb has to say. sharkss like the are circling a little bit. alix: but what is the problem they have with it? is it more of a labor issue? apparently several members at the last meeting of the supervisory board questioned the logic of the merger about worried that the ecb credibility will suffer a major blow if they approve the deal and the bank runs into trouble. david: there was speculation the might be concerned with the macro potential. how strong will this bank be, and what will the service business look like -- and what
will the reserves and business look like? it is quite possible they are saying we want to be sure this is going to be a strong bank. alix: and if you are in a deal, you are going to have to raise fresh capital, but apparently one official said even if they raise the funds, that still won't be sufficient to sway regulators if they don't consider the business case to be convincing. at the end of the day, if you can't make a good case, it doesn't matter how much money you have. david: if you take two struggling institutions and put them together, did you end up with one big struggling institution or a different situation? alix: but mario draghi once consolidation. he said so yesterday. yet, the ecb is not totally sold on a deutsche bank/commerzbank deal based on its credibility, basically, if they approve it and something goes bad. coming up, wall street in the
coming up. japan's largest lender sliding international business falls flat. then you've got some small .anking with big pay packages and wall street takes the hot seat, holding megabanks accountable quickly turning from allynure review of systemic important banks and super awkward moments. david: we have to turn to this story breaking now that the ecb is saying, not so fast, commerzbank. turn of an amazing events even within the last when he for hours. commerzbank is calling for a meeting to say we don't think this is such a good idea either. so all of the sudden, what looked like was going to be a forced marriage ran through by the german government, there's a
big question. david: the stock bump up would suggest markets didn't like this much anyway. funds are betting against deutsche bank. reporter: one element we haven't talked as much about in this deal, cerberus, the private equity firm that has stakes in both. they are certainly behind-the-scenes. i'm told they are advising on this, so we will see. david: but also something has got to get done. there's got to be a plan b. worses a bank doing even than deutsche bank, nomura. their shares are down even more. reporter: they are indeed. six months slide down 23%. that is worse than socgen and deutsche bank. it is interesting reading on
this little bit and what analysts are saying. they are trying to improve their profit through cost-cutting instead of growing. that can work in the short term, as we all know, but in the long-term it is not a great strategy. alix: it is definitely not a good strategy. who would have thought something worse than deutsche bank? let's get to our next story and talk about a nice pay package here. a small california bank, axos financial, who ceo made more than jamie dimon, yet it only has about $10 billion in assets. momentshese are the when i love david westin. we were emailing about this last night. this is the first time someone has managed to come up with a compensation package that is totally aboveboard, totally legal, shareholders approved
come aboard approved, and yet you go, what? how does this work? it is a complicated set of incentives tied to the scott price -- to the stock price. on the face of it, you think a ceo should be tied to the stock price. then you dig in and say there was some short interest and artificially inflated stock price. david: and you have the ceo making almost as much as the whole company made. alix: which makes you feel good if you are a worker there. jason: we are at this moment where there are a lot of big questions around ceo compensation at banks. david: and a lot of questions got asked at these hearings yesterday that went on forever. when you take seven ceos and put them with 60 plus members and a committee to ask really import questions, you end up with people asking early important questions and total confusions -- asking short questions and total confusion.
>> those of you who are not factoring the rule as it relates to hiring, can you just raise your hands? it rooney rule, where started in the nfl, where commissioner rooney said when you interview for general managers and coaches on nfl teams, you must interview a diverse group of candidates. if we applied it to banking, are any of you doing that? everybody? sure i -- ok. ok. let's pretend the rooney rule applies to banks. some of you have such a policy?
all right, that doesn't work. >> we have members that are waiting. >> madam chair, you took 10 seconds from a time. >> mr. duffy, if you insist, go ahead and take another five seconds. >> is your bank likely to have a female or person of color within the next decade? kindly extend your hand into the air. two, three, four, five. david: i think they were all doing their best, but if you , one range ofat questions covered everything under the sun and not much useful coming out of that. jason: it was bizarre to watch, i have to say. it was clear a lot of the banks were confused about some of the questions. you saw that at the end. jamie dimon like, wait what?
as you showed at the top, the rooney rule. obviously not a lot of football fans in there who know about diversity hiring in the nfl. wanted to, you grandstand on it, but you couldn't when you had six of them. and one person who was really sad he missed it, lloyd blankfein. [laughter] we are at an amazing moment, and this goes back to the story that we were talking about with the compensation for the ceo. clearly that was at the forefront of all of this. there was one moment where a representative pulls out a whiteboard and starts doing all of this math because jamie dimon said i'm not sure your math is right. then she tweets out later and says this is how my math is right. pretty contentious. as you said, the format didn't do a lot for them in that the lawmakers had five minutes each and would ask a series of disjointed questions.
♪ beid: ecb officials said to questioning the logic of the deutsche bank deal. bloomberg's germany bureau chief joins us from berlin. what is the problem the ecb apparently may have? reporter: we are hearing from sources today that ecb officials having recent meetings with deutsche bank and commerzbank officials expressed concerns about this deal.
what may be troubling for the two banks is that the concerns are not just over the capital that they might need to raise, but the logic of the deal itself. there is no formal plan that has been presented, so this is all very much preliminary, but those somerns certainly present worries for both of these banks. we are also hearing from labor leaders today who have come out very strongly to say that they oppose this deal. that opposition in and of itself isn't new, but they are now saying they are going to vote as one block to try and block this both on the deutsche bank and commerzbank side. people outside of germany, as a reminder, labor representatives seats on the supervisory boards of these banks. the opposition is a real worry for these banks if they plan to move forward with this deal. david: it was no secret if this deal went forward, they would be laying off some people.
it is obvious why the labor unions wouldn't like that. what is the plan that would make this a stronger bank? that is what the ecb appears to have questions about. do we know what that is? chad: i don't think the ecb knows because i'm not sure that the two snow -- that the two banks know. nothing has been presented yet as far as we have been able to find out. there is discussion also as to when they might actually have a plan to present. at this point it is difficult to say. david: thanks so much, chad thomas. alix: coming up, oppenheimer fund's cio and head of fixed bank, as wellsche as bracket. this is bloomberg. ♪ ♪
scary. eu agrees to a brexit extension until october 31. french president emmanuel macron flexes his muscles in negotiations. question als deutsche bank/commerzbank merger. and the fed signals it could move rates in either direction as the market prices any rate cut from the ecb. david: welcome to "bloomberg tokets" on this thursday -- "number daybreak" on this thursday. alix: who wants a deal? approvesaying if they it, it could hurt their credibility if something goes wrong, which it could. david: we just talked to a reporter in frankfurt who said there is no plan. how could you go this far forward with emerging
negotiation without saying why you should do it? alix: how did this start? david: desperation? alix: who made that phone call? the government, or ceos that were talking? david: i'm hoping it was a plan that we just don't know about yet. alix: like brexit. in the market, kicking all cans down the road, whether you are the ecb, the fed, opec, or brexit. s&p futures a little in the green. boeing weighing on the dow the last four days. the dollar now turning positive, a little bit of a bid. currenciesor haven on the tenure. 30 year option coming later today. the 10 pretty solid yesterday. crude continuing the risk off field even though opec keeps saying the market is really tight. is like kicking -- again, it is
like kicking all cans. david: sooner or later, something good will happen. time never the morning reef. at eight: -- morning brief. ppi numberset u.s. for march and weekly jobless claims. evening eastern, the walt disney company announces details of its plans for a new streaming service to be called disney plus as part of its ongoing challenge to netflix. now we want to turn back to the fed. our next guest was a cofounder of the club for growth, he distinguished visiting fellow at the heritage foundation, and onomics," of "trump and now stephen moore is the man president trump says should be on the fed board. >> it was a great honor when the
president called me and asked me to do this. i can't wait to help jerome powell be the most successful chairman of the fed ever. david: explain to us from your point of view what you bring to that. obviously when you put together a fed, it is a team. what would you particularly bring? mr. moore: thank you for asking that question. i am not a phd economist. i do have 35 years experience in the game. i think i have probably as good a record on the economy is any economist you want to put me up against. i think i bring a kind of real-world experience. i would say the same thing for herman cain, who i think was a tremendous pick. having a businessman on the fed would be a brush of -- a breath of fresh air. i will bring a new perspective. one of my missions is to open up the fed. i'm going to run on an agenda of transparency, openness. why shouldn't bloomberg and c-span and others be able to cover everything they do?
why does there have to be this temple of secrecy? i want to open some light on the fed, and i come in with the idea to challenge one fundamental idea that i think is endemic at the fed, which i think is complete we wrong, which is that growth causes inflation. growth does not cause inflation. we know that. when you have more output of goods and services, prices fall. i think the fed has been afraid of growth, and i think they are wrong. david: one of the questions that has been raised is whether your appointment to that position would undermined the independence of the fed. you have not made secret the fact that you approach president trump's approach to growth. is it justified to be somewhat concerned that having you there would undermined the church and state distinction between politics and the federal reserve? mr. moore: certainly i am not at all embarrassed or apologist for what i've done for donald trump. donald trump has a phenomenal
record on the economy. i'm one of the people who put his agenda together. i worked with larry kudlow to put the tax plan together. we worked on the regulation. we've got this booming economy right now, and i'm not going to apologize for that. i think that is a credential for me, that i helped come up with some of the policies that trump has put in place to create the best labor market for workers in 50 years, wage increases, strong growth in the economy. but i am independent of donald trump. i don't agree with -- by the way, people should read my book if they don't think i am independent of donald trump because your are a lot of areas where i disagree with trump on some of his tariff policies. i've been a vocal critic of the steel and auto tariffs. i think he should be much tougher on government spending. but i am proud of what we've done, and i think it is a credential for me. one other quick thing, i was one of the first economists around to call out the fed for their
disastrous decision last december to raise interest rates. i was kind of the canary in the coal mine on that. and we know i was right on that because even the fed a few weeks later had to but its tail between its legs and admit that it had made a mistake, and thank god they corrected that because that did severe damage to the stock market and economy. alix: so if we have a democrat in the white house president lauren or sanders for white house -- like president warren or sanders, and they nominated someone close, you would approve of that? mr. moore: i think the president has the right to nominate people, and it is appropriate he would nominate people that agree with his framework. alix: it does freak markets out because with people coming in with diametrically opposed views, strong views on either side, that makes them worried,
versus a more academic. mr. moore: to say that other president haven't put people who agree with their position on the fed is wrong. i'm not saying you are saying that come about what other people are saying. i have a track record of 35 years. people can look at what i've stood for. my big thing is we want wage gains for workers, high economic growth. i've been a big challenger to bys crazy idea out there some of the most prominent economists in the country who said we have stagnation and can't get 2% real, growth. that is the best -- real economic growth. that is the best we can do. i told larry kudlow that is complete nonsense. real, andw 3% to 4% last year we did get to 3%. people should look at my record and see if they agree with the things that have been achieved
in my productions. alix: let's talk about -- david: let's talk about the job you would do as a practical matter. there's been some question about your emphasis on price stability over employment, specifically on -- mr. moore: not over employment. i just want to. correct you on this i think price -- i just want to correct you on this. i think price stability is the -- david: right, using that price stability will come, that they aren't two separate things develops. mr. moore: i think the most important thing the fed can do is provide a stable price. have: more precisely, you admitted you are not a monetary policy expert, but when you really focus on commodity prices in particular, do you still believe the fed should really be focused on commodity prices? commodity prices go up and down
from everyday. monetary policy cannot. does that really take you to a gold standard? mr. moore: no, i am not in favor of the gold standard. only looking at commodity prices, but there's a couple advantages of a commodity price. what happened in the summer of 2018, the reason i was one of the first people to call out the fed for the mistakes of those rate increases, go back to the summer of 2018. 4% economic growth, zero inflation, high implement rising wages. it was a beautiful picture. you can't get any better than that, and the fed starts raising rates. why would you change policy when everything is going so right with the economy? the first indication that something was going wrong was as soon as the fed started raising rates, commodity prices started a very steady fall. by the way, the stock market fell at almost exactly the same pace. people remember the last three months in the last quarter of
2018 was a disaster, and it was because the fed made a wrong decision on rate increases. one other quick thing on the commodities, one of the advantages looking at commodities is you can go on your computer screen right now and you know what the commodity prices are. we don't know what consumer prices are until six or eight weeks later. we don't know what gdp growth is until six months later. this is a good way to indicate which direction prices are going. alix: which makes sense if commodities were only dictated by supply and demand, but when they are not, when it is like opec is going to -- mr. moore: that is a great point. i'm glad we are having this conversation because there is a misunderstanding on this. there's many commodity indexes so you wouldn't want to just look at energy. the advantage of looking at 20 , you could seees
why maybe saudi arabia might be able to influence the oil market, but they can't influence the soybean market, right? so with all the commodities are falling at the same time, which is what happened at the end of 2018, i would argue that is a pretty good indication that you have a deflation of prices, not an inflation. david: so if you look at the whole cluster right now, does that tell you you should cut rates? we have congressmen saying we should cut. i don't see in the commodity prices why we should. prices arecommodity still about 8% to 10% below where they were in the summer when we had 4% growth, so i think commodity prices are still a little bit too low, but they have corrected. you're right. when the fed reversed its decision in late december, they said we are wrong. commodity prices started a benign rise, and what has happened to the stock market since then? it has been a nice ride.
having those commodities stable is a good indicator of where we are on inflation and deflation. alix: does it also come with more policy? i brought up opec, but you said saudi arabia can't influence soybeans, but china and trade can. so you are more subject to headlines. how do you factor in these more idiosyncratic, but still macro, things that don't have to do with supply and demand? mr. moore: it is a valid question. that is why you don't only look at one commodity. out of 30 major commodities, 25 were falling in price. people are going to have to explain to me because i took some heat for saying we were in deflation at the end of 2018, if they don't think we were in deflation, how do they explain that 24 to 25 of the 30 major
commodities were falling in price at the same time? alix: i can't argue with that. david: she's a commodity person. alix: really appreciate it. thank you for joining us. mr. moore: i hope to be on your show anytime. david: you can be very transparent right here. [laughter] , thanks very moore much. coming up, prime minister theresa may and the eu agreed to delay brexit until october 31. more on the u.k.'s long goodbye. this is bloomberg. ♪
to brexit, but not the short one theresa may asked for. bloomberg'somas is brexit editor. tell us what happened and what it means. emma: we are now definitively in brexit limbo, and the feeling in brussels is that this might not be the last extension. they were quick to point out last night we might be back in october for another extension, and even donald tusk, president of the eu council, didn't dismiss that possibility, which is quite bad news for business, who are complaining that they are wasting lots of money on things like stockpiling and warehousing as the uncertainty continues. the focus is very much back to the u.k. this delay will be very unpopular with the probe brexit wing in theresa may's party. she insists she is still trying to get this thing done by the end of may so that u.k. can leave on june 1. probably can expect another go
at getting her deal through parliament. she has had talks with the labour party, but it is not clear if there is any pressure on the labour -- on the labour side. may has been held in place by the uncertainty and the risk of no deal, and the very volatile situation in brexit talks. now that there is breathing room , there's quite a lot of chatter that perhaps this would give time for a leadership contest or even a general election. david: is there any general sense that theresa may can get this done? she's had it almost three years now. emma: right. a lot will depend on the incentive on both sides in the talks of the labour party, but very much theresa may is in a rush to get this done by june 1, and the labour party don't seem to be in the same rush, so it is may who is going to have to move
and compromise. anything she offers, really, is going to be extremely toxic for a large chunk of her party. the customs union has been talked about a lot. that basically means staying in the eu trading regime. a tiny number of conservatives want that. they see it as a complete betrayal. see whatvery hard to she could offer without really splitting her party and a very damaging way. i think we are sort of stuck in brexit limbo for a while. david: thank you so much. that is blumberg's emma ross thomas. alix: joining us now is ppenheimer's krishna emani.
krishna: the fact that this jig got delayed until october was expected, and we probably expect the can to get kicked down further. this is not getting resolved anytime soon. david: is it showing up anywhere in asset values? u.k.na: the prices of assets are probably lower than where things would be if the brexit issue wasn't out there. to some extent, european growth would have been somewhat better if this uncertainty wasn't there either. alix: what struck me yesterday was the indecisiveness of europe and how they clash with each other. we got to october because of macron. if tusk got his way, it would have been another year. krishna: this has been bad for europe. -- it is annomic
economic issue for the continent as well. it whereif we resolve that u.k. leaves with no deal, i think that would be another disaster. to arrivetending it at a solution that is organized is a much better outcome. alix: krishna memani will be sticking with us. coming up, risk might be brewing outside of the financial system. we will discuss next. this is bloomberg. ♪
there's more and more direct lending being done in separate vehicles that is not regulated, not scrutinized. at the moment i don't think it is systemic, but it is growing, and i think it is something over time that we would want to have a closer look at. alix: joining us now is morgan andley's head of banks diversified finance lending. thank you for being with us. what do you think of what david said? if banks come into earnings and say we don't have a lot to loan, is that because they are all going to shadow banking? is that true? betsy: when we look at credit formation outside of banks in the commercial space, it has been faster as a percentage over the last 10 years. the share that banks have of corporate loans has gone down about 10 percentage points, so it is a factual statement. alix: is it a risk in the same way he said?
issy: i think the question is it systemic or not. when you have smaller pockets of lending outside of the banking system, that is where the question is. what is the blow to the financial system? i think people are thinking about whether or not that is the case. david: should we be concerned that the reason it is being done is to get a lot of -- to get around a lot of the financial regulations and protections built after the financial crisis? betsy: when all these rules were being put into place, one of the things people were mentioning is you are going to squeeze credit into other parts of the market, so i don't think that was an unexpected, unintended consequence, but from where i sit, i don't see the risk so large that we should be concerned about an impending issue.
krishna: i think for it to be a systemic issue, the bank has to be far more levered than it currently is. subprime was really the catalyst, the driver of the catastrophe. the global banking system was significantly levered. that is not the case right now. any of things would be localized, but they are not going to impact the whole credit market. wex: to that point, have re-rated do what these banks are now to what they were 10 years ago? they are not going to be this huge loan driver machine. betsy: bank valuations today are basically hovering at cycle lows from a pe perspective, and even relative to the s&p we are hovering at relative lows. i don't see the banks as having multiple forreased
higher liquidity. i think the market is saying we have to get through the next downturn, and then we will see how you did and assess whether we should give you higher multiples at that point. alix: thank you. coming up, bank earnings coming on deck. jp morgan and citi. more on that. plus spanish 10 year bond yield falls to 1%, the lowest since october 2016. saudi bonds doing as well. saudi aramco bonds kind of struggling in secondary markets. much more coming up. this is bloomberg. ♪
futures. killer q1ng in a sales. the dollar gaining. the curve steeper. crude having a risk off bid, down over 1%. despite the ia saying the market is tight. ppi dropping. david is laughing. where is the inflation? on a month-to-month basis if you back out food and energy, you're on year basis coming in 2.4%. the total month over month was up .6%. x food and energy and trade you are actually flat. have demand coming in 2.2%, we're not seeing the cpi. david: cpi numbers yesterday were soft.
because the issue of pricing power. the worry about operating margins coming in and getting weaker and expectations getting weaker and this is a prelude. david: it shows up in margins. alix: that is why you will have the earnings recession. david: bank earnings start tomorrow when jpmorgan announces its first-quarter results. still of this are betsy grayson of morgan stanley and christian my money of oppenheimer funds. betsy: we are slightly below consensus. names like of the goldman wells fargo. it is because of trading. training was tough this past quarter. the government shutdown. don't we know that? not in everyone's prices. na: i do not expect
anything out of the banks. banks are the ultimate value trap in the markets. there is a lot to like about banks but they are not going anywhere, but they are not going anywhere because businesses are not going anywhere. theyan earnings standpoint can come up with better results down the road but today it is about buybacks for banks rather than earnings helping them. this is a chart that shows earnings estimates and revenue estimates for banks. is this going to be the tropical? atsy: we expect he will have pickup in advisory and trading activity. we also see better loan growth. last year everyone is like where is loan growth? now we have seen loan growth running at 10%, up from last year.
there are legs to asset growth. david: not all banks are created equal. given that analysis, if you compare, bank of america tends to be more retail oriented as opposed to goldman sachs. does that differentiate among the banks? betsy: sure. as we think about the earnings thathe specific quarter, is why we are deeper below the street on goldman and some of the other names we cover. do your point on where do they go from here? we see an improvement in the trading activity faster. the other point is deposit pricing. we had low deposit betas. we think that will pick up and differentiate some of the institutions that have the better quality consumer franchises. krishna: on the business side, from a loan growth perspective, one question we have to ask ourselves, are the larger banks
in the most important part of the market, which is where private credit has been going? is this a permanent phenomenon the way corporate bond markets intermediated high-grade loans decades ago. you may have a debacle there. this private credit thing is more permanent than the banks are thinking about. david: is that hurting the main banks earnings? they are losing that high revenue of business? betsy: at this stage i would say no because banks are able to lend to their customers. they have sufficient capital and liquidity. as we talked earlier, there are rules around bank availability of credit and i do not think it is hurting them. alix: you mentioned investment banking revenue. we have a chart with the five big banks.
what is not priced in? they have signaled it is not going to be good. where are we missing it? betsy: we are below the street on eps. i would argue on a valuation the multiples to reflect an expectation it will be a weak quarter. the question from here is what is the outlook for two q, what is the outlook for the rest of the year? for is the opportunity set things like buybacks that we discussed earlier. q1.d: we are talking about it will be weak on every count. krishna: blame the fed. david: exactly. but the fed has corrected itself. that raises the question what about the year? what are you looking at? betsy: it is fair does -- krishna: it is fair to say first quarter will be the trough and things will pick up in the back
half of the year. international growth will pick up. gdp growth will pick up. across the board, the earnings outlook and the topline growth outlook and the gdp outlook improves materially in the second half. alix: fairpoint. -- fair point. part of it will be evaluation due to rates. >> i am long on overweight financials. it is far and away the cheapest sector in the s&p. alix: that is kind of what you were just talking about. if we do get rates that could be a good thing. krishna: maybe. i think this has been the story with banks for the entire cycle. everyone likes banks because they have decent earnings. stocks do not go anywhere. that is going to be the case for a while. alix: what will make that go somewhere? betsy: loan growth. buybacks. alix: it will not come from a
steeper curve or the fed? betsy: i'm not predicting the interest rate, but if the curve goes up, sure. alix: if the long end goes up x amount -- betsy: the long end of the curve on the banks there are times when it looks 100% correlated and times when it looks uncorrelated. at this point in time they are trading closely with the 10 year. i do not believe that is an accurate way of estimating their earnings. earnings are not entirely tied to the 10 year. in answering your question, what make them go up, the 10 year yield went up, they will go up. alix: betsy graczyk, morgan ,tanley, and krishna memani thank you both very much. david: we go live to parliament where i'm told theresa may is speaking. may: many of our
european partners shared a deep frustration that i know so many of us feel in this house. there is a range of views about an extension, with a large number of member states preferring a larger extension at the end of this year or into the next. what was agreed by the u.k. and eu was a compromise come an extension lasting until the end of october. the council also agreed we would update on her progress at the next meeting in june. critically, the council agreed this extension could be terminated when the withdrawal agreement has been ratified. for example, if we were to pass a deal by the 22nd of a, we would not have to take part in european elections and when the eu thought they were ratified, we would be able to leave in may. the data our departure from the eu and our participation in
parliamentary elections remains a decision for this house. as president tossed said -- as said, the course of action will be entirely in the uk's hands. in agreeing to the extension there was some discussion about whether stringent condition should be imposed on the u.k. brits e.u. membership. i argued against this. and --itionally attached. the council conclusions are clear that during the course of the extension, the u.k. will continue to hold full membership rights. i assured my fellow leaders the u.k. will continue to be bound by our ongoing obligation as a member state including the duty of cooperation. place aed kingdom responsible and constructive role on the world stage and we always will. that is the kind of country we are. we face are stark
and the timetable is clear. i believe we must now has on with our efforts to reach a consensus on a deal in the national interest. i welcome the discussions that have taken place with the opposition in recent days and further talks today. this is not the normal way of british politics, and it is uncomfortable for many in both the government and opposition parties. reaching an agreement will not be easy because to be successful it will require both sides to make compromises. however challenging it may be politically, i profoundly believe that in this unique situation, where the house is deadlocked, it is incumbent on both branches to seek to work together to deliver what the british people voted for. i think the british people expect their politicians to do just that, where the national interest demands it. i hope we can reach an agreement
on a single unified approach that we can put the house for approval. we will seek then to review a small number of options for the future relationship we'll put to the house in a series of votes to determine which course to pursue. before, the clear government stands ready to abide by the decision of the house. to make this process work, the opposition would need to agree to this. consent, wese's could also bring forward the withdrawal agreement bill, a necessary element of any deal. this bill will take time to pass through both houses. if we want to get on with leaving, we need to start this process soon. it can also provide a useful forum to resolve some of the outstanding issues in the future relationship. crucially, any agreement on the future relationship may involve a number of additions and clarifications. that in this council all 27 member states
responded my update by agreeing the european council is prepared to reconsider the declaration on the future relationship in accordance with the principle stated in its guidelines and statement. the council also reiterated the withdrawal agreement itself cannot be reopened. i know the country is intensely tostrated that this process leave the european union has not been completed. i never wanted to seek this extension and i regret we have not been able to secure agreement in this house for a deal that would allow us to move in a smooth way. is putting debate members on all sides of the house under immense pressure and causing uncertainty across the country, and we need to resolve this. let's use the opportunity of the recess to reflect on the decisions that will have to be made swiftly on our return after easter and look to find a way through the impasse so we can leave the european union with a deal as soon as possible so we
can avoid having to hold parliamentary elections and so we can fulfill the democratic ,ecision of the referendum deliver brexit, and move our country forward to it this is our national duty and elected members of this house -- as elected members of this house and nothing is more pressing and vital. i commend this statement to the house. >> thank you, mr. speaker. i would like to thank the prime minister for a copy of the statement. leaders agreed to grant the united kingdom and article 50 extension. this means britain will now have to start the process of holding european elections in the extraordinary situation of not knowing david: we've been hearing theresa may give her statement to parliament. now we are seeing the beginning of jeremy corbyn. he is the opposition leader. what i heard from prime minister may is people are frustrated, and we have to work together,
the labour party as well as her own party, so we can leave as soon as possible to deliver to the british people what they asked for. alix: it is like when i talk to my husband and daughter when they are fighting. you both go to different corners and cool off and we will talk about it. that is not what you want to hear from the u.k. government. now a critical time? if you're going to get to short-term extensions all the time, where's your impetus to get anything done? gettingot clear we are closer to the end the beginning. alix: and cable rates not moving. time for follow the lead. today we will take a look at the push for the green new deal and the mass mobilization to address climate change and reduce the nation's climate footprint. the center for american progress senior vice president for energy and environmental policy and former managing director of the white house council on environmental quality. >> why we need easy to get
climate change.? can't free markets do it themselves? >> the scale of the problem is beyond anyone solution. it will take the free market, it will take regulations, it will take targets come it will take all of the tools we have the toolbox to address the challenge. use ais it correct to cost-benefit analysis when you are looking at climate change as a company? christy: it depends how you factor in the -- it depends how you factor in the cost-benefit analysis. as we are shifting we will need to single to the market that here is where investment is going. year is what the cost of inaction is, which is something we have been behind in analyzing.
we have to shift the way we are thinking about this. there is the cost today and the real cost we are seeing the future. a lot moreseeing money to respond to impacts. alix: if you're going to diversified to new energy that is not profitable the way oil is. as you diversified that hurts coal and potential nuclear. there is job losses. how do you offset that kind of cost-benefit analysis? christy: we have so many new jobs coming through clean energy and you have to figure out from a politician perspective where do we see the greatest job growth, whether it is in solar or wind, and then we have to have a serious discussion about what are we going to do about communities that will have to shift away from the fossil fuel boom bust cycle we've become so accustomed to? that is where politicians are asking themselves the questions. what are the solutions that would get us to solving the problem and how are we going to
incorporate all of society? it feels like one of the problems with something like the green new deal is that it is so extreme it causes the other side to make fun of it and not take it seriously. how do we change the conversation to actual policy? christy: the green new deal is a resolution. it is not a policy. it costs nothing. this was a grand vision, a call to action. cortez has said that. what we need to do is put solutions on the table. that is where republicans are falling short. they criticize the idea we have to act but they have no plans of their own. , people aren, d.c. demanding action and real solutions. alix: what will be an incentive to get republicans on board? weisty: i believe the energy saw around the green new deal and are forcing to see forces a conversation.
serious lawmakers on the left and the right have to come together and say what are we willing to do? senator murkowski and senator mansion say we both -- senator joe manchin say we believe in climate change and we need to start talking about solutions. that is how policy is made. this is the start of the discussion. alix: is there concern this will turn out like obamacare in that lots of good ideas, good in theory, but somehow universal health care cannot help certain ?eople let be a situation where you move fast and some people get left behind? christy: i have a different impression of obamacare. when i would say in terms of climate change that is similar is you have to understand the problem and people have to benefit from the solutions. what are the jobs that come out of addressing climate change and what improves people's lives as a result of this. alix: that was my interview with
christy goldfuss from the center of american progress. here in the studio is the man responsible for the summit, response and director of the club you center on global energy policy. not only do you leave the summit, but you also had an essay on the green new deal, saying there are things we should take from this. what is the right prescription to tackling climate change? >> the visibility the green new deal has brought to the issue, the fact that we are talking about it is fantastic. what is important to remember is the energy system we have is not one that is determined by government investments, government spending. it is the result of private individual economic choices. we need policies that direct those free market forces and a lower carbon direction. i would put a carbon price at the top of that list. it is not the only thing we need. to look at technologies
and land-based solutions that might remove co2 from the atmosphere. non-co2 gases like methane emissions. there is an important role for government spending on things like research and moment and infrastructure. the primary metric of ambition and success for the green new deal, i don't believe his government spending. will be policies the direct market forces. the total of private capital out there exceeds what the government might spend. done ono get something this order magnitude, unique political will. polls indicate most americans want something done about climate. where is the disconnect between the populist on one hand and what is getting done in washington? you need a lot of well to get done the things you're talking about. jason: washington is dysfunctional in a lot of ways right now. we have a challenge. what the green new deal is saying -- is doing is when people say i do not support it, the question is what do you
support? it is not a conversation about whether climate change is real. you see that with the industry. we conference in houston and other places. they talk about what the right solution might be. there will be a cost of doing some of this and we need to make sure that is communicated in ways the american people understand and can accept. alix: in your essay you out up writing just that. at two degrees warming, one in three of the population will be exposed to a severe warming event. federal spending is not the primary measure of
jonathan: the fed grappling with significant uncertainty. the next policy move could be up or down. deutsche bank and commerzbank facing pushback from the ecb. question thed to logic and gearing up for another big tech ipo mover could be filing as soon as today. 30 minutes away from the opening bell. here is your price action this thursday. futures up a single point on the s&p 500. treasury yields turning higher over 30 minutes. up to 2.49 on the u.s. 10 year and the euro softer. euro-dollar 1.12. we begin with our top story. the fed knows nothing you do not know. >> data dependent. >> patient. >> keep their options open. >> the bed made clear they are more tolerant of inflation.