francine: holding fire. steve mnuchin pours cold water over the idea that donald trump might sack jay powell. continues asdown democrats say the sides are far apart in negotiations. in a christmas miracle. the vti holds near lows as concern over u.s. supplies outweighs opec's pledge.

i'm francine lacqua in london. happy holidays to each and one of you. this is what your markets are doing. from legit u.s. stock futures. the dollar falling. keep in mind that any kind of move is on low trading. after the trade secretary that treasury secretary called the banks. the head of global macro strategy at ubs at night -- to :00 a.m. london time. let's get to the bloomberg first word news. we start with treasury secretary steve mnuchin. house tries tote calm the markets after the recent steep losses.

the message to the banks as they have ample liquidity for lending to consumers in other operations. and jay powell is safe at the fed after reports that president trump had discussed firing him. the shutdown in washington is expected to drag into the new year. acting white house chief of staff mick mulvaney says the administration is awaiting a counter offer to the presence demand of $5 billion. no move is expected before the end of the week and talked democrats say they have no intentions of paying up. >> $5 billion is a lot of money. that's 650,000 children attending headstart. 2 million meals a day for a year for seniors. to spend it on a fourth century strategy is so silly that improves border security is the were not going to do. francine: for more, let's get to

our guests. he joins us now to discuss markets. what was surprising the last 84 hours? that we are discussing trump possibly firing jay powell or that steve mnuchin was talking about liquidity when no one had on their radar? >> in my view, the biggest surprises mattis. in my view, it won't be easy or possible to fire powell. i see him similar to janet yellen and most likely to have a one term policy. mathis in my view is more concerning in terms of 2019. francine: if you have taken battlement markets go, do you

just have to understand with the dollar does? i don't think so. at a 2019 will be different from the past few years. it's not just kennedy were the market is up or down. it'll be a very volatile market. you could have standard volatility without returns. it's more practical -- tactical rather than strategic. francine: where were the volatility come from? is an earnings? is a china? above plus more. central banks tightening too quickly or not finding enough. then you would also have mistakes of market participants

misinterpreting the central banks. in the underlying politics and economics. concerned about liquidity? the fed and the central banks generally around the globe are aware. we talked about as one of the main concerns. thanos: but we do know that if there is a sudden slowdown then is going to bee called -- paused. it's not a concern. moregoing to be slightly --itive on the francine: how should we view central bank independence?

does it change fed policy? i don't think it changes fed policy. i believe powell was right to tighten interest rates. the underlying u.s. economy is not week. it's good to collect and have some dry powder ahead. it was very prudent to raise rates. there's no reason for the fed to put out fires which were created by the executive part. it's a question broadly about central bank independence. we saw that last year with turkey. more recently with india. there are some concerns. is there a part of the market that's a good value or unlocked? thanos: more positive emerging

markets in the broader market consensus. china is not going to have a hard landing, i believe they will manage their economy. they can use whatever leaders -- levers are at their discretion. expectback of that, i emerging markets to do better than expected. when we bring you to i chart of the day. it basically sees friday having the highest equity volumes since president trump was elected. thanos: there was complacence in volatility. wasbiggest concern at 2018 expressed in september. the lack of volatility in markets, given the uncertainty geopolitically and economically, the markets were complacent.

this is where volatility should be. within our range, broadly speaking, we should have high volatility. especially during lower liquidity and holiday markets. he stays with us. coming up next, plenty of things. germany's economy strengths for the first time since 2015 very a little bit later with the vti and bear markets, we will ask if we will see in a joy for quite a lots area of things -- producers. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's get to the bloomberg is flash. the i sudan-based exchange operator seeking support for a 625 million euro cash tender offer. euronet khazar to conserve -- secure the offer. this represents 49.6% of all outstanding shares. vp willecom company remove equipment from the core communications network. it's already pulled gear from its own core structure.

inherited a quitman made by a chinese company after the acquisition of the mobile carrier. bmw facing a criminal probe in south korea after investigators concluded the company concealed fire hazards and delayed recall's. almost $10 million for allegedly botched response to the fires in south korea. the ministry accuses the german carmaker of moving too slowly earlier this year after about 40 fires. branch thousand will cooperate with ongoing investigations. to. prosecutors decided not over ane richard liu alleged rape.

this cast doubts over the leadership of china's second-biggest retailer. euro areathe economies closing out 2018 on it living up. germany shrank for the first time since 2015. adding to the negative sentiment over the past month, italy has finally offered some relief after a tense standoff with the eu. it has published its revised budget and push it to the center -- the senate. thanos.oined by jamie, welcome to the program. i think the pmi is always a pretty good gauge. momentum is clearly fading. doesn't matter for ecb policy? you had lots of strong growth

come recovery is largely complete. wage growth is finally picking up. slowing, thate is doesn't mean that the ecb holds normalization altogether. how must we focus on who will replace mario draghi compared to what brexit does to the european economy? jamie: the brexit impacts are going to be relatively small. it sounds as though parliament has any much ruled out a no deal from happening. britain is small compared to europe. that's just a fact. one question on ecb policy. impact of the bond buying program? jamie: major impact was felt

back when it was announced. actually, a came to expectations of interest rates. is in going to be very big. we don't see a problem there. as far as the leadership, there's a lot of people who like draghi and they're the ones who are most likely to be taking over. francine: how does it change or outlook for europe depending on who replaces him? thanos: it's very important and what happened, this was driven from trump. athink merkel was surprised the lack of multilateralism in the administration. she was also surprised that there was more of a discussion between the executive and the

european commission. how much she knew she was going to be out and passing the rains, she was in favor of someone with more germanic ideology. at the same time, she couldn't push for a german ec president as the same time as an ecb president. view, it's going to be a fan. -- finn. advicewill be getting from the germans. francine: is it a dollar story, jamie? jamie: the ecb is probably on a tiny path. at the moment, markets are priced. surprise,looking for it would be more hawkish ecb.

i think we are going lower. the u.s. army continued to get hit in 2019. we will talk a little bit more about brexit. coming up, staying in office. the times reports theresa may's allies are keeping plans to keep her in office within two years after brexit. more on that next. ♪

francine: i'm francine lacqua in london. allies of theresa may are reported to be making plans and would keep her in office more than two years after brexit. the sunday times, she would continue as the prime minister until 2021 before being replaced less than a year before the next scheduled general election. she survived an attempt by colleagues to house her earlier this month. can we really predict anything that goes on in u.k. politics right now? now she is here for two years the other day she was out for three days. thanos: i think she will pull it through. she's got two sticks with which to do it. the first is to the tories would says if you are not paying --

playing the ball, jeremy corbyn -- jerry -- jeremy corbyn could replace us. opponentser is to her who say if you don't accept the deal, it could go to a people's. francine: this is very high risk. what are the chances of the u.k. leaving with no deal could -- deal because she's playing with fire? 15% probability. it's not higher than that because is not anybody's best interests for no deal. realistic risk is the extension of the end of march. but that would mean the eu has agreement. francine: if you are mark

carney, you have three possibilities you can do? exits without a deal, they can hike rates. jamie: i know they keep saying it could go up, it could go down, we haven't decided. it the nonsensical to do that. that would be a temporary supply shock. rome a certain they would cut rates if there is no deal. liquidity, that's what you do. of thehave a crisis border, you don't need a crisis in the financial sector. francine: what will happen overall? how many people are moving out of london? thanos: there has been a trend. this is not something that will impact immediately.

it will take a couple of years for the decisions to come through. my concern is should it in the pound plummets, it's going to create inflationary pressures. past, there have been policy mistakes. pound weekend, helps exports, and boost the economy. happen in the u.k.. what we see his inflation coming through. that's my biggest worry. francine: you can see that it's at the cheapest in five years. do you buy it in 2019? aanos: generally 2019 is tactical opportunity so ftse would be a sector are looking to. francine: is it pound, binary at

1.15 or 1.50? the difference between what theresa may is proposing and the wto role, the long-term is 7% in a nopact deal. most of the bad stuff is priced in. you will have depreciation if there's no deal. the chief economist for bloomberg economics. we will talk a little bit more about the inflation coming up next. come into theto bear market? we will have a wind -- roundup of what we are seeing in these markets. at dollar, u.s. stock futures climbing, and we

stevee secretary treasury mnuchin calling top banks. european shares are down. steve mnuchin attempting to reassure financial markets that would not be removed from the central bank despite trump having discussed it. minors and retail monks the biggest decliners in today's session. this is bloomberg. ♪

>> economics, finance, politics. this is bloomberg surveillance. let's check in on what is trending. twitter, in an attempt

to reduce carbon emissions, the government and luxembourg wants to mccaw's public transport free of charge. on bloomberg.com, new legal filing appears to offer u.s. supreme court to intervene for the first time. the investigation into the 2016 election. our most read stories here on bloomberg. opec members are in whatever it takes mode. in second place, president trump and the term as defense secretary two months earlier than planned and are most read story on the treasury secretary called top u.s. banking executive following last week's heavy losses in the stock market. let's get straight to the bloomberg first reviews. jim mattis, he will now leave the job two months early. president trump has promoted to his top deputy from january 1 onward. the abrupt move could cut short his tenure.

it is followed by criticism over the president's son -- sudden change of support. patrick shanahan. he is a former executive who joined the administration last year. italy's populist government has pushed its revised budget bill through the senate. the government held a confidence vote, which is used to ensure disapproval for legislation. it now needs the measured pass level that lower health to meet the end of the deadline. the bill passed despite protests from opposition. the accused e-government a ramming through the legislation with last minute changes. police in the investigation say it is possible there may not have been any genuine drone activity. the times newspaper quotes police as believing the sighting my have been mistaken. a couple arrested after the incident have been released without charge. disruptedisruptive -- christmas travel. spacex has capped a record year

with a deployment of a new gps satellite for the u.s. air force. the mission was of the 21st of the year, breaking the previous high of 18 set in 2017. it was delayed several times because of technical issues and bad weather. it is now rated the third most valuable venture backed startup after uber and airbnb. local news, 24 hours a day. more than 120 countries. this is bloomberg. >> thanks so much. quite a merry christmas for oil folds and wti's. that is as per his over u.s. supplies and the problem economy overshadows singles -- signals -- last week, officials from iraq, kuwait, and the you a you agreed with saudi arabia's expectation that they will -- joining us is bloomberg .xecutive editor

thank you for sticking around. what is going on in the oil market? >> they have lost control of the narrative. had the meeting two weeks ago. you look at the oil price since then, it has been like the oil face of the eye pointing the wrong way. was we saw over the weekend more members of opec come out and reason the line saudi arabia already spun. not believing is it. it is not believing largely because there is no data, at the moment, to suggest it is getting anyway very fast. all of these things take time. the oil market has the attention span of a small toddler. it does not have a month or two to see where it will happen and how quickly. >> what has been more surprising? we are going to $100, almost a certainty in the first half of the year.

-- is 2019 going to be more volatility from the oil markets? >> yes. they are getting it from both sides. the supply side, we did not mention shale, that looms large over the market. last couple in the of weeks, particularly when you look across -- across the asset classes, slow and global growth. emerging markets carry the weight when it comes to demand growth and oil. all that is combining into a nasty picture going at 2019. >> what does it mean for your investment strategy? of a are in a little bit sold territory. the high 60's was overdone. trump will drive through lower prices leading to the midterms. we have seen the corrections a little bit of oversold territory. especially in the price and the cost that that entails.

more volatility will be coming through. it will be positive in emerging overall, ifd >> there is a global downturn, we see it in all -- oil demand first >>. . you'll probably see it in shipping first. we look at the tank fleets around the world, which is enormously labor-intensive. you are booking these cargoes at least one month -- two or three months ahead of time. in effect, you will see what is coming down the type -- the pipeline. >> anything going at the moment? >> we have somewhat conflicting signals because this year, they have scrapped more ships than they ever have in history, which is some stewing the rates. they are making money. when we go to 2019, we are a lot more cautious about whether that can be sustained. those cargoes are not necessarily going to be booked. >> you are not expecting some

sort of slowdown. doi think there is too much and gloom. i think china can contain the slowdown, they can target the economies given that it is a planned economy sure also they can work around the beijing consensus regionally, locally. they can see through the trump administration policies. i am more positive on the market expectations. markets,bout emerging it is a selective opportunity. i worried about india and the central bank issues. positive on brazil. >> you are not worried about china? >> i'm positive on china. president she does not have a term limit so they can see through trump administration. >> they are buying less oil. and now. the numbers were skewed by the fact that when oil was very cheap they were buying an enormous amount.

that's somewhat obscures the picture. where we have some concerns about where the growth will continue is on the gas side. at the moment, you have a huge supply glut of coming onto the market for next year. china just does not have the import capacity to be able to -- >> if i am an opec water, i want to know whether the saudi alliance holds. and whether russia delivers on what it said it would deliver. the last time around, they did what they said they were going to do. certain members of opec did more than they said they would do, really, the market is looking at those two players and saying what will they do in q1. >> thank you both for joining us. stay with us. up next, u.s. tragedy or -- treasury secretary tries to reassure markets after reports president trump is planning to fire jake powell. we will discuss that next. this is bloomberg. ♪

>> this is bloomberg surveillance. as you us treasury secretary poured cold water over reports president trump has been discussing the missing chairman, the policies of jay powell are still center stage after last week's hike. on friday, the new york fed president spoke exclusively to bloomberg kathleen hays in new york after the -- people in the markets should understand the fed does not care about market prices for themselves. it only cares about market prices and terms of how it affects the economy, the unemployment rate -- rate, and inflation. the fed is not there to take away the markets pain, it is

there to follow monetary policy. objective ofe sustainable employment and price ability. the fed filed it back yesterday. they went from three hikes in 2019 to two as a medium estimate. they answer to some language that suggested maybe they will not do as many gradual rate hikes. they added the issue of financial conditions being a factor that they will follow. they added the notion that they are watching what is happening in the global economy. they did dial it back. maybe they did not dial it back as much as the market would like but they did dial it back. >> as you may recall, in february, when you came to bloomberg, we had just had a big drop in stocks. you said this is not going to affect the fed, this is small potatoes. since then, we have had a steady decline which seems to be

accelerating in these last couple of months. a global stop -- stock market. ist people are worried about that the fed is in danger of making a mistake because they are not taking the market signals seriously. having imprecations for were the economy is going and what it means for the fed. >> i think chairman powell made it clear that he is thinking about it. yes talk about the tightening of financial conditions. he said that the fed is taking that on board eared he also said the financial conditions tightening has to be significant, has to be long-lasting. have a real effect on the economy. at the end of the day, the thing to focus on is what is the fed's outlook for growth, what is the consequence of that outlook front of claimant, what is the consequence of the decline on unemployment for wages and prices. what the fed is a saying in their forecast is they still that the economy will grow at above trend pace next year. that is why they are continuing to tighten. say to peopleyou

who don't understand what you just said? isn't there a point -- is there a point where a stock market selloff -- where it is so severe that we better pause. >> absolutely. if this went on much farther from at longer, and it changed the fed view about the outlook, the fed is looking at the stock market and financial conditions broadly. they are also looking at the economic news. payroll employment. papal -- to see payroll employment gain 100,000 month. they have been seeing gains much greater than that. economy is growing above trend pace. we have a very tight market. we -- we need to slow the economy down. a bad thing. they are probably a necessary thing for the fed achieve its objectives. >> that was the former new york fed president. -- how do youanos look at the trade wars?

trade warshink the would benefit after everything is said and done. it would be sort of less bad for china than it would be for the u.s.. i think that for a number of reasons. the president does not have the term limit that president trump has. if this works out in a negative fashion been a trump would be out by 2020. in my view, he will orchestrate it in a way that we do not have a worse case scenario and he will be voted back in. on the back of that, i would toect the chinese president -- it is a planned economy, they can control -- and pushed in areas where there be more beneficial. >> what is the unintended consequences? is it trickier? >> yes. that is kicking the can down for another time.

that will be a secondary issue. at this point in time, the more important point is for them to maintain that economic growth. the impact on effects from the trade tensions, maintain the consensus, and not allow -- to create friction with the sort of geopolitical government they're working with come with russia, europe, japan. relationship with china have been working very hard to build. >> you have been talking to me about emerging markets for the hour. this is what we are looking at. this is the fact that the s&p 500 has wider price wings and emerging-market stocks. would you be buying anything on the s&p 500? thanos: i would not be taking any action at this time for the reason that we are in a holiday time. the positions across asset owners and managers have been closed for the years. this is not the time to be taking such decisions.

for thise looking approach once we have more clarity, new set of economic data coming through in january. no strategic decisions from here. >> what is your favorite currency? thanos: the dollar. i like the dollar versus the majors. also positive on the peso. i think the bank of japan will do its utmost to maintain currency, clearly, very highly courtney did with japanese consumer sentiment. >> thank you so much. shareholder activist hits a record high in 2018. we discussed how that impacts the industry next. this is bloomberg. ♪

>> economics, finance, politics. this is bloomberg surveillance. let's get straight to the business flash. >> euro has approached the board of company which operates the norwegian stock exchange.

seeking support for a 625 million euro cash option. this for all the outstanding shares of the board. they have already secured support for the offer from the vps shareholders. u.k. telecom company bt is to remove -- equivalent for the core communications network of police force and other emergency services. from itseady pulled -- own core structure. bt is equipment made by the chinese company after the 2015 acquisition of mobile carrier ee. bmw is facing a criminal probe in south korea after investigators concluded the company concealed fire hazard and delayed recall's. the german carmaker is being fined almost $10 million for an allegedly botched engine buyers in south korea. the south korean ministry says they tried to cover up technical issues. they also accuse the german carmaker of moving too slowly

earlier this year after about 40 fires. apologized.anch has it about it will cooperate with ongoing investigations. jd has avoided to the biggest crisis in its history. u.s. prosecutors decided not to charge -- over an alleged rape. authorities say there is not enough evidence to prove a crime . the decision has a month-long program made global headlines and cap. of the leadership of china's number two online retailer. spacex has kept a record year with a deployment of a you gps -- new gps satellite. the mission was the 21st of the year. it breaks the previous high of 18 set in 2017. it was delayed several times because of technical issues and bad weather. risen's valuation has along with its launch record. it is the third most -- valuable venture startup after uber and airbnb. that is the biggest -- business flash. >> thanks so much.

the number of companies targeted by -- has hit a record high in 2018. some of the more aggressive moves have included -- . and taking stakes in buyer. discuss, and what we can expect next year is lewis david. thank you, sticking around, ruth, welcome to surveillance. if you look at activist investors, there -- what has changed? >> a few things. if you look at shareholder registry, a lot of them are now u.s. investors. they are more used to this kind of stuff. europe, if you look the way that the stocks have been performing, lagging their u.s. peers, they -- you have a lot of the conglomerate strictures here which you have gotten rid of in

the u.s.. the biggest names like ge selling off a lot of assets are you have not seen that so much in europe. i think success begets success. some of these activists started coming in three years back and had a -- a few successes. it was probably their biggest and most successful. they got the ceo outcome of they got a seat on the board. telefonica is looking at that and thinking i will be next. speculationthis that elliott might have taken it fair. they said it is not pure it it is an indebted company. if you are an indented, investors are unhappy. if you have a clunky conglomerate structure that does not make as much sense, you are the ceo and the activists are probably running through lows at you. >> there is barclays, is there a particular type of company because it is in a certain sector that gets targeted? ruth: they seem to like all

kinds of sectors, whether that .s --, telecom, banks the things that they've they are looking at is for a lot of these big funds that has the noise and backing, a small company does not make that much sense. itbacking, a small company does not make that much sense. it does not need as much. they are going after the giants, they are fine to go after the -- of the world because they feel like they can make a difference there. you saw them not go ahead with their plans to scrap the deal headquarters because activist spoke up. even regular activists are looking at what the regular investors are looking at what the active investors are doing. they are saying maybe it is time to be more vocal and not just to do everything the hind closed doors in nice light europe. i like that. be less polite. would you actually invest in a company because there is a

shareholder activist that gets you better returns or is that dangerous? my expertise is not within this sector. i would not have the experience to take that position. is an exampleeing -- industry, they are bringing outside as in to deal with the administrative areas. the cost will bring in areas of expertise which they did not have from within. these are interesting areas where activist would really bring -- be able to add some fresh views, perspectives, and know-how from other industries. >> interesting you talk about biotech. what industries will go through more in 2019? is it difficult to say right now? ruth: tech is one, other industries saw a slowdown. tech was up like 50%. that is a trend that will continue as it disrupts industries. whether that is retail or autos or any of these sectors, you are going to see companies doing more m and a.

we might not see as many megadeals because of regulatory and antistress concerns. getting approval is harder. it seems like the number of deals could still be pretty big. >> thank you both for joining us. bloomberg surveillance continues in the next hour. conversation will continue on the u.s. shutdown and on the fed. that conversation, 11:00 london time. 6:00 in new york. this is bloomberg. ♪

>> holding fire, steve mnuchin

pours cold water over reports donald trump might sack jay powell. will bumping markets be convinced? worry as the u.s. shutdown enters -- sides are far apart in the negotiation. nancy pelosi once resolution until january. no christmas miracle after the signing of 11% last week. wti holds the near lows. morning, everyone. good afternoon if you are watching from asia. this is bloomberg surveillance. little biting at a of market move. i would point to varies in claims. it you look at politics and take stock of the year that 2018 was. looking ahead to 2019. >> the only thing in volume of the ability to find a sidewalk on 5th avenue. america, an extraordinary saturday and sunday. shopping, i have no idea what the retail numbers are. on this christmas eve, i am thrilled to be with you.

let's get straight to the first news. mnuchin speaking to the sixth largest u.s. bank over the weekend. this as the white house moves to try to calm the markets after the recent losses. the message to the banks, they have ample liquidity for lending to consumers, businesses, and other operations. also assuring financial markets that jay powell is safe in the fed after reports president trump has discussed firing him. the shutdown in washington is now expected to drop into the new year. republicans and democrats at odds over president trump border wall asking the white house chief of staff saying that administration is awaiting a counter offer to the president's demand for $5 billion. no vote is expected before the end of the week. top democrats saying they have no intention of paying up. >> $5 billion is a lot of money. 600 50,000 children

attending head start. it is 2 million meals a day for a year for seniors. on a four century strategy rather -- rather than stuff that improves for security, something we are just not going to do. >> -- viviana: jim mattis will leave the job two months early. the abrupt move to cut short his tenure was announced in a tweet. criticism over the sudden change of course on syria and afghanistan. patrick is a boeing executive who joins administration last year. to theedging closer stronghold in syria. the country's military has employed hundreds of vehicles and troops in areas surrounding the town. turkey has repeatedly vowed to after the syrian town, u.s. troops in the region were a major obstacle to carrying out a military operation. president trump decision to withdraw leaves kurdish forces exposed to a turkish operation. spacex has capped a record year

with a diplomat of a new gps satellite for the u.s. air force. of thesion was the 21st year, breaking the previous high of 18% in 2017. it was delayed several times because of technical issues and bad weather. spacex valuation has risen with its record. it is the third most valuable venture -- powered by more than 27 hundred journalists and analysts in more than 120 countries. this is bloomberg. >> thank you so much. equities, bonds, currencies, commodities, watching that. up after the really difficult friday curve. a little bit of steepening there. euro comes in. weakness as well. -- going nowhere. you wonder where the bid is on oil. a huge theme for this tumultuous december. 29.67, driven on the dow closing 22,000.

important. we had a 1/10 print on yen. 30 year bond, i am watching a 299 is like a thousand benchmark. we are not there right now. francine: we are not there yet, if you look at dollars, it is very centrica. this is after the treasury secretary actually called on top liquidity.to discuss we heard from mnuchin that he tried to reassure financial markets that jay powell would not be ousted from the fed. there is a little bit of -- a little bit out there for assets including gold >>. for like that, looking havens. that is the gentleness of this christmas eve morning. let me go to dollar-yen. in those of you not linked to global wall street, why dollar-yen is a deep, deep

market. it is something people can conveniently look at. this is yen strength right here. way over here. huge yen weakness. to see these drops and strength cared we have another one, this puts in perspective, we have a way to go on yen strength. it is true on equities and true within the bond market as well. francine: what i am looking at is a very simple chart looking at what happened the last couple of days. i am looking at volatility because it is probably the name of the game in 2019. we are trying to figure out exactly what happened friday. friday saw the highest equities since president trump election. it is a good way to look at things to come. u.s. equities just had their worst we can since 2011. i can see dropping seven point 1%. the nasdaq into a bear market, equally troubling was the sheer volume distant thing the thursday and friday. meanwhile, the white house officials including steve

mnuchin moved to reassure financial markets that jay powell's job is safe. we had more on that. we will go through everything that is happening with the fed. joining us is -- macro strategy. first of all, we made it to december 24 after a pretty busy year. congratulations to everyone who is watching. do you look at volatility for 2019, do you look at liquidity, what are you looking at? you have to start from the cycle itself. i think that is probably the it comesg copper when to respect of what is going on at the last couple of weeks, months. still, this is a pretty constructive phase of the cycle globally. even for the u.s.. there is a number of weeks of of focus onot things like the ones you mentioned. volatility and liquidity. there is certainly a part of

this phase of the cycle will increase. we just need to get used to it. secondarily, in terms of liquidity, it is still a bit too premature to be talking about some major change here. i think the market was to talk about it. francine: is the market too pessimistic? things have turned, markets are saying the fed can't raise as much as we are expecting it to her darling up to pessimistic? yianos: yes. it is as simple as that. three months ago, we were discussing -- and how optimistic the market was. i think that is a feature again of this phase of the cycle. i think it is too early to talk about the transition to the phase of the cycle. >> i want to take this christmas eve to step back. it is a slower day, lesser volume. i want to talk about the great myth of 07. that is amplitude. it was so hard to get the size of moves right. are we at that same point now where we can go you are cap --

yields are coming in, do we have still this massive mystery of how much we can move in the future? yianos: i think there is definitely massive ministry every time we step into the markets. i think that the market is probably prone to think that this might be the last year before something bad happens. i think that will be my major point. we need to conduct -- contextualize it first within the long strategy of history and think about the transition probabilities here. and micra economically, while the risks are plentiful, the realities that we are moving slightly away from that type of tension. him the end of the cycle you need more pressure. tightening of the one that we are experiencing, at least in this last phase. the fed has taken a few steps back. i am more encouraged. >> the difference between static

and dynamic is profound. within any of the game, we are talking about, i find that people are very static about what corporations will do. how will companies react to what we have seen in the markets in october and december? yianos: they are meant not can overreact. that is the type of planning they are supposed to be thinking about. the type of investment plans that they should be contemplating should not be shifting just because the market has experienced a drawdown. to your point, it will make an impact. i think that if we stay at the current state of affairs, for too long a time, it becomes -- there is some reflexive a t. >> george soros here this morning. yianos: i think your point is very valid. >> let's come back.

we will do carl popper in our next set. this morning.see this is what we try to do on this christmas eve. move back and take a larger, broader picture with an absolute tumultuous news flow of washington. no one better to do that than robert ofador kissinger associates. we are honored to have him with us. i believe this will be a four hour interview. robert. stay with us. this is bloomberg. ♪

francine: -- viviana: this is bloomberg surveillance. -- operates the norwegian stock exchange. they up -- amsterdam operations

exchanger, seeking report for a cash tender offer. this for all the outstanding shares of the board. this represents 49.6% of all outstanding shares. company is to remove hallway equipment for the core communications network of the police force and other emergency services. it has already pulled -- from its own core structure. feet he is inheriting equipment made by the chinese company after the 2016 acquisition of mobile carrier ge, it is -- throughout its system. that is the bloomberg business/. >> thank you so much. one of the quiet moments this week was the thursday interview with bill. william dudley, the former fed president of the new york courts for years. running economics as goldman sachs. here's build a -- deadly on the fed. in the markets should

understand the fed does not care about market prices for themselves. they care about market rices in terms of how it affects the economy, the unemployment rate, and inflation. the fed is not there to take away the markets pain, the fed is there to follow monetary policy that best achieves its twin objectives of sustainable employment and price stability. , 48 hoursliquidity after that with the secretary of treasury. -- with us of the u.s. to talk fed. it is a dual mandate but it has become a triple mandate. after the crisis of 2007 p that is asset bubbles. how lovely are we right now? thanos: i don't think we are that bubbly. has operated at times of the course of the last 10 years thinking that the bond market is about to burst. i think that the threshold for that story is still extremely high. if anything, the market has been

behaving, even during this time of stress, indicating that yields are going downward as opposed to upward. i think that basis of talking about liquidity constraints is problematic in my mind. i would expect to see yields shooting higher and -- in that sort of stood -- set up. >> as you would expect, we can wax philosophical, we mentioned carol and george moments ago. on reflexivity. the heart of the matter is the delusion that we can get up front. we can -- versus waiting for the actor theing for fact. as that we really learned this year the end of the day, all central banking is after-the-fact? presumably, should be exactly the opposite. in the sense that they should be trying to smooth the -- smooth the transition of the market to different faces. that may be what we learned this year is maybe the policymaker

got a little bit too optimistic to quickly and violated their own premises in terms of being gradual and hopeful about the future. i think we are taking this back slowly but steadily here. >> can you guide the markets are do have start reading too much into it? thanos: i think because of data dependency and the next time we will see it move, we probably lost that opportunity. it will take some time now. and it is going to be more of a process. if anything, you will have to go through speeches in the course of the next few months for the fed detritus and a different story. -- the fed to try and spin a different story. you have lost your year if you participate, it is good and bad. francine: where does the dollar

go in 2019, is it higher? yianos: -- thanos: it is lower. interestingly, a big part behind the dollar will be what happens to the others as opposed to the u.s.. that we canredict get back to a phillips curve discussion in the vicinity of next year? can we get back to some form of normal set model? one would hope. i can attempt to predict. the reality is that we are observing elements that things might be becoming a little bit like 2000 16. something interesting happened, you might have a hybrid ability of a -- on deflation expectations. let me give you a second to explain. explicit -- inflation expectations should be -- should not be infected by current events and data.

the moment you start getting now startinflation, you seeing inflation expectations shifting along. would you don't want to see, the arket is coming progressively bit more pessimistic, which takes away the does -- the curve out of the picture right now. francine: thank you so much. bloomberg, macro risk advisors chief executive officer, we will ask him about dollar dynamics at 7:00 in new york. what :00 in london. this is bloomberg. ♪

francine: this is bloomberg surveillance. tell us about your area, the economy is closing out 2018 a gloomy note. germany is europe's biggest economy. france dropped to its lowest in four years. despite adding to the negative sentiment over the past month, it has finally offered some relief. after tense stand ups with the eu, the populist government has pushed its revised budget bill through the senate. strategyead of global is still with us. when you look at in the euro area, we are not talking about who will replace mario. how can we be so sure that someone with the same policy is in place?

thanos: we can't. that is the beauty of the developed market. if you don't worry too much about who comes next, that is a good sign. has a -- bloomberg interesting server this morning where it lists the first up for candidates that i noticed. effectively, i don't think you can go that run with any of those four. that is good. francine: do you worry about the error that area being the weakest economy in 2019 because of populist measures? we saw what happened with the budgets. thanos: i think there is a twist if we think about taking a step back. think about what is going on. we are inching toward a bit more expensive fiscal policy for the european union, both for the italians and french moving in that direction. even with a transition in germany, this might be a bit .ore of more likely than i think that is the tone for a bit more support in terms of europe not being necessarily the major underperformer in 2019. >> are we any closer to a united

states of europe? to linking inser fiscal sensibility with monetary sensibility? thanos: i think, and a european way, moving in a slow motion, the answer is yes. we are certainly, you know, closer to this that we are to the dissolution of europe. concepts are very slow moving concepts. because of the tension that we have experienced in the course of the last few years, around europe and we will continue to, most likely, that helps your >> the feature, and i am saying this is a gentleman from the union back of since -- switzerland, i do want to get you in trouble, part of this is clearing the banks. part of this is just a clearing on creative destruction or a clearing of the banks. we are nowhere clearing the mass of european banking. are we? thanos: there are a couple of

different ways of clearing the mess. there is one which things can happen in an abrupt -- abrupt fashion. the other is the european slow-motion way where you create conditions where you think -- i think, consolidation in this industry will likely continue. i think the opportunities will come up on that front and will help toward actually clearing the picture over time. francine: what happens in the brexit scenario for the european side? if you look at the markets, not sure what is priced in. there is definitely some sort of a concern that is being reflected in terms of the degree of upside that you will have for the euro. i think that is one of the delaying factors here. it in placesee like the euro swiss. the impact on brexit appears to be inching upward.

it is less significant than italy has been. easy that percolating in the number of days -- different assets. i don't think it is truly significant. it will be with us in 2019. francine: think you so much. coming up on bloomberg mark gets, -- markets, in new york, 6:00. in london -- seeing volumes. we are seeing a little bit of a risk of food looking at dollars actually flipping a u.s. futures rising. i'm looking at gold climbing the treasuries. this is bloomberg. ♪

tom: new york city on this christmas eve. welcome you and hope you travel safely through the

season. francine in london and i'm tom keene in new york. in most of europe, markets are closed. in america, we are open until p.m.p.m. equities, 2:00 bonds. it is an odd day. we are taking an advantage to step back with smart conversation. right now, with a news update, here is the vienna. viviana: -- here is viviana. viviana: steven mnuchin speaking to the six largest u.s. banks over the weekend as the white house moves to try to calm the markets after losses. the message, they've ample liquidity for lending. minutia and reassuring -- steve mnuchin reassuring financial markets that jay powell is safe at the fed after reports president trump has discussed firing him.

theresa may is discussing plans to keep her in office until 2020 one before being replaced as conservative leader at less than a year before the next election. may surviving an attempt to oust her this month. giuseppe conti says that government will keep pursuing its expansionary economic goals. it will complete its full five-year term after the government managed to push its revised budget bill through senate. it needs the measure to pass the lower house to meet a deadline. policeeported that conducting begat wic airport investigation say it is possible there may not have been drone activity. police leaving open the possibility that the siding may have been mistaken. a couple arrested after the

incident which disrupted travel have been released without charge. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thanks. china's top policymakers confirmed that more support will be rolled out in 2019 as the second economy grapples with the slowdown. it comes as beijing announces another round of cuts and taxes. isning us now from beijing the bloomberg executive editor for greater china. what are the things we should be watching out for in china in 2019? is it trade wars or domestic stimulus policy? >> i think the headlines will be about trade. that is what is weighing on markets. what people should be watching chinese deleveraging

campaign, if it continues to push on that or if it sidesteps mored starts to be accommodative in terms of fiscal and monetary policy. francine: what is the concern on trade concern? our trade tensions going to escalate? john: everything we have seen in the last couple of months and weeks has been positive. you have got lifting tariffs on u.s. cars. you have got china buying soybeans, u.s. oil. over the weekend, there was a report that says the chinese legislature is considering laws that would curb force technology transfer. will that deal be enough? tom: wonderful to have you with us.

on the website of the churches in beijing, you cannot get into them if you do not have a passport. that is one sample of the distance between washington and beijing. next year, what would you predict will be the changes within the government in terms of rights of the people? i know it is a diffuse question. is there a hope for a looser regime or is there every reality of a more stricter president xi? john: i think the u.s. and china are different. it is almost impossible to broach all of those differences not in one meeting, not in 20 meetings. both sides see the benefit of having less limited trade economically. in beijing, just as much in washington, needs numbers to

make the populations they serve happy. that is what is going to propel movement. tom: a general question, one of our themes has been the pollution across asia, china getting most of the blame. is it a cleaner beijing? is president xi making headway in making the cities of china cleaner? john: i get asked that a bit. it is better but not good. relative to 2012, it has improved a lot. we have clear skies, we have pollution but not as often. this winter, pollution has been worse and that is a result of policymakers being more flexible with how they control industrial production, capacity by the

steelmakers. that is concerns about the economy have resulted in worst pollution. francine: thank you so much. to yianosback kontopoulos. ,f you look at these slow down would you see it in china, would you see it in demand coming from oil? yianos: i think china has played a role this year in terms of creating negative surprises in the third quarter and in the fourth quarter. you saw mrs. in terms of expected gdp. also in places like australia and switzerland and even in the u.s. this is not unrelated. once we step back, we are going to look back and see as china having been a pivotal factor in

terms of the slowdown and fears about 2019. it is important to look ahead. .t is about china reflating in the recent months when we saw the chinese authorities, they told us they are inclined to fight away negative effects out of trade in terms of growth. i think they are going to be increasingly aggressive in the next three months. francine: what does that do to debt? yianos: a pushes debt. they are trying to do a number of different things. they are encouraging equity financing. they are going to take more risk in terms of counteracting this and that is good news. tom: what is your growth call? you are the head of macro strategies. paint for us your relative growth call for america and europe. yianos: i do not have to make

those calls. it is one set up that indicates a growth slowdown in both cases. it showsin the u.s., more aggressively given the starting point. overall, if you were to be presented with the numbers, i do not think you would be shocked. we are still above growth. theme,ow does that mr. draghi delaying a monetary lift out to august or september of next year, is the surprise going to be they extend that further? do not think the europeans have to deliver the surprise policy wise. the u.s. has to work more aggressively here. if ourprise might come

scenario is connect and we see normalization, but the rest of the world might be pushing more tight monetary policy than expected. the surprise might come the other way around. it is shocking to say that. tom: thank you so much. we will continue. coming up, she is going to be with us not once but twice. margaret talev will join us on the tumult in washington. bloomberg radio, nathan hager, karen moskow. stay with us, worldwide. this is "bloomberg." ♪ ♪

viviana: this is bloomberg

surveillance. bmw facing a criminal probe and south korea after investigators conclude the company concealed fire hazards. the automaker will be fined almost $10 million. thetransport ministry said carmaker try to cover up technical issues. the ministry accuses the carmaker of moving too slowly after about 40 iris. the career branch has apologized and said it will cooperate. jd.com has avoided the biggest price taken history. prosecutors decided not to charge the founder over an alleged rape. there is not enough evidence to prove a crime. the decision and's a probe that made global headlines and cast doubt over the number two online retailer. spacex has capped a record year with the deployment of a new satellite for the air force. it was the 21st of the year, breaking the previous high of

18. it was delayed several times because of technical issues and bad weather. spacex valuation has risen. it is now rated the third most valuable venture backed startup after uber and airbnb. that is the business flash. tom: thank you. francine in london, i'm tom keene in new york. this is our interview of the day. margaret talev is going to be with us at the 5:00, 6:00 time. we are negotiating with her people right now. she is our white house correspondent, deeply steeped in the presidential dynamics. wonderful to have you. i want to bounce off your work of the aloneness of this president. trump onn is president this christmas eve -- how alone is president trump on this christmas eve?

there is almost nobody he feels he can trust to help represent him. he is perhaps the most frustrated with one of his closest advisers, one of his greatest defenders, the treasury secretary. moment, he is staring down a shutdown, the probe, the continuing conflict over trade policies. this is a difficult moment. to go over to msnbc, a tweet out, we will have an acting secretary of defense, and acting attorney general, no interior secretary, no deputy at hud. why is that? does nobody want these jobs? these vacancies exist for a number of reasons but they can be traced back to the president. ofse folks had to go because

their own controversies. in other cases, they wanted to go to get out ahead of what was going to go down. lefte other cases, they with policies they felt they needed to protest. you are an expert on the dynamics of the hallways of the white house. what is the relationship with the president after the week we have seen with the first lady lady, with his family? margaret: his family is all he has left and in another sense, he is more distant from them. importantner are more than ever at this moment when the president is surrounded by fewer of his original advisers. moment, inifficult many ways, of his own doing. francine: does the white house see it as a difficult moment or

do they simply think they are keeping the promises they made? margaret: the president is saying he is keeping his promises and that he is proud. he is in a difficult situation and the top aides are in a complex situation of trying to help direct him make good decisions economically and on the other hand, defendant decisions he is making when they as has hisussions recent decision in syria and has -- and as has the shutdown francine:. if we talk about this array -- shut down. francine: if we talk about disa rray, is it about firing jay powell or about the shutdown? margaret: what has given him the leverage to make these policy

or on the wall or immigration is the fact the economy was doing well. as long as he could reassure his base he was moving forward on rest of the the country that the economy was doing well, he had the wind at his back even in the face of a democratic majority in the house. when the economy is shaken, that destabilizes the president. situation,precarious take a look at the s&p and investor confidence and what prompted mr. mnuchin to make this series of calls to the banks. if the president loses the undercutads, it could his ability to continue to prosecute his policies. francine: where do you see this heading when it comes to the shutdown and the funding?

is it going to be a long shutdown? margaret: it could be. the earliest resolution could be the end of this week. a could stretch into the new democratic majority in the house. it does not affect the defense department, there are many reasons why both the republicans and democrats think this could be sustainable. it is not ideal but both sides seem determined not to give in. tom: thank you so much. we are going to get her back here in 15 minutes. there is no other immediate news than the challenges for the president of the united states. a new year's resolution? i am suppose to wait until wednesday? if you are on global wall street, here is what you need to know. you have got to learn to use gtv .

it is a bunch of charts. you can come in here and you can see fear driving trading. this is bond stream. over here is dollar-yen. steal them and use them in your meetings. this is bloomberg. ♪

tom: bloomberg surveillance, in london, francine lacqua. what do i want for next year? opec is going to be interesting. i make jokes about all of those scrums. francine: a barrel of oil. tom: i got a barrel of oil five years ago. i lost money. is a big deal except it is not a joke. guestn't you bring in our on this huge shock of oil? francine: it feels like we were going toward $100. still with us is yianos kontopoulos. i am not sure how we should see

the price of oil in 2019. this political alliance between , not sure if it will hold. do not remember which one of the regional feds, in terms of trying to see what are the major drivers are least exposed in terms of the market prices. it appears supply has been the dominant one. the impact of q3 might have played a role. i would say we have to start with supply. if the supply response becomes more definitive, the market embraces what opec is trying to communicate and things are manageable. i do not think we are being

driven by some sort of negative gap in demand that is going to take time to fix. even if you are in the last phase of the cycle, commodities do well. reward should be thinking out of bounds. need something more definitive and maybe winter will help. a proper winter might be the thing we need. it is alllook at oil about opec and russia. is russia a new member? , de facto.hink interests andned that is the good news. do they have the capacity to take us close to the height we have experienced this year? very unlikely.

if anything, we have been getting information that there is coordination and that is good news for us to have stability here. tom: thank you so much for joining us. greatly appreciate it. are going to drive forward this conversation. alev will join us again. for a broader picture, we will talk to robert hormats about foreign policy, the projection of america abroad. this is bloomberg. ♪

tom: this morning, global finance considers the united states of america.

where to begin the three kings? mattis, mcmaster, gone. the president is alone, waiting for the house democrats. nothing to see, we are liquid in our crisis. what crisis? the treasury secretary works the phones. earned by a liberty cogent foreign policy. robert hormats on our isolationism. there is little joy. good morning. this is bloomberg surveillance, live from new york, i'm tom keene. in london, francine lacqua. people go, why are we working today? there is a tradition of working on christmas eve. our markets closed in london? francine: markets are not close. some of the markets in germany are closed.

thatve to look at the week was in terms of the markets and volatility and the politics in the u.s. over the weekend. tom: u.s. markets are open for trading. let us turn first to first word news. at least 200 81 people have been killed in the indonesian sunol me. -- indonesian tsunami. most victims were tourists. they were killed thursday thought to have been triggered by and direction -- by an eruption of a volcano. and may hurt the tourism industry. steven mnuchin speaking to the six largest u.s. banks over the weekend as the white house moves to try to calm the markets after the recent losses. the message, they've ample

liquidity for lending to consumers, businesses, and operations. steve mnuchin was reassuring financial markets that jay powell is safe at the fed after reports president trump has discussed firing him. china has discussed another round of tariff cuts. someinance ministry saying export tariffs will become as part of china's efforts to open the economy. tariff reductions is the third round this year, a comes into force at the start of next month. allies of theresa may are reported to be making plans that would keep her in office until -- in office until 2021 before being replaced as conservative leader at less than a year before the next election. may survived an attempt to oust her this month. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120

countries. i'm viviana hurtado. this is "bloomberg." tom: thank you. bonds, currencies, commodities off what we saw friday, a bounce in the market. let's do a data check. oil without a bid. the vix said a 30 level. i guess that is better. 110 when i walked in. a stronger yen over the last three days. francine: japanese yen is what i was looking at. you can see risk off. i am also looking at gold, up. u.s.,r yields in the 2.78%. tom: we will get to robert hormats and margaret talev. here is one of the acting members of the trump administration on chairman

powell. >> wednesday is the first day this kicks in. the paychecks will go out. no one is working without getting paid. impacted his period january 11. it is possible the shutdown will be into the new congress. newsthe background is the of chairman powell, general mattis, and on and on. update from 1600 pennsylvania avenue and there's no one better qualified than margaret talev. thank you for being with us again. how alone is the president? margaret: if only he were in mar-a-lago. having totrump is double down in washington and he is isolated at his own doing.

he has decided to push forward with these fights on the shutdown. he decided to pull out of syria despite what his security team thought. -- mr.case of mr. towel powell, the treasury secretary is trying to reassure everyone the president has no intention of firing him. he has spent a lot of time having conversations about what would it look like? tom: critics would say he would not know your bulgaria from baltimore. who is advising the president? margaret: it is a smaller circle. departure, is's having an impact. positionscabinet where people are acting or in an interim capacity. the president is relying on his

family and relying on that outside kitching that has been with -- outside kitchen cabinet that has long been with him. incoming chiefw of staff but fewer people who are willing to challenge him and say that is a bad idea and that has got lawmakers and investors concerned. francine: what can you tell us about the shutdown? do we have any idea how long it could last? margaret: as you heard mick mulvaney say, it could be a couple of weeks. democrats who are set to take over the house may end up holding the house version of the and nancy pelosi and the democrats have been dug in on the idea they are not going to buckle against president trump. the president insisting he is holding out. the vice president trying to cut

a deal between what everybody wants. days.going to be a few . the critics say this was a disastrous week. president and the people close to him see it that way? look, even the president and his advisers recognize it has the potential depending howus the markets continue to react. the president is convinced now is the time for him to be remaining from those members and advisors who have been giving him advice. the president has felt he should follow his own instincts, that is his best prospects for reelection. inre are republicans

congress, given the democratic takeover of the house, who are concerned about where that philosophy will leave both the president and them. at gunpoint, one final question, i had to watch "home alone two" and there was the young lad walking into the plaza hotel and he is greeted by mr. trump. is the donald trump in that movie the same as the donald trump now? margaret: such a good question. is one that the folks who have been with him for a long time are trying to understand. he has always followed his own instincts. he is in charge of the united states and in some sense, the world and that is different than running your own business.

he is confronting the reality of governing, like all presidents do, he is in charge not just of the ideas but in how they shake out. greatly appreciate your attendance this morning. hormatsnow, ambassador of kissinger associates. bipartisan in his representation. we are thrilled robert hormats could be with us. i'm going to give you the same question. were you watching "home alone "? he walks by as the younger donald trump from another side -- from another time and place. non-politically attuned. where do we go from here? robert: let me make one point

since it was discussed on jay powell. i think a little background to the genesis of the fed and what the fed is about would be useful today in washington. the fed was established to be independent. jay powell does not set interest rates. of 12set by a committee people, five of home are presidents of a regional fed. third, jay powell is a person of enormous integrity and they are able people on the board and on the fomc. last, the market instability we ine seen will pale significance to the market instability that would result in a decision to fire the chairman of the fed who is supposed to be

running an independent agency. even the threat of it is disruptive. the action would make markets more unstable. of the great phrases is taken from thatcher "expect the unexpected." i am going to go with the unexpected of secretary mnuchin calling the bankers with the dow down 17%, screaming worries about liquidity. they seem out in front of the crisis. am i right? robert: i do not understand that at all. one of the positive things is the banks are in better shape today than they were. they have liquidity. they do not have the overextension they had been. they have made changes and they are in better shape and the markets were not focusing on

bank liquidity or the ability to make loans. how this came up, doesn't lead people to think maybe there is a , iblem we do not know about doubt it. it was a way of trying to stabilize markets and give the market something positive. it came from left field. fortunately, what the bank said was reassuring. the idea raises questions about procedure and why the call was made. are a diplomat, what kind of advice would you give to the white house today? robert: on which issue? francine: on the liquidity issue. say at thisuld point, the call has been made, the banks have said what they

have to say. let it go. do not talk about the fed or jay powell anymore. they are independent. this kind of conversation is highly unhelpful and other presidents have tried to influence the fed, not to this degree. it has not turned out well. , theess said on liquidity better. the markets will make their adjustment without intervention from washington, which can be more disruptive than the kind of things we have seen. , anotherhe other point piece of advice, on syria, i would reconsider. i do think we will get to this. to me, if you look at the notion of american leadership in the region, we are not going to remake syria.

the fact that americans were fighting alongside allies and now, we are pulling them out, it opens an opportunity for the turks to go after the kurds. it gives the russians and iranians a greater opportunity to do what they do. i would rethink that. tom: let us come back. ambassador hormats will be with us through the afternoon as he watches "home alone three." this is "bloomberg." ♪

tom: good morning. francine in london, i'm tom keene in new york. robert hormats with us.

bnp paribas with us. what do the greek letters tell you? >> the outlook is one of more volatility. we had a selloff through quarter for and that sets the theme for more volatility. tom: asymmetry was big in the powell press conference. that comes down to acceleration. , is that ane gamma opportunity to not lose money? >> it is a way to hedge your portfolio. tom: eventually. >> it depends on the outlook for the market. it is a good way to hedge your portfolio. francine: are you expecting more volatility? greg: absolutely. the corporate earnings outlook starts to soften further.

the political landscape remains volatile and we could see bigger moves them what we have been accustomed to. francine: where does volatility come from? i think there are a number of different things that come together. the outlook statements for corporates become more cautious. we have a number of political catalysts, the shutdown, which is the hot topic of the moment. the trade negotiations as well linger. there are factors the drive volatility. tom: part of the confluence is the actors. they look south. -- is vectors. they look south. any appearance of that? have moved from an

environment of buying on the dips. tom: just that simple. lots to talk about. we are going to drive forward the volatility discussion. that is an important discussion. to continue here on the topics of the moments. robert hormats with us. please stay with us from london and new york. this is "bloomberg." ♪ g." ♪

tom: bloomberg surveillance. good morning.

london, i'm tom keene in new york. how about a chart of the year and there is better to do this with then robert hormats and greg boudle with us. robert hormats lived. , add the twin deficits them together, we are reaganesque. theme of your book "the price of liberty," is you cannot get your shop and order if you have got deficits. it is different than reagan. robert: it is. different than world war ii when we also had big deficits. we have got a growing budget , andit, $1 trillion widening trade deficits, neither of which are sustainable over

the long-term and perhaps not over the medium term. washington, we are moving in the wrong direction. tom: this is important. you are so good at linking in the finance to politics. are we at a point where neil affecting both the trade dynamic and fiscal dynamic? robert: yes, in one sense, and that is on the budget side. the irony is that the money we are getting through higher tariffs was supposed to improve, increase our growth. and help to reduce the budget deficit. the president, let us take the china tariffs, has had to pay out more money to the farmers than the government has taken in from these tariffs.

the notion that china is paying the tariffs is a misnomer. it is the american consumer or the companies that import the goods, they are the ones. tom: francine, jump in. to ask greatanted how he sees this developing on the markets. comes at ank it unfortunate time that we are seeing growth peak. have a political instability against a strong backdrop of corporate earnings see a, we are starting to softening in earnings forecast and people think about us reaching a peak in the cycle, political instability is more difficult to digest. tom: robert hormats with us. we want to do a block on china. he has visited china in the last number of days. greg boudle with us.

tradeificant heritage of and revenue from china as well. much to talk about. markets are closed. u.s. open for trading into the early afternoon hours. better,autiful and even santa gets to london before new york. what a perfect morning. ♪ ♪ there's no place like home for the holidays ♪

♪ 'cause no matter how far away you roam ♪ ♪ if you want to be happy in a million ways ♪ ♪ for the holidays you can't beat home sweet home ♪

francine: bloomberg surveillance live from london and new york. this is a time when we compare

scenery, we will push it out on social media with the sun now. york, -- instead of new york, we're looking at washington, d.c.. huge news flow and we will have this across all of our platforms today. right now, on a difficult tsunami, here is the be on a. viviana: -- here is viviana. viviana: at least 280 people tsunami. killed by a it was triggered by an eruption of a nearby volcano. it may hurt the tourism industry. steven mnuchin speaking to the six largest u.s. banks over the weekend as the white house moves to try to calm the markets after

the recent losses. the message, they've ample liquidity for lending. mnuchin reassuring financial markets that jay powell is safe at the fed after reports president trump has discussed firing him. mick mulvaney has weighed in. tweethink he put out a saying he realizes he does not have the ability. have not heard directly from the president. i did speak with the treasury secretary about the shutdown and he did not mention that. giuseppe conti says the government will keep pursuing its goals. he also vowed it will complete its full five-year term after the government managed to push its revised budget bill through the italian senate. the government held a confidence vote which is used to ensure

swift approval for legislation. it needs the measure to pass the lower house to meet a deadline. active investigations are continuing into the drone incident which closed one of the busiest airports. said the, they sightings may have been a mistake. a couple arrested after the incident have been released without charge. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thank you. top policymakers confirmed that more fiscal support will be rolled out in 2019. as the second largest economy grapples with the slowdown. it lowered import taxes on more than 700 goods. so with us are robert hormats and greg boudle.

ambassador, let me start with you. you know china like not many people do. what worries you about china? i think what the chinese are trying to do is to respond to a two things. toy are trying -- respond two things. they are trying to keep the andomy at greater growth this is part of a general policy aimed at doing this. trying tothing is work with the united states and respond to pressures to open their economy further to reduce to foreign goods. they are trying to do it in a way that does not look like they are giving in to pressures from washington. what they are doing is doing a

lot of this stuff for internal reasons that are beneficial internally but will gain favor in washington and demonstrate they are opening up and are going to be more receptive to american goods. want moreent, they foreign investment. they do not want to restrict or an investment. they focusing on reform or just on growth and can they do the two together? robert: that is a great question. but want to continue reform for the moment growth is the higher priority. down, it is more difficult to absorb the large number of workers coming into the cities and there is a general pact between the government and the people that growth will be sustained to

create higher living standards. growth is the goal at this point. tom: i'm going to paint 70 years of china here. ambassador hormats with a perspective. ii, out ofd war harvard and a guy named kissinger and you were with him in shanghai on his way to beijing. you have lived this. in is down to where we were 1998. how do they socially respond? i would suggest the same as they did with henry kissinger, they will wait us out. robert: i think they would like to see some resolution for the they'reo the problems having, the escalating tariffs. they would like to see a cooling off.

they do not want a trade battle with the united states that moves in the wrong direction because it cuts off certain exports. they want to keep export growth up. , as xi jinping indicated, they are not going to give into everything we are asking for. where there are ways of opening their economy further by lowering tariffs, to buy more american goods, as they have indicated they will do, they are going to do that. they have intellectual property they are developing. we have concerns and i think there is a way of reducing tensions in that area. roach -- back to steve is this a new china or are there

reaction functions what you and steve roach lived, what secretary kissinger changed? robert: it is a new china. tom: in what way? robert: they are innovative. i gave a talk and they lot of companies. they are developing their own innovation. they are competitive with american companies in these new, advanced technologies. they are playing a more proactive role internationally than china ever did with the number of things they are doing in the south china sea. they are more assertive. they see an opportunity with the leadershipg back of in global institutions, they have an opportunity to play a greater role which helps them to shape the rules. it is a new china, bolder than

before. they have difficulties they are dealing with at home over leveraging, excess capacity in real estate. they are dealing with a lot of things. a more centralized government province since -- process. francine: i wanted to ask gray, what are the the implications on u.s. equities was. tensions to become more worrying and what is the impact on supply chain? greg: it is a big issue for the u.s. equity market. we see a slowdown for our base case. what happens in terms of the trade talks is a further marginal negative. it could be difficult for the market because it could drag growth. any corporate's that are impacted on the supply chain, there is a further layer of difficulty.

tom: let me go back to this chart. i want to look at it now on the derivatives. this is the log chart and it shows the first derivative. this is not a good chart. weree below where we before the boom. this is an ugly second derivative. do you see any evidence they turn this around? greg: potentially. we are looking for a synchronized slowdown in terms of growth globally. see thees difficult to region stabilize. tom: let's come back. greg boudle with us and robert hormats as well. please stay with us. of what is going on in washington. ,hank you to margaret talev

driving for that discussion on radio. stay with us. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. your next has approach the board of the company which operates the norwegian stock exchange, seeking support for a cash tender offer for all of the outstanding shares of oslo bourse. euronext has secured support for the offer from shareholders. this represents 49.6% of all outstanding shares. bp reporting -- removing huawei equipment from the core equipment from the police force

. it has already pulled equipment from its structure. bp inherited equipment after the acquisition of ee. it used huawei technology throughout its system. spacex has capped a record year with the deployment of a new gps satellite for the air force. it was the 21st of the year, breaking the previous high of 18. valuation has risen. it is now rated the third most valuable venture backed startup after uber and airbnb. the euro area economy is closing out on a gloomy no. -- gloomy note. dropped.area pmi after afering relief couple of standoffs, the government has pushed its bill

through the senate. germany us now is bloomberg's chief at con a miss. -- joining us now is bloomberg's chief economist. what are the flashpoints? >> italy is still one of them. what they have settled for is no fiscal stimulus. there are almost as many takeaways as giveaways in that budget. populace isthe unhappy. the same is true in france. stimulus given by macron. the risk is those will run out. francine: what do you do? >> trade is hanging over europe.

is that ife upside china does stimulate the economy substantially and moves it back towards investing, you may see upsides for germany and other exporters who specialize. it is not all down news. tom: is there in the indication they will clear markets? the great challenge in america has than the inability to move on -- has been the inability to move on and deal with the banking system. where is the indication for next year? jamie: we are still a way away from having a functioning bank in union. that could change. one of the things that is up for presidency andb one of the front runners is the finish central banker.

job, maybe it top moves closer towards safer banking. tom: very quickly, what is the politics of who gets the job? germany, what is of the nextss draghi? jamie: a lot of this comes back to trump. germanneeds to be more -- the e.u. needs to be more german. the case,ppens to be that is where the frenchman or woman, possibly coming from finland. that has opened dynamic substantially. francine: thank you so much. we will be back with robert hormats and greg boudle.

this is what you need to do. i cannot sell it better than tom. you should log on to gtv . you can browse through the charts we had today. you can go back to what we did all year. preparedse them, get and you can dazzle your bosses. this is "bloomberg." ♪

tom: bloomberg surveillance. francine lacqua and tom keene. how about a chart of the day? not a chart. merriam-webster. get a subscription. word of the day and the chart of the day is the word -- robert hormats. is short-term paper? greg: the volatility we of seen

the markets is -- tom: how about the yield? greg: i think the reason people are worried about inversion of the yield curve is it is a good lead indicator of recession. that is a reflection of where we are in the cycle. whether the curve is almost inverted or just inverted is a big deal. ambassador hormats, you served under kissinger. the republicans have to get out of the grinch mode and have a plan forward. what is the plan post trump? robert: it is hard for them to come up with a plan because there is a lot of difference within the party, a lot of in theies, but more now republican party, as we have seen.

i would say one thing to broaden the debate. i do think one of the areas where there is a potential for republicans and democrats to work together is on the question of retirees, a lot of people are underwater and this is an area where you might be able to get progress. is: what i would suggest cindy is going to run for democratic candidate in 2020. francine: if we look at the markets, what does that mean, i do not know whether the fault line is going to be politics, whether it comes from emerging markets, or fed policy. greg: the issue for markets is the number of risks there are. it is difficult to pin down which one of those is the largest catalyst. we arethe reasons

concerned is there are so many different catalysts. oflectively, there are a lot tail risks. robert: having discussed china, if they can reduce and manage and solve some of the tensions with china, that would be helpful. china is an important player for a lot of american companies who are selling and investing there. it would demonstrate progress can be made on an important global issue. while that will not solve all of the issues, it will go one step in the right direction of creating a more stable environment and be reassuring to the market, where this is one of many destabilizing factors. francine: is there anything in terms of headwinds we are not seeing, is there something that could really its ugly head?

rear its ugly head? i would focus on is the bottom up outlook for corporate earnings. where we saw this selloff, one of the drivers behind that is the more cautious outlook statements we have been getting. we look at the consensus forecast for analysts and what we are seeing is those are trending lower and if we get a decline further in expectations for next year, regardless of the political front, that will be difficult for equities. tom: thank you so much. robert hormats of kissinger associates and greg boudle of b.n.p. paribas. francine, it has been my fault that we happened avoid of the great debate of 2019. of the greatdevoid

debate of 2019. how does brexit begin in january? may is tryingesa to lobby parliament from all sides, her own party, to get this vote through. the vote should happen the week of january 14. we understand she may be looking at better arithmetic. she has a better chance of getting it through. i do know know what is reality. happy holidays, tom. tom: we will see. we will have a few days off. i look forward to being with francine that week in january. this is "bloomberg." ♪

♪ >> the mnuchin push.

the treasury secretary calls wall street banks to check on marketability as he tries to contain fallout from president trump's desire to fire jay powell. investors ask why. shutdown showdown. the government could be shut down until january, as more resignations and unpredictably rattled the beltway. in nowhere to hide. the s&p has its worst quarter since 2008, oil gets pummeled, credit threads blowout. welcome to "bloomberg daybreak." it is christmas eve. merry christmas, everybody. i thought it was going to be quiet. we would come in and have to tape for two hours. washington,out of it was kind of peaceful early this monday morning, but as we know, it has been very busy over the weekend. treasury secretary steve mnuchin trying to calm the markets in wall street. meantime, more questions from the president about the future of jay powell. >>