disruption rattles investors. u.s. ahead of the first trading day of the week. president donald trump raises steve mnuchin and a move to call the market and adds the fed will get it soon. oil fell below $50 for the first time since 2017 and worries about u.s. supply overshadow pledges.dges -- on howave a quick check the markets are digesting the festivities. it has been some concern on the markets. swinging between gains and losses. we are up 6/10 of 1%. seeing these nerves get into the market as donald trump dried to

u.s.ney moving into the dollar, the japanese yen weakening. money flat on the all country world index. interesting news coming from roles,s they release new promising to treat all companies equally. bitcoin has had a run-up in the past couple of days. let's get to the bloomberg first word news. trump calledident steve mnuchin "a very talented guy and very small person ." he extended his vote of confidence to the federal reserve. he discussed firing chairman powell over interest rates. he says the market creates an opportunity to buy. a second immigrant child from

guatemala has died while in the custody of u.s. border protection. authorities first noticed he was ill on monday. they have ordered medical checks on every child in its custody. beto o'rourke says it is not enough. >> we are thinking about his family right now, what they must be feeling to a lost their child on christmas day. not strange country, to know what is next for them, so we want to do everything we can. the expected general is investigating the death of another detained child who died earlier this month. indonesian authorities are asking people to avoid the coast hit by the tsunami. more than 420 people were killed when a volcanic eruption triggered underwater landslides.

monitor theinue to eruption. target military taking at the syrian -- according to a ,.k. based human rights group and is confirmed this with the israel's first strike on syria since the u.s. announced plans to withdraw troops. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. caroline: thank you very much. of course, markets, u.s. stock futures in particular went soaring between gains and losses as investors try to assess the rhetoric out of washington. the s&p 500 teeters on the edge of plunging into bear market territory, closing at its lowest level in 20 months.

let's get the inside track. analysis, please, of these markets, especially when you see moves like those on the s&p 500. it seems like trump steadied nerves by giving his confidence to treasury secretary mnuchin. >> this is very much expected every single day that we have seen in this quarter, the market going up and down. the question is -- are we nervous about the market? certainly not. economic data is still somewhat solid. cracks have started to surface in the housing data and consumer confidence data. yes, these are some of the raise theat would concern for u.s. markers. for investors who like to take some risk, this is an

opportunity because we are entering into a bear market. there is anrly see opportunity for investors who like to take risk. having said that, i want investors to take this with a pinch of salt because i do not think this bear market will end, or the selloff will and going into 2019. i think this will continue because of the trump economics and i think that trump will still create more waves in this market than anything else. as long as he maintains his stance towards the fed, that you do not have authority -- you have to do what i tell you to do, the market will be incited around that. caroline: we can start to buy in now. if you want to put money to work and will not sit on the sidelines in cash, where might you want to dip ato in if you are willing to stomach

volatility? naeem: my favorite market is the dax index. caroline: already off more than 20% in dollar terms. naeem: 17% down for the year, but look at the health of the balance sheets and what these companies are telling you, the risk to reward ratio. if you look at where the euro is trading, that will create a more favorable environment for european stocks. if you look at the forward ratio for the s&p, it is sitting at a five-year low. if you compare that with the stoxx 600, that is sitting at a nearly 10 year average. investors who like to take risk for more reward, dax is my favorite index. caroline: you have been talking about some of the concerns policy,.s. data, fed and trump's response, but what about the ecb? what sort of support might we see from mario draghi? will see is the

ecb becoming even more dovish going into 2019 because the fed has been way hot -- way to bring hawkish. -- too hawkish. i think going into 2019, i think there is a probability if you start looking at the odds for the rate cuts, they are sitting at 6.9% in q2. caroline: still very low in terms of a rate cut in the u.s., but in the ecb will we see a move away from ending quantitative easing and certainly a delay in any rate hikes? naeem: i think you will see daylight when it comes to interest rate hikes. -- a delay when it comes to interest rate hikes. the conversation of another kiwi, quantum -- qe will become

a reality. caroline: you like the dax and you have some concern about where u.s. policy goes in general, whether that be economic policy coming from the fed and what happens in terms of trade policy. what about u.s. data that you said is starting to turn? looks like we are getting some strong data around the consumer. does that continue? naeem: let's take it from a practical example. if the fed will continue to increase interest rates, i will have to dig more deep into my pocket to pay my expenses. if that is the case, i do not have spare income to start buying all the luxury goods i want. if you look at it that yes, the consumer consent -- consumer sentiment data is still solid.

if things continue to edit space, i would expect that data to derail. the leading economic data is the housing index and what is that telling you? the numbers are becoming soft. if that continues to remain the a ripplewould expect effect going into other economic data. caroline: where do you think u.s. markets might look appetizing? you said the dax in europe, but what about if you got involved in the united states? would you be looking at equities to put cash to work or still looking at the bond market? naeem: i think bond market would be a preference because i still want to say on the sidelines -- stay on the sidelines. i am expecting more of a selloff into 2019. i might start building up my shopping list and i would expect to have bank stocks on their is the issues -- on there because issues are great.

we will get more analysis on crypto and economics to come. endss battle with the fed the year in focus. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." oil continues to struggle as brent crude dropped below $15 a barrel on christmas day for the first time since 2017. rising u.s. supplies have overshadowed opec's efforts to stabilize the market. thee carlos ghosn remains hind bars, the man arrested with him was released. brett kelly was granted bail after spending more than a month in a tokyo detention center. underortedly helped ghosn report by millions of dollars.

the new rules clarify its policies on cross shareholdings. -- examineill exam whether such shareholding is appropriate and rather the risks -- whether the risks cover the cost of capital. that is the bloomberg business flash. caroline: thank you very much. president trump has expressed support for treasury secretary steve mnuchin after questions about he -- why he discussed bank liquidity. the president says mnuchin is a talented guy and appeared to roll back some criticism of jay powell, repeating has believe the fed is raising rate too fast but believes policymakers will "get it" soon. -- with us 90 moslem slam.eem a

do you think this is something we should be distracted by or something trump would execute? -- it is highly unlikely to say whether he would take that step. when the central bank -- when he went after the central bank and said the central bank does not -- is not an independent entity, like we saw to the turkish lira, we are not comparing apples to apples that the example fits. trump cannoto -- tell the fed, this is what you have got to do. if i will let the bloomberg chart and see how the fed has increased interest rates over the past 30 years and you compare that with the equity market, one thing becomes clear,

the fed has paid attention to what is going on. donald trump coming and saying, i'm going to fire jerome powell, the person i brought in and think about someone else, this that youdictatorship are going to start dictating what the fed is supposed to do. the fed is supposed to react to the economic data and health of the country. donald trump intervening is creating more uncertainty and problems for investors who are willing to step into the market, thinking that we are 10% to 20% down from all-time low and that possibly this is an option for them to get involved. of thisth policies particular management, this is nothing but an uncertainty for the market. caroline: will the fed get it, as trump has seemingly thought

himself? will we see the fed take the pause the market wants it to? naeem: i think the fed has reacted to a certain extent. we were going to get three interest rate hikes in 2019 and now the fed has circled back and said possibly just two. caroline: is that too many? naeem: i think one is enough. caroline: why is two to bring many when the consumer is still the consumer is still strong and there is plenty of buoyancy? naeem: we are taking their liquidity out of the system by increasing the interest rate. now you have to balance the two-year so if we get one interest rate hike next year we are talking about five hikes over the space of two years. caroline: then we have some sort of normalization in comparison were.re we

were. is it a necessary step? naeem: normal steps in an unprecedented era steps in an unprecedented era, because the market is used to seeing this quantitative easing, used to the fed coming into the market. this is bloomberg. ♪

♪ caroline: i'm caroline hyde in london. tom keene and francine lacqua are off. rise to thedramatic highest $18,500, that coin has plunged to $4000 -- bitcoin has plunged to $4000 in the span of a year. they believe the long-term prospect is brighter than ever.

on crypto his take here it where does crypto go? is it a full errands to find out where we might go? naeem: if you are a speculator, yes. if you are a believer in the technology, no. anding at the crypto space the user production technology, it will have an impact if you are a longer-term investor. if you are short-term investor you could have made a lot of money. ethereum hit its low of 81. on friday, it was up 44% on the day. talk about a santa rally. caroline: in terms of the bloomberg galaxy crypto index, it was up 17% on monday and today down somewhat. where would you look in terms of the crypto space universe? you mentioned it the area, --

ethereum, that has seen some bounce off it flows. is it still all about bitcoin? are you a believer that one currency wins the war? naeem: yes. bitcoin is the religion. if the religion dies, the space will die altogether. 2018 withve seen in respect to 2017, if you have an idea you can go out and raise $20 million or $40 million. caroline: an ipo and initial coin offering. naeem: in 2018, investors have become even more intelligent and do not believe that those bogus projects will work just by having an idea on the table. you not only have to have a prototype but an environment where you can go and plug that prototype and show how it is working. caroline: didn't it take

regulators to weigh in to educate the investor base? it took the likes of the sec to willertain isos if they hand money back to investors. did it take regulators to make investors more wise? naeem: in times -- in terms of regulation, it will become more friendly. it will be a complete abolishment of all the share park it -- projects and the market. they will use the blockchain tech knowledge he to its core. -- technology to its core. share, these coin are the projects that will use the blockchain take elegy -- technology to make the system more efficient and as investors, to show you this is what we promised and this is what we produced and this is evidence. caroline: are these already

securities or are they utility coins? how are these projects which i do not know that intimately, above and beyond what future regulation could be? naeem: right now, the space has security token offering. it is a more efficient way of doing an ipo. i can securitize that. i can put it on your platform and have instant liquidity. you have a house, i can put that house on a platform where you can do this sto. caroline: when does the ledger of assets and this new form of making all sorts of assets more liquid become a reality? naeem: this is about the adoption and the regulators coming on board. from where i said, i see 2019 becoming the year where we have a large number of exchanges

coming in and providing liquidity. caroline: we have already got a large number of exchanges. naeem: a large number of exchanges such as coinbase. coinbase is providing another custody service. where are these exchanges moving into? they are moving into -- caroline: they are not even in ico's. naeem: they are listing all the ico projects. caroline: coinbase takes a long time. naeem: these exchanges take an enormous amount of funny up front to release the coins on the exchange. i have been in this space for the last two years. if you see projects you want listed on an exchange, you are talking about a couple of million before you can list your tokens. now the industry has shifted from that curve to the extent that if the project is good , they are happy to list

your project on an exchange. caroline: not all of them. there were reports the ripple offered money to the likes of coinbase and they refused to take that on. naeem: let me speak of the price action first of all. caroline: we have only got 30 seconds. we will save that debate. thank you. londonup, oil and falling below $50 a barrel for the first time since july 2017. this is bloomberg. ♪

♪ caroline: i am caroline hyde in london. tom keene and francine are off with a festive break. it has meant plenty of volatility.

futures, keep a close eye on that contract. we have seen it swinging between gains and losses. late trading u.k. time last night, we saw it down more than one percentage point on reports that donald trump was growing irritated with secretary steven mnuchin. support thatt the trump has in his treasury secretary and for the federal reserve chief as well. marketsf action on the and in first word news. viviana: president trump says the government shutdown will continue until congress provides necessary funding for border security. he shows no signs of budging from his demand. the impasse enters its fifth day. >> i cannot tell you when the government will be up. it will not be up until we have a wall, a fence, whatever they

would like to call it. it is all the same thing, a barrier from people coming into our country with drugs. viviana: asked what he would do when presented with a bill that funding for the wall, he said that is presidential harassment. improper maintenance led to the lion air crash. a critical error speed sensor on the boeing 737 was not calibrated correctly by the ground crew. the probe will take months to complete. for the first time in 30 years, japan well resume commercial whale hunting. they are leaving the international well -- whale commission but will no longer go to the antarctic. italy, the mount etna volcano

triggering an earthquake that injured 10 people. villagesin cicero -- in cicero were forced to evacuate the cousin of the quake. -- because of the quake. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. caroline: the u.k. labour party leader has ruled out any a referendum, telling the guardian newspaper he would prefer to renegotiate. the man once tipped to be labour leader says he thinks theresa may is playing a dangerous game of chicken over brexit. he spoke with david westin. believe that was promised in the referendum is not available. you cannot have frictionless trade, leave the single market, and not have a hard border.

british people should be given the chance to say whether they want to go ahead with this deal. when you buy a house, you get a surveyor to put -- to do a report and you are not obligated . better safe than sorry, that is the way out of this. despite the economic and social costs, or a reversal. david: there seems to be a movement in that direction. ago came on the show a year saying 10% to 15% chance of a referendum. now i'm saying 35%. what may happen is the pressure to come in behind may's adequate -- inadequate deal -- it is only about divorce, not the future -- that tender deal to withdraw, i fear you will get enormous pressure from people on the conservative side of parliament

and on the labor side. -- labour were side. the sword of damocles she is holding could crash out with no deal at all, and that is very dangerous. it is a game of chicken with serious consequences. david: could do real damage to the u.k. >> already is doing damage. it is a fantastic place to do people, full of amazing that the danger is we lose the replication of pragmatism and four and ability to get problems solved. u.k. formerrmer secretary david miliband. talking to our very own david westin. let's get back to unite them as long for a prospective -- let's slam for ao naeem a perspective on the british pound. how much do you think the sort

of damocles, -- sword of damocles as we are hearing it, which way does it swing? naeem: just to address your first part, if you wanted to see the real impact, look at it against the euro, where it is trading. that will tell you how much weakness is because of the brexit chaos. these politicians who are supposed to rule the country and guide us and the entire economy to a happy ending, they have created nothing but chaos. what do we think? chances that are we could see -- by either party. the chances of another referendum, although i would love to see that, because i think everyone deserves a second

chance and the people do not know what they voted for, but i do not think this will go through is that. a is more likely to see current deal as jeremy corbyn says. we have to respect the will of the people and they voted to leave. caroline: the will of the people should be listened to from the first referendum, there should not be a second referendum now that we can see what the potential outcomes are? naeem: i think what it should be, once they have another deal which is backed by the parliament or by the political leaders, then you should throw the question back to the public. caroline: there should be a second referendum? naeem: there should be in that respect, what do you want? do you want this variant of a current deal or no brexit? caroline: what about a fallout

entirely without a deal? naeem: i think that is highly unlikely that would happen because i do not think a no brexit deal or brexit without a deal will take place. i do not think we will go towards that end. i think there will be a deal. we are talking about a divorce, not the future of the children. caroline: what is the future for u.k. assets? what is your general consensus in terms of what deal we get and what it means for the u.k. economy and the pound versus the euro? naeem: we are sitting toward the sterlingdollar, and and dollar. i can see this sterling-dollar falling to 1.23. that will happen if the current chaos continues.

break 1.23, that if the situation changes we could see sterling-dollar rallying regardless of what the dollar strength is on the other side. it will continue to weaken because of the fed. there are likely chances that by q1 we could see sterling-dollar touching 1.28 or 1.30, orecially if we have a deal are sailing towards a happy landing. caroline: may be time to start traveling. slam is sticking with us. sharyn o'halloran is coming up 11:000 a.m. in new york, a.m. in london. ♪

♪ i am caroline hyde in london. tom keene and francine lacqua are off. brent crude briefly dipping below the $50 mark for the first time since july last year. oil prices have been hammered amid fears of global growth and that u.s. supply will lead to a surplus. is the us from riyadh economic director of research and served as an advisor for the saudi arabia department of planning. give us your take on where we currently have seen the never-ending slide in oil. we are up about 1.2% on the brent. is this a bottom? are we getting to the low? jonathan: i believe so.

a lot of factors have contributed to this down flow and quick decline in oil prices. there is all of this bearish news coming out and a lot of it has to do with demand, the global economy, concerns about ,he fed, issues about trade war and what happens to the u.s.-china conflict on trade, and how this plays out, and as well the equities story which has been exaggerated on the downside. the whole story about oil is not representative of what it is today and i think it will go up in the first quarter. caroline: go up on the back of supply-side initiatives, or more the demand side stabilizes? john: i think there are two important elements. on the demand side, the global economy in 2019 will face some

issues but we are not going into a global recession. on the supply side, opec plus russia will have to address the issue and i think the statements have been coming out to that effect. we will see saudi arabia taking the lead and russia as well. we will see oil coming off the market. we have 1.2 million and i think we will have a meeting coming soon to effectively announce another cut. if oil stays at this level for 50, not going below that, in order to address the supply matter. caroline: does this inevitably lead to a swing too far in the other direction? the you see prices destabilizing to the higher side if we see production cuts in excess of 1.2 million? that was exceeding expectations. john: that is right, there could

be a bit of that. i do not see oil going back to is $80, $85 -- brent, that -- anytime soon. do have a crash like we had in 2009 where oil hit $32 a barrel, we need to avoid that so we need to take extraordinary measures to see oil in the 60's level. that is healthy for everybody. caroline: how does u.s. supply play into this? energyer novak, the minister is trying to assure investors and opec production cuts, but what about shale? or is theed too low supply destabilizing the market? john: that is the unknown, of course. as we have said in the past, but thens a decision

there is the decision in texas and shale is a contributor. the break even could be $40, $45, so shale is contributing to this concern and the downside risks for oil. $35,certain point around shale begins to hurt. i do not think president trump wants to see oil at these levels. i think he wants to see it recovering a little bit more than just $50. caroline: it has been trump in many ways who has been on twitter, his favorite social oila outlet, demanding that remains low, begging upon saudi arabia to make sure the oil pipes keep flowing. john: saudi arabia has done its part. oil has contributed positively, at least the price on the downside, to the global economy

as there are concerns of a slowdown. saudi arabia has done its bit. i think it is exaggerated, brent at $50. we should see oil recovering. equities should be recovering in the u.s. it is exaggerated on the downside. bad news thatvery is not representative of where we are in the global economy. caroline: it is interesting that we heard from russia's energy minister saying that opec plus is set to meet in april, but at any moment they could convene for an emergency meeting. what would be the tipping point, do you think? is there a price they cannot stomach? john: yes, absolutely. i am not inside opec, but i can tell you that if brent, let's use that as a benchmark, goes to

$40 or $45, there will be more voices. we have the uae oil minister suchncing opec could take a step and an ounce an extraordinary meeting, so oil in the 40's could call for such a meeting. longer-term, i am interested in your perspective for how much we will see the domination of u.s. and opec around the oil market. how much will we see the influence of china going forward on the oil market, particularly as the trade war seems to be pushing oil prices to the downside? wholechina and asia as a is a significant contributor to the demand side, so whatever happens to china has an impact on oil prices. of course, the big unknown as for how long china will be growing at the 6% level. i am concerned that over the

last few quarters, china has been growing to a lesser extent below this 6.5% in terms of gdp. i think china has a role to play but china is looking for alternatives. it is important to have a healthy chinese economy to see oil at a healthy level. caroline: great perspective. i am pleased to say he will be sticking with us. thank you for sticking with us throughout the morning, naeem aslam. you can catch up on plenty on the bloomberg terminals. check out g tv . and have a look at how liquidity should be something the market is wearing about, even though it is something treasury secretary mnuchin took the market by

surprise with. this is bloomberg. ♪

♪ this is bloomberg

"surveillance: gold rallying into the end of 2018, climbing as much as 4/10 gain to extend last week's , putting it on course for its biggest monthly advance since january 2017. is nikkei 225 average slipping into a bear market after dipping below 20,000 amid concerns over the global economy. it was the worst single day and more than two years, down 21% from its peak. the bank of japan doubling down on it stable monetary policies. governor kuroda said growing risk overseas and market volatility are good reasons for sticking with powerful and sustainable stimulus, and cautioned against too much pessimism. he sent the economy should be strong enough to withstand a

shock. caroline: thank you very much. the white house has announced president trump is open to a potential meeting in the future what the turkish president after it was revealed that in a december phone call between the leaders, the president said the u.s. was done with syria. how has the middle east in particular, and saudi arabia reacted to the shocking news even within trump's inner circle that the u.s. was pulling out of syria? john: i can say that everybody, all the pundits who have been watching the geopolitical situation in syria, have been surprised. i think 2019 will be another year full of surprises of what comes out of the white house and what is said and done with middle east foreign policy, and especially the outreach toward president are to one -- erdogan. do you see that

progressing? jim mattis has left as defense secretary. you said it could be surprises. morethe relationship being positive towards turkey or saudi arabia? how do you see allegiances developing? john: not long ago, especially over the summer with the issue concerning the american priest, turkey and the u.s. were two opposing forces. what is interesting is in both countries you have very populist leaders who use twitter quite frequently. we are back toy, normalcy between the two countries. ,019 will be full of surprises and it seems now turkey is a good friend of the united states back again. caroline: is this generally positive for world economy from

your perspective? think the economic relationship between turkey and the u.s., and especially turkey and parts of the middle east, have not been disturbed. if you look at the two military-industrial complexes of both countries, it has not been impacted. and it seemsncerns the economics of trade has been dominating the two countries. caroline: great to get your assessment from ray ad. -- read add. -- riyadh. joining us to talk retail, this is bloomberg. ♪

♪ >> where is the santa rally?

bear market, d c function, futures in the green after fluctuating after the first full day of trading. president trump praises steven mnuchin and. he adds the fed will get it soon. $50 for the first time since 2017 over worries of u.s. supply. this is "bloomberg surveillance." let's get you up to speed with first word news. >> a second immigrant child has died while in custody. the eight-year-old had been detained with his father since december. authorities noticed he was ill on monday. medical checks have been ordered on every child in custody. beto o'rourke it says it is not enough. is just tragic.

we are thinking about his family right now, what they must be feeling to have lost their child on christmas day, to be in a strange country and not know what is next for them. we want to do everything we can to help that family. >> the inspector general is investigating the circumstances that led to the death of a seven-year-old earlier this month. north and south korea staging a ceremony to upgrade severed rail links between the two countries. they were revived earlier this year. the u.s. security council ranted an exemption to allow the ceremony proceed despite sanctions on the north. an outbreak of the ebola virus says the congo will push back a presidential election, saying it will be delayed for months in certain communities where

hundreds of peoples have been infected. has already been put off more than two years. the opposition party saying they will not accept further delays. an israeli airstrike taking aim at targets in syria. the syrian military says that injured three soldiers. according to a human rights group, the strike hit weapons depots longing to iran or hezbollah. it would be the first strike on syria since the u.s. announced plans to withdraw troops from the country. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. >> thank you. let's check the markets. the s&p 500 .4%. losses into the

cnn thatports from trump is growing frustrated with steven mnuchin. tomp is trying to take steps calm investors -- to calm investors. crude oil is bouncing back. gold, currently a .4%. concernsearly seeing and some risk aversion. money moving into the u.s. dollar and out of the yen. china is unchanged on the offshore yuan as china tries to ease concerns, treating all companies equally, the new rules being offered by china, the latest in the steps offered by the country. 10%.in is currently off

let's keep an i on that volatility. s&p futures off by 1.1%, relations with steven mnuchin adding fuel to the fire. then we have an easing of concerns that as donald trump says he has confidence in the fed getting it, and indeed his confiden confidence in the u.s.. let's get an investor take with our next guest. officer,f investment what do you make of the headline risks coming from the white house? >> for a long time, everybody loved the trump economy and the trump stock market, even though they felt trump occasionally likes to take a detour into crazy town. now the rally from the time he was elected until now has

pre-much faded, and there are increasing concerns the economy may be slowing. then you add to that his criticism of the fed and the fact this call steven mnuchin made on monday to all the bank heads was kind of confusing. there is a lot of confusion and i think stocksr are unbelievably oversold. they are cheaper now than they were at the beginning of this year and the economy does not show signs of slowing. we have had a 5% increase in holiday sales over last year, so the consumer seems to be strong and there is a huge opportunity in the pullback. >> i wanted to get your take on the economic data we are

getting. sentimentnsumer tends to beut that less key in midcycle areas. market?ut the housing are they pointing to any concerns about the dreaded word recession? >> there has been concern the housing market has not in that strong. i believe it is not so much economically driven. consumers are spending on their houses. you look at how well home depot and the home suppliers have been doing as people have been upgrading and spending on their houses. people buy new houses when they have families, and family formation has been slow. when the family formation cycle increases, housing demand will increase, so that is demographically driven and not an economic concern. >> you are saying the economy looks relatively strong from

your perspective. with thea disconnect sentiment on the stock market and the strength of the u.s. questionen a of catching a falling knife. right to now assets purchase if you can handle volatility? four the industrial stocks like caterpillar and boeing are incredible buys. if we do get a resolution to the trade situation with china, there is huge upside potential in those stocks. many retailers who have sold off like nordstrom's and macy's, they will report very strong fourth-quarter results. those are you advised. -- good buys. the tech sector is to the engine behind the economy. you saw it in apple and amazon and google and facebook and nvidia, microsoft, all

incredible buys. these companies will report strong q4 results starting in the q4 resultsd we get in mid-january will be the catalyst the drive stocks higher. >> in three weeks or so, that is where we might mark the low and earnings will lead us higher. what about ensuring you can mitigate against volatility? the vix has crossed 30. have you looked at ways of stabilizing yourself doing volatility? >> -- during volatility? >> four i mostly -- i am mostly a long investor. it's unfortunate, sometimes you have to write out these times, but we have -- ride out these times. the market always comes back. the strength in the economy will be a driver for further stock

market gains, and the biggest overhanging catalyst will be some type of trade resolution with china. that much concerned about the government shutdown right now. in the pass, they have had almost no effect on the stock market. i think they will probably get an extension on interim funding and wait until congress resumes in january to resolve the government budget. a great way to set us up into 2019 trading. thank you. is columbia university professor and author of a forthcoming book, "10 years after the crash." i want to get your take on the volatility. we've had comments from secretary mnuchin as to why we have seen such volatility.

he blames high-frequency trading and the volcker rule. what you think is behind the volatility? it has been the uncertainty of policy. we have seen a rollback on some .f the regulations we have seen the trade, .eopolitical uncertainty we have seen the number of different types of aspects that have created a lot of concern, immigration policy on down the line. therefore it is difficult for because theye bets don't understand how each of these policies will feed through the economy. in my mind we have an economy doing well. stock market there was probably overheated and ready for a correction, but nothing

along the lines you have seen a presidentu had who pursued a trade war in good economic times, which is unheard of. responding in a market that had no inflation saying they will have a neutral inflation rate. hoover did is what and we understand the consequences. we are seeing people enacting policies not coordinated, not well understood about the implications, and it is creating confusion. the secretary highlighted a concern of credit crisis that no it had thought about, and was really concerning about whether there was sufficient coverage for the leveraged loans of corporate america, and again, that has been a growing area of concern, but no one thought we

would not be able to cover the liquidity as the market was having issues, so those were the issues i think have led the market to actually think. plenty to discuss after this break. coming up, trump's attack continues. how that battle may be causing turmoil for the markets. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the business flash. exxon mobil headed for its worst 1981. performance since

it is down 20% for the year. it goes through one of the largest restructurings and its modes modern history. it is making a push for natural gas. all businesses will be regulated equally according to china. it has released new rules that go into effect immediately. the changes could create competition for the many state-owned companies that dominate the chinese economy. in new york, the top 10 apartment sales have combined to top $500 million. those numbers are down significantly from the previous three years. top 10 sales were heavily discounted from their original list prices. one apartment took a $17 million price cut before it found a buyer.

that is the bloomberg business flash. >> thank you. president trump has expressed support for steven mnuchin and after questions about why he discussed bank liquidity when it did not seem to be a problem. is aid steven mnuchin talented guy and is prepared to roll back some of his criticism of jerome powell and repeated his believe that the fed is raising rates too fast and is confident policymakers will "get it" soon. joining us now is the president of the american institute for economic research. i want to get your perspective. is there something for the fed to "get"? >> the fed is having to measure so many variables and getting criticism from so many different groups, including the president. the other day he said the only problem the economy has is the federal reserve. it is ahave to say

strong overstatement. i think the fed can be destabilizing, and many times it is, but there are so many different verticals. bad for thel chairman for facing so much criticism. >> isn't a problem for the economy in general? is there more or less the fed should be doing? >> the traditional view is the fed stabilizes and always knows what they are doing. a lot of my colleagues have talked about the potential the federal reserve can destabilize when they inject money into the system or pull money out of the system. that can have ripple effects and not actually helping the economy. >> is it impacting liquidity from your perspective? selloff,rly around the many seem to be worried about

the balance sheet, whereas it had not been an issue before. do you think the fed is draining liquidity from the system? >> we have this huge skyrocketing of the balance sheet over the past 10 years. they own a lot of securities and debt assets. people have been talking about how they should continue that. to theyit is and ought have all that money in assets. a lot of people say they should be unwinding it, whether that is not renewing securities as they reach maturity, or an outright selloff. i think people have been talking about this for a long time and expecting it. i would not that is the cause of the recent downturn in stock prices. there are so many things going on right now. >> does any of the reasoning behind the downturn in stock prices, fed-related,

trade-related to white house-related concerns, do any of them manifest in hurting the overall economy? changingrisk sentiment and the stock market have an impact real terms on the economy? >> the stock prices are basically a representation of current expectations of future profitability of firms and how will businesses will be doing in the future, so as business conditions start going down, that gets reflected in lower stock prices. stock market goes down by 20%, they are expecting all these businesses to not be as successful in the future, that terms up in terms of opportunities for workers and consumers as well. the stock market is just an indicator of economic, future economic activity in the economy. >> you will be sticking with us.

sharon will also stick with us. a quick check on the futures market. we are currently in the green. we are up across the board. thin trading on a day after the festive break. we have trading in the u.s., s&p futures swinging wildly. this is bloomberg. ♪ ♪

tom keene and francine lacqua are off today. it has been 10 years since the financial crisis. our guest has edited the forthcoming book "10 years after and analyzes the possible forces of the next one. bear marketnk of a for the s&p 500 and the nasdaq already in one with plenty of headwinds so you eloquently highlighted for me investor base and the economy, are we any closer to another financial crisis? one, we have put in some regulations i think do solve some of the issues that we faced previously, orderly liquidation and so on, that i think will be helpful, but we still have huge gaps in the regulatory structure

that will be problematic. we do face other types of asset , leveraged loans on the corporate bonds, and this is where the liquidity issue is rising, that the problems with , itstock market going down is a lot of leveraged loans based on stock prices. there are margin calls, and that like in the subprime loans can lead to these crises where there collateralalls, calls, defaults, and so on. again, we are faced with those instabilities based on the instruments that are not regulated and transparent with accountability on the books and so forth. in many ways, there are the remnants of these same elements,

but there are different types of ways in which the institution as a whole can be unwound without the same types of cascading. still don't have the means to measure the systemic risks. those of the issues. caroline: some clear issue still ahead we will be digging into more. i guess are sticking with us. we will be talking holiday season next, and investors are keeping a close eye on the consumer dollar. that is next. this is bloomberg. ♪ ♪ 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 ♪

you caughtet's get up with the first word news. >> president trump offering a

vote of confidence as steven mnuchin and and the federal with a report discussing of firing of jerome powell over interest rates. he is doing so well that he raises interest rates. that is a form of safety. president obama did not do that. rate, theyd interest have money in the bank and get interest on the money. added he thinks the fed will "get it" very soon and the downturn creates an opportunity for investors to buy. improper maintenance appears to have led two the crash of air airplane.

it was not calibrated correctly by the crew. the probe will take months to complete. indonesian authorities are asking people to avoid the coast in areas hit by the tsunami. 420 were killed when underwater landslides were triggered, creating a disaster without warning. government workers continue to monitor eruptions. triggeringount etna an earthquake that hurt 10 people. forced to flee their homes as the ongoing irruption created a 4.8 magnitude quake. onhas also opened up cracks a highway that was closed for inspection. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. caroline: thank you. let's check the markets. we have green across our screens. some risk appetite, but thin

trading after the holiday. futures on the s&p 500 up. this could help us push away from the bear market. already 20% off of its market high. in terms of the bond markets, flat, 10 year yields unchanged. crude oil getting a tiny bit. still trading low for wti contract. gold doing well, up .4%. meanwhile, amazon, another holiday smash. it sold more devices this holiday season than last year. it may not be the only one enjoying the boost. rose from a sales year ago. that is the strongest holiday sales gain tracked in six years.

perspective from our guest. the sentiment you are seeing, the research you are doing, it feels like a strong end to the season. >> it looks like we had a good holiday season, that 5.1 .ncrease the consumer has dollars to spend. inf innovation is helping to drive sales with consumer spending both in stores and online. caroline: we heard from amazon that it is all about its latest dogets and goods, but where you think the money is really going >>? of the pickup, but

were also seeing it in apparel sales. consumers need to replenish their wardrobes and closets, like they haven't done, so i think you're seeing a spend across the spectrum in terms of that's the end, but it was in nailbiter because you had the pickup at the end. january is important given the redemption of gift cards. caroline: daniel, what about the margins. >> it has been promotional. we do tracking on promotions with our weekly trend report. some levels were higher than last year, but the majority of the retailers were in line. some companies were beginning to inng in goods early an

anticipation of tariff hikes, so inventories will have to be watch. we're entering 2019 with a lack of clarity, as compared with the optimism of 2018. caroline: great to get your perspective. is sharon and edward edward,. i want to start with you. , does thatr strength continue into 2019. >> i hope so. i feel bad for the consumers who will have to pay more for their products because of increased taxes on their goods. those taxes are called terrorists. they are taxes on american consumers that will hit people's pocketbooks.

it will be taxing american corporations for using ingredients from other goods, and taxing specifically foreign products that are bought by american consumers. so those are potentially negative, and the more we can move away from these harmful trade wars, the better off we will all be, especially the consumer. caroline: sharon, you are a trade expert. how much of a concern is the situation and tensions between china and the u.s. from an economic perspective. , especiallyortant at the intermediary goods level and the production process, where you will have the most impact downstream on the consumer and on the supply chain. that is going to have. we are seeing significant impacts.

also, you are seeing people shift production abroad, and that is where it's going to be really problematic. , buttariffs problematic moving production abroad is even worse, so that is what i'm concerned about. you are: edward, worried for the consumer and the prices they will have to be backfire come it or will the trade turks work if we see an opening of the chinese economy. we solved this weekend more moves by china to alleviate tensions, promising new rules, new regulations and it comes to promising to treat all companies equally. withoutdeal is a world tariffs and taxes on consumer goods and production goods. if that is the goal, then we

might the optimistic if china is actually going to be reducing tariffs on us and we will not be having tariffs on them. that is good. that is more free trade, what every economist wants. what was alarming a few weeks ago when the president announced ," and thisiff man seems like the ideal. you will hear some tension in , so with the goal is to increase trade restrictions, i am not optimistic. . am hoping for the best if china opens the market to us come all the better. caroline: give us your take on what 2019 brings. the economists say we will still

be above trend in terms of overall growth. does that appear it will be sustained? >> it does appear the economy is still growing. there is a lag in the trade aspect going forward. inre will be uncertainty some of the investment. consumer demand does not appear to be slowing down, yet. again, in the u.s. economy that is three quarters of it. government spending is still those components are still there, but there is growing drag, so, yes, i would assume, but you have interest rates increasing as well. it should be increasing, but not at the same rate. i don't know if it is sustainable. caroline: great to get your

perspective. now on your commute, tune in on radio. this is bloomberg. ♪

caroline: i am caroline hyde. president trump said the shutdown will continue until there is an agreement over the border wall.

departments and agencies shutdown on saturday after trump refused to sign a spending bill that did not include money for a wall, a top campaign promise. kevin: most lawmakers, all lawmakers, have gone home for the holiday break. democrats are set to take over the house on january 3. meanwhile, the president facing pressure for his comments on the hasral reserve, comments he walked back, as well is pressure with the fluctuations in the stock market. we have seen democrats start to speak out about the president's rhetoric, particularly pertaining to the economy. the new chairwoman of the house financial services committee urging the president to change his tone.

caroline: talk to us about the tone, in particular surrounding his treasury secretary. this put the markets on edge. we had reports that he was falling out of favor, secretary mnuchin. kevin: steven mnuchin and has had a close, personal, and professional relationship with president trump. he has been able to maintain that. the treasury secretary is caught in the middle of recent attacks that have escalated on the federal reserve, as well as the fluctuating markets. think the bottom line is secretary mnuchin finds himself not in the middle of the trade looming but a congressional debate. now the treasury secretary will be facing not just the trade war, but a congressional war in which democrats will be looking president'sting the

tax returns. that will run right through the treasury department. caroline: it feels as if there will be more loggerheads, not fewer. where does the shutdown come to an end? is there any compromise that will alleviate the concerns the president has an enable funding the government? kevin: not right now. everyone isou that prepared for there to be a long government shutdown. it is quite remarkable. one source said the government can't stay shut down forever, but the last one in 2013 lasted more than two weeks, so buckle up. , certainlyuckle up something president trump warned could last a long time. he has owned the shutdown. what does this mean for voters?

does the frustration grow with the president himself? kevin: the president is saying that his base, even independent voters, would like to see something done on border security, particularly as it pertains to a host of other issues, the economic implications of that, but the wall is what he campaigned on. from that vantage point, they don't see the base leaving them on that front. the president has supporters in congress on this. you have support particularly among the freedom caucus and deep red state republicans, so there has not been pressure on red state democrats, like senator joe manchin, who voted against it. that is where the debate has not had it yet. democratscentrist feel pressure on the border wall , this is an uphill battle for republicans. caroline: you will be reporting

on that battle as it continues. kevin cirilli, we thank you for joining us. bloomberg users can interact with the charts we show at gtv . you can browse recent charts and catch up on key and analysis and save charts for future reference , like this one on oils wild ride, volatility spiking. oil currently trading up 1.5% today. this is bloomberg. ♪ this is bloomberg. ♪

caroline: i am caroline hyde. a beautiful dawn breaking in new york. we are up .5%. let's have a look at the single best chart. this is the s&p 500 over the course of the year. not so pretty. year, but3% for the close to a 20% nosedive from the previous high, meaning we are seven points from a bear market. we could push that higher if we

do hold onto gains. are close totill the edge of a bear market when it comes to the s&p 500. let's get the take of our guests. i want to start with you, edward. that,e see charts such as do you think the market is out of whack with the economy? >> it is always difficult to say. the best indicator of where we are our current stock prices. i would not want to second-guess the large investors in small investors out there. look at thesee a things in the long-term perspective. often times when we see things go up, then it goes down, everyone starts freaking out and it is the end of the world. there is a lot of cause for concern that things are not going as well as they could the from ald be, but

long-term perspective, things have been going up quite a bit over the last few years. it is unfortunate when they don't continue to go up even more, but we have a lot of positive things in the economy, record low unemployment rates over the past 50 years. things are still doing well. tempered i being unnecessary barriers, trade thingss, and different that are potentially getting in the way of markets. markets: those currently on track for the worst month since 2008. your book was all about the ramifications of 2008 and the previous financial crisis, and whether or not we are setting ourselves up for a second one. how significant are liquidity concerns in the market to you? they were amplified unnecessarily by steven mnuchin and, but is it something that

the market is paying attention to to the right extent? would not have anticipated the quiddity concerns were a big issue now with all the capital requirements and the stress testing and so forth. i thought there was ample liquidity to cover all the various obligations out there, even with the leverage loans in the corporate debt sector. however, when you put in a whole notion of confidence and people start getting really concerned could have then you a run on the quiddity and people could start using their credit lines and so forth and you could have an artificial crisis. therefore liquidity could be drying up because of the signal sent by the government. they created a crisis in and of themselves. that is a problem. those are the types of concerns

i have looking at this last crisis waseally the the failure to identify, manage, and mitigate risks at the individual firm and systemic level. we have to ask ourselves have we done a better job at that going into these cases we are looking at now, and do we have the tools available to mitigate them. that is where we are. caroline: edward, what is your number one risk for 2019? regulations, interference with the economy. we have this constant back and forth between these people, businesses who know what they are doing, and you have people from the government saying we are going to prevent you from buying foreign goods and prevent you from hiring foreign workers,

put up a wall to prevent american corporations from hiring foreign workers, so all of this tension we are creating is artificial. we have the potential for world peace through markets, and that is getting interfered with. i think that is a major risk. if we encourage more trade, i could be very optimistic. risks ♪: artificial , reasons to be optimistic. -- risk, reasons to be optimistic. thank you both. great to have you. we this is bloomberg. ♪ will be speaking to them on radio next. peaking to them on radio next.

♪ >> near the end of a bull market

, the longest rally on the brink of instinctual as equities head for the worst december on record. we'll market stability is coming. minister says oil will be quieter in 2019. calmdent trump tries to the markets. he says by the depth and called steven mnuchin a very smart person. welcome to "bloomberg daybreak." i am alix steel. david westin is off today. will we get a reprieve from the brutal selling on monday? index at that level. dollar-yen snapping an eight-day losing streak, below the 200 day moving average, getting a reprieve today. the 10 year