>> apple anxiety, the tech giant sza slowdown in china -- sites a slowdown in china. suppliers take a hit on the apple warning in europe. currency confusion. in just seven minutes, the yen surges to levels not held in a decade. what caused the sharp move? we will talk about the upheaval in the market. good morning, welcome to

"surveillance," i'm guy johnson in for francine lacqua. we have had a very interesting funny four hours. let's talk about what is happening here. europe is down, but not by much. europe does have luxury stocks. we will talk about those in a moment. the dax is under pressure. the cac is under pressure as well. the cac is being affected by some of those luxury stocks. the dax is a little richer with some of the tech stocks. they are under pressure. let's take a look at some of the individual moves to show you what is happening in the single stocks. story issupply chain present in europe. ams is down by 20% this morning. ross fromalso a read ac the apple story. some would perceive that as a luxury stock. as a result of which, they are

extrapolating the china slowdown story into some of the luxury stocks. 2.53% this morning. the retail story is a little more nuanced this morning. we are seeing positive news out of the u.k. that is rippling into stocks like marks & spencer. there is also something going on with zalando. an m and h story seems to be priced in. it is hard to pin anything on the story at this point in time. we will see if the story shakes out a little more. 3.92%. is trading up by it could just be the next read across out of the u.k. the other big story is the flash crash, thin liquidity out of asia. japan is still closed until the beginning of next week. we do see a very aggressive move in the end -- yen.

it also rippled through into some of the other crosses. take a look at dollar-turkish lira. a huge round-trip. it seems to be japanese retail part of this move. japanese retail sellers. they have also been big buyers of turkish bonds, which carry a significant coupon, as a result of which you could probably make that move into the turkish lira. probably explains what we have seen. let's get the bloomberg first word news update. >> apple has lowered its revenue outlook for the first time in almost 20 years. ceo tim cook says the company billion, of about $84 that is down from previous estimates. cook saying apple did not see the magnitude of the economic deceleration, particularly in greater china. he also cites fewer than expected upgrades to iphones, the product responsible for about two thirds of apple revenue. congressional leaders and president trump have failed to strike a deal to end a partial

shutdown of the federal government. it now enters its 13th day. the president says he remains willing to work with democrats and has invited them back to the white house on friday for further negotiations. democrats taking control of the house later today are set to vote on a plan to end the shutdown but without funding for the trump border wall. ryanair has posted another gear of slower passenger growth. the airline is in the midst of a battle with airline workers and traffic controller strikes. just over 139 million tickets sold. the slowest growth since 2015. reportingval wizz air a 20% passenger jump. hasbudapest-based upstart increased its presence in key markets like the u.k.. a mixed report on christmas sales as investors look to end

the year on a high note after months of struggle and retail sector. the british clothing manufacturer -- retailer said the result was better than some analysts anticipated. manhattan home sales falling in the median fourth quarter. according to a report, prices declined to $999,000 in three months leading to december. that is a drop of 5.8% from a year earlier. is continuingies to allow buyers to demand sweeter deals. global news 24 hours per day, this is bloomberg. indeed.nk you very much let's get back to the apple story. shares are sticking in premarket trading. the company cut its outlook for the first time in almost two decades citing weaker demand in

china for its iphones. supply shares in europe are getting hit hard this morning. as you can see. europe does not exactly have a massive tech sector, so we won't feel a full effect of this and the later in the morning. joining us now is head of markets research for continuing economics. hussein, let me start with you. is this an idiosyncratic apple issue? smartphones are definitely on the way down. they have been declining. i don't think apple has given best given a good reason to consumers to upgrade. what is surprising is how late this is coming from apple and how strong guidance has been for the last year. the second story, in china, it definitely feels like there is an economic slowdown. i think that is the story to watch in 2019. guy: are the chinese consumers

shifting to more locally-based brands? you look at the numbers coming others, henceand the kind of idiosyncratic story. does apple just have the wrong products at the wrong price point? hussein: in the u.s., we have seen that the upgrade cycles have lengthened to three years of to about two years. people every allies to they can patch the iphone with a new battery as opposed to buying a new phone for $1000. china, there are very strong local competitors and both of them are eating into apple's market share. as a macro story for the smartphone industry, smartphone unit sales are down across the sector. has hitan industry that saturation and apple is poorly servicing the industry by not giving people a reason to buy the latest, greatest fun. guy: michael, what does it tell us about the chinese economy?

michael: hotels is the picture we have seen from retail sales and other data in december, that china is in a slowdown phase. it is worth remembering why we are seeing the slowdown phase. , they haveng china turned things around. they probably still have not stimulated enough. we expect further announcement of further stimulation. they will try to ensure a soft landing. guy: we saw them expanding the number of banks for the reserve requirement. what does that expanded stimulus look like? michael: that is partly led by forced increases in bank lending by the major banks. it also involves better profitability through reserve requirement cuts. it involves further fiscal stimulation. it probably does not involve the

yuan depreciation. those factors are enough. we have seen it time and time again from the chinese authorities. although we are looking for 6.3% , we are not looking at a dramatically worse situation. where does the story ripple out into other assets? can we tie it to the story? michael: the timing is definitely triggered by the apple perspective. there are veryd, thin conditions and financial markets at the moment.

the long dollar trade is probably the one trade that was not moved. we saw people get out of the short u.s. treasury positions. , we couldan standing see liquidation of long dollar positions in january. guy: we have an upgrade cycle 4g to 5g.terms of to consumers care? apple has made it clear that it will not be at the forefront of the move and will wait for a bigger market to be available. michael: i think consumers definitely care -- hussein: i think consumers definitely care. it is disappointing that apple is not on the forefront of this trend.

they are going to help unit sales given how big the iphone is for their sales. guy: thank you very much indeed. stay with us. we are going to discuss the flash crash overnight. wild swings in the end. that is next.

finance,omics, politics, this is "bloomberg surveillance," i'm guy johnson. the partial u.s.

government shutdown in the united states did not go anywhere yesterday. congressional leaders unable to reach a deal at a meeting with the president. he has invited them back tomorrow. i'm talking about the democrats here, they have not decided whether or not they are going to go. they are holding firm on their opposition to a border wall. net to said democrats will pass legislation today to, try to reopen the government pressuring senate republicans to do the same. joining us now from hong kong is the senior international editor, jodie snyder. where are we? the cabinet meeting was interesting. where are we in this process? will friday yield any movement? l, you're right, that did not go very well. the democrats and republicans both left the white house having the same position that they started with when they entered the building and president trump has not backed down from his billion in funding

for a border wall or border security at the u.s.-mexico border. now, the question is what happens next? nancy pelosi is poised to take over as house speaker with the democrats taking control of the u.s. house. she will likely put forward two different pieces of legislation. 1-wood fund the departments of the government for the rest of the fiscal year. one bill would be temporary funding for the department of homeland security, where this border dispute lies. that would give them some time to try to settle the issue to negotiate, although president trump does not seem particularly willing to negotiate and democrats have called spending on the wall wasteful and ineffective. essentially the 13th day of the shutdown. it is going to go into its second week. we are starting to see some effects. hundreds of thousands of federal workers across the country will not get their paycheck on january 11.

we have now seen the smithsonian institution and some of its iconic museums, like the national air and space museum, close. there does not seem to be much movement at this point. guy: one of the most fantastic museums ever to be visited. j thank you very much indeed. odi schneider joining us out of hong kong. michael is still with us. do you care? michael: i think the prime focus of the market at the moment is what is the fed going to do? are they going to sort of change their tactics relative to december? what is happening with the economic data? this is a china soft lending or is it a harder landing in china? those are dominating the macro picture. because if those can be resolved in some ways, some of this market for this volatility will dissipate. guy: we are going to hear from powell on friday. mike: i think it is a

double-edged message. one that the fed are still looking to raise interest rates in 2019 because they see growth being about trend. they don't see tremendous adverse effects from asset market volatility. and it isat inflation still above their desires. , milking someme data dependency. as long as the data is ok, they will go ahead. if the data softens, they will think about it. guy: just very quickly, does powell -- he is in a bit of a dilemma -- what he wants to do is say the u.s. economy is great, don't worry about it, don't worry about december, don't worry about china, we are cool -- on the other hand, he probably does not want to push the hiking rates kind of message, so how does the balance the story? mike: i think the reassurance is twofold. as you kind of intimate. will note thate

the trajectory of the economic data is still very good and the fed is still confident that that will continue. at the same time, actually giving the market and the economy a safety nets are just in case things do deteriorate, the fed will not actually go on autopilot. maybel actually decide or we push it back in delay. guy: plenty to think about. mike gallagher is going to stay with us. coming up, we will speak to the dallas fed president. that conversation is at 12:30 p.m. london time. lots of fed speak over the next few days. we will be spending a great deal of attention on what is coming up. this is bloomberg. ♪

22 minutes past the hour. "bloomberg surveillance," i'm guy johnson in london. we have a seven-minute long flash crash in the currency market overnight. the japanese yen jumped almost 8% against the australian dollar. some believe that apple's revenue outlook could be the trigger. seems logical. others believe japanese retail investors. those don't have to be mutually exclusive. there are a bunch of factors coming forward into this story. let's try to make some sense of it. gallagher is still with us. >> as you mentioned, i think it

was a perfect strong rating to happen. apple came out with the revenue warning, the first in two decades. the u.s. investors did not have any time to react. then there is a gap in asian currency trading. was it was not fully up and running. japan is not open. you have a combination of bad news, particularly in china. ie proxy fors china korea japan out. bad news from apple. concern about the china economy. all of it just kind of from one end to the other. guy: the focus on japanese retail investors. a holiday with a little more time on their hands. you kind of look at the lira rate, why would the lira move so aggressively in this?

then you look at the fact that japanese investors have been aggressive buyers of turkish debt over the last few years and that kind of makes sense a little more. does that point back to the retail investor being a significant part of this? ven: it probably was a significant part of it. as you mentioned, the turkish lira and the dollar, big kerry place for japanese retail investors. of stops.ered a bunch as the stop losses piled, one fed into the other. what we saw was are we going through levels not seen since 2016? the same for the other crosses as well. we have seen this happen with the south african rand before. the pound has happened in october 2016. now it is happening again. what is intriguing is all of it pretty much happened at the same time.

guy: same time of the day. michael, your view is that the lira was probably a little punchy in terms of the positioning and it probably got a little overboard. mike: i think if you look at this, this is predominantly foreign-exchange phenomena today. the lira had definitely rally down too far in the fourth quarter. people were playing the yield. people thought that it would be the end of turkey's woes. is still going to be quite a tricky and turbulent year for turkey. through the course of 2019. place and high-yield the market to play. also within this, if you go back to the china story, some people are looking at it in that context, that it is a cascade of china worries. if you look at copper this morning, we have not really seen in copperf selloff

that we have seen. it tells us it is an fx market positioning story. it is probably still true that the yen is one of the better place for 2019 and for january. it has probably been exaggerated. n, thank you very much indeed. michael is going to stay with us with the brexit deal debate due to start. the former brexit secretary delays are vote again. that is his advice. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.

"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. economics, finance, politics, this is "bloomberg surveillance." i'm guy johnson in london. apple trading down more than 7% in premarket trading.

europe does not have much of a technology sector. the stocks are under pressure. there is apple. there is lvmh trading down on this. ams is a big supplier into the apple supply chain. it is trading down quite sharply. we are getting a little bit of data. let me bring you that. we are getting the market construction data out of the u.k. coming through bang in line with estimates. prior 53.4. from a .ore difficulty generating here is viviana or taught oh. theeo tim cook saying

corridor just ended. apple did not foresee the magnitude particularly in greater china. congressional leaders and president trump have failed to strike a deal to end the partial shutdown. saying they will still work with white house. they plan to end the shutdown, but without funding the border wall. dropped production by 30 barrels per day. that is the sharpest pullback in nearly two years. leading member saudi arabia trimmed output in december. libya and iran seeing deductions

of more than 100,000 barrels each. investors remaining concerned that the cartel won't cut enough to make you not -- up for the surge in u.s. shale supply. manhattan home prices falling in the fourth quarter. the median less than $1 million for the first time in three years. $999,000 in the three months before december to be exact. from a a drop of 5.8% year earlier. apple inventory is continuing to allow buyers to demand sweeter deals. on theas landed a probe far side of the moon. it is the first-ever spacecraft to reach the surface that always faces away from earth. the people's daily newspaper reporting the lunar probe landed at 10:26 a.m. beijing time. new horizonssa's spacecraft has sent back images of the most distant celestial object ever explored. this small icy object you see back there is made up of

different particles and it looks like a reddish colored space snowman. it is about 1.6 billion kilometers. beyond pluto global news 24 hours per day and at tictoc on twitter, this is bloomberg. guy? guy: thank you indeed. david davis says that the u.k. prime minister should delay the vote on her brexit deal for a second time, writing in the they telegraph, he says 11th hour. the eu is worried about losing the divorce payment. 39 million pounds. that would come as the result of the brexit deal. joining us now is tim martin, the founder of je weatherspoon. michael is still with us. happy new year. tim: and to you. thank you. guy: did you have a good christmas? tim: i don't have a lot of time for that question, we will both go to jail. pretty good, thanks. [laughter] guy: what is your view of the

u.k. consumer right now? storyt is certainly the that has been running around the media before christmas and during christmas. there were some things out this morning that i saw that consumer spending was plus 4%. actually pretty good. a lot of these gloomy stories are unjustified. they said that consumer spending would turn down. it hasn't done so and things are going ok. you are ready for a kind of hard brexit. we all know that. tim: we are tough. guy: is the business ready for a hard brexit? tim: yes, because all businesses need reasonable government. that is a north america has done so well. it has a democratic constitution and for all its tribulations,

democratic government, which works well. south america struggles. we need a democratic government to make some decisions. if we need with no deal -- leave with no deal, we leave without 39 million pounds. oncan and the tariff bananas, oranges, and a lot of other things, which will help us, help consumers. of we can regain control things like fishing. above all, we can become more democratic. we can elect a presidents when we want them, unlike the eu. guy: how would the business change with the hard brexit? full of allcellars of the things you need? story, thehis scare channel ports are going to block up, therefore you need to stock up. we don't believe that for a second. but we are to switch from french branding to american and australian branding. switch from french champagne to

sparkling and so on. we switched a whole he will products. they are in pubs now. sales have not gone down a bit. if eu is very vulnerable u.k. consumers do that because eu,ything we buy from the you can buy from 93% of the world. guy: where those products come in? which ports? tim: i haven't been -- guy: no come on just curious. if there is a problem left over and your american whatever it is comes through, it is still going to be affected by this. tim: guy, this is fantasy talk. i'm not blaming you. it is fantasy talk. there are certain controls, extra controls on non-eu goods coming in to the country. but there are no cues. if the same controls apply at dover, other than possibly in the short term, there will not be queuing there. guy, don't worry.

it is all a shaggy dog story. guy: why is the government hiring extra capacity? tim: governments do funny things, don't they? guy: this no deal brexit planning money is a waste of money? tim: i can't go so far as to say that. what you can't rule out is people deliberately messing up the system. eu suppliers won't want to because they will lose business, but certainly it is possible there will be some things that the government has to do. for us, nothing. we are so organized and groovy that we don't need to do anything. we had so many consultants. we spent a fortune trying to prevent it. not one person has come up to me this is what we need to

do. guy: michael, what do your numbers tell you. to bank of england has tried forecast short-term numbers. it is a difficult model to build. mike: some businesses like tim's are well-prepared. more crucially, i think investment would continue to be very subdued. beyond that, the very short term in march and april of next year, there will be considerable uncertainty. thing you have to have a look at is the prospect of a no deal exit in march is probably 10% because it still looks like may will lose the vote, but maybe by less than the 100 that was the previous indication in december, which leads us into three different routes. actually talk to the

europeans about kicking the can down the road and delaying the date. examining other options, including a referendum, or ea membership. that is the kind of decision tree facing theresa may at the present moment in time. it is possible that you could actually see referendum and eea being discussed more substantially by the end of january. what do you think will happen? tim: it will be a great tragedy for the u.k. if we don't leave the eu. it is a failing institution. i hope that we leave. can i look into the crystal ball? no. no one would have predicted theresa may would be prime minister. no one would have predicted jeremy corbyn would be leader of the opposition. no one predicted donald trump would be -- guy: ok. tim: we are going to leave with no deal. that is my prediction. guy: we will leave it there. founder of jee

weatherspoon. chairmanwhat the ubs had to say about banking consolidation in europe. a preview of tonight's episode of "leaders with locke what." -- francine lacqua." this is bloomberg. ♪

you are watching "bloomberg surveillance," i'm guy johnson in london in four francine lacqua. european banks deep in a bear market. that has prompted shakeups at the top of several leading banks, including deutsche bank. and danske bank. ubs, succession planning is also underway. francine speaks to the ubs chairman about the future of

banking. industry is inhe the middle of a transformation already. the first 10 years after the financial crisis, was a reregulation of the industry, and many including ubs have changed their business model. we were among the first. over the next 10 years, there will be different trends that will shape the industry. technology is one of them. overall, the business model will be challenged by disruption. and the question the future will banks rise to the challenge and basically transform themselves rather than being disrupted? we have seen disruption in many industries. technology is the key driver. i think thanks will continue to face those challenges. i think we will rise to the challenge. we will basically adopt what is good their financial technology. the business model will change. it will become more technology driven. it will become even more

client-centric. the main beneficiary of the technology will be the clients. banksne: how will the big not be disrupted, not left behind, how do they not become obsolete? axel: what will get disrupted coreanks that have a business model that has no distinguishing factors. focus ons like ours one business area. i would not say niche because we are the largest player in the world and wealth management. where content matters. content will matter even more in the future. clients are getting more educated about financial markets through technology. clients are more risk sensitive. they have a different interaction with the banks through technology. ands will simulate that continue to provide content and be industry leaders and they will survive that way. ubs is a do you think blueprint for the rest of the european financials? axel: not necessarily because we don't want everyone to move into wealth management and no one has

the core strength in the market as a whole that we have every at it is a very lucrative market. because of the small size of our home market, we were a very early force at swiss bank, so we are very international. the internationality helps ubs at the moment. francine: what are the risks associated with wealth management, especially for high net worth individuals? axel: we are seeing an opportunity. what we recently announced with our investor day, we think that the current trends in the market will continue to produce one byproduct of this qe and monetary policy easing that is unwarranted and undesirable, and that is an increasing difference between the best performing in the economy and the least performing. inequality is going to rise. it will continue to produce very high income and very high wealth and many of the affluent parts of our society and the middleman will continue to be somewhat

left on the side. to offer continue opportunities for large banks who can basically focus on the wealthiest of their clients and the most affluent in the society and ubs is one of those banks. guy: that was francine speaking exclusively to the ubs chairman axel weber. that airs at 7:30 p.m. in london tonight and in hong kong. different times for different areas. let's get back to michael. european banks, terrible trade last year. what does that tell us about the kind of european economy? this is an economy that relies so much on these banks. does the fact that the banks are doing so badly bode well? mike: i think if you look at it from an economy standpoint, you've got to look at overall bank lending. the story there is somewhat better than the story in terms of the share price of european banks.

so, we are still seeing reasonable lending growth. the corporate sector. in terms of mortgage demand. ,t is not necessarily seller but it is consistent with a reasonable growth picture of about 1.5% in terms of european growth. 1.5% in terms of european growth. guy: does the ecb raise rates? mike: yes, i think it does. but it is going to do it very slowly and very tentatively. it is going to be a real dovish hike. i think the crucial thing is there is a lot of excess liquidity. the overnight rate, the key rate is locked onto the deposit rate. that is probably going to go at a slower rate than the other interest rates. the official interest rates will signal that the cycle is turning, but the reality will be that it will be extremely cheap for everybody to borrow money. not the deeper rate does

move very much. what happens the next cycle? 75 basisey raise points in this cycle. i'm being really optimistic there. what happens in the next cycle? where is the ammunition? mike: the ammunition is in terms of quantitative easing. so, the ecb the next time around can actually use the tool they have used the last time and they can use it once again. they may well use it in a different way, but they have crossed the threshold in terms of actually utilizing qe. moment, i'm at the not quite looking that far ahead because of the transition of leadership. it is more about what is happening in 2019. i think that is a really relevant question, guy. i don't think we are going to get answers from the ecb until well into 2021 the new board has settled then and they have actually got a multiyear deal on what they want to do and what will be the backstop in that

kind of situation if we do see a slowdown. death wenevertheless are effectively going to have super stimulus policy if what you say about the deeper rate comes into the reality. basically, we have super-stimulus economic policy of the ecb for as far as the eye can the. mike: certainly through the course of the next 18 months. if growth holds up, then i think we will slowly see the ecb may be quick and the pace a little bit in 2021. at least her 2019 and 2020, it is going to be nothing until the end of the year, then a very gentle lift, and then the same story the first half of 2020. guy: thank you very much indeed, michael. ke gallagher, the head of market research at continuum economics. guya quick look at the markets. a flash crash overnight in some of the yen crosses. things like the turkish lira. the yen is kind of back to

1:0773. nymex crude is down once again. the apple story front and center. this is bloomberg. ♪

economics, finance, and politics, this is "bloomberg surveillance." let's get a bloomberg business flash. >> ryanair has posted another year of slower passenger growth as the airlines battle with take their toll. the biggest discount carrier prices rising -- ticket sales rising for the slowest growth since 2015. wizz air reported a 20% passenger jump for the year. the budapest upstart has stepped up its challenge to larger rivals by increasing its presence in key markets like the u.k. tesla shares dropping after the electric carmaker announced it -- c lineg prices by

elon musk had talked about upping production in the fourth quarter of 2017 to more than 51,000 in 2018. that is the bloomberg business flash. guy: thank you very much indeed. let's take a look at some of the biggest stock movers. >> two big factors today. that starts at the bottom. into theok playing tech stocks. absolutely slammed. all of the tech suppliers getting hit. being the most exposed to the company, that goes to dialogue summary. will be brutal. expect a ton of downgrades from the companies in the coming days. at the top of the market, we see

retail. a ghost of more than 5%. a decent post christmas result. meltdownve skipped the in u.k. retail. many of its peers getting a boost. all of these companies that were so cruelly crushed at the end of last month. we finish off with the dutch company -- they said the data is likely to deteriorate further in the coming months and that will result in fresher on organic growth. we see this at a july 2016 low. great stuff. think you very much indeed. some of the key corporate stories we are watching. "bloomberg surveillance" continues in the next hour. tom keene will be joining me out of new york. later on bloomberg, we will

speak to the dallas fed president, robert kaplan. that conversation happening at 12:30 p.m. london time, after 12:30 p.m. to be honest. we are very much looking forward to hearing from mr. kaplan, getting his take on where we are with the u.s. economy. remember that tomorrow, we get jerome powell. being interviewed by his two predecessors, which i think is a fascinating event. we are looking forward to that. payrolls coming through. and we have fed minutes. that is next wednesday. dollar-yen, the flash crash overnight, one of the big stories. apple, the other one. we will talk about all of that in the next hour. bloomberg surveillance continues. this is bloomberg. ♪

>> this morning, the trade war comes to cupertino as apple has

a fourth quarter. confront themust asian slowdown carried australian dollar weakens four standard deviations against the yen. when will they cut rates? global central banks react to trump's trade war. this morning, robert kaplan of dallas and trombetta losey agreed to meet agree -- trumpet pelosi agreednd to meet again. and guy johnson, filling in for francine lacqua carried you have been doing conversations all morning on china, apple, china, apple, trade war. what have you learned? number one observation is i suspect apple has the wrong product at the wrong price point. if you look at the fact we are seeing a local bias emerging in

china. chinese consumers are simply buying huawei devices. maybe apple has just got the wrong product. tom: i wonder about the price of a phone versus the monthly plan thing. but go to our first word news. viviana: the collateral damage from u.s. trade war with china has hit one of america's most recognizable brands. apple lowered first-quarter revenue outlook after a slowdown in china undercutting president trump's assurances the u.s. could grow despite the conflict. shares dragged down broader indices. talks to end the partial u.s. government shutdown didn't go anywhere. leaders were unable to reach a deal at a meeting with president trump. he's invited him to come back tomorrow. inocrats are holding firm their opposition to a boarding wall and incoming house speaker

nancy pelosi says democrats will pass legislation today to reopen the government. that will pressure senate republicans to do the same. there was a seven minute long flash crash in the currency over market. the japanese yen, jumping 10% versus the turkish lira and almost 7% against the australian dollar. there was expectation after you -- apple's outlook may have triggered. were exacerbated by algorithmic programs. the chinese have landed a lunar probe on the far side of the moon. it is the first-ever spacecraft to reach the surface that always faces away from earth, landing on the unexplored region allowed the chinese to better understand the moon. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries i'm viviana rotondo.

this is bloomberg. tom: equities, bonds, currencies, commodities. extend, -35, dow futures -359. interesting to see how that migrates through the morning. crude part ofng, the story in the last 12, 15 hours. the vix, this is amazing. 21.5 -- yen, one of seven. lots to -- 107. 74.91 is a meaningful number. that is the ones, two's spread. the difference in yield between the two year and the one year yield, and this goes to the robert kaplan interview that michael mckee will have in about two and half hours. guy: a lot of fed speak over the

next 48 hours. this is what i've got for you. european stocks are down .8%. we have luxury stocks moving lower on an apple china read across. , down almost 17%. obviously, the yen the story overnight. in liquidity, not a lot of foreign exchange traders in new zealand. remember, japan is closed until next week and not much going on in brent butterworth paying attention to because of the move yesterday. tom: i would suggest out to april, the vienna meetings of opec will be fascinating. maybe we can do that like we did the paris election. flash crash, ise don't think it is accurate here, but what i see is a four-standard deviation move yesterday in strong yen, week australia. this is the china chart.

here is a strong yen and then the sleep yesterday -- this leap yesterday up to four standard deviations. all you've got to know is two standard deviations is normal. four is like a medical chart on one of those dr. shows guy johnson was on years ago. int was a monumental move yen. guy: let's look at the turkish lira because it was actually one of the bigger movers overnight. why would the turkish lira move so much? factyou think about the that the japanese retail investors into the turkish bonds, looking for the kerry and as a result, you get a move like this and it is the japanese retail investors that will be moving out of the turkish lira. tom: let us begin our conversation in the markets. we do that with the chief

currency columnist at rbc. the interview with robert kaplan was important. what do you want to hear from robert kaplan of dallas later on bloomberg? i love your phrase, "the repricing of central banks." what do you want to hear from robert kaplan this morning? >> i think markets are hoping to her some reassurance that the fears that have crept into markets in the last two weeks or so, slowdown in global growth, mostly in china, some reassurance the fed is less worried than markets and that might allow us payrolls tomorrow -- i'm not sure how far we can go, that may allow us to price in a slightly more realistic prospect for u.s. interest rates than the curve prices in. tom: in the progress ask, what observe in the dynamics

yesterday, the four standard deviation move we saw. what was the observation you saw that you can bring to us? ism: i think the bottom line firstly, that is partly how our markets work now. manner thanabrupt the way they used to move. simply a reflection of a fact that dollar-yen is particularly shallow this week with japanese investors being on holiday until the trade tomorrow. it was a currency pair that was a main risk proxy at a night when risk was generally being sold, in unusually thin and shallow market conditions. i don't think you can make that much into it. some are suggesting it is a reflection of the fact that investors are very short of yen generally. i think the evidence of that is less compelling. it is more of a function of

market function and a lack of liquidity. guy: was it a reaction to apple? adam: yeah, that was the catalyst and again -- yen and fx still a haven currency. that wasagnitude move surprising yesterday, at least double what you would expect for a selloff in broader equities, which wasn't that great. it is the magnitude of the move that was surprising. absolutely, with japan out. does it frighten the boj into doing anything? no, if we were seeing these moves in more normal market conditions and the yen appreciating at the pace it has gone when markets are functioning more normally, maybe later in the month, then that would possibly be on the boj's agenda but i think that they'll

because this and of the fact that these are not normal markets we are looking at. of rbc, thank you. joining us, the head of derivative strategy at b.n.p. paribas. what do you make of that? the price action of the last 24 hours? we have to make his liquidity is very thin, so moves tend to be extreme and we tend to make too much of it and the reality is we shouldn't. guy: nevertheless, we find ourselves with extreme moves. we've seen flash crashes in similar timeslots than we have here. is this a dysfunctional market? do we need to fix some of this? edmund: that is possibly true, but in the fx market, it is even more liquid than the equity market. i'm not so worried about turkish lira, but yen-aussie dollar is a major pair so we should be surprised liquidity is that thing on any day in something

that is such a major pair, but that is a reflection on all markets. a bond market, would never fuss about liquidity anyhe bund or treasury or major bond markets. today, they have to and that is a big change in all markets. not just fx or equities, bonds, credit, all markets. tom: edmund, good morning. i look back to bnp paribas's lengthy history and china -- in china. just from a bank standpoint, do you presume there are other apples in china? are we going to see other multinationals with the same shock earnings announcement as we saw from cupertino? edmund: that's a very interesting question, tom. i would be surprised, because i think the problem is we talk about u.s.-china trade tensions.

i think there is an element of that. we are not sure how much of the element is playing through into apple particularly, but it is the case chinese consumers are shunning american branded goods, which branded goods suffer? suffer in the same way, so we should look at nike and where me see nokia ash nike, the quarterly results from china, we will know. apple has with chinese competitors in the smarts bone -- smartphone space corps the u.s. brands? we see futures deteriorating, -33 right now on s&p futures. he got more across "bloomberg surveillance" this morning. coming up, michael mckee's and nowt interview timely interview with robert

kaplan of the dallas fed. robert kaplan. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the business flash. apollo global management in his talks to buy a narrow space manufacturer. share,would pay $22 a roughly and 18% premium over the closing price yesterday. the parties are negotiating a that would protect from liability in the deadly greg hill tile -- greg hill tower fire. according to a bloomberg survey, officials tracking data, saudi

arabia is cutting output. opec is trying to keep oil prices from falling further. fedex has dropped a plan to begin cargo flights to cuba. the trump administration has imposed new restrictions on the ability to do business with cuba. was havingsaid it problems finding local partners and getting airport ground services. that is bloomberg business flash. guy: viviana, thank you. edmund shing is still with us in london. talk about where portfolio managers are right now. they've come in, new year, trying to figure out how to allocate money. , one monthe week basis but they are seeing a lot of uncertainty and most of them are saying, i will not take the risk at this stage. what will it take for them to step up and deliver the first swing?

what is it that will calm them down and get them into position? edmund: from a macro perspective, they want to see some stability out of china. secondly, i think they would like to see the federal reserve send signals they will change tack, that maybe they will not continue quantitative tightening, not reduce the balance sheet and raise rates. if you look at fed funds, futures, the market is pricing the fed won't do much more on interest rates but we don't know when they will stop quantitative tightening. pause inthey may the first quarter. i am hearing from managers is they are waiting for the corporate earnings season. like the apple story today, they want to see what is going on, what effect there is from trade, what effect from the global slowdown story. you are in the options business.

how are people setting up this reporting season? are there any trades? how are they prepared? what are you getting in the flows? edmund: not very much. they will wait to the last minute. using optionss around earnings reports will do so maybe a week before, not much more. they will wait until the 11th hour before putting trades through. at the moment, they are doing a lot of nothing. a lot of hedge funds start the year with clean books. they don't want to start off taking a loss. they want to have a sure thing and that means they swing the bat at the last minute. tom: there is way too much cricket talk here. swing the bat. stepping up to the plate, baseball, tom. tom: edmund shing, real simple.

the laureate robert engle will be looking at this and translating it over the typical bell curve. tell me about the wall street bell curve. to help us somehow fat are the tales? edmund: i think tales are fat but if we look at the implied volatility, you mentioned the vix. if you look at the vstoxx volatility in europe, you see the same picture. vixoday's levels, 26 on the and 23 on the vstoxx, we are the 96th percentile over the last trading year. what that means in normal layman's talk is volatility has only been higher in the last year 4% of the time so we are high points right now. seasonably, these seasons tend to peek out in january so we are close to the peak and should see volatility declining thereafter. verymore from edmund shing

shortly. he joins us from bnp paribas. hour, hsbc.xt the head of fx strategy, we will talk more about the flash crash next. this is bloomberg. ♪

guy: francine lacqua spoke with ubs's chairman axa waiver --

>> the first 10 years after the a largel crisis, reregulation of the industry and many have change their business model. we were among the first and over the last 10 years, there will be different trends that shaped the industry. technology is one of them. overall, the business model will be challenged by disruption and the question in the future will incumbents like ubs raised to the challenge and transform themselves rather than be disrupted? i think banks will continue to face those challenges, so we will rise to the challenge. he will adopt what is good through financial technology. the business model has changed. more technology driven. it will become more client centric because the main

beneficiary of this disruption will be the clients. francine: how do the big banks not become obsolete? what will get disrupted is banks who have in their business model a core model that has no distinction. many banks like ours focus on because we areea the largest player in the world in wealth management, or content matters and content will matter even more in the future. the client experience will change through technology, but clients are getting more educated about financial markets through technology. clients are more risk sensitive. they had a different interactions with the banks through technology and the banks through technology and banks will assimilate that into their business model and provide content in the industry leaders. francine: you think ubs is a blueprint for the rest of european financials? axel: not necessarily, because we wouldn't want everyone in wealth management. the strength in

the core market that we have. small market, banks can be very international. at the moment, this helps ubs. francine: what are the risks associated with wealth management? what we you look at recently announced with our investor day we think that the current trends in the markets will continue to produce one byproduct of this qb and monetary politcy easing, which is increasing difference between the best-performing in the economy and the least performing. inequality will rise. it will continue to produce very high income and very high wealth in many of the affluent parts of our societies and the middleman will continue to feel somewhat left on the sidelines.

that will continue to offer opportunities for large banks who can basically focus on the wealthiest of their clients and on the most affluent in society and ubs is one of those banks. in: i was francine lacqua conversation with axel weber, the full play out of that. net 7:30 p.m. -- airing at 7:30 p.m. we will get takes on the market. we will focus on the equity side of the trade. that is next. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.

"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. tom: good morning, everyone. "bloomberg surveillance." -- check,rket share dow futures, down.

the vix, 26.09 right now. our first word news with viviana rotondo. the trump administration argues the long-term gain from the trade war justifies short terms pain. apple, the iphone maker, has cut first-quarter revenue outlook. apple saying with a larger than expected slowdown in china, dragging down broader indices. talks to end the partial u.s. government shutdown didn't go anywhere. nancy pelosi will try it her way. house democrats will pass legislation to reopen federal government agencies. that will put pressure on senate republicans to act. president trump invited the congressional leaders back for another meeting tomorrow. economists say you can forget

about the u.s. repeating strong job gains. employers added almost 2.5 million. -- jobs in 25th -- 2018. the estimates for december's payroll gains is the lowest since last january. the growth and explore -- employment and wages will moderate in 2019. nasa has released pictures from ultima thule, and it looks like a big snowman. the new horizons spacecraft taking photos on new year's day. scientists hope the shots will inform us as to how earth and the neighboring planets work formed. 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. this is bloomberg. guy: thank you very much. as an economic slowdown bites, china will improve lending -- funding conditions this month.

china cut the amount of cash banks need to set aside as reserves four times last year struggled with growth. joining us, enda curran. is this a sign of things to come? are we witnessing the first steps of the chinese authorities to a greater level of stimulus? enda: on the one hand, we are seeing something reasonably seasonal. we are coming up on the new year holiday at the start of february, the time of year when there is a lot of demand on banks. billspanies settle tax and payments that are associated with the major holiday are required. that is one side of the story but there is no doubt the policymakers are tweaking or encouraging banks to get more money into the economy, encouraging them to lend as the broader economy slows down. the question becomes whether the

demand will be there for the cash. it is one thing to cut the requirement for banks and say off you go, lend more money. the question is, will corporate want to borrow it if the demand isn't fair? we will have to see that play out over weeks and months. guy: what is the read across, if any, from the apple story into the macro story for china? enda: that was a big debate today. there are two ways of looking at it. i spoke to economists about this and on the one side, there are those who look at it as an industry specific thing. you get into smartphone the models not offering as much in terms of the new handset, you get into the world of new chinese competition, huawei and others providing competition and then there is the world of 5g technology. on the other side of it, there is no denying china's economy

and consumerism is slowing. retail sales in november grew the slowest since 2003. the economists today were saying it is probably more on the industry side then signaling a collapse on the consumer side. tom: first, what is gdp growth in china? does anybody have a clue? is it sub seven? seven, sub 6, 73? what is it? have their own metrics on how to measure the economy. inevitably, the range is quite far and wide. some will tell you it is well below are the government says it is sitting, which according to xi jinping, expected around the 6.5% level for 2018. no doubt many economists are skeptical of it. the counterargument is, it is

the only benchmark people have from the official side of things. it is at least pointing in the direction the economy is going. ok, great. what is the degrees of freedom the chinese elites have? withve robert kaplan on michael mckee in an hour and a half and he will tell us the degrees of freedom chairman powell has. what are the degrees of freedom beijing has to deal with the trade war and the reality of an apple collapse? think china is pretty serious about putting offers on the table with regard to trade wars. they are already buying soybeans -- cuttingutting tariffs on imported vehicles and the like, but whether or not they give up their structural ambitions is a whole other story and unlikely to be resolved by march. tom: enda curran, our chief asia

economic political correspondent and trade war correspondent. edmund shing of bnp paribas stays with us. i like the idea of squeezing degrees of freedom out of central bankers. draghi has been front and center on this, but it seems everyone's choice limiting down in early 2019. what does that lead to in the summer of 2019? edmund: i think that is a very interesting question, tom, but we need to think about what the fed is likely to do. if we think about qt, it is likely the fed puts that on hold sooner rather than later. from the point of view withdrawing liquidity from markets, the fed will probably lead the way in stopping the withdrawal of liquidities. at the same time, the bank of japan continues and the pboc will continue to add liquidity to try to boost the credit

impulse in china by reducing the rrr ratio. it seems in the eurozone, the ecb will not do very much. they will stop buying bonds, but not be shrinking the balance sheet. they are merely stabilizing the balance sheet for the moment. guy: is all of that going to stabilize the global economy? the fear at the moment is we are in a global slowdown phase. even the is peaking, u.s. is feeling the gravitational effects and as a result, that will be the story we have to manage through this year. our central banks going to slow that process, halt that process in 2019? what can investors expect from global growth? thend: i think that's why u.s.-chinese trade talks are so important because they can tip the balance either way. central banks can do their part and say, we are not going to really clamped down tightly and it seems the ecb will go slowly, the fed will likely go slowly

is be data dependent, pboc easing, but at the end of the day, if the trade talks go south notthe u.s. says this is working for us, we will impose more tariffs on china -- that tips the global economy into a deeper slowdown. guy: let's say, scenario a, the trade talks go south. reasonably, there is asymmetrical response from central banks to the scenario. what happens if we muddle along? how symmetrical these responses are in terms of the balance we get? edmund: i don't think they are symmetrical. central banks are limited in terms of the options they can use should the talks go south and that is the problem. if thell be powerless trade talks don't work out. tom: the smartest thing i have heard in the last 14 hours of this madness, the phrase "muddle

along." edmund shing, this is really important. how much does the nexus of this solve our problems? if we can muddle along into the second quarter, third quarter, fourth quarter, stagger into 2020, does that help or hinder us? if we don'tally, get any nasty surprises from the trade talks, that will help us. central banks generally will be easing off a little in the sense that from the fed, quantitative tightening will stop. secondly, don't forget we have the delayed effect of the global oil price, which will help the consumers around the world. that is the second element that comes online and the third element that will help and in particular, will help the u.s. economy potentially is where bond yields are. bond yields have come over 50 basis points. that has to help mortgage rates and the housing market, which

was at risk of slowing down more quickly in the u.s. when the 30 year chopped up. now it has come down and that could be a boost through 2019. 2.98 percent in the new year. well-timed, edmund shing with us from bnp paribas. we will not model along at -- modeuddle along at "bloomberg surveillance." democrats and republicans are staggering from meeting to meeting. in the situation room, the gridlock room, we will do that in the 6:00 hour. this is bloomberg. ♪

tom: "bloomberg surveillance." guy johnson in london. i'm tom keene in new york. more data checks, dow futures -360 and oil isn't part of the story. perfect time to talk to jason gamble of --jason gammel of jeffries. are you going to rewrite your view forward after the vienna meetings in april? if your conviction on oil is where it is now, will you have that conviction in 90 days? jason: you raise an important point here. we really do need a sustained effort from opec producers to take supply out of the market in order for prices to recover. we are starting to see that. saudis have a significant cut but they will need to maintain that discipline at least through the first half of the year oil prices are going to recover. tom: if -- what is the

difference between brent and west texas? brent is the global price. what is the nuance between brent and west texas? jason: the biggest distinction is brent is a waterborne crude and wti is a pipeline crude in the middle of the u.s. it is more captive and you have to be able to price wti at a level that would allow it to compete on an export basis, which means you have to get it to the coast, loaded onto ships and get it to market. guy: what price are global oil equities pricing in for crude, let's collect brent? jason: i think they retreated to somewhere in the high 40's at this point, so the equities are trading at a pretty significant discount to where the brent forward is trading.

guy: in terms of what that tells us about opportunities to i am certain the integrated will have more insulation around the trading story. how will i position within the space? jason: i generally agree with that. investors have been burned on multiple occasions in the energy space in the last several years, so the new investor coming back in is going to look for the stability you find with the integrated companies. right now, royal dutch shell is trading at 6.5% yield and that would be one place we would be looking. 4.5%on is trading at about yield, another name we would be looking to. the -- to the different nations and different kind of oils if the price breaks down another level? i don't know if it is one dollar

or five dollars down, but what is the choice different types of oil have if we get a lower price level? generally speaking, you will see brent and brent-based crudes holding the best because they are flexible in what markets they can move to. i would expect wti, we would potentially see its discounts increase. the canadian crude is at the end of the pipeline system, perhaps would have the most elasticity of all the crudes. we have seen recovery in those canadian crudes as alberta has talked about shutting production. they we would expect would be hit the hardest. at the dynamics of oil and i guess i have to come back to the marginal person who withing to stop producing lower oil prices. do i assume it is canada or is it someone else? problem is,nk the

the variable cost of producing oil once you have it online is very low, so we really don't see because ofshut in low prices until they get $20, somewhere in that range. the highest variable producing cost you find globally are in the canadian producers so those would be the ones. guy: thanks for joining us. jason gammel joining us from jeffries on the oil story. edmund shing is still with us. what do you see on the options trade? edmund: i like the oil sector. it has been heavily discounted. if we look at the european oil and gas sector, we like spreads with a six-month maturity. you limit your outlay. the outlay is fairly limited. you don't get it to the downside. if it works, you can get a nice three or four times multiple on that outlay in that trade.

that's an easy option straight to do. with bnpnd shing paribas, thank you. we will continue. a lot of good conversations and charts to keep you entertained. we have robert kaplan with michael mckee, a good time to review discussion with our guest. looking forward to that after robert kaplan. this is bloomberg. ♪

>> this is bloomberg surveillance let's get the bloomberg business flash. shares of british retailers are up today, a sector bellwether had holiday sales that were -- strong sales in the weeks before christmas helps make up for a disappointing november. one of the three brothers that ran nordstrom's has died. blake nordstrom was 58 years old. he revealed he was undergoing chemotherapy for lymphoma. blake nordstrom was the public

face of the store chain. become the most expensive american ever to play the game. the english premier league has played -- paid to sign him. he is 28 years old and joins chelsea this summer. that is the bloomberg business flash. guy: the americans do like football, tom keene. tom: i'm searching for the correct team. it depends on the guest. all newcastle united. guy: a fickle football fan. we are joined from bmp paramount. let's talk more about apple. there are figures floating around, but appellee is heavily down on its buybacks it generated in 2018.

is now the opportunity for apple to double down on that by backstory? story?ack pushing it far but it would make sense given the fact that in 2018, maybe they have lost money on the average price paid but over the medium term, they have made 800 money on their stock buyback program. it has been one element in the outperformance of apple. i would argue maybe it didn't work in 2018, but it is a long-term strategy. guy: would you be happy to buy apple today on the basis that pimco will be looking and say this is a great opportunity to stabilize the situation? edmund: it wouldn't be the only reason, but if i was tim cook, it would be an opportunity to buy apple stock cheap right now given the profitability is going to be better when he announces results than the iphone unit sales were. all of this goes back to

the distrust over financial engineering. general electric is one example. how do you relate value to financial engineering if there is such an urge to buy back stock given the decrease in prices? is this financial hearing -- engineering or just good financial math? edmund: in this case, good financial math. there are occasions when companies become overcomplicated and indulge in too much financial engineering. i look for cash-rich companies that can do buybacks of stock and still reinvest and that is something apple can do. they can fund their rnd and buyback stocks. that is not true of a lot of companies. looking at the financial leverage of companies, it is an essential ingredient in whether or not the buybacks are good or bad and whether that is sustainable in the long term.

with ge, perhaps the answer is no whereas with apple, yes. tom: how do you determine that? we have the giant of shareholder value often. determine which company will be apple and which company will be ge? edmund: there are two metrics i would use. one is the complexity of the company. do you as an investor understand the key main activities the company does, and do they fit together? is there a logic to the level of activities and kinds of activities anyone company engages in? secondly, how much debt have they got, and how does it compare to their free cash flow? those are the questions you need to ask and if you can find a decent answer, you should know enough. tom: very good. edmund shing, very beneficial as we see futures again.

-42 on the bloomberg right now. half, robert kaplan of the dallas fed with michael mckee. which hasnterview become exceptionally important. central banks worldwide reset, given the trade war, the turmoil, volatility we have seen. it is a warm which are in new york. berlin, beautiful snow in berlin. good morning, matthew miller and all of continental europe. stay with us worldwide. this is bloomberg. good morning. ♪

. tom: the trade war comes apple, they have a china free

fourth quarter. mustrait -- president xi confront china. a huge. global central banks react to trumps trade war. bloomberg has robert kaplan. trump and pelosi agreed to meet again. let's call it the gridlock room. good morning. this is bloomberg surveillance. guy johnson in london in for francine. oft a great conversation these limited choices so many people -- it seems like everybody is getting squeezed down to fewer choices moving forward. guy: i don't think anybody wants to make a choice at this point. onetalk to managers on a

week, one month basis no one wants to step up to the plate right now they want to see what the earnings season looks like. with the trait story is going to look like. uncertainty is the word right now. tom: i cannot emphasize enough it was a good interview. this is a critical moment this morning as michael mckee speaks to robert kaplan. let's get to first word news. viviana: the collateral damage from the u.s. trade war with china includes one of america's most recognizable to best recommendable brands. --le has lowered undercutting president trump's assurances the u.s. would keep growing despite the conflict. shares falling in the premarket dragging down broader indices. talk to end the partial u.s. government shutdown did not go anywhere. congressional leaders were unable to reach a deal with president trump. he's invited them to come back tomorrow.

the regrets holding firm in their opposition to a border wall and nancy pelosi says democrats will pass legislation today to reopen the government. that would pressure senate republicans to do the same. a series of stunning moves in the currency market that just took seven minutes. in that amount of time the japanese yen jumping 10% and almost 7% against the dollar. speculation apples revenue outlook may have been a trigger. the moves were aggravated by the rhythmic programs and liquidity. the chinese have landed a lunar probe on the far side of the moon. a first for china and its space program. the first ever spacecraft to reach the surface that always spaces away from earth.

global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. equities bonds and forced standard deviation commodities and currencies. i was going back and forth jon ferro about the abruptness. curve flattening is what we see. oil, really not part of the picture with a lift in oil yesterday afternoon. next screen is a surprise. 26.35. of its own.ory for many of you that is inside baseball. all you got to know is strong risk free risk off with japanese yen and weak china play with a weaker australian dollar. mislabeled by me, i'm sorry. the different to the two-year and the one year is a robert kaplan item showing in inversion. i'm sure michael mckee will bring that up today. down.uropean stocks are

the channel by which the apple story is being represented in europe is in the luxury sector which is weaker today on that read across. i guess apple is a luxury item. the supply chain for apple is being hit. down by 19.48% but europe is not blessed with a big technology sector. massive volatility overnight. we're going to continue to talk about it. it happens at roughly the same period in an overnight trading story. tom: we made a decision at "surveillance" to focus on china and the trade war. international aspects of this apple debacle. yet it is about cupertino. the sumler is expert on .f the parts

we have any clue? cannot say right now. that is a little outside my wheelhouse. i will say this was not a stunning development for apple. if you remember last quarter they sort of raised the red flag and said we are no lover going to give you iphone units or pricing. they could not break it in quarter in an quarter out. that signaled to the street there's a bit of trouble ahead and i think you hit on it a moment ago. the trade war was probably one of several factors. the question i had when all of this was breaking in america you , ini talked about this america we buy our fancy iphones on a monthly plan. in china, do they do that? $1000 or morey up

for each phone? john: i think it is a bit like it is here. probably a combination of both. i think the real issue in terms of the price of the device is that apple, if you look over the past year, the unit growth for .phone has been almost nil pushing up the average price. they've made feature enhancements in order to justify that but my guess is the price increases outpace those feature enhancements so you get to a point whether it's china or the u.s. where people just say the phone is not worth it to me. the other factor in china is competition and we can talk about that a bit if you want. absolutely. you've hinted at the fact that maybe the price point is wrong. it does seem as if the chinese --sumer is preferring a

preferring another phone. is that what's happening here? john: apple is a premium private that -- premium product and they price it as such. vendors makelocal very good phones at attractive price points. are of those products positioned as premium products but not the whole portfolio so apple actually, over those competitors, really has a true .spirational brand you can only play that card so much before you begin to run out of gas and i think that perhaps is what we saw in the last quarter. guy: i read something this morning that said chinese consumers prefer the fingerprints button on the front of the phone rather than face recognition. can you boil it down for things

like that as well? is a again, i said this most like a plane crash. there's a number of factors that go into the ultimate result. i think culturally they are in different regions, different preferences. i've not read that about china. here in the states i find it is a mix. some people miss the sensor or love the fingerprint sensor other people could care less that it is gone now. probably the same situation in china. guy: it the obvious reaction from tim cook to increase a buyback to make a significant statement with a sizable buyback? is that the obvious trade for him? john: for me the obvious trade would be to put some of the cash to work and make some acquisitions. i think apples in a position more than ever where they probably need to acquire some growth.

i think they're doing a fabulous job in services and with other products they could beef up the hasr products area which been their highs growth segment over the past several quarters and i think they could really beef that up with a good acquisition. tom: we look forward to your publications with bloomberg intelligence on apple. let's link this back into international markets. .o better shot than hsbc an outlier call on strong dollar . we've seen a resilience dollar over the last number of months. reaffirm right now your belief and conviction in strong dollar. >> i'm looking at a consensus that's got it wrong all the way through 2018 calling for dollar weakness. it's a tough start for them. the reality is sometimes you get the new york times citing what

is your big new venture for the year. we are happy with the story we've had. we are at 110 on the euro-dollar. we've already had a bit of a move. the consensus is pointing the opposite direction which i find bizarre. tom: within strong dollar is the harm it does to companies. the harm it does to a system. islain to robert kaplan what a strong -- what does a strong dollar mean for our central bank? daragh: it is a constraint on inflation. tom: which is like a rate cut. excuse me it is like a rate hike added in real time. daragh: then we have to think is this rally. significant enough to change the dial on the fed? i would say no. 14 we had a big dollar rally. one of the elements that stopped the fed -- they recognized the

dollar and of the work for them. -- it is coming against the backdrop of the u.s. economy doing pretty well. tom: you're not predicting a 2014 rally? i want to be clear on the amplitude of the outlier call. we are doing more data checks for you as well. coming up in an hour, michael mckee in conversation with robert kaplan. it's real simple, the fed with the changing dialogue to that january 30 meeting. good morning. ♪

viviana: let's get the bloomberg business flash. apollo global management is in talks to buy our conic. apollo would pay about $22 a share, roughly in 18% premium. the parties are negotiating a deal that would protect from opec's oilability outlook plunging last month by the most in almost two years before the cartel had agreed to cut production according to a bloomberg survey of officials analysts and should tracking data, saudi arabia cut back its there were unplanned losses in iran and libya. opec is trying to keep oil prices from falling further. fedex has dropped the plan to begin cargo flights to cuba. the trump administration has

imposed new restrictions on the ability to do business with cuba that ask also saying it was having problems finding local partners and getting airport ground services. tom: thank you so much. she is already have the curtains made. maybe she will rehang them today. nancy pelosi takes over again with democratic leadership in the house of representatives. here is speaker pelosi. >> the president to open up government. we are giving him a republican path to do that. why would he not do it? tom: after a situation room meeting today we get the situation not with wolf blitzer but with kevin cirilli, our chief washington correspondent. i made a joke it is the gridlock room. how contentious is this debate?

kevin: a very contentious. nancy pelosi taking over for the new democratic house majority at a time in which republicans and democrats have no incentive to compromise because the president has made the calculation that it is in his political best interest in order to build a wall and dig into the conservative movement while democrats made the calculation they need to also align their progressive base as opposed to working with this white house. the final test will be tomorrow essentially when these talks are going to resume. expect a budget to -- that does not include the mechanism for the wall. either way this government is going to remain partially shut down. tom: how does it partially open up again? what is the process you and other observers see to get the government open again? kevin: first and foremost they could kick the can down the road and reopen it in a short-term

solution. or they're going to have to arrive at some sort of longer-term agreement. in terms of the short-term solution we should note the atatility for that existed last calendar year is a most certainly going to exist this calendar year because the backdrop to the partial government shutdown remains ongoing u.s. china trade talks. this key new developments. the u.s. japan talks, u.s. europe talks and usmca which the president is considering ripping congress to deal with this and don't forget about the debt ceiling guy:. ago the vice president suggested a number of around $2.5 billion to you could of been a compromise number. the president in it cabinet meeting crack -- trashed that idea. are we wrong to focus on the number here? wrong to think there's going to be a compromise

somewhere in the middle of those figures? ultimately this is going to come down to some type of negotiation the government cannot remain partially shut down forever. i'm struck at the white house that this meeting lasted for more than one hour in the situation room. senate majority leader mitch mcconnell suggested he wanted to get out of there in order to go open up the senate by 4:00 and it went well beyond 4:00. in terms of what they said after, both republicans and democrats essentially saying the meeting was a wash for lack of a better term a. tom: what was it like for legislators to be in the situation room? this is truly unprecedented isn't it? kevin: these types of meetings are typically only occurring when there is a huge national security interest. so clearly the president was trying to make his case.

tom: did he succeed? kevin: well there is no deal. tom: let's leave it there. we could go on and on. we will continue with terry haines. maybe he has some perspective on the situation room as well. we will do that in a bit. michael mckee with robert kaplan in the next hour. this is bloomberg. ♪

guy: guy johnson in london. francine lacqua has the day off. it took seven minutes for the yen to surge. we have not been through it in almost a decade. ragh is still with us on set with tom in new york. a bunch of factors seem to come together here to provide the opportunity for this flash crash to take place. it looks like then liquidity. what would you add? i daragh: think that is a big element. you need what is a catalyst. news, then that apple fear factor around the global trade war. that was a catalyst. you add thin liquidity, japanese holiday. the reports that bloomberg has carried that the japanese retail base, stops have been triggered there.

yield, if there had been scared out of those positions that's a significant development. i know it's been amplified in terms of liquidity but the reality is we have a number of catalyst come together for the perfect storm overnight. a massive move particularly against risk on currencies. guy: is this a problem for proper market functioning? this is not the first time this has happened. i remember the flash crash in the british pound. other examples happening in a similar time slot. daragh: big dislocations. not like they are happening so frequently. we have a handwringing about algorithms and all these and how they build on themselves and then we move on. i think it dominates the news for a brief period. we have the flash crash in sterling and we have not talked about it since until this

morning because we had an equivalent one. i don't think it's a game changer of the markets. tom: i want to show what guy has describing. a four standard deviation move. an extraordinary chart. i can say never seen it. the huge move, strong yen, we australia. ,ld that back into your outlier back toward the strong dollar call. guy: that is really good. daragh: one of the things we do agree with the market, dollar-yen will be the exception . tom: it is still a strong dollar. daragh: against currencies like the new zealand dollar, that is what you are going to see.

we've gone from when are they going to hike to the market saying they might have to cut rates. new zealand went through a similar transition and the new zealand dollar is down. , what arede to that you going to own? the dollar. tom: an interesting first two days to 2019. we will continue for bloomberg radio, jon ferro and i. the conversation on bloomberg radio, the bond market, those new yields with chairman powell. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.

"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. guy:guy: guy johnson in london. tom keene in new york. some news coming out of poland with breaking. the polish central bank governor

radio,ccording to polish going to be interrogated by prosecutors in the southern city -- it is the same place they just had the climate change meeting. basically, what is going on here, a link to a bribery scandal which led to the departure of the financial regulator cost protege. as a result he is being brought into this. watchdog.e banking you can see a reaction but it seems to me retracing. tom: this is where surveillance -- this is what surveillance is about. where else will you get euro/ zloty at 6:30 and morning?

guy: i suspect few places will be doing this now. tom: let me rip up the script. this is completely unprepared :oing to do it on easter year has been a success story within the new populism. daragh: we're slew of pmi's across the world. it is another curiosity. this is a big year for european populism with the european elections coming up what picture doing paint of populism across europe? tom: what's great about this. brexit free for two days are you when we get back to brexit? is there a date when everybody comes back like francine from holiday? guy: same day, monday. we are back talking about it. no coincidence between those events. they are uncorrelated. i'm sure fran will have a few things to say about that.

the former brexit secretary david davis is suggesting theresa may delay the vote. tom: enough on that. where else are you going to see euro/zloty? viviana: the trump administration argues the long-term gain from a trade war with china justifies short-term pain for consumers and investors. collateral damage includes one of the world's best-known brands , apple. the iphone maker has cut first-quarter revenue outlook. apple says there was a larger than expected slowdown in demand from china. shares are falling in the premarket dragging down broader indices. talks between president trump and congressional leaders did not lead to a deal to end the partial government shutdown so incoming u.s. house speaker nancy pelosi will try it her way. she says house democrats will pass legislation to we -- to reopen government agencies that will put pressure on senate

republicans to act. president trump inviting congressional leaders back tomorrow for another meeting. economists expect growth in u.s. employment and wages will moderate in 2019. employers added almost 2.5 million jobs in 2018, the most in years but the estimate for december's payroll gains is the lowest since last january. looks like a big snowman. the new horizons spacecraft flew by on new year's day. scientists are hoping close-up shots will give clues into how the earth and neighboring planets were formed. global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. of when iis a photo open my eyes new year's day after the third bottle of champagne. it could be either that or 4 billion miles away.

thank you so much, viviana. one of the joys of terence haynes is he writes piercing reports that will be always one sentence that stops you dead. he joins us in our washington studio. daragh maher with us as well. terry, you are really in on the difference in the majority vote. the democrats have a slimmer 17 vote majority. power that exact speaker pelosi will have with a more narrow majority? terry: happy new year ultima tom. i don't know a lot of things that i can count. that is a tiny majority. i think the general perception is somehow house democrats will be a monolithic block and that is demonstrably not true. mrs. pelosi, speaker designate

pelosi, after today, probably speaker after she gets the votes to become speaker, and's up having to corral a very fractious group that are a combination of two factions, coastal progressives and heartland moderates. more centrist democrats who are really the people who are --ponsible for tom: they'retom: not progressives, they are liberals. which is fine. i get it. you got the liberals and the moderates. what body language have you seen from moderates as the liberals get the headlines? terry: i think they are biding their time. what you have, the first tangible signs of these rifts i'm talking about happened today. a vote that would be of to a lot of people but is very important.

the rules package. every two years the house of representatives reconstitutes itself. the house of representatives decides collectively what rules they operate under. after the election of speaker pelosi is going to be the rules package. what you already see in the rules package, this is usually the majority working its will over the chamber. democrats have to break this rules package up into three votes just to get it passed and the big dissension between the moderates and the liberals or progressives is whether or not they continue to have pay go, continue to pay for the initiatives they want. and the progressives don't want pay go anymore. which would be a deficit increasing measure if any stuff became law. tom: that was just like inside

brexit baseball. i can hear a global audience going what the heck is mr. haynes talking about? guy: i was not going to put it quite so brutally but let me ask terry a question. i'm sitting here in london people are sitting in paris and frank for and all around the world trying to learn the kind of pull the signal out of the noise of this shutdown stuff. what is it teaching me about how u.s. politics is going to progress from here? terry: i think it is teaching you a little bit of something we knew and something we did not after the midterms. we knew divided government was going to be a little more contentious. it always is. what markets have seen in the last six years of the obama presidency was divided government. that part is not new. what is new, this president is

interested in taking the initiative and taking the fight on a number of his priorities directly to the opposition party. in this case, before they've taken office. that is new and the level of aggressiveness is unusual in recent politics. what it means, you are going to get these noisy fights over important policy issues. mostly the things that are not related to the markets regularly punctuating the next two years. markets should learn to not ignore them, but to look at them closely and understand whether or not there consequential. by and large they are not going to be particularly consequential because they will be on social issues or things that are not directly relevant to the markets. i see the potential for looming fights on the fiscal 2020 spending packages in the fall.

maybe with a debt ceiling fight. guy: what did you make of the mitt romney line?the editorial and the response from the president and what that tells us about what's going on inside the republican party? terry: i look at senator elect and as a branding exercise more than anything else. this is someone in my view who has toggled back and forth between looking like a troll loyalist and wanting the endorsement of the president for his senate run, for other things, one of his relatives runs the republican national committee for example so there's tacklingnite linkage, -- toggling back and forth -- he is going to be an independent voice for his state. that's an important message to have but he gets accused by some people of trying to take up the

jeff flake handle on this and i'm not sure that's what happened but that is possible. tom: thank you for the briefing. we continue. i want to keep up on the apple story area and let me show you the chart as we have the headline of a 9% negative on apple. the long-term chart of apple back five or six years. bring it up if you can. the idea of coming down to 143 level right here back to the summer of 2017. we got a very acquittal and swoon. -- an equivalent swoon. look for bloomberg technology later today. coming up, your morning briefing. looking forward to that. bloomberg daybreak: asia, first. -- bloomberg daybreak, first this is bloomberg.

viviana: let's get the bloomberg business flash. one of the three brothers at norge from has died -- at nordstrom has died. he was undergoing chemotherapy for a treatable form of lymphoma. nordstrom's does not have the ceo. click nordstrom was the face of the chain. -- blake nordstrom was the face of the chain. chelsea has paid 73 million --

priscilla's, 20 years old. guy: thank you very much. let's recap where we are. the price action we are seeding. we kind of knew this overnight the action indicates we are seeing a significant drop in apple with trading circa 9% on the downside. say, right nowld 6:44 in new york. the way to the tape today is different from yesterday even though we were down there was this feeling of moving up. i don't see that this morning anyway. guy: there will be a ripple effect off of this. apple tries to turn this story around. do you think people will see this as a real opportunity?

if you believe in the apple story this could be a cracking intrigue point. -- cracking entry point. price comingwalter to chinan we get , theion mark guy: freya apple story looks like the china story. is that the reader cross? can read across from apple into china consumer weakness or is the apple story idiosyncratic? it got the wrong product or price point or whatever it is? >> i think this is a pretty macroeconomic story. you can read across from the opposite direction as well. in this case all through last year the headline retail sales year-over-year, prince were coming in stronger than what the underlying data was telling us.

prints wereheadline deteriorating the way they published the data in china you get the underlying levels data and that does not always match up with what you see flashing in the year-over-year headline because supposedly those headlines are adjusted for distortions which occur because firms fall in and out of the sample said you have a lot of smaller firms because it only in -- it only includes the larger firms. if you have a lot of firms trending to smaller forms you get this big drop in the oferlying value, the levels retail sales values. you can extrapolate from that if you have that quantity of firms that are falling out of the sample that there is a great deal of underlying weakness that was not really being reported in the headline figures. data that was there.

guy: we saw a little step forward today increasing the number of banks that are eligible for the reserve requirements. they can lend a little more money into the real economy. do we get a bazooka from the freya: iuthority? don't think we get a bazooka. they are very much up against new constraints they have not had previously. one of those being environmental constraints. companiesindustrial they can't just ratchet up production anymore because it's such a political issue to have clean air with these environmental targets in place as well and those old guard firms the way in which the authorities have been used to driving the economy, they are also the over indebted firms as well. haven top of that we also to realize china's current account surplus has dissolved into nothingness.

that means they have limited space for a fiscal bazooka. tom: i love this chart. all you got to know is the volatility of years ago, the crisis and the smoothness in the rollover in their gdp growth that we've seen in the last 2, 3, even four years as well. what is the mood like on the ground in china? away from the macro babble, what is it domestic economy and mood like right now? the lack ofnk volatility is perplexing in the -- the listednese data and the price movements. mental not really reflect things going on.

if you look at the nominal gdp growth and extrapolate what real gdp growth would be by compiling your own you get a lot more volatility than what is showing up in official headlines. i think it is a lot weaker than we are seeing. tom: wonderful. thank you for joining us. your knees are shaking your it hsbc you got to go into a meeting and talk strong dollar, what do you do? you steal a chart from guy johnson and bloomberg surveillance. what's important is you can steal china gdp. you can steal what we are doing. bloomberg. ♪

tom: the markets are different than yesterdaytom:. standard & poor's futures -43 and they have sustained through the morning. there futures on the edge of ugly. i want to make clear we will do

that banner. that is the right banner slump is correct and it is a different slump in yesterday. this will bear watching through the robert kaplan interview with theael mckee and into market opening as well. stay with us on all our platforms for more data checks this morning. we can say with our single best chart 2019 is not too thousand 14. too thousandis not 14. the genius on low interest rates. here's the dollar strength of 2014. we can go with that and we are not going to see the equivalency. why is this not like 2014? daragh: we don't have quite the ingredients in place. not the big pivot to the exit that drove us to reappraisal of the dollar.

still a relative story on the dollar compared to everyone else . even what we had overnight, risk off that news on apple. everyone buys the yen. do want to on the euro? no. tom: the capital flows call as well? .bviously it is interest rates visit also about flows were people want to buy dollar assets ?let's protect we daragh: go down more sinister routes of the economy. capital is going to flow were central banks can respond. they built up some ammunition. where does the ecb go with negative rates? norway, money will gravitate where you can insulate from some of the downturn if you can't, your currency has to weaken and act as a shock absorber. you gotglobal economy

to be bullish on the u.s. dollar. even in that scenario you are still buying the dollar. delta.essarily the it is not a change in that differential that is critical. at the end of the day every time we walk into the office we are paid 2.5% over a year for owning the world's preeminent risk-free currency. to hold the dollar. if you go to europe and you want to hold euros you have to pay them for the privilege of lending them money. you're picking up every day by being low on the dollar. tom: you can such a sport today to come in with a huge client loads. aussie yen volatility surface. this is what the pros look at. bloomberg stuff. this looks great on radio. you can't believe how the volatility surface looks on radio. two hands on the steering wheel.

call fora gentle stronger yen. we just did that so daragh will come back. the interview of the day, robert kaplan of the dallas fed come in interesting fed president. robert kaplan in conversation with michael mckee on the move forward for the fed. the feeling of the january 30 meeting and then the idea of moving that critical march meeting look for that across our platforms in the 7:00 hour. thank you for being with us today. thank you, john butler and others on apple. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.

"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast.

>> the yen risk off crash, safe haven currency breaking key levels in seven minutes. there are many culprits. a bite out of apple, the tech giant lowers its first revenue forecast as the trade war claims of a. wade downake control, by the china growth fears of recession indicators flashing red. we break down the explict -- exclusive interview with the dallas kaplan fed president. david: it's all about companies. alix: bristol-myers buying celgene, it's in cash and it's also in stock. they are also talking about the 2015, $4.20 onr the interested earnings. david: looks like