>> 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 celgene is up

43%. that is of course a biopharmaceutical company working on things like cancer and immunotherapy. interesting, there was a big divergence between the app with the seller saying -- look, we just had this insane and it'sve in december interesting that this happened right after the new year despite a big selloff. everyone comes in saying that health care is the place to be, with consolidation being one way to go. that is definitely the case. bristol-myers squibb is buying celgene. transactionhe cash was one share the $50 in cash.

will definitely be taking a look at this as we go. work in the premarket, looks at care having some reservation about the price grabs. the markets, though, the negative apple sentiment is outweighing pretty much anything. [no audio] deal with one&a dollar-yen being the least of it, filled by 1%. the 10 year yield selling in the hit pretty, getting hard, the yield is up to basis points in the u.s., flat on the day. that was until apple came out. story into was the the market closed and then apple had the announcement.

who would have thought, opec curtailed. david: exactly. time now for the morning brief. 8:30 this morning, last week's jobless claims and adp payroll numbers for the month of december. starting at 9:00 we will get results from automakers like toyota, ford, and nissan. up.quarterly report, coming 10:00 this morning we have ifn housecturing data and the of elect its next speaker, followed in the afternoon by the official swearing-in of the 116th congress. alix: you mocking me? he's mocking me. i will my eyess at congress. like glad they got to work a month later.

applications it's the third week it has fallen. what it leadsity, to in the real economy, sentiment is rolling over so this is an interesting take here . 4.48%. and there is concern in the housing market about softness. alix: that we will get to later in the show. ourt up, we are joined by bloomberg reporters. a let's get to the flashback overnight. , it's-yen, currency cost an unbelievable move. >> i woke up? it was asleep by then. [laughter] the first couple of things that jumped to mind, we were told new year, fresh bank balance sheet, more liquidity around with extenuating circumstances. i was just struck by how much

this is a continuation of what we saw at the tail end of 2018. we were hoping we would get some sort of calendar affect but things are not changing quickly. look at whatu happened with aussie dollar, new zealand dollar, those were the big moves. ite: it raises -- lisa: raises a couple of issues. what does it say at the early hours asian trading? you get the splash back during that time and it's exacerbated by the bank holiday in japan. the idea that a lot of retail investors in japan have been stretching for yields and going into other currencies for the extra yields and are reporting on backtracking on those trades as the yen appreciated versus other dollar currencies. i mean a lot of things kind of came together to create the and the yen

strengthens substantially, what does it mean for the japanese economy? and the silver lining is that the carry trade was in vogue. really we are looking for action in a place like turkey, which was such a problem child last year. david: ok. that's a great point. let's go to the second story. crash.it wasn't a flash investor said that we go it to you that it's not going to look pretty, we are taking revenues down, which they haven't done in forever. he said it's the chinese economy, trade problems, and not upgrading iphones. i was struck by the lack of joy in here. that they needed apple to fess up to the weakness that they saw coming. this is kind of a cleanup move

at apple and i'm struck by the comparison to early 2016, when tim cook said that we are experiencing extreme conditions in the global economy like we have never seen before and experiencing slowdowns in greater china. there wasn't a cut then and there is a cut now, so we are getting a lot of comparisons to that time. it raises the question, how much of this is apple and how much of this is broader than apple? it does raise the question of what happened in the last two months to cause after to so dramatically revise its forecast for the first quarter. slowdown there was a two months ago. this is not a secret. one of this is a surprise. we have known about the cyclical shift in smartphones. exactly to your point, we don't

know the answer. if something has materially shifted to a more negative downturn in china than we are currently aware of. the third story in the bloomberg is what apple is going to do to the s&p, it has really moved higher recently and now we are at .7. it's still like oil equities, when it is something that is going to trickle down downstream, people apparently might not have priced in the but how much it causes estimate cuts across the board. alix: and sales are not horrible, sales are holding up in general, and now it's a question of a large cap. >> tech analysts will tell you

that apple is somewhat different, uniquely exposed to the chinese market and still making tons of money. the big question here is -- what don't we know? what caused this sudden revision and such an unusual move? that said, there already is a fear of slowing growth with trade tensions and what it will do to that at an ongoing level .nd this only exacerbates that saying go, guys, do your thing. david: we have had the chinese government single out apple as saying this is someone they might go after. at this point i think it's china and not so much trade, per se, slowing at a faster pace, coming down, and this trade skirmish is highlighting this reality and making people more aware of it.

alix: coming up next, recapping the breaking news, bristol-myers is purchasing celgene with an equity value deal that they say is going to have 2.5 billion dollars in cost energy by 2022, increasing their adjusted earnings forecast with a high of 420. now,ng at it with trading $87, that's a nice hefty premium there. david, this is huge. david: general motors numbers are out, the quarterly numbers are averaging month by month, projected overall for auto and in the premarket you

can see that they are down 1.5% and it was projected that general motors would be down 4.3%. one of the issues there is pickups that were supposed to be helping out. overall u.s. sales are expected to be down for the month. alix: with sales coming in for the whole year, calendar year estimated at 17.3 million. david: that's actually better. but right now the premarket is not rewarding them for it. the fact is, there is softness in the u.s. auto market and we have known that, it's not a big surprise. general motors also has to take a look at china. these are u.s. auto numbers. to qualify, fourth-quarter total deliveries are down, a bit better than what was expected. recapping here, mortgage applications are down, not as

bad as expected. fore struggling in china the first time in two decades with a huge m&a deal, bristol-myers purchasing celgene . want to make sure that we are recapping. david: the headlines in the bloomberg say that bristol myers is projecting a 40% increase in the first year. sounds like a good deal. with a projection up in cost energy's. an enormous deal for the auto market as well. david: we welcome now shannon cross, joining us over the telephone. apple. a buy rating on welcome, thank you for joining us. shannon: to be clear, our price

target was taken down to 185 david:z. appreciate that. two morning it was 158 -- 185. david: appreciate that. this morning it was 158? david: tell us what you put in the letter yesterday to investors. shannon: it was interesting, clearly, china, you guys talk about this earlier, it clearly got much worse than expected. they had record revenue compared to the european countries and the u.s. in the markets. very china specific. it moves so quickly that you almost wonder if there is something extraneous. i don't know whether this is true, but the news that was planned, boycotts on the phone's, there is a macro challenge in china and it clearly was an extreme move

given how much of the revenue was attributed to china. reading tim cook's letter, it sounds like people were just not buying the phones, much more dramatically than anticipated. true, but thes question is why. was there some other reason not to purchase apple phones? was it the trade wars? the chinese issue is remedied, will that than have things revert? that's the biggest question people have right now. clearly from the letter that he put out there, they are going to be pretty aggressive with promotions. they started obviously before the holidays with basically handed your phone and you can get a phone for a much lower .rice betting on what you have apple is effectively providing subsidies that would have been provided by carriers in the past.

alix: playing devil's advocate, they still have a lot of money, strong sales other products. david kirkpatrick weighed in on that yesterday. here's what he had to say. apt --alance, i modestly optimistic, but to say they couldn't get worse, given the incredible uncertainty in the landscape right now, that's risky. looking at the fundamentals that are still strong in the stock? shannon: we kept our buy because at this point there is a concern -- a compelling story about active devices, effectively the in stock, 1.3 billion in the last 12 months. that is what's driving the service revenue. they grew the service revenue in light of these results.

what apple is shifting from is a hardware based and again, it's still a hardware-based company, i understand that, but they have this installed base, a platform with concern about netflix moving, the numbers given for netflix were too high, frankly. apple past the first year of subscription only charges people 15%, which isn't that much to have your product on a platform. and the cash flow side of things, based on the shares that were repurchased, it seems like apple pulled back a little bit after seeing these results. we expect them to be very aggressive in the market going forward. i would not write them off. very much focused on china. remedyll do things to that, but some of what's going

on might not be what apple can control in the near-term. where apple goes, so do stocks. is that we should be looking at here? joining us now to discuss, mark adams.ck and gina martin what is going to be the scene? the: it's a big feature of tech sector. it goes all the way to semi conductors. you see it and it has been in a sort of doom loop since the summer months in tech. weaknessedominantly by in china, it's pretty clear. but also a number of headlines, fourth not to the being a strong as expected. it really is specific to tech and china stocks.

it will be interesting to see today if we still get this buying power coming in. that is what happened yesterday. we saw the markets early in the morning the futures down to what they are today and a value search. this will be a really big test of investor sellers today. if they can overcome the apple risk. it's not abnormal for apple to underperform the s&p 500. stocks still rose in 2014 when they underperformed. but it is abnormal for stocks to fall. alix: does that mean more buybacks? gina: it may, but the problem is that the efficacy drop significantly last year. some pennies buying back shares were punished. buybacks were at a higher rate than they were by the end of the year, right? they bought it back at a higher stock price than they did at the

end of the year. that's becoming a bit of a conundrum for companies. investors showed a clear preference last year for dividend buybacks. tech: it affects the sector, does it affect the rest of the market? since the midterms you have seen a massive underperformance in u.s. equities compared to the rest of the world. in u.s. moves have been much more aggressive in the tightening and financial conditions in the u.s.. there is an element here where it feeds into a market that's ray fragile right now and this is being displayed through what you would call a holiday market. people'sliquidity with risk budgets very tight. people haven't really started trading yet. news headlines related to apple and china with a growth dynamic will feed into the market. even with the downturn

from apple, what it did to the overall, the santa claus rally actually remains overall,s rally actually remains intact over the last few days. still up nicely more than recent years. mark: yeah, i would say that when it comes back to the global importantt's really right now is how u.s. equities trade versus the rest of the world and there has been an element here of what we call the make america great here momentum rally in equities through most of last year was driven by forces that seem to be temporary. seeing that change in the leadership in the government after the midterms, these stories around apple, everyone doing ok, but what you are starting to see is a lot more volatility with the volatility coming through in the equity market, really having a much bigger implication in the tech market when you look at the yen. we have the alix:

celgene bristol-myers merger. bristol is getting hammered. down 14%. do you learn about the market reaction to this deal? it's a good question. i don't know if you want to read through to a market a single deal. they can often be valued on different measures. the point that this is a very sentiment driven market, so any news is the negative news with the market having a difficult time overcoming that news to the extent that any deal involves that. it's not particularly well-received because that is more extensive today with interest rising in s&p 500 until the-- companies fed shifts gears. it more on the interest rate markets will be the case. health care has its own specific

trading characteristics that are not indicative of what happened in the rest of the market, unlike tech. it appears to drive markets one way or another. view this as very deal specific with probably a little bit of sentiment headwind creating negativity. talking about the yen and the wild moves that we saw in the overnight trading session, it was down with the sterling, the lira, or the aussie dollar. mark mccormack, what did you make of this? the end was where you go for safety and calm, not 2%, 7%, 8% moves. mark: we had emerging markets blowing up over the summer and

it was a very stable dollar-yen. now post midterms we fast-forward to the collapse of with morequity market volatility coming through and you have the dollar-yen starting to do what it's supposed to do and it's a way to articulate the yen, not a view on global risk, but a currency that is displaced around american markets. this is one thing that people sointerpret, safe havens in far as the japanese investing a lot of money in risk assets, the in thecredit spreads

what's happening to the rest of the world. that's the way you want to start thinking about the world, it's a play on u.s. assets. david: at the same time, the abruptness of the moves, the lack of liquidity in japan, why the turkish lira in the aussie dollar? why did those move the most genetically? mark: it does fit into the positioning of liquidity. it's a big thing that happens trading,electronic they are not fully staffed yet and you have what are called skeleton people kind of working through the office bits right now and the point that i would make is that with electronic trading you have lots of liquidity until everyone needs it, so you get these air pockets with an element of the markets being very fragile and with debtslopsided operating in the same liquidity positions. there is no one in japan to kind of more from this market, they don't come back until friday. some of these overnight sessions are being dealt with in markets where there isn't a lot of

liquidity. aussie had the easiest and most turkey being the most illiquid and making the biggest moves, largely because someone couldn't take on the positions and for me i would say that this revolves around macro support where apple reinforces the element of what's going on in the u.s. equity market, movesg itself with the overnight exaggerated by holiday conditions. mccormack, thank you so much. david: auto news, general motors coming out with u.s. domestic in north america reporting down to .7%, less than was forecast. with fewer fleet sales, that was and adam jonas at morgan stanley said the globally auto sales are going to be down.

starting in the 9:00 hour you can get a lot more auto sales. and then you have got this 100 and $42here, it's a cash share, and stocks deal, bristol-myers getting hammered, but the headlines we are hearing have been pretty good with significant to immediate earnings at 40%. $2.5 billion worth of synergy in 2020 two, they got the financing. these are solid sentiments the market not reporting it. coming up, an exclusive interview with robert kaplan. this is bloomberg. ♪

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the tech sector, slim as it is, taken to the woodshed by over 3% . is it trade, china, which is it? or just apple? the dollar-yen taking the spotlight down by 1%, a huge violent move overnight with any currency cost involving the yen and huge buying costs in the up 14 basis points, sell, sell, sell is what we are seeing here in the three-month 10 years spread, that's where everyone is looking now, flat on the day with a special interview for you, turning to michael mckee for an exclusive interview with the dallas fed president on the economy and race. mike? mike: thank you very much for joining us worldwide on television and radio. looking at the red on the screen, i'm not sure how happy it is for investors.

there's only one question that matters to the markets. been longrrection enough, deep enough, severe enough? >> let me answer it this way, there are three big issues in the market that are consistent with what i see in the economy. global growth decelerating. interest sensitive and economically sensitive industry showing weakness with financial and credittightening spreads have widened. those three issues are i'm sure affecting the markets but also my thinking about monetary policy. it's going to take some time to see the depth and breadth of those three issues. do you think the fed should go on hold for now? robert: my own view is that we should not take any further action on interest rates until these issues are resolved, for better or for worse.

i would be an advocate of taking no action. for example in the first couple of quarters of this year, u.s. me my base case, that is to take no action at all. change if things improve, but i think we should be patient to give some time to the economy and to watch other situation unfolds. mike: do the markets know something that the fed hasn't seen? i don't know about that, i watch the markets carefully, others watch it carefully. we have in trying to balance a very tight labor market and a strong consumer and trying to meet the dual mandate. i think it's critical in the job that i'm in a you pay close attention to what the markets are saying. it's important in that what they tell us about what's going on in the economy with some of these market forces, including

financial conditions, can spill over and tighten the economy and cause growth to slow and it's critical that we are very attuned to it. do you see that happening now? happening now.be credit spreads have had a high-yield issue for the last number of weeks that suggests a lack of access and as history has shown, when you see that kind of action, it tends to if prolonged can lead to a slowing in the economy. in the dallas fed we have an estimate for gdp growth for 2019 that is a little bit below 2%. you have been hearing me say older in 2018. 18 would be strong and we think that fiscal stimulus will wane in 2019. the impact of the fed rate increases will take hold and we expected slowing and that as

even lower than -- greater than expected. i'm watching this very carefully. mike: did it change your forecast at all? down a bithas come and it has been our view that by 2020 bb trending back down and potential, but the 19 forecast has come down a little bit and it has been affected by some of the issues i just talked about. global growth accelerating, economically sensitive industries recredit spreads, all of those things are in the forecast. mike: does apple signal anything about the growth economy? robert: for months we have been talking about chinese growth being somewhat weaker. if is masked by the fact that they tend to use leverage, investment on state owned

enterprises to meet their 6.5% goal. what i'm hearing from businesses tell me the chinese growth has been weaker, so it doesn't surprise me that we are seeing more education on weaker chinese growth and it has been exacerbated. the iceberg above the water, are we going to see more ceos coming out? robert: i'm not going to talk about a specific company, but what i hear from 30 ceos per month is weakness in china. it doesn't surprise me that you are going to see some further weakness. i don't think that china can indefinitely keep using leverage them to grow gdp. they are also very dependent on trade. i am sure that these trade tensions have had some effect. the one comment that i make, why does it matter to us, the reason

i watch it so carefully, 45 percent of s&p revenues come from outside the united states. china growth slowing, we are unlikely to be immune to that. ,e might the immune for a time but not indefinitely. it's likely to spill over into u.s. growth and that's what i'm watching carefully. you are calling for a pause and monetary action, but what about the balance sheet? it's a process that we set up and started in the fall of 2017. it is a specific process where we let maturities lapse. we don't sell maturities, we are just not replacing them as they expire. my own view, and i have said this to you several times, this is unprecedented. for exitingtextbook quantitative easing. my own view as well, there are

profits in place and we should be very vigilant, watching very carefully, being open if necessary to making adjustments in this balance sheet runoff if we need to. i'm not at that point yet, but i'm watching it very carefully and i think we should be makingnded about adjustments to the process if we need to. a lot of traders complaining in recent weeks about the trying up of liquidity. is that fair? or is that just drying up of credit? i watch very carefully and we do track trading volumes, which are lower than they were 10 years ago. that was true even before the fed started to run off its balance sheet. with the somewhat lack of liquidity in the two-way flows, my guess is the market is more

sensitive to the reduction of central bank liquidity, so it's just something we have to be aware of. the point is we are watching it very carefully and we ought to be very vigilant about monitoring this process. it has not been done before and we should be learning as the process unfolds. david: how could you adjust the balance sheet runoff? robert: i don't want to speculate right now, right now it's at $50 billion per month in there are a number of things we can do in terms of caps and pacing, but i'm not there yet and i don't even want to speculate on it other than to say that we are watching it very carefully and i think we ought to be. david: he said he thought we would -- mike: you said you thought we would go down to trend growth and yield curve. have your recession fears risen i've noted at:

number of things. the weakness in what we are talking about regarding credit conditions, i noted in particular that the two-year yield is now below the one year yield, which tells me at least that the market is saying that they expect some sluggish lips in 19 and more in 2020. rate tellshe 10 year me that the outlook for growth is ray sluggish. the main thing that i take from all of that is that it's critical that we take the right action at the fed during this time, it's a critical time and we need to be vigilant and on our toes and i think that patience is a critical tool that we should be using during this this right, but normalizing monetary policy was never going to be easy. who thought the process of normalization would be easy, it's not a we were destined to go through times like this. a lot of investors come

on our shows and say at this point that the fed has gone too far. you have already tightened too much. robert: my guess is that in a few years we will talk less about what we are at and talk more about what the fed does from here. i think that what we do in 2019 will turn out to be more significant than weather 2.5 is too far. then whether 2.5 is too far. it means real interest rates or a quarter and a half, with also my own view being as of a few months ago that the fed doesn't need to be stimulating the economy. we are still in my view very mildly modestly stimulating. we are not restrictive here. my guess is that it's going to matter much more what we do from here than anything we have done

up to now. we are talking with robert kaplan, joining us for a new year's interview this morning. looking at the wirp function on the bloomberg, calculating interest rate probabilities, the forets have priced any move 2019 and there more likelihood of a cut before the end of the year that another rate increase. is that a fair assumption in the markets? , marketmarket expectations can change on a dime, sentiment can change. all i can do is tell you my own view, which is that we shouldn't be taking any further action until some of these uncertainties resolve themselves and that could take several months. i'm open-minded about what the timetable might be. and i will be watching very carefully. has the idea of a cut entered your mind yet? it hasn't.

my main objective is to be vigilant and patient and moderate during this time. inflation in my judgment is not running away from us. we are running at about 2%. the structural forces of technology and to some extent globalization are having a meeting affect on inflation so we have the luxury at the fed, we are fortunate to have that luxury and we ought to take advantage of that opportunity. mike: you are the president of the federal reserve bank of the oil patch. is this going to be like 2016 where investment suddenly hits the larger economy? my guess is that it might go to that extent. some are supply related and some are demand related. the u.s. is producing more than people expected. that's number one. shale has been much more prolific than people thought. number two, saudi arabia increase production with other opec countries and the u.s. gave

more waivers and were expected. that's the supply side creating excess supply. the other thing going on in the price is that people are worried about global deceleration and it's affecting price, too. part of this is the demand story. you will see it in the oil patch, there are so many uncompleted wells. you will see production with a net increase by one million barrels per day plus and the issue will be if these lowered prices go on for an extended , it may affecton 24th. our surveys show, and my discussion of contact that this oil price, we are above breakeven. does the mike: dysfunction in washington have a discernible impact on the economy as far as you can see? robert: i'm looking to comment on any one of those, as it probably won't surprise you, but

i was say that the general level of uncertainty out there is very high. i have talked to business people and the level of uncertainty is very high and when business people feel uncertain, it has a chilling effect on capex employment decisions, trade and partare an example of that uncertainty, and i'm very aware of the fact that input costs for companies have gone up, pricing power is lower than it's been in my lifetime. there tends to be a margin squeeze going on that creates uncertainty and causes businesses to be more careful about making investment decisions. the president's tweets about the fed discussed in any way overtly at the fed? robert: i won't comment on that overtly, other than to say that and it won't surprise you, the standard for the fed is that we will make decisions without regard to political influence or political considerations and i'm

very confident around the table that that is the standard we are going to uphold. the president tweeted that if the impasse continues, he might close the southern border as the fed official responsible for much of that southern border , what impact would that have? robert: the fact of the matter is that trade flow is critical to gdp and there is a swath of industries in the united states that use logistics and supply chains across that border to improve their global competitiveness. it's critical to jobs and growth in the united states. to 2019, has ahead your outlook changed in terms of whether you are worried about where we are? do you think it can be managed and can the fed bring us in for a soft landing? robert: i'm hopeful that we can,

but it's critical what we do now. people ask me about recessions and i tell them about recessions someday, but our job at the fed is to maximum employment with price stability and try to extend this expansion. and i think we have an opportunity, depending on what we do in the next month to handle this right where we can achieve the dual mandate, but it's critical, i think, what we do over the next several months. robert kaplan, joining us on bloomberg television and radio worldwide this morning. david: thanks so much to mike mckee, a terrific interview. he's saying to because she us, not doing anything rash like raising rates further for the time being. and he says that this moment is critical for the fed to get it right going forward. alix: not a ton of market

movement, i wonder how much of that means it's priced into the at u.s.the fed looking equity markets as a somewhat absurd prom in their economy. the balance sheet we have a process and we should be looking at that process and maybe re-examining it. it really feels like he had a slightly different view than chairman powell about being on autopilot. alix: exactly. interesting was when he said they were mildly accommodative and looking for impact towards getting tight, meaning the balance sheet would --e a bigger affect him bigger affect. if you talk about ducks. david: reassuring. [laughter] david: time for a look at the biggest business stories in the

news right now from and it -- emma chandra. : $74 billion in cash and pharmaceutical giant on the celgene closing price yesterday, combined with bristol-myers squibb. general motors says fourth-quarter sales fell and it's not all bad news for the -- the automaker. and it's a first for china and its space program. [no audio] called earthly electromagnetic interference.

that's your bloomberg business flash. alix: so cool. david: very cool, very cool. alix: a lot of space. david: another thing that's cool, a big m&a story, megamerger, bristol-myers squibb agreeing to purchase celgene and a cash and stock deal. for more on that position we have ruth david. i guess the main question that we always have is why did this make sense for bristol-myers squibb? ruth: absolutely. it's interesting, the deal came literally minutes after was an analyst call by bank of america saying that it was unlikely that mega pharma deals were going to happen. we definitely get the sense that there's a lot about the cancer drugs, right? that's the best-selling drug, seems to be one of the big draws here. with a few of the other biofarma caught -- companies rising in the market on the topic that there could be more deals

emerging in the sector. worrieds are still about a few things. one, in terms of the financing, even though they say they have lined up debt financing, we don't know the exact amount and we will probably find out after the analysts call. the question is -- at what term did they get the financing? and even though it's a u.s. the u.s. deal, will they get the regulatory approvals needed to make this go ahead? there was a lot of skepticism at the and of last year on whether big m&a was going to continue and dealmaker's seemed scared about that. this is interesting. this is the second time in the year you have a mega pharma deal. alix: cantor fitzgerald, saying that they were surprised didn't sell for more. wall street this morning, buffett technical difficulties. a fix with apple watches adding woes with ubsogy

being a member of banking consolidation. expecting european financials to consolidate and rival u.s. peers. manhattan home prices fall in the fourth quarter. the median home price falls below $1 million for the first time in three years of ample inventory giving buyers bargaining power. you have to sell it to buy it, you see what i'm saying? joining us now, jason kelly. i don't want to beat up on warren buffett, who set for the longest time that he wouldn't get involved with tech, he didn't understand it. buyingthat he was still apple, but in fairness we don't know the price, so he could still be in the black. be, although it's hard to imagine that he is with the fall that apple has had and yesterday apple, with its really was theed revenue, it shocker around the world, i was on air when it happened and you

just saw it spike all over the place on the bloomberg. you saw a bunch of other tech stocks falling, a little miniature contagion with apple in the nasdaq falling already. and for warren buffett this is, as you as well know and area that he has assiduously avoided for a long time, very publicly saying that he invest in things he understands and he doesn't necessarily if -- understand these tech companies. alix: or he buys it because he's a value guy. jason: true. and on the other side, they still have $84 billion. alix: and they are making a lot of money. about whatcqua talk would happen with consolidation in new york city. >> he will still have a call for a national champion. what europe needs in order to catch up with american firms is european champions. banks that are larger in size across the border, cross-border

banks with european consolidation. that is your bid against the sentiment where too big to fail has led to a lot of regulation and in the u.s. we are seeing that trend gets likely reversed. there's still a lot of regulation for the top banks but some of them find it much easier to get regulatory breaks that have enabled them to basically start emerging. sure, who's going to want to buy deutsche bank? >> let's point out that he said we are not going to merge with anybody. that we should get together to create this bank and we are awesome. david: even two banks wanting to get together to merge, these nationstates, it's not like it's a federal system. >> exactly, and europe isn't exactly cohesive at the moment. [laughter]

>> the other ubs story that people are buzzing about is this banker who left has her husband was accused of insider trading. david: it's a sad story. the way i read it. an investment banker doing her job and her husband listening on the telephone and she didn't know it. ubs said that she doesn't think she's at fault but she said she had to leave. . -- >> someone leaked her name, she had gone to let -- great lengths to not have her name link -- leaked but it is one of the these things where everyone on wall street is looking over their shoulder. and how do you have that personal conversation? >> please don't trade him my work. alix: well, the third thing we want to talk about his manhattan home prices. co-op and condo prices felt a

990 $9,000 in the last quarter of last year. we should point out that falls under $1 million, i had this reaction where like -- well, the median price is now $999,000. , butnot argan shopping there's interesting color in the story with sentiment that people are being given, given significantly less than they are asking. david: right, it can actually exacerbate the situation. but on the flipside if you were worried about the market, this helps you. having home prices fall is going to help you and offset the rising rates. so many influences, thinking about the changes in the tax code here, it's

westchester or new york city, and terms of the cost of owning and acquiring a home going up a little bit. marketsense to me like alex -- alix isn't the market. [laughter] andd: thanks to jason kelly you can tune in on bloomberg radio every single day from 2:00 to 5:00 eastern time. coming up, the deal of the morning, bristol-myers squibb, andmillion debt on celgene they are surprised that they didn't sell themselves for more. up 54% premium, but why? this is bloomberg. ♪

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further action on interest rates until these issues are resolved. alix: kaplan says that he's on hold. global growth with tighter financial conditions has him pressing the pause button and he's watching the equity markets. bristol-myers monitoring a deal for $74 million and a 54% , two point 5 billion, the market punishing the stock. the first guidance from apple in two decades ways on equities to take back control of the market. here with a lot of news, we let off the last hour with a deal for celgene. they bid $74 billion in cash and stock in the celgene stock is up , and the market is not liking bristol-myers squibb at the moment. no and i find that to be

very interesting, they were down at one point despite the superlatives related to the deal. billion, 2022, the issue to rate by back. i wonder what that is about. at a lot ofoked mergers and you have to look long and hard with the first year earnings shares going up like that. they don't make these promises lightly. bristol-myers needed to do a deal, they needed more, they got them. it was quite a lot of money. and celgene is on an uptick because of those drugs. those things are strong and the market is at least skeptical. off the lows of the market, s&p up 30, it had been worse when the news broke, but

letting it in, now continuing to lead u.s. futures as well, the dollar-yen down, it was a wimpy action for the yen over the last 12 hours. really a huge move that we haven't seen pretty much ever for the yen, breaking those key support levels there. the real action is the underperformer in the italian gdp coming in quite strong with crude coming in with a big rally yesterday. leading the market higher after the opec production at its lowest in almost two years. i couldn't hold when apple took over. time now for the morning time now for the morning brief. last week's jobless claims plus 80 people numbers for december. starting at 9:00 we get results for automakers like toyota and nissan.

we have already got the g.m. quarterly sales report that showed 2.7% reduction in need the u.s. north american auto sales. 10:00 this morning we get iso manufacturing data for the month of december. and starting at noon nancy pelosi, and the official swearing-in of the new 116th , doing their part to get the government back up and running. alix: analysts slashing price targets on affect giant for the first time in two decades and we spoke to one of them earlier. andprice target was 185 240. >> we expect them to be aggressive in the market going forward and they have plans during the quiet times. i would not write off apple. they are going to do things to remedy this, but some of what's going on in china might not be

something that apple can control in the near term. alix: andrew, have you taken any steps? >> know, we have worked solidly on the sideline for well over a year. the cycle was slowing. we have been kind of, quite honestly waiting for this market for a little longer than i thought it was going to take. they said "look, apple is the envy of the corporate world, number sales and their one mission of being a public company and being honest with investors about the business, the company denied the reality until denial was no longer an option. we knew that the smartphone world could hit the peak.

what changed in the last two months? >> that was our biggest question. the last earnings call, tim cook on november 1 called out china as not being a problem. what happened that they invested this badly? it's more than just macro. the phones are too high's -- high-priced, they are not price takers anymore. it's probably broader than just china and i think that's what the primary question is going to be on the next earnings call, what's going on everywhere else. that's a fascinating point. you think apple may have to change the strategy question mark the strategy seems to be to keep the high-priced iphones out there. even overseas? what would that do to the stock value? alix: i don't know what they -- >> at of the with a can-do. four years ago, a good example,

revenue for the quarter for beones was roughly going to $52 billion. that was the revenue for years ago. back when services were half the level they were today. those are higher-level product lines. yet for years ago the gross margin was 2/5 higher than it is today. part of why apple drives pricing higher isn't because they can't take price, they have to keep that gross margin higher. i don't know what they do, if the prices onring hardware, the gross margin goes south and investors will like that either. they are in a tough spot here. going back to the tim cook letter to investors, he said the even though we will miss the top line, he said the other issues like gross margins was emphasis costs

on the other lines of business. and they willney keep going until they bring along the other parts of the x they are not wrong, even in the more bearish scenarios the cash generation of the stock buyback and all of these other lines of businesses which is why we have not underperformed. a fortune 100 company david: how much of it is apple and how much of it is china and emerging markets more generally.

bloomberg spoke with evan lucas, that you market strategist to think that there may be a bigger lesson here. washe fact that apple showing its under pressure and if you have a look at the main sort of big providers into china as well, they have been telling you this for a while. i agree with you, you are seeing the idea that emerging markets is installing faster than forecast and that maybe actual gdp is lower than what they tell you. anastasia,elcome now global investment strategist. let's address that question. is it possible that china is much worse off than we realized? >> one thing that investors focused on our the trade wars. but the reality is that that's not the only thing impacting china and in particular there is in some of these fixed asset investments.

apple as an example, thinking about them trying to sell the iphones, rising, the dollar china slowing,r making it more challenging in the market environment. i think that what we are seeing is that this is not just trade war related, but the economic slowdown happening in china with the pmi numbers that we got yesterday. we think that china has to step up. china has done a good job managing their economy, so if you are right, does that mean that with the central bank a step in and put it back on the right track? >> think they will have to. if you think about it, up until now the has not been a great reason for them to step in.

pmi's were still growing slightly and not slowing down as much. worse andhings get that will be the case earlier this year, that will be more of an onus on the pboc team. things like corporate tax cuts or consumer tax cuts especially, that will be part of the playbook, along with a few infrastructure related levers. alix: much better was the manufacturing pmi that hadn't been working for the consumers, so what's the case to be made for the apple iphone pricing issue? as opposed to the macro china issue? >> there is definitely an idiosyncratic issue to that story and it's about the battery replacement cycle, that was one of the other things referenced

in the releases, the fact that you can replace the battery and that it had elongated the replacement cycle, there was that idiosyncratic issue for sure. david: china saying that they changing the economy and when you look to stimulus, the play that you just referred to, just handed it back in the 80's and the 90's. that is a new playbook consumer-oriented and service oriented? >> i think we will see a new playbook and one of the issues they may need to address is tax cuts for the consumers. and on the corporate side and the consumer side, china has a little bit of cash. the problem with the effect of that stimulus is that it has not been battle tested. we have not figured out exactly the propensity for what the government has done to cut taxes . that's the wildcard.

if it's a combination of the old playbook, it's the consumer. the pboc, keeping less reserves. it sounds great, at the same time feeding back into leverage. hard to do both at the same time . thank you for staying with us. coming up, the dallas fed president, robert kaplan, holding off on hiking rates for now. we will have more reaction to that exclusive interview next. my own view is that we should not take any further action on these trips rate issues until they are resolved. for example, in the first couple of quarters of this year, you asked me my base case and that would be to take no action at all. that could change of things improved but my own view right

now is that we should be patient and give some time for the .conomy

emma: this is "bloomberg ," bristol-myers squibb has agreed to purchase celgene for the price of $74 billion in cash and stock with a 54% premium on the closing price yesterday. the combined company will have nine products of more than $1 billion in annual sales. apollo global management is in learned purchase and that apollo would pay $22 billion per share, and 18%

premium over the closing price yesterday. the closing price is on a deal that would protect them from possible liability with the strong firepower in london. general motors said that fourth-quarter sales fell 2.7% but it's not all bad news for the automaker. gm retail market share is more profitable by every month in the quarter and that is your bloomberg business flash. jobs, our 80 feet, added in december. excel number going to jobs friday. david: but i'm not sure the correlation between the two. it really was different compared , athe projection of 180 blowout number, that's terrific. robert kaplan says that we need to be vigilant according to the dallas fed president, and he

told bloomberg in exclusive interview this morning with the fed to hold off on rate hikes for now and they need to be open to tweaking the balance sheet. robert: there is no textbook for exiting quantitative easing. my own view as well is that there is a process and pray -- in place in which we should be very vigilant by watching it carefully and be very open, if necessary, to making adjustments in the balance sheet runoff if we need to. ira andining us now is faye. it's the front end of the curve and the belly is underperforming here. what's your biggest take away on that interview? >> how dovish he actually was. predecessor, he seems more dovish. he's not a voter this year but he still sits around the table meetings.

his opinion will have sway if he can make good arguments about the global slowdown that's coming being the continuing for a little while. and until the issues are worked out, maybe the fed should be on hold. at what jay powell sent tomorrow, if he's a bit more dovish as well as compared to how he was at the end of the press conference at the december oh fomc meeting. royce, who has been the executive vice president of products for general motors, promoted to be the president of general motors. i would say that he is the car this is a but position that opened up to dan hammond, who had been the president, moved over now to run the cruise, their autonomous you know that honda and softbank are invested in. that job was open and mark royce, a car guy through and through, i spent a lot of time with him, he has now been

promoted to the president of general motors and now general motors, who announced their auto sales earlier today and were off quite a bit, came back a little bit. the significance? david: an interesting strategy of launching a new company within an old company. it's much more about the internal combustion engine, doing a terrific job in developing that. they have taken dan hammond, an investment banker out of wall whent and was with them they went into bankruptcy and he's really the financial guy and he is taking over cruise. he is on the forefront of this. they basically have two horses in the race, which looks like it makes some sense. you agree, it would be like the step ahead. absolutely. , they a great assessment

are trying to build something new within an old infrastructure. there is so much competition going on in the electric vehicle space. something like 400 automakers trying to build these electric vehicles, that's the trouble for these automakers, the investment is going to be a lot. the competition is pretty fierce. david: when they purchased it a couple of years ago, they spent about $1 billion. now with all of the other isestments, the market cap going up like general motors overall. like $15 billion. and jim heck has said that he has to come up with a strategy to put things forward and the pressure is on to come up with an overall strategy. and of course the auto -- the overall auto sales richer is changing a little bit. back to what robert kaplan was talking about with how dovish he

here,d, on the terminal it was the three versus the 10 year spread, close to inversion. the fed looks at this as a recession predictor. does this make robert kaplan right? it does.k what happens when curves get flat? from one year to five years, it's that we are asked just think of the economy if the fed were to hike more, we get the inversion that we all fear. right now the market is not pricing for a fed hike this year . and theed stays hawkish market prices in for one or two hikes, you will get the inversion that will strike fear in the hearts of the market that there will be a recession, so the fed can avoid that by being more dovish and if jay powell comes out tomorrow with a january fomc and the market prices statement to say that they are not going to hike until it turns around, they can

avoid that version. it was interesting to me, listening to president kaplan, he step right up to say that they were playing close attention to that yield curve and he was talking specifically about the two spots that he was concerned about, saying he was critical that they get it right from here on out and that it's terribly important for the fed up to make a misstep. that was the connection about the recession. >> and he was specifically looking at the one year versus the two-year. there are technicals that you have to consider about that particular curve, but if you go beyond that and listen to what he said about stock market in the signals coming out of the stock market, the fed is using a , the jobsh of data report, gdp and markets. markets being as forward-looking as they tend to be, there's

important information that policymakers need to take for that. and he has stressed that in his view the market is saying we are at this limit and we have to stop. >> i would say that there are many reasons to think carefully beat -- carefully about when rate hikes happen and everything you have to go very right in the economy, the globe and the markets for the hef fed to hike in march. that's a pretty high threshold. obviously what we saw certainly holds, but there are many more things that will have to go right economically and the fed would essentially have to say -- we don't care what happens in the markets, we going to go hike anyway. david: at what point do we have

the wealth or the reverse health effect where the stock market machinations start to affect the fundamental economy? wrecks we are definitely not there yet. consumer net worth, not impacted to a great degree, but what matters are the financial conditions and is not just the atck market down almost 20% one point, the credit spreads are critical for the fed as well at 560 basis points with a high yield, the fed is likely to notice.king although powell didn't directly say that, more and more to say asrs came out robert kaplan said that patience is a critical tool. , anastasia, thank you for being with us. time now for the bottom line where we take a look at three companies worth watching this morning. one surprise you that i'm watching general motors, they came out with auto sales that were down better than the forecast. the stock went down and came out with the announcement that they have a new president replacing

dan hammond with their operation and mark royce has been the detective vice president for global products. he is the car guy, if you spend any time with him at all. i like him a lot. auto sales coming out in the next hour as well. david: not just north america, but global auto sales will be down this year. auto sales coming out in the next hour as well.

with almost 5% of the doubt. that negativity will permeate throughout. the third company this morning is of course mr. myers and we are joined by brooke sullivan, a big deal in cash and stock. >> a massive deal, the biggest biotechnology pharmaceutical deal we have ever seen if this gets across the finish line. remember a few years ago that didn't get completed and that would have been the biggest. but we are not really seeing the love from bristol-myers shareholders for the deal and i think that has to do with the fact that people were looking for bristol-myers to make a deal or potentially be acquired because it wasn't really clear where the first -- future growth was coming from.

we have the checkpoint inhibitor cancer drug, but people were worried about where they were going to go. celgene also has questionable growth prospects with a number of drugs that have gotten to the final stages but not over the finish line, so i don't know that this is necessarily the solution that bristol-myers shareholders were looking for. clearly bristol-myers thinks it's a solution because my understanding from the bloomberg is that on 40% they can deliver with the market, are they not believing? that sounds pretty good. >> it does. one thing to keep in mind is that there have been a lot of doubts about the celgene management team with the poor handling of these drugs, not handling the right decision-making. there is something where when you get it into the hands of bristol-myers they can carry it out and that's what they believe clearly, they can pull this off.

there are also worries about patent rollouts for these drugs. what they would get from them will be as helpful as they might need. >> yes, there is a contingent value component, right? drug, the blood cancer drug that we have all been talking about that is an generic competition in the upcoming years. tell us about pharma --david: tell us about pharma and health care. >> it's about the need for pipelines to come back up again. part of the acquisition is how you get the pipelines back up as they start to expire. that will be a big trend for sure in health care and one way to grow the health care pipeline is to m&a. broadly speaking i think that m&a, we had a blockbuster year really last year with a big step up for large deals.

i'm not sure of that will be repeatable this year. the lows of the session, down only about 12%, cfo saying they can deliver andkly after the deal discussing it quickly for some time. what is the one thing you would ask if you were on the call us brook: i would ask how confident are they that there will be a sort of replacement for this blood cancer drug blockbuster that was capitalized on. they did the acquisition last year for about $9 billion and got key therapy out of that, .hich is still being developed what's really making bristol-myers excited about this? where is the growth coming from? alix: thanks very much. and you are going to be sticking with us? 30 seconds time, s&p futures are off the lows of the session and moving higher after mr. robert kaplan of the dallas fed came in quite dovish, he's on hold, definitely looking at the equity

markets. european technology stocks are down, other asset classes here, down just one but off the lows of the session. selling bonds wherever they go, 10 year yield over 17 basis point. that is really we are headed, and crude up over 1%. initial jobless claims in line with estimates. 231,000 evil filed last week, so -- 231,000 people filed last week. claims have been creeping higher in the last few months, so that was a potential worry area for the market. robert kaplan still feels pretty good about the economy and job market. david: you have adp coming in with a big beat. job was claims to seem to be creeping up.

alix: are you going to talk about goldilocks? more people in the workforce. david: robert kaplan was not sounding goldilocks. maybe there is some uncertainty about growth. is a state street senior economist, as well as anastasia amoroso still with us. simona, these jobless claims are little noisy. give us a broader sense of where we are in the economy with respect to labor. >> i would say, despite a little freaked out episode in markets, the broad when a mental economy is still quite strong, and the labor market is doing very well. these initial claims, continuing claims am a you have to look at this on an index on a longer-term respective. it was not long ago that we were

breaking the low, and then we reached below 1.7 or these are extremely low levels, extremely low. if you have a little bit of a pickup in initial claims, it is perhaps churning the labor market, but at the same time you have such a high number of job companies might have been hiring temporarily but others are jumping into hire those workers. i do not think we're seeing serious signs. alix: we talked to the dallas fed president about him remaining vigilant on the balance sheet. here is what he said. >> it is critical that we take the right action at the fed during this period. it is a very critical time, and we need to be very vigilant and ison our toes, and patience

a critical tool we should be using. alix: what was your take on that? how does that set the fed up for begich a policy mistakes or a fed that is behind the curve? for potential policy mistakes are a fed that is behind the curve? >> the reality is they were damned if they did, damned if they didn't. in the end, they did. if they did not, there would have been this is a about a loss of independence. the the december hike in rearview mirror, i believe we of no actionperiod and, rather, observation on the part of the fed. we do not expect the next hike until close to maybe a year, but a lot can happen. but given the situation as we see now and given the data flow and the size of weaknesses in some areas, particularly

overseas, and what we are seeing in the market, i think vigilance is definitely what is needed. david: anastasia, we have jobs day tomorrow. there will be an indicator that the fed likes. where are we with the economy? anastasia: i think the status quo is going well. initial jobless claims being very low, even though they picked up a little bit. no cause for alarm here. the fed is starting to monitor is the propensity of change and the second derivative. and depending on how the jobs come in on friday, the three-month trend has been declining low the 12-month trend. i think the fed wants to see acceleration to give them are confidence. if you look at inflation breakevens, they have been rolling over in, and -- rolling over. the status quo is great, but as robert kaplan pointed out, one thing you have to consider is,

what do higher wages mean for corporations? thehigher costs, whether in form of the u.s. dollar, whether in the form of tariffs, or on wages, all of these things can squeeze margins. that is what is really important perspective.et will we get another consecutive year of margin expansion to support the market? i think that is a big if. alix: earlier we got adp employment changes coming in the most in two years at u.s. companies at the most workers in almost two years in december. so super solid job market into the end of 2018. on the flipside, initial jobless claims had a four-week high, but we did have that federal shutdown which can distort the data. claims to get to 231,000. david: tomorrow is jobs day. jobs.tion is like 180,000

a lot of economists are sent we should get used to the fact that we will not add that many jobs every month after doing good for so long. what will it tell a 50 -- what will it tell us if the number trails off? >> in reality, i do not think it tells us that much. you do not even knew that many jobs created every month to still bring the unemployment rate lower. you almost wish the member moderates a little to preserve the goldilocks environment where the competition for workers does not intensify so much that wage inflation accelerates very quickly. so i think anything above 100,000 or 125,000, we should get used to slightly lower numbers, that those are not bad numbers even though they might be weaker. thank you both very much for being with us. "bloomberg daybreak"

tomorrow for our jobs day coverage. we will get a read on hiring from a u.s. express ceo. alix: spreads widening further, and the dallas fed president told number key is watching that and the flashing warning signs. credit spreads since october have widen pretty substantially. have not had a high-yield issue for the less number of weeks, very little issuance, suggesting lack of access. history shows me that when you see that kind of action, if it is prolonged, a could lead to a slowing in the economy. alix: joining us from new york is barclays head of credit strategy and research. onset, molly smith, bloomberg corporate credit reporter. brad, do you agree that robert kaplan is saying the market is looking close? brad: a little extreme.

definitely not a great market to come with new issue. no new issuance, for example, and high yields for the first time in 10 years and very little in ingressive -- investment grade. there has not been a big m&a backlog calendar in the investment grade space. you look at high-yield, as well, very little refinancing for short-term maturities and very little lbos. ont of it was just prudence the side of corporate. the new issue would have been significant in december if it came. david: given the yields, how big of a dampening effect will it have on companies raising capital through high yields? i wonder even about investment grade because they will have to pay more to borrow. brad: it will definitely have an impact. in the high-yield market, we see that companies do not let their debt become current, ie, due in

the next one year. time, get periods of maybe three months, the markets do not feel great, companies just will not come. when that becomes more complicated, you go back a decade plus ago with the financial crisis, there was a huge bridge book and banks sitting there saying it had to come, but the brakes had committed in desperate the banks had committed with lbo's, etc.. the lbo market was just about $10 billion last year. the loan market is less concentrated. that is another thing we have seen various fed presidents comment on recently. alix: if we get m&a picking up -- today, you had a bridge facility under and by morgan stanley, and celgene for $33.5 billion, and raising new debt. molly, if we see these kind of

deals, what has to happen to change the issuance world? molly: you see big yields like this go through in our positively granted, and we do not know if it will happen yet, the success of those deals can do a lot for sentiment. we saw that a lot through last cvs-aetna with the deal less margin really across the m&a world. it can do a world of good for sediment when you see large deals getting printed and meaningful concessions coming through. brad,e end b -- david: what about the overall balance sheets being constrained? brad: we are not that worried about that. there has been a lot of press about the amount of corporate debt and how that is at the high of sort of that ratio of corporate debt to gdp being quite high historically. but they do not repay debt with gdp. if you look at those type of

ratios, right, corporate debt to earnings, they actually look fairly good, especially after the tax changes we had last year. so we are not that concerned with leverage, but you are talking about margins. i think that is the right thing to be concerned about going forward. it changes if there gets to be some margin pressure, and that is what we're focused on. there is going to be some margin pressure this year. alix: with less issuance, molly, what the company use that for a do they use less of that if they do not issue? at m&a type looking issuance, and there was a lot of that last year. some of that is not what we call good issuance, necessarily. aggressive balance sheet levering which drives credit downgrades of a lot of cases. that kind is not always positive for credit. but when looking at other kinds of issuance for refinancing purposes, that can be positive

for companies and balance sheet management. david: we have heard a lot about the bbb's and how many there are in the danger of that. i guess it is called fallen angels. how big of a problem is that? brad: that is the thing people are focused on in the investment grade market and the high-yield market, too. angels become bbb's or lower. market is lower than what it has been historically. the one positive thing is the , the lowestf bbb- rating with the bucket, has stayed pretty constant, lower than average historically. it is not like a lot of things are on the cusp, but it can happen with deals today were you have a's becoming high bbb's. there are some investors that, whether it is for regulatory

reasons or other practices, want to own aaa. there is a premium to come down to bbb. you look at spreads today and how wide they are and compared to the mid-2000's, and it is not entirely comparable because the work it is lower quality investment grade than it was an longer duration. i think why you are seeing credit spreads widen is not just a decrease in quality, but it is, where does the man come from for something that is a long-duration asset? average duration of investment grade credit is over seven today, and you have two-year treasuries at almost 2.5%. you take duration risk? brad: i think there are plenty of bbb's where you can take credit risks and of the on the precipice of downgrading into high-yield. the shape of the credit curve is fairly normal.

it could flatten a little bit here if we see rates go higher. but the shape of the credit curve is fairly normal right now, so not like you are dying to take that. are you moree -- open to duration today than you were two months ago? brad: i think you have to be a little bit more open to it, yes, than a few months ago. feels like a little bit of a cap, but 10-year and 30-year have come down quite a bit. going back to lowe's we had a few months ago, you could get sunday's in losses. it probably involves a little bit of the credit curve. rogofggf of barclays, thank you very much. wasd: him as chandra is it first word news per day in pot talks to end the partial u.s. government shutdown have not progressed be her to reach a deal in the meeting with president trump. he invited them back tomorrow.

democrats are holding firm in opposition to a border wall, and the incoming house speaker says democrats passed legislation today to reopen the government. that would pressure senate are publicans to do the same. economists say you can forget about the u.s. repeating last year's strong job gains. tomorrow's report is forecast to show that employers added almost 2.5 million jobs in 2018, the most in three years. but the estimate for december's payroll gains is the lowest since last january, and economists expect growth in employment and wages will moderate this year. and a first for china and its space program, the chinese have landed a lunar probe on the far side of the moon, the first ever spacecraft to reach the surface that always faces way from earth. landing there will allow the chinese river to better study the mood because of the lack of earthly electromagnetic interference. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.

i am emma chandra. david: thanks so much. how do get this single from the far side of the moon back to earth? there is a satellite around the moon. it collects it and beams it back to the us. alix: here is what you do not know about david, he knows everything about everything. what is thathey, random thing up and space 17 bazillion miles away? he is like, well, in my research -- nerdy stuff. david: i plead guilty. ok, the government shutdown, president trump and congressional leadership emerged from the meeting yesterday without a deal, but they will get together can tomorrow. we welcome republican senator james lankford from oklahoma joining us from capitol hill. good to have you here, senator. most americans have two questions.

when is there going to be a deal, and what is it going to look like? if you were in charge them a what would you do? senator: we would have a modest border security package and we would have had this resolved a long time ago. made out a proposal two weeks ago to deal with corporation bills left to be done, how we would do the border security, how we would break it up with fencing, judges, and i had wide bipartisan support. but this broke into politics last week, and that has been the frustration and tends to be the frustration around here. this whole negotiation is on pause until nancy pelosi the speakership and she can actually lead. chuck schumer refused to be able to finish negotiations until pelosi was in this puzzled they could be in a better position to negotiate.

let's get everybody in the same room like yesterday, house, senate, white house, negotiate it, and bring it back. interestingade an point i do not hear expressed enough, which is when we talk about securing our borders, it is not just the physical border with mexico. we have ports and other places where drugs could come in, and i have not heard enough discussion about that. security is more than just about whether there is a wall or not with mexico. senator cowan correct. -- senator: correct. and it used to be a bipartisan issue. even on the migrant caravan, 5000 people trying to illegally cross the border, and literally 250 words from the largest legal border crossing in the world. 100,000 people a day legally go to the process to cross over, that cameras were on the 5000. we have to deal with how we're checking for drugs.

we have scanning devices to help identify drugs. all those things are exceptionally important to security here in the united states. it should not be a partisan issue. we think thaty republican senators and congressmen generally would have a substantial role in resolving this. sounds like mitch mcconnell has said we are not going to do anything unless president trump likes it. does that essentially delegate it to the president? is it true that it has to be with president trump wants to get it done? senator: i think what mitch mcconnell has said is the president has to be able to agree on this. what chuck schumer and mitch mcconnell agreed to two weeks ago is they would not bring anything to the senate floor that do not have support in the house and senate and the white house, and chuck schumer even made the statement multiple times, if the white house does not agree on this, it will not go anywhere. that is true of any law that is

made. in the house, looks like they will try to pass something as a messaging bill, knowing the white house will not bring it up. clearly we are not going to bring it up in the senate. it is already the agreement chuck schumer and mitch mcconnell made. we will finish what is happening. let we will do for border security we will do all together, house, senate, and white house. it will be a bipartisan effort, and we will try to get this done. it is not have to be as complicated as everyone is making this. david: is it possible to make the deal actually bigger? yesterday, the president referred to daca, which i have not heard much of lately. whatever happened to the germans? is it possible there would be a larger deal of that includes the dreamers? -- what ever happen to the dreamers? senator: i think that would overcome look at the negotiation. if you throw in daca or

temporary protected status and if there is all this conversation but other immigration policy, that becomes a much longer dialogue. i think we should do those things. should bed daca addressed. but if we do it right now, it slows down the process even more. we have government employees trying to get back to the job of people trying to get permits. we have to be up to resolve those as fast as possible. david: senator, we talked a lot about the markets these days at bloomberg. given what equity markets have done, it has been alarming to a lot of people. ont is the perception capitol hill? we had the president yesterday address the issue, calling it a glitch, and then set all we needed were better trade deals. is the cause of the market to subject, from your point of view as a senator, a matter of the federal reserve, which we have heard from the president of the past, or if we get into trade deals?

the market does not like what comes out of the federal reserve. every rumor, the market wrecks two. the long-term systemic issue is trade. if you do not have stability in trade and you do not know where it is going to go or where it is going, it decreases the incentive to engage in companies that do a lot of international trade. that is the vast majority of companies on the stock market. we can resolve the issues with china and issues on the pacific rim. that helps us. brexit has an impact. at this point, we do not know what the u.k. is going to be able to do with the eu, much less with us. that dramatically effects trade with us long-term, as well. i think people are on pause. get thatg we can do is resolved. david: senator, thank you so much. we appreciate your time. senator james lankford of oklahoma. alix: in the market, the one stock i am watching is going to be apple, looking down by about

8% in premarket, possibly opening at the lowest levels since july 2017. the company cutting its outlook on weakness in china for the first time in two decades. dan morgan is joining me on the phone. he holds apple. the want to buy on the dip down? >> good morning. happy new year. in terms of apple right now, obviously, in regards to buying at this very moment, we do like more information as we come into the close of this quarter. we have that letter that came the president, giving us information we are reacting to right now. we're long-term holders of apple. we have owned the stock since prices.single-digit wes are not going to exit it nowo. it has been a tremendous performer for us. i would like to see what happens over the next couple of weeks and get a little bit more

information and color on some of the reasons why they came out with morning. alix: the question many struggle with is what changed in the last 25 months. -- in the last two months. guidance looked fine, they cannot two wants -- months later. did apple not have visibility or was it a like of awareness or did things fundamentally change? >> i do not think there has been a huge fundamental change, just somewhat of an adjustment. if you look at china in terms of overall revenue growth, as you know in the last quarter, their fourth quarter, it was up 19% quarter to quarter. u.s. was up about 12%. so it is one of the faster growing segments they are focusing on. what you might be seeing is a little bit of a hesitation from chinese consumers in regards to , we know theegy iphone 10 is very extensive. and there are quite a few local

manufacturers in that country who are producing phones at a lower price. it could be more of a secular move in regards to it ise economy where starting to slow down a little bit. we have been predicting that for a while. but i do not think it is a direct, huge change in terms of apple wanting to focus on that these to drive sales as domestic and european markets become more mature. alix: do you expect more buybacks now? >> i think apple will be using buybacks, dividend increasing, things kind of like that, kind of that financial engineering to drive the share price. it has become more of a value play, trading at only 11 to 12 times earning. a dividend of 1.9%. so you have a nice floor there. kind of supported and work through this issue in china. alix: dan morgan of synovus

trust, thank you. that was the thing we have seen, headlines are dramatic for apple, but remember, they still make a lot of money. david: i think they have $148 billion in their balance sheet still. gm weighing onad the market. you had m&a that did not like the bristol-myers bid, all adding to a tough tape. merge its then the applications. alix: forgot about that. bloomberg markets: the open" with jonathan ferro. the wells fargo securities head of equity strategy will be joining him. this is bloomberg. ♪

jonathan: from new york city, the count on to the open starts right now.

[bellringing] jonathan: apple cutting its revenue outlook for the first time in the last few decades. signs the world's second-largest economy is slowing,'s and the global equity markets lower in triggering a massive surge in the japanese yen. 30 minutes way from the opening bell. off the lows, down just .9% on the s&p 500. 1%.strength fixed, up by all about apple, down hard in the premarket, almost 9%. that move just one more reason to be concerned about the world's second-largest economy. china real speed bump in -- >> slowdown in global growth in china -- >> emerging markets in china slowing faster than forecasted. >> stuck between a rock and hard place. >>