♪ matt: waiting for powell: the fed chair makes his first comment december 19. what will today's job figures look like? , globals hit pause equities hit higher after the route yesterday. and the shutdown continues, the newly democratically controlled .ouse passes a bill on spending the president is not on board. can a meeting with the white

house today help break the stalemate? matt: welcome to bloomberg: surveillance. i'm matt miller in berlin in for francine lacqua. let's check in on what is going on with data. the number of pmi's coming across the euro area. outservices pmi is reading 51.2. the pulmonary reading was 51.4. was 51.4.nary reading we have seen some misses, but there is one interesting beat in italy. pmi ahead out with a of the survey, 50 was the market. atly's composite pmi was 49.3. that this week has showed a slowdown in manufacturing. let's go to bloomberg first word news. confirmed a u.s.

delegation will visit monday and tuesday for trade talks, the first face-to-face negotiations since they agreed to a 90 day traders. meanwhile, powell's economic adviser says the trade war will force many companies to join apple in announcing lower than , saying earnings downgrades well, until there is a deal with beijing. the new democratic house majority voted to end the shutdown, but the plan brings washington no closer to resolving the impasse over present donald trump's demand to pay for a border wall. the house votes coming hours after the opening of the 116th congress and the return of nancy pelosi as speaker, her second time in position, serving beforehand in 2007 until 2011. >> we're not doing a wall. we don't have any doubts that we are not doing a more. 2018 cite u.k. health prices

post their slowest annual growth in five years according to a nationwide building society. inflation slowed to 0.5% in december, down from 2.6% earlier. the property market is moderating after decades of steep price gains. brexit uncertainty is also denting demand and clouding the economic outlook. quick is-- get ick is spendingw thousands on anti-drone technology after thousands of flights were disrupted after drugs were spotted. they also say he throw has bus technology to combat unmanned -- heathrow has bought technology to combat unmanned craft. stocks anticipate rebounding.

blackstone's annual list of surprises, they say the fed will refrain from raising rates is here and says the u.s. economy and spend between 2.5 2.25%. they also say trade deal will be reason the first quarter -- reached in the first quarter. >> the fed does not raise rates at all. 15% fromt appreciates its opening. i would say those are two major ones. >> global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. back to you in berlin. much.thanks very a gauge of u.s. manufacturing has plunged the most since the they trade war is having a bigger impact on the u.s. economy then expected.

the isn index dropped to a two-year low. new orders slumped the most in almost five years. the next day to watch out for is the big one, the non-jobs report. and then we get comments from fed chair jay powell. the presidentfrom to take the recent battering of global markets into , powell ison sticking to his data dependent approach. yesterday, alice kaplan advocated holding off on raising rates further. my own view is that we should not take any further action on these rates until the issues are resolved for better or worse. i would be an advocate of taking .o action for example, in the first couple of quarters, if you ask me my base case, mind be to take no action at all. joining me for the hour is

mark bell of asset strategist at jp. your time this morning. let me ask you what you think about powell and his speech. what do you want to hear from him? mark: i think the market needs him to be dovish and to talk about how they will not go in march and there will be a positive increasing interest rates. the thing i would point out is that it is already priced in. if you look prior to december, the market had dramatically moved down. come out dovish, they reduced the number of rate rises they expected. three to two. the market pricing in what it is at the market -- at the moment, they need to appear quite dovish to not appear

hawkish relative to market expectations. when you think about the policy he has been on in terms of data dependency, not looking at the markets, not worried about a feel for the drops, is that a policy error? mark: those are two questions, really. you have got a low unemployment level, and a key question is if wage growth will keep accelerating. if it does, the fed can cause, but they cannot stop forever if you see an acceleration. the other thing is that, i think the fed and powell in particular, are concerned about the buildup in corporate credit. it has been rising and is at elevated levels. i think that is another reason why the fed might well pause. unless the economy actually materially deteriorates and

heads into a recession, if the positively to a rally in the stock market, that the fed will look to go again. matt: we have had a lot of big names that are worried about defaults in investment grade credit. obviously, investment markets have fallen into bear markets from japan to germany. since the worst decembers 1931, and that all relates to our mliv question of the day. i will ask it to you, how scared are you by the snuggly -- and this ugly new year? that the way we view it is there are a lot of two-way risks , around which it is hard to have significant confidence. maybe start with the first two of which we do have more confidence. one question is around brexit.

i think the likelihood of a no deal brexit is still very low. u.k. parliament can revoke article 50 if they need to come at the damage it would cause is to significant. eventually, it will be prevented. they'll be quite a lot of movement around that. looking more globally, i think the other question you have got yousk around china, what get any chinese stimulus or offset the slowdown? there, it is fair to say that you are going to get further moving onto the other questions, it is much harder to have that same degree of confidence. is there going to be a recession in the u.s. by the end of 2020? you cannot rule that out. guaranteed,y is not but that risk is not likely to be ruled out.

it is choppy and struggling to make significant gains. the other question when you look at it our trade wars. are you going to see escalation in the trade war or not? perhaps some kind of deal. if you did get a deal, the market that a short-term bounce to look at the other hand as if you had a trade deal, the fed would probably feel more comfortable hiking rates. you have a short-term bounce, but it is not clear that on the medium-term, that necessarily removes volatility. those are key questions facing investors, and quite frankly, it is hard to have enough confidence in them to be overweight risk of the moment -- moment. i trade deal could lead to balance, so you do not want to be underweight either. since the summer, we have been neutral on risk because of the two-way risk. matt: mike, we're going to keep you with us.

mike bell from j.p. morgan is our guest for the hour. don't miss our great lineup of guests throughout the day. a lot of them will be reacting to the u.s. jobs report. we will speak to larry kudlow, national economic council director. also have allianz chief economic advisor and a bloomberg opinion columnist. blackrock global's chief investment officer for fixed income. this is bloomberg. ♪

matt: economics, finance, politics, this is bloomberg: surveillance. let's get the bloomberg business flash. >> mercedes-benz eking out a

third straight u.s. luxury sail crown. but with fewer than a thousand vehicles separating it from bmw. for the second straight year, tell you finished third with a two .2% decline. iraq further behind german front-runners. gm saw a percent decline in fourth-quarter sales, meanwhile, they were up a bigger than expected drop in december. airbus reportedly narrowly missing its target for aircraft deliveries despite factories operating until the last minutes of december 31. they failed to reach the goal of about 800. renaming the model acquired in october. they cut that target.

the company's share price tumbled some 20%. the social network ceo pledged to unload up to 75 million physical shares -- physical shares, part of his plan to give away part of his fortune during his lifetime. he's sold shares worth more than $5 billion. he sold his shares for one wall. apple shares suffered their worst day since january of 2013, tumbling 10% after the i make imaker had disappointing sales in china. literally decimated. the tech giant has priced itself out of the world's biggest market, but a top white house economic adviser has warned that more u.s. companies will be forced to downgraded earnings outlooks until there is a trade deal. let's bring in a bloomberg opinion tech columnists to talk more about this.

the stocks getting absolutely crushed, alex, and some analysts think it could fall even further, right? seeing some sort of solution from the company, they have really hemorrhaged market shares in china in recent years. the expectation was, if you look back two years, with the introduction of the iphone x generation of phones, that would spur what they called a super cycle. a new growth leg for the company. the fact that they cut these targets the decline in china, even worse than expected. this market position has been eroded substantially. very much for joining us. bloomberg opinion tech columnist following his work and that of his colleagues. bell from us, mike j.p. morgan asset management.

ande talking about comments seeing companies cutting forecasts for the fourth quarter. true --hink this is all due to the trade war and how much further will it go? i don't know if it is all due to the trade war, but is certainly a factor. they have come down a bit, so if it is further -- purely a valuation story. earnings estimates have just started to be revised down. if there is further downside for earnings, then valuations perhaps tell a slightly misleading story. even of the pe has come down, it could fall further leading to further downside, perhaps for equity markets.

downside, i more think it will be partly determined by whether you get an escalation on the trade war front or a deal. the other question, clearly, is if global growth continues to slow. the u.s.hat growth in will continue to slow, pmi is telling us growth slows there as clear question really is if we are going to have the slowdown or if it will cause a recession at some point. slowdown, that i think that these kind of valuations are attractive. but if we head into a recession in the next couple of years and it is clearly further downside for earnings estimates, then in that scenario, markets will be lower. matt: that is something investors need to take it to heart. mike bell is going to stick with

us. he is our guest for the hour. coming up, britain's official eu exit date approaches and the outlook for the housing market may hinge on the outcome. more on that next, this is bloomberg. ♪

♪ welcome back to bloomberg: surveillance.

some breaking news in from china. the country has cut its reserve ratio i one percentage point. china cutting its reserve requirement ratio, very interesting. of course, we had that apple news based on a slowdown in china sales. they are down 7% because of a slowdown in the country. the party is doing what it can economy. boost the the pboc is saying that the reserve requirement ratio will be cut by one percentage point. there you go, more gas for the economy in china. now let's talk about the u.k.. house prices are at their slowest annual growth in five years according to the nationwide building society. growth slowed to .5% in december, down from 2.6% a year

earlier. with the uncertainty surrounding brexit cladding the market, what is the outlook for the next 12 months in the u.k.? isning us to talk about that the london bureau chief for bloomberg news. .ike bell is still with us what we take from these numbers? is it all about brexit? >> brexit is the main factor. sentiment,driven by people are clearly making the decision that they will either hold off on buying or offer well below. what is interesting is that the banks around london are most affected. these areas are the biggest fallers, down 4.8%, a big decline. reverses the

situation from last year. matt: when we think about the housing market, especially the u.k., we think about really rich non-british people coming in and driving prices up. with that continue with the markets -- will that continue with the markets? they haveneil: largely been put off by the increase in taxes. you're seeing a big decline in sales along the river thames. i don't think you will see much price gouging, while you will theredecline in sales houses being sold that are now finished and are filtered through. a lot of those are actually being flipped with big losses,

but the registry and other prices will be in the original sale price, so it looks like prices are going up when they are actually going down. matt: very interesting. i think a lot of people are watching the u.k. housing market to see when it will happen and when it will be time to take that risk. neil callahan is our bureau chief -- london bureau chief. we are back with more from mike bell in just a minute. stay with us here -- stay with us. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. matt: economics, finance, politics. this is "bloomberg surveillance." i'm matt miller in berlin in for francine lacqua.

after the breaking news just brought you that the people's bank of china is went to cut its reserve requirement ratio by one percentage point in just a couple of days, to what has happened in the yuan. this is the kind of news that pushes it around a little bit. it is not want to move around that much. in this kind of command economy, china really has tight control over its currency, but it is still interesting to look and see what they allow to happen. we also have gains in european markets. maybe a little bit on optimism about the u.s.-china trade talks total kickoff over the weekend. you can see the stoxx 600 gaining 1.3%. one of the biggest gainers on european indexes is the dax, up 1.7% due to carmakers. they are always happy to hear

that could be talks between trump and xi. we are also getting u.s. services pmi in. u.k.orry, we got a fantastic manufacturer in pmi rating from the u.k. as well. as dismal as the whole brexit opportunity looks to be, we are getting strong pmi numbers out of the u.k. compared to the weakness we are seeing here on the continent in europe. look at the bloomberg first word news. na: china has confirmed a u.s. delegation will visit on monday and tuesday for trade talks. it is the first face-to-face delegation since the two sides agreed last month to a 90 day truce in the trade war. and economic advisor said the trade war will force many u.s. companies to join apple.

the new house democratic majority voted to end the government shutdown but plans to bring washington no closer to resolving the impact over president trump's demand for the border wall. nancy pelosi returning as speaker of the house. we are not doing a wall. viviana: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. that.thanks very much for carmakers have enjoyed a long run of near record u.s. sales and fat profits because of the big trucks they sell their. this year, the party could come to an end.

the deliveries may drop due to rates,interest prices, and impossible and to the stimulus. will talk about some of the standout numbers we got yesterday. we got these monthly reporting figures, always exciting. since it was the end of the year, we got the final victors. the one having a lot of people were looking at was the part, because that is a big proportion of the u.s. market. divine between betweenls -- divide what sells here and what those in the u.s.. pickup trucks are joined

to drive. it is like a luxury car, bait have this great storage space in the back. ikt: maybe europeans have less to transfer. bmw has the suvs, but they're still a sedan company. were also isn't selling our muscle cars, the corvette or camaro. you are seeing companies move out of those to some degree. suvs aren'tky selling. their looking for smaller suvs and pickup trucks. matt: reviewers say the ram in

the best pickup truck around. benedikt: you know more than i do. show is the biggest around. that this we heard year might actually be slower. matt: thanks very much. been a talk about what is clearly my favorite subject. mike.g us still is sales will trade in the u.s. and cars in front to talk about, i can't believe muscle cars are dying out somehow. certainly, if you are invested in the industry, you have gotten crushed. it is a worst-performing group, automakers and parts in the entire stoxx 600, falling more than 28%. can the turnaround?

mike: clearly, it is a very cyclical sector. here in europe, consumer confidence has been falling over the last year. in the u.s., consumer confidence is still very high, but has moderated slightly. one of the key things we are to be watching over the rest of this year is where this consumer confidence goes from here. if it can pick up in the eurozone, auto companies should do pretty well on the back of that. if you see a continued deterioration in consumer confidence, i think that will feed across into the cyclical factors. i think in the u.s., it is very important to watch because you have consumer confidence not far from the highs we saw back in 2000. generally, the time we want to take a lot of overweight risk positions is when consumer confidence is starting to improve.

with confidence at elevated levels, there is probably more downside risk. mike is going to stick with us. is a global strategist for jpmorgan. and want to quickly take a look at what is going on in markets. not only are we gaining across europe, that we've had a little bit of lift, especially since the headlines from china have come out. 600 up 1.3%.toxx the euro gaining against the dollar. the dollar has been serving as a safe haven. that may be a good news story there. look at nymex crude. it was only two or three days ago that we were at $43. .81. it is at $47

making its climb back as the saudi's cut production. this is bloomberg. ♪

matt: economics, finance, politics. this is "bloomberg surveillance." i;'m matt miller in berlin for francine lacqua. let's get your bloomberg business flash. viviana: airbus reportedly narrowly missed its targets despite factories operating at

the last moment of december 31. they fail to reach the goal of about 800. and potentially aiming to 820 planes this year. target.hat after his brief stint as white house vacation director, anthony's rebooted career in hedge funds is going rather better. managed tocapital make money. in an enemy, he said each of his funds made returns of nearly 3.5%. mark zuckerberg stopped selling his facebook stopped in the last quarter of 2018 as share prices tumbled. the ceo had pledged to unload millions of facebook shares of the pledge to give away almost all of his fortune during his lifetime. since that announcement, he has

sold shares worth more than $5 billion. that is the bloomberg business flash. let's turn to when the top stories we are following for you this hour. opting tontral bank release cash into the u.s. economy by cutting the reserve ratio for banks by the middle of january. the pboc has already caused the times cut the rrr four since 2008. this again pboc did and why now? : they did it because the economy has obviously been slowing. headlineshas seen the about apple cutting its revenue projections, which they blame on slower sales in china. there is also been the

manufacturing gauge going into contraction. today's move is slightly different from the earlier ones last year. this is an overall cut versus earlier, they did very targeted cuts for some banks, not all banks. matt: does this have anything to do with the trade war? clearly, this cut is a quick to come into effect now until after the talks. are they being spurred by the problems in the economy due to the trade war? : it all has something to do with the trade war in the sense that china's economy was without the trade war, not going great. thetrade war, the tariffs trump administration has levied on chinese goods has made everything worse, and probably prompted the government to act in a more aggressively than they would have liked. the reserve requirement cut will

on the 15th of january. another half a percentage point on the 25th. matt: thanks very much for that. john, are executive editor for greater china out of beijing. bell,with us is mike jpmorgan asset management. and prayer, wall street watches surprises. year, wall street watches surprises. one of the things i thought interesting was that the chinese 25%.t could bounce back what you think about that since it has been battered so hard in the pboc and party are getting behind the economy? got: as a china has clearly a foot back on the accelerator.

to slowdown in china that has taken place over the last couple of years has been largely intentional. to have been a lot of shadow bank lending. authorities want to cut down on the excess of growth in the banking system. in doing so, that is fairly slow down money supply, credit creation for the economy as a whole. now what they are trying to do is simulate the economy so banks can lend more, but tyra banks banksep the regular -- can keep the regular in place as well. to are also getting fiscal stimulus coming through in china. if you get a deal on trade in the u.s. and this fiscal stimulus coming through, and for the reserve requirement cuts, that could support chinese equities this year. on the other hand, they are clearly not immune from the global growth concerns over

whether the u.s. and eurozone according to slow down. if that happens, it will be hard for china to see actual gains in seety markets if you markets worrying about a recession and either the u.s. or europe. it is possible that given they have already followed a long way and stimulus is coming through from china. on a relative basis, perhaps they hold up. matt: to come. , does the apple news concerning does thee full circle, applet is concern you more than the u.s.? the sales there were a problem, although it is very expensive, the product they are selling. mike: i don't know how much you can read across into chinese demand from the. -- that very high end product

for the chinese economy. what i would take away more is the fact that over the last nine years, until relatively recently, about september. you have seen this very strong performance in the growth stocks. value stocks had been beaten up on a relative basis. growth stocks, tech names in particular have been shooting their lights out. back in september, we said there was a risk to the trade, paper start to see value stocks outperforming as some of those growth stocks start to outperform. historically, with the exception of financial crises, is the economy slows and has into a recession, you often see those more expensive growth stocks give up some of their relative performances. i think it makes sense not to be overweight growth stocks still. matt: what do you like here? especially if you're looking at risk assets, equities.

on their pockets you think investors should be in here or should they just be defensive? mike: overall, we are neutral on equity risk. i think it is risky to be overweight at this stage. i also think there are risks to being underweight, given you could see a balance. when we look at it on a style and sector basis., i think the main risks are being overweight the things which have done very , but i started to struggle since the beginning of october. i would be cautious about being overweight. more cap stocks being overweight, growth stocks. out also be cautious about being overweight in the low-quality stocks. i think you want to focus on quality stocks that can withstand the slowdown in the economy. strong cash flow differentiation, value focused

within portfolios, as well as probably a tilt away from small-cap and mortar. matt: thanks very much for joining us. is a global market strategist at jpmorgan asset management. let's take a quick look at the markets as we come towards the end of the trading our. are just about an hour and 15 minutes in. 1% gains on all of the regional indexes, the broader stoxx 600 up 1.3%. to euro gaining a little bit of ground against the dollar, which is interesting. the euro is seen as a risk on play. the dollar as a bit of a safe haven asset, in some respects. the euro there over 114. it has been battered in recent days. crush.as been absolutely

it has now come back in the last couple of sessions and trading at 47.98 a barrel. don't miss our great lineup of guests we are acting to the u.s. jobs report today from 2:00 p.m. london time. we will speak to larry kudlow, advisor,hief economic plus blackrock global cio for fixed income. this is bloomberg. ♪

matt: economics, finance, politics. this is "bloomberg surveillance." let's get the bloomberg first word news. has confirmed a u.s. delegation will visit on monday and tuesday of next week for trade talks. is the first face-to-face negotiations since the two sides agreed last month to a 90 day traders. top white house economic adviser says the trade war will

force many u.s. companies to join apple and reporting lower than expected earnings. the new house democratic majority voted to end the partial government shutdown, of the plan brings washington no closer to resolving the impasse over demands for portable. also coming hours after the opening of the 160 congress and return of nancy pelosi as it speaker.and is her second time in this position . we are not doing and will. -- wall. viviana: 2018 solute cahill prices post their slowest annual growth in nine years. slowing to 0.5% in december. the property market is moderating after decades of steep rice gains made homes less

affordable.brexit uncertainty is also tempting demands and calling the economic outlook. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. much.let's getry a check on today's biggest stock movers . for that, we can to sebastian salek. sebastian: let's start with one of the big sector stories of the day. you see a lot of familiar names among the top performers. bp.likes of ata the saudi's cutting back it up before the deal comes into force. the highest level for subsea since december 10. thean stanley lowering

price target for asian tv channels, including -- 8 tv channels, including itv. this is the netflix threat consumer trends changing. taking the stock to a seven-year low. in.ler coming matt: thanks very much. we continue in the next hour. keene.nson joins tom this is bloomberg. ♪

tom: this morning, markets discover ask if and when the

next apple will drop in china. u.s. trade mid-level officials will travel to beijing next week. wasadp report outstanding. is this as good as it gets? house speaker pelosi wants the government shutdown to end. day one already, there are cracks within the grand old party. good morning, everyone. this is "bloomberg surveillance." on tom keene in new york, guy johnson in london. with got some economic data. this goes to all central banks. it is a second look at infla toin. guy: it is an inflation number the ecb is not going to be happy with. calls coming in year on year at 1%. cpi year on year estimates come

through for december at 1.6, that is down from two. to survey number was 1.7. this is even weaker headline inflation. when does the ecb rate hike come? are they making the right decision in winding down its qe program? the data are moving against it. tom: a number of themes today. this is being focused on later today. it is a nice theme for the data. new disinflation we see within 2019. right now, let's get to our first word news in new york city. majority: the new house voted to end the government shutdown. both the president and senate republicans oppose the democratic plan. leaders of both parties meeting

with the president later today. next week, the u.s. and china will hold her first round of trade talks since last month's meeting between the country's leaders. president trump in xi jinping agreed it to a 90 day truce, the u.s. delaying scheduled tari increases on chinese productsff. in response, chinese temporarily -- tariffs on u.s. cars. the pboc has cut the reserve requirement ratio's for some banks four times last year. jerome powell may strike a more cautious tone about the u.s. economy today, after last month's getting the u.s. economy a thumbs-up. the latest u.s. housing data giving worry. investors in see the fed's next move being a rate cut. that would be the first in a decade.

global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: on body finish there with chairman powell. interesting off of the kaplan interview. now. go to the data right it is better than what we saw for the first two days of the year . futures rebound. dell futures up to 55, curve steepening. euro showing the way. the dow closed. that was ugly yesterday. agencies. yen 107. the 30 year bond is maybe the anomaly of lower interest rates until we see good bond openings this morning. guy: i think we will wait and watch that one. the powell story is going to be dominating. right now, the focus is on what

is happening here in europe and on china. china has cut its reserve requirement. the pboc has done. it is doing it in two increments. the first one is going to come through on january 15. there is another one scheduled for january the 25th. that is by to happen in two increments. eurodollar is coming off the boil a little. we have had this disappointing cpi data. the euro stoxx is being bit. it is interesting to have decided to announce this news. i guess it is. friday copper is reacting to it as well. tom: i had, friday at 5:00 p.m. in china. maybe that makes a little bit of difference. i want to show a chart which folds in jobs day here in america. the political challenges that every nation has. this is prime employment in the united states.

those aged 25-54, back to eisenhower. this is an exceptionally important chart. here is the boom of the 1970's, 1980's. maybe a little bit of leveling out for the 1990's. here is the end of it all as we know, which is the maximum slope of 2000. this has been the ugly years, which is all of the populism angst we see nation to nation. it is a flattening of employment for prime age americans. guy: and quality, you could probably argue as well. the middle class and how they have been affected by the jobs on offer. 2.6 trilliont what euros by two. iss chart, the white line called cpi in the eurozone. the blue line is the ecb's balance sheets. the balance sheet has gone up, up. basically, 2.6 trillion buys you

a 2.4 pickup in core inflation. that is an awful lot of money to be spending. against you can't argue. what would have happened if the ecb have not done the? let's get back to the data in more detail. all eyes turned to the jobs report and is interesting comments you get from fed chair powell a little later on today. 10:30 a.m. eastern time is when he starts speaking. joining us now in london, bank sara, standardd chartered's chief economist. what would like to? sara: i like to hear a bit more clarity on how seriously they take the recent market moves we

have seen. how far they think there is going to be an impact on the real economy, and it will have the payroll data by then. we may will see quite a divergence between the week manufacturing number we had earlier and potentially a pretty punchy jobs picture as well. we are going to hear from powell that we are not any situation where the fed is listening to the market. all options are on the table, including how they manage the balance sheet. >> i think that definitely made a step in the right direction by pretty much telling us they're not in autopilot anymore and very much data dependent. i think it is quite likely there is way to be some further flexibility to allow even management of how the balance sheet, the unwinding is going to go. area for todayl

is that i doubt how was quick to divert too much from what has actually happened in the previous meeting. i think this because at the end of the day, the fed would not queuing intoen exactly what the equity market has been doing. different get a second disappointment in the payroll, we have to remember, we also got disappointment in the previous month at 155,000. that is actually changing the picture that at that because yet a large stuck in the isn. validation over the markets that has slowed down. standard chartered has such a heritage of emerging markets. i want to ask a big bank question. theybody is challenged,

want to replay that they can't because everything is deflating right now. where is terminal value for latvia,the philippines, and on and on? are they going to squeeze down here like all the major economies? sarah: i think if you're talking about the medium-term, you have to be pretty optimistic at the moment. countries like brazil have been through a squeeze. low commodity prices is not positive. the question is how far the new administration can make a difference in terms of reform. would perhaps shouldn't be too pessimistic about the. their work of the constraints that there were opportunities there as well for both scenarios. the question for the philippines, a country which is in a great position in terms of

really leveraging on the asia growth story. again, in the current situation where you have such growth in china, that is not the for countries like the philippines and brazil. i think we would be cautious about the two cautious on china. beijing has been pretty successful in stimulating growth when it is required. they are already making moves to upset some of the trade measures. tom: we saw that this morning. the fact here is that people have tools to get things done. are you going into the weekend id into this eventful week, looking to next week and the rest of january and the fed meeting were central bankers have tools to get things done? leios: we have to make of decision between the pboc

and other central. we have to remember we are talking about a country in china that is fully centralized, and therefore a very quick and effective to respond. cut.ell the rrr i believe into the soft landing story as far as china is concerned. as far as other banks are concerned, there are varying degrees of problems. the ecb has potentially most of the problems that at the major central banks because they are already in negative territory. they've already expended the balance sheet an awful lot as opposed to the fabrinet posted interest rates and could respond to a downturn by lowering interest rates. it is going to be a very interesting and very turbulent period for central banking in 2019.

it looks like we are going into a slow down. vaasileios and sa with usrah. we have jobs with us. john is speaking with lawrence kudlow of the white house posted jobs report. look for that in the 9:00 hour. this is really cool, the aea is a wonderful set of meetings. for me, it is like disneyland. , with a man named bernanke and a lady named yellen. we will listen to jerome powell in the 10:00 hour from atlanta. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." the largest ever pharmaceutical deal will also be a big payday for bankers. estimates, the lead banker's of morgan stanley will share as much as $85 million in fees. couldan and citigroup split as much as $110 million. mercedes-benz is the top-selling luxury brand in the u.s. it beat bmw by fewer than 5000 vehicles. toyota's lexus brand was third. audi finishing fourth after posting its first annual sales drop since 2009. that plunge in oil prices not

scaring off industry executives. the majority of those surveyed said this year, they still plan to boost spending. robert kaplan telling bloomberg a profit is still being made at current crisis. -- prices. tom: thank you so much.this is a really important chart. the shanghai composite, equity markets in china is truly one of the most distressing charts out there. there's no other way to put it. joining us from our beijing studios, john joins us, from executive editor for greater china. right now, we see the action to tweak monetary policy today. what is the sense of desperation in beijing? i can't figure it out for the conventional 80th. what is the level of sweat behind -- media. what is the level of sweat behind the closed doors? today's news is the

biggest they are taken so far to cushion the slow down. the cut in the reserve requirement this time is for all banks. lasted, the central bank cut four times. this is the first widespread cut. i think you can interpret this to say they see the situation getting more serious. guy: they are clearly not worried about deleveraging.are we that now ? -- done with that now? john: i think in spots, they are still working on it. for example, the peer-to-peer lending area. to try to look at shadow banking's. more broadly, they are tapping the brakes. tom: what is next? n: they haven't moved on interest rates for a very long time. they still have that in their pocket. the big problem they are dealing

with right now is transmission. the central bank has been time to pump liquidity in and get banks to lend to small companies. banks haven't been doing it. they have been plowing into short-term debt. tom: that is right where i wanted to go. thank you so much. sara is with us. the transmission mechanism, reaction functions of authoritarian regime. is their bank like our bank? they don't have the same system like we do, do they? sarah: think that been pretty effective in previous episodes and making sure they provide credit that is required and reacting to worries about over leveraging. it is a matter of calibrating these things at the moment. this latest move signals that there are concerns about the level of -- extent of the credits ways -- squeeze.

the moves we have seen them take yesterday and today ought to address some of those worries. there are broader aspects to this. broader policy news that can be made. we have seen already some fiscal stimulus. we expect the fiscal deficit is when to be somewhat wider this year. infrastructure spending is being advanced. by think it is a combination of pboc and beijing taking action to underpin growth and push activity slightly higher than the relatively weak deficit we have seen. sara is pretty stay with ush. updating you on what will be happening with the pboc and reserve requirement ratio cut we have seen.

also coming up, the big fed day. massive fed day, big payroll day as well. we will talk about all that next. this is bloomberg. ♪

tom: we welcome all of you worldwide. guy johnson in for francine lacqua in london. exceptional amount

of central bank discussion in the united states today. in washington, a new and return of speaker of the house. here is pelosi of california. >> we are not doing a wall. does anybody have any doubt? tom: absolutely extraordinary. some of the images. stephanie baker, what i would say is that the thundering silence of the grandal party. how to the republicans regroup on this new washington? challenge the main facing both houses of congress right now is to get the government back open. republicans in the senate have refused to accept what the democrats passed in the house. both sides seem to be digging in their heels. leaders of both parties will be meeting with trump today to try and see if they can break the impasse. it seems unlikely. there is no win for either side

if they back down. trump has promised a will to his base. the democrats have promised to not build a wall. i don't see how they're going to break this impasse. even mitch mcconnell is saying that he is expecting the shutdown to last for weeks. tom: we saw the immediate moves of speaker pelosi. is a great tradition, the first statements of the party. what comes next for speaker policy? issue went to go right after the president, the great evil, or is she going to bite her time and hold the liberals off and say take her time. which is it? stephanie: she is under a lot of pressure from the democrats to pursue impeachment proceedings against the president. she has said that she doesn't see the evidence there yet to pursue impeachment. she wants to focus on the issues at hand that the democrats campaigned on, on tangible benefits.things like

transparency , infrastructure, holding the government accountable. she did say that she thought it was an open question whether or not a sitting president could be indicted. that has been an issue that has been bandied about for years. that the department of justice opinions that say a sitting president cannot be indicted. however, i think the situation facing trump is quite different because of the challenges he faced prior to his election. guy: thank you very much. this is bloomberg. ♪

♪ extraordinary news flow on china, apple, and economics worldwide. we have a conversation with

three people who matter. the 9:00l-erian in hour has a solution for the fed. larry kudlow from the white house after the jobs report. the conversation of the day, loretta mester is with the cleveland fed. we spoke with robert kaplan yesterday. is at thehael mckee meetings of the american economic association with loretta mester. sandwiched in there is chairman powell. right now, your first word news. for the second time in three days, president will meet with leaders of both parties to try to end the government shutdown. house democratic majority made it clear where it stands. the house approving a spending bill that would reopen closed agencies. republicans oppose the plan. comes the u.s. government out with his final jobs report for 2018.

it is likely to show employers capped a strong year of hiring. payrolls rising by 184,000 in december. economists expect hiring to cool down this year. the has extended its rally, price breaking through 1300 dollars an ounce before falling back. investors have been flocking to gold. up, rising to the highest level since july. carlos ghosn will finally get his stay in court. jail cellbeen in a since being arrested on financial crimes. will be in ae district court. his lawyers will ask why he remains in jail. prosecutors extending his detention several times. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." thank you. sector recovers

slightly in december from more than a two-year low bringing the economy close to stagnation in the last quarter. the bank of england says approvals dipped to a seven-month low. still with us is vasileios gkionakis and sarah huon of standard chartered. let's talk about the pound. euro-sterling came back quickly. is that indicative of the factory floor is in first sterling? 90 has proven to be a strong resistance level and 125 has also been a strong support level for cable. of thisnest, in spite ongoing drama about brexit, indications first sterling are simple.

we are currently trading at the lower end of the recent range and we will be trading along , wee levels along 125-126 are trading along headline risks. it becomes binary. if you get a no deal, cable collapses towards 115 or lower. if we get a softer brexit, whatever form that is, because cable has incorporated a hard brexit premium into it, that premium is going to be priced out and it will allow cable to rally. it is difficult now to make an outright bet on the sterling market. guy: u.k.-based investors are using linkers as their insurance policy. you get an inflation spike higher. if we get a no deal brexit, does that trade make sense? protectionerms of

sharp declinee a in the pound, you get inflation coming through rapidly. we are talking tariff impacts as well. prices would be rising dramatically. anything that protects against that would look like a reasonable position to take if you are expecting a no deal brexit. what we are hearing is many people standing back, not willing to touch sterling assets at all because of the uncertainty. at this point, every option is open from no brexit and crashing out in a dramatic way in march. the impact on sterling assets is dramatically different under those scenarios. up a chart,to bring it is a fascinating chart. it shows 1992.

sterling with a wonderful decade , down we go in a financial crisis and this is extraordinary , sterling trade weighted is still down where it was in 2008. as you mentioned, we are in this range. the level of wealth destruction in the united kingdom? a devaluation and not a depreciation, isn't it? vasileios: absolutely. there is no doubt. becauselem we have is it is only two years of data that we have been able to collect since the referendum, it extenticult to find the of the underlying structural damage in the economy. that is one of the things i have pointed out several times. all of our long-term valuation

models have thrown out of the because it is an event of which we have no prior and we cannot judge anything on the back of it. what we can say with a fair degree of certainty is that there is certainly a degree of wealth destruction going on into the u.k. there is little doubt about that. followinge you the example -- for decades i've been hearing about how robust the -- house prices in london are. if you go back into the recession, we had a drop. recall, london back then was the quickest market to come back from that drop. throughw, we are going a two-year period that house prices have stagnated. you are talking about a destruction of wealth.

discussion, let me go back to the standard there is wishful thinking in the united kingdom that the united kingdom can do a singapore and do nostalgic trading to the world. buy the idea that the united kingdom can learn lessons from how singapore trades? sarah: singapore is a fantastic model. it is an economy which has stone and willlast decades continue to do well in the future. fors a political decision the country to decide whether they want to adopt that model. i think the history of the u.k. suggests that the trade-offs you have to make are not the trade-offs that most voters will want to support. course, we are in a situation where the deal on the table is

one which tries to keep the u.k. as close to the e.u. as possible but we do not know if that is going to get the votes in parliament when it goes to a vote the 14th of january. plenty to play for. i agree we have seen wealth destruction through this period with the potential threat of more significant wealth distraction depending on how close we come to a no deal brexit. guy: singapore does not have the nhs which is worth bearing in mind. we turn our attention to the eurozone and talk about where the ecb finds itself. print come through, the inflation has come through it 1.6%. this is it. static at 1%. this is in an environment where the ecb has thrown trillions at

the economy to try and get inflation to move higher. where does the ecb go? sarah: they sit tight. everything they have said indicates they are prepared to sit it out. their medium-term forecast, they have core inflation back at target. as and when we move closer to that, they have the mandate to start to raise interest rates but that is not going to be happening soon. i would caution we are seeing rising wage growth and of course, for the ecb, that is a significant factor. they are looking at underlying inflation, you can say that labor markets are at full capacity. that is differentiated across the region. i think we should not be too hasty in saying rates are never

going to rise in the area. guy: if they were never to rise, were with that leave the euro -- where would that leave the euro? i do not know. i do not know what will be the trigger for not raising rates. forecasts onking traditional economic models, right? we are having a tighter labor market which is now showing wage buy that, they conclude that inflation is going to start picking up. if it doesn't, that does not mean it is going to be eurozone specific phenomenon. a phenomenon in which every major central bank is stuck and is not able to raise rates. therefore, exchange rates are

going to be moved by relative interest rate differentials. guy: the fed has raised rates. vasileios: that has already been in the price of the dollar. my point is, what if the ecb is not able to raise rates but the fed starts cutting rates because the phillips curve is nonexistent. that is not my scenario but i am speculating. tom: let's continue. of banks gkionakis ofwind and sarah standard chartered. we have a number of wonderful guests. 9:00 a.m., must watch, must listen. coming up.rro he has the future coach of the jets, rick rieder and lawrence

kudlow off of the jobs report. the report yesterday was something. all of that. stay with us. this is "bloomberg." ♪

guy: guy johnson in london. tom keene in new york. gold has come off its highs, joining a slip for haven assets in the aftermath of china's reserve cuts. gold had been at the $1300 level in what has been a rally. for --igher, head it's

headed for its biggest weekly gain since 2017. copper getting a decent bid. is the managing editor for energy and commodities. what will be the implications of the chinese cut? markets have responded were up thisetals morning and they increase some of those gains after the cut and that is on optimism that china is starting to use its monetary policy toolbox means they will keep the economy going. ofna is the key driver commodities, more than half of the world's copper. it will be positive. talk about gold for a moment, hedge funds.

hedge funds seem to be turning that positive of gold. it is a small move in terms of positioning. is there a sense more will follow? seen thatink we have people are optimistic about gold this year. in pricesood rally the last quarter and overnight, before this risk on move this ed theg, gold reach t an ounce. some are looking for gold to get higher. that would be significant. it has been range bound in its trading. that is what we would be looking for. tom: this has been important. let's bring up the chart, this is of gold, of gold in london.

gold four years ago -- move in gold four years ago. does gold go higher because of the microeconomics of gold in mining? does it go higher because of fear? what is the catalyst to break out of the range? it is going to depend on the economy. it is all about whether we are going to see that global slowdown we have seen in economic data and whether policymakers will be able to respond. analysts are saying the could be the catalyst to drive 00 an ouncethat $14 level i mentioned. tom: a long time since we have focused on goal. coming up on bloomberg radio, it

,s jim glassman with us thrilled to have them with us some bloomberg television. alan krueger on television, on theo, former chairman of council of economic advisers. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. jeffrey gunn lot beating the competition last year. his $47 billion bond fund returning 1.8% in 2018. that was the best performance among the 10 largest actively managed funds. invest in mostly mortgage related securities. tesla is close to winning approval to sell its model three electric car in europe. selling the model three is a priority for elon musk, targeting potential customers of the bmw three series. the man who set the standard for a discount air travel in the u.s. has died. southwest airlines fire -- founder was 87.

of bond that dozens imitators. it made southwest the largest u.s. carrier by domestic traffic. tom: thank you. there are many u.s. dollars. you can look at it against the g5, g7 or against asia. let's look at that chart right now. 1997.e go, the crash of up we go and we have strong dollar and the rollover of asian currencies since 2012. ewin with us and vasileios gkionakis. does standard chartered call for a strong u.s. dollar in continued asian erosion? sarah: we are not expecting the dollar to be stronger this time next year.

we see dollar weakness and the recovery on the asian fx side. the slow down for the u.s., we are not expecting a big slowdown , we think that some of the structural factors will start to weigh on the dollar, in particular the twin deficits. tom: i want to go to the asian model. , is it a strong dollar against asia? general,: well, in what you would like to see in the asian countries is that they kerld like to have weae currencies to ensure they are competitive. what i think is interesting and this relates to china is that months ago,t 6 to 8

authorities have made it clear they're not going to make the currency the first line of defense to address competitive issues and the slowdown. this is important in the sense of what is in store for dollar-china in 2019 and that is where we differ with the majority of forecasters that see dollar-china breaking through seven. we see dollar-china moving to around 6.85. the reason is this the attention of the authorities is shifting more towards fiscal thatmentation and in respect, this is going to be good for the exchange rate if they manage to rev the economy without loosening monetary policy too much. at the same time, you have the dollar in general. that goes back to an argument we

have been making for some time. thisollar got a boost year, propped up by an enthusiasm about fiscal stimulus in the u.s. that enthusiasm is going to end, fading and in the you're going to find the u.s. operating at full employment without the need of a fiscal stimulus but with a twin deficit. years, thet 10 portfolio flows have been humongous. the position has exploded in the u.s. that if risk premiums in the u.s. start rising, we are bound to start seeing outflows and they do not have to be big to put pressure on the dollar. tom: very good. thank you so much. vasileios gkionakis and sarah

hewin with us this morning. to dive into our jobs day coverage bird a lot on economics today, dow futures up 293. i cannot convey enough the work of michael mckee. robert kaplan from the dallas fed, mr. mckie at the american economic association to attend the jay powell conversation with jay bernanke and yellen -- with ben bernanke and yellen. he will also be in conversation with loretta mester. jim glassman next. this is "bloomberg." ♪

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my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. 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: this morning, markets and

in the and i'll ask if and when the next apple will drop in china. mid-level officials will travel to beijing next week. it is jobs day in america. is this as good as it gets? wants theker pelosi government shutdown to and. so, do republican senators of colorado in maine. surveillance,erg live from new york, i'm tom keene. guy johnson from london. you have been focused on this rate adjustment which is an accommodating forced to their struggling economy. guy: we have been waiting for this, the chinese authorities waiting to deliver some of this stimulus. will we get fiscal stimulus to follow?

was they would wait until they got more news on trade. into a going to get higher gear with the u.s. representatives visiting china. they decided to go before that. which is interesting. tom: also interesting, our first word news. hill, then capitol new house democratic majority voted last night to end a partial government shutdown. that brought congress no closer to resolving the impasse to the presidents demand to build a a border wall. the president and the senate republicans oppose the plan. leaders of both parties meet with the president today. the u.s. and china will hold the first round of trade talks between the country's leaders. president trump and president xi jinping agreed to a truce in their trade war. the u.s. delayed scheduling tariff increases on chinese products. in response, china lowered tariffs on cars. china's central bank is moving

to release cash into the economy. the pboc cutting the amount of cash lenders must hold in reserve by 1%. in a speech today, jerome powell may strike a more cautious tone about the u.s. economy after last month giving the economy of -- a thumbs-up. the latest manufacturing housing and market data give the central bank reason to worry. move as asee the next rate cut that will be the first in a decade. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: thank you so much. today,o the market futures up 32, dow futures advance.

the euro is stronger. there it is. 107.99, weaker. the 30 year bond up three basis points. that is remarkable. guy: let's talk about what we have got in terms of reaction. the data on this side of atlantic. the euro has come softer as we see that different -- disappointing cpi print. equity markets did not get a chance to respond to the cut. bider did and it is better as a result. tom: let us begin our coverage

with james glassman of jpmorgan. expert on the american labor economy and combines it with frequent flyer miles as he listens to commercial customers. thrilled to have you with us. what have you learned in talking to clients? james: everybody is busy. are having a tougher time finding people. tom: why don't they raise wages? guys in suits and ties from jpmorgan go, forget about it. james: you have got to operate competitively. up, youcosts are going have got an eye on whether you can get a rice pricing. we do not have the but -- get the right pricing. we do not have the bodies.

the us economy is back but there has been little net immigration which is unusual for our history and that is a reminder that immigration reform is an important step toward solving that. tom: i did this chart. he nailed the teenage employment one decade ago. employed in the united states back to eisenhower, back to truman and those slopes matter. bernanke, yellen, and powell are watching the show now. . boom i want you to explain to our ,udience why prime employees why have we flatlined since 2000? james: it is interesting. families today have more resources than my family had.

what we noticed in this last cycle is people get out of college and cannot find a job and they have options. 3 million young adults went back to school. good for them. life is getting more competitive and if you get a little extra edge, they are doing better. what we saw was a generation that had options and when times are tough, they chose to go back to school. we are seeing most of that come back. there are about one million young adults relative to where we were back in 2007 who are still out there. people realize a college education is not a guarantee of a job. the tight labor market mean the productivity improves? james: it will. businesses that are doing clever things to get around this, innovation is part of it.

is, all the technology we have, we know it is improving productivity. it is difficult to measure productivity in the digital era. the lines between work and leisure have become blurred. we do not know how much work effort to people put into their job. my work life look similar to my home life. allows mel technology to do a lot of things that work at home. -- at work at home. this is going to be improving labor productivity. when you cannot hire people, you're going to find ways of getting more with existing workforces. guy: are they listening? maybe they do not want to invest financialbecause the markets are signaling more difficult times are ahead. james: the people who run businesses are seasoned.

they know the markets are volatile. there used to volatility. -- theyes them nervous are used to volatility. this makes them nervous. decisions are based on fundamental economics and market opportunities. i doubt we are going to see a huge echo from what is going on now. tom: are they going to not cut because we are fully employed? mumbo-jumbo all the , loretta mester today, chairman powell today. in the background, is it people ite you, are they all saying is a fully employed america? james: it is great to have a fully employed economy. we do not know what our capacity limits are and the central bank takes their cue from the population. inflation has not played out

like people feared. that is why the fed is beginning to be more cautious. remember, all the talk about we're going to overheat the economy. tom: jamie dimon nailed bitcoin last year. he is a major banker and has to do with technology. we all have to deal with technology. as we begin this year, is technology our friend or enemy? james: our friend because it is ways of doing things better, more efficient. it is disruptive but you have to embrace it because that is how you survived. in our business, it is key. tom: what do you say to the half removed fromat is this technology economy? james: this technology would not

be happening if consumers weren't embracing it. every time i click, i am embracing the technology. [no audio] if consumers to not embrace is it would not be happening. tom: jim glassman with us. alan krueger scheduled later. through the day, with michael meetings in aea atlanta. jonathan ferro interviewing lawrence kudlow. jerome powell in atlanta. comment in powell in speaking with chairman bernanke and chairman yellen. together. hourfor that in the 10:00 and lawrence kudlow in the 9:00 hour. stay with us. this is "bloomberg." ♪

viviana: let's get the bloomberg business flash. they largest pharmaceutical deal will be a big payday for bankers. bristol-myers squibb agreeing to pay $74 billion for should celgene. according to lead analysts, they will share much as $85 million in celgene. citigroup could split as much as $110 million. for the third straight year, mercedes-benz is the top luxury car brand in the u.s., selling 316,000 cars and suvs, it beats bmw by fewer than 5000 vehicles. toyota was third, audi was forth

after posting its first drop since 2009. the european union will begin to search for candidates to replace peter paris. euro area finance ministers will pick the new board number -- member next month. tom: thank you so much. let us listen to a newly minted speaker pelosi. >> we are not doing a wall. does anybody have any doubt we're not doing a wall? days, dayentful two three will be just as eventful. kevin cirilli is in washington. i'm going to give you an open question. what is kevin cirilli looking for when everything gets going in washington? kevin: whether or not there are going to be republicans who push back against the president. you are starting to see cracks

in the senate republicans as well. they do not want to have a partially remained shut down government for long. this is a nightmare with small businesses urging the government to reconsider. you have got thousands of workers not reporting. h affecthaving a sluggis on the northern virginia economy. what is speaker pelosi willing to compromise on? tom: what is or downside to waiting out this president? the democrats run the risk of being attacked to swing voters who have gone back-and-forth and not being able to work with the president or to have no new concrete ideas to put forward. polling and it would suggest most americans are on the side of the democrats on the wall.

when you start talking opioid addiction, gang violence, that is where republicans are able to make inroads. to the u.s. cost economy exceeded $5 billion, the cost of the wall? kevin: in terms of the market , millions of dollars, it eclipses the $5 billion that we are talking about and that is going to be the longer-term coupleity play, we are a of days away from a u.s. delegation headed to beijing, a couple of weeks away in terms of the additional tariffs on china and the raising of the debt limit. aere is chatter to have short-term extension to open the government. that there is going to be a stable couple of months, that is a dream. about the views of

americans on what is happening. do the democrats underestimate how important this is to trump's base? kevin: he has made the calculation this is something he needs to deliver. i was shocked by how he is taking a different issue -- different approach on the issue of border security then trade. the farmers have stuck with him even though they have been impacted by trade policies. he has made a calculation that the base would not stick with him on immigration. yesterday, an important essay in time magazine, why trump's generals have abandoned ship. admiral, he says i

have been annoyed by a number of generals. there is an ongoing sense that wasmoral structure unconventional to the military mind. what will it mean that the credibility of his life and career supported the work of this administration? that is a personal choice. how are the generals doing? kevin: the commander hit the nail on the head in terms of the frustration within the military community about the decisions and withdrawal from the middle east. in thata lot of folks community are waiting for the first quarter of this year to see how the president charts the new course. tom: you look great. kevin cirilli is our chief washington correspondent. thank you. coming up, more to talk about.

james glassman with us. we have got to talk central banks. michael mckee at the meetings in atlanta with the president of the cleveland fed. stay with us. this is "bloomberg." ♪

guy: guy johnson in new york. francine lacqua is off. we have got this powell event

coming up. it is like disneyland for people like us. it is something we have to see. what are you expecting? is painting a positive picture of the economy. do you think we get that from powell? tom: we need to stop and say this is cool. is where all of the fancy academic economists get together and it is a job fair for every aspiring economist in academics. you have these three heavyweights showing up together. 10:00ill be an important hour. guy: i think it is interesting, you have got two academics and one nonacademic. i wonder if that is going to be highlighted. in jimy don't you bring glassman. guy: you painted a positive

picture for the u.s. economy, companies are out there investing. is something that risk asset markets are not reflecting now. opportunity to average into these markets, it is interesting retail is selling now but pension funds are buying risk assets. james: it is an opportunity. slowdown inat the the u.s. is going to be a problem for the u.s. when unemployment is lower, is strange. these folks are going to be reflecting a different view about this. market -- what the job market is telling us is that the economy is growing. a slowdown would be a good thing because it would increase the odds that this expansion is going to go longer. that is the idea bothering the markets.

people are worrying about a possibility of a new recession. that is unlikely because inflation is well behaved. i think this is why people like going to be reflecting a more optimistic view. guy: is what powell has got to do is say the economy is in good shape but we are aware of the risks and we are going to take them seriously. all of the policy tools are on the table. mohamed el-erian wrote a nice piece, that is what it boils down to. james: i think the he driver for the shift in the mood lately, -- the key driver for the shift in the mood lately, everybody was talking about overheating the u.s. economy and over the last six months, that has not happen. it is the moderate behavior of inflation despite blowing -- low

unemployment and a strong economy that is changing the fed's mine. look at their assumptions about where the sustainable level of unemployment is. it keeps coming down. if you had asked what the possibility of unemployment was range, they would have said no chance. guy: stick around. coming up, rick rieder, blackrock, the conversation at 9:00 in new york. this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. amazon prime video so when you say words like... show me best of prime video into this... you'll see awesome stuff like this. discover prime originals like the emmy-winning the marvelous mrs. maisel... tom clancy's jack ryan... and the man in the high castle. all in the same place as your live tv. its all included with your amazon prime membership. that's how xfinity makes tv... simple. easy. awesome. tom: bloomberg surveillance. we say good morning from new york city. guy johnson in london. an extraordinary news flow, and

extraordinary beginning to 2019. time in for the second three days, president trump will meet with leaders of both parties to try to end the government shutdown. the house democratic majority made it clear where it stands. the house approving a spending bill that would reopen closed agencies. the president and senate republicans oppose the plan. today, the u.s. government comes out with this final jobs report or 2018. it is likely to show employers capped a strong year of hiring. according to a survey payrolls , rising by 184,000 in december. economists expect hiring to cool down this year. carlos ghosn will finally get his day in court. ghosn has been in a jail cell since being arrested on financial crimes. on tuesday, he will be in a district court. his lawyers will ask why he remains in jail. prosecutors extending his detention several times. global news 24 hours a day and

at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: very good. thank you. joining us now is william hoagland, the senior vice president. that barely does justice. james glassman of j.p. morgan chase with us. this is wonderful, you together is a wonderful thing. flashback., it is a it is about the fiscal responsibility. are we going to get fiscal responsibility from democrats? william: they are talking about it in terms of every is stating -- in terms every in stating the rule. it is difficult to say

you will see the deficit coming down. tom: how do you link that to any kind of gdp slow down we see? on given is the trilli any kind of slow down in the run rate of the economy? jim has indicated, there is stimulus still in there with that deficit. we have been on panels before. i tend to be more concerned about the level of debt we are accumulating. i wish jim would focus on that more. tom: excuse me, we need to rip up the script. this is important. the movement of the debt versus the level of the debt. which matters? james: i think if we could get the spending and the revenue lines moving closely that would help. then we would be thinking about

the debt levels. is hard to figure anybody is going to do anything until you see the symptoms. these symptoms they care people symptoms thate get people focus, that drives interest rates up. most people do not know why we're talking about this. the answer to this is get our hands around health care and more energy in the u.s. economy, immigration reform is a part of that. if we can boost growth potential above what the cbo assumes, it would do a lot to make progress on the fiscal picture. let me jump in. i am trying to take a more global perspective to get an idea of what is going on. what we see from outside the

united states is a congress that is likely to continue to fight with the white house. what does that mean in terms of the ability of government to deliver productive policy going forward, for the ability to invest in the right spaces. what does that mean for the debt load? william: you are right. this issue we are going through right now as it relates to be slow down or the shutdown is the tip of the iceberg. we are going to see a volatile situation in the congress. we are looking at a statutory debt limit that we have to increase the spring. we are talking about reductions in spending under the existing budget law which congress will not tick the cuts. we are seeing a number of issues that deal with medicare.

are i am suggesting is we going to look at a lot of volatility. if you think this shutdown is the issue, this is just the tip of the iceberg which will create the issue of volatility in the markets throughout 2019. i'm running a company in america, am i looking at this as having an impact on what i am doing? i am struggling to find people, i'm worried about the signals the markets are sending. , nuts andit mean to figure out, where these workers are coming from? my perspective on it is that this creates uncertainty in terms of whether i should or should not invest, whether interest rates are going up or down. think this creates uncertainty as to what their future

investment should or should not be. holidays, one of the great essays was the washington post looking at suburban republicans. things, youreat remember what a liberal was. difference in your world between a liberal and progressive? difficulties,e tom, trying to define the differences. i really do. i look at a liberal as more of a pragmatist than a progressive. that would be my definition. tom: dr. glassman squirming. , how are the democrats going to re-fame -- reframe their fiscal conservatives and -- conservatism? the difference,

what is the difference between a cowboys fan and a phillies fan? we hate each other but we love the game. divided, we have different ideas about how we should be running things but we all of the country, we all want something better. if we're not making progress, it is because things are good, there is no big crisis we see now. if we had a crisis, if the fiscal situation was a crisis, it is too many of us, we would be doing something. tom: perfect timing. i'm going to bring up my chart it is aear last year, move forward chart, the twin deficits. what dr. glassman just mentioned is the angst year of the reagan years. heading, are we are

terror over 20 deficits? william: i believe, yes. i believe we are going to be looking at deficits continuing to grow. i do not expect there to be a 2 -- deal of effort to may to be made to control the deficit. congress is not going to cut defense which is in the cards now. i do believe we headed toward a combination similar to the reagan years. case, if it is the is going to be a bigger story and the stimulus is going to fade from the economy, what does that mean for the dollar? that is going negative? -- james: we all have the same problem. the u.s. is the best house in a bad neighborhood.

that makes happen people worried, they run to the dollar. we benefit by being a source of stability, a place where people are happy to move money when they are afraid. i do not think we are going to see this, it is not going to throw the economy off course. it will be an issue with got to deal with politically and it is hard to see how we get there in this environment. we will be forced to. in terms of-- guy: when that comes, when does that come? the privilege that the united economynjoys, the u.s. is doing well, people by the -- uy the dollar.th how long does the deficit story

take the four starts having an impact on the -- before it starts seven impact on that kind of response? james: it takes time. policies, that process is keeping interest rates down. if we were back down to fully normal, we would feel that impact and see it more in interest rates. that is not going to happen soon. part of the answer as to why iserest rates are so low global interest rates. tom: thank you so much. be speakingill with william hoagland a little bit more through 2019. coming up, a wonderful morning. mohamed el-erian in the 9:00 hour.

lawrence kudlow from the white house with president trump, looking at the jobs report. michael mckee at the meetings of the american economic association, timely, in conversation with a mathematician from cleveland, loretta mester. please stay with us. this is "bloomberg." ♪

viviana: mrs. bloomberg surveillance. let's get the biz -- this is bloomberg surveillance. jeffrey gunlach beating the competition last year. his $47 billion bond fund returning 1.8% in 2018.

that was the best performance among the 10 largest actively managed funds. the funds invest in mostly mortgage related securities. the man who set the standard for discount air travel in the u.s. has died. the southwest airlines founder was 87. it spawned dozens of imitators. it made southwest the largest u.s. carrier by domestic traffic. that is the business flash. guy: thank you. miranda car joining us now. rrr cut out of the chinese, a little earlier than anticipated. we have got trade talks next week. it has come earlier. what is your take away from what we have seen? it has been widely expected.

they need to boost liquidity before that. they fact this cut is permanent is offsetting some of the short-term lending facilities. is across the board, across all of the banks, lending across the board indicates the need to boost the economy early tied in with things like the local government issuing bonds for infrastructure spending indicates a need to offset the trade slowdown we are likely to see. bigger boosts than was expected. guy: what does it signal about the chinese authority attitude toward their currency? the key reasons they have not cut it previously has been to try to minimize pressure on the cny. , one of thewith

things they could take the pressure off is that the u.s. dollar is not so strong. you are getting deflationary policy coming out of china. you saw price fall significantly and you have seen prices fall across key commodities. exportingtarts deflation, there is less pressure for interest rate hikes, less pressure on the u.s. dollar. maybe they think it will not see as much pressure as last year and they can ease monetary policy without having too much pressure. that has been a problem in the past. i want to dovetail this with a book that i featured last year. i cannot say enough about this as being the most efficient way to get into her world. you read the "third revolution" and it is a whole different view. what is the third revolution of

beijing's monetary discretion? do they have the freedom to fix their system or are they lock ed into certain decisions because of the weight they are set up? -- because of the way they are set up? miranda: you can have china self-reliant. message was about chinese self-reliance, managing its own monetary policy, not trying to decouple its monetary policy from the u.s. economy and u.s. dollar. that is not entirely possible. you face pressure on outflows, you have to encourage money into china which means it has to get out again as well. there is wishful thinking about how much china can control itself without facing pressures

from the outside world. one more question, if we could. if thisthe next step, does not work, what is the next step if we see gdp go down to a five handle? they are going to have to put more money into the infrastructure. accepted.he growth is six even ifort growth reports -- even if growth seems lower. it does face, they are categorically and saying they do not want to pump up the economy. they're going to struggle because there are no more debt levers to pull.

the government is to leverage, the corporate's are too leveraged. the next phase is weaker than we saw in the 2015 rebound. much, withyou so this important announcement. we are going to come back with jim glassman. i have got a chart to work with their on this jobs day, on the choices made by central banks. stay with us. this is "bloomberg." ♪

tom: bloomberg surveillance. we need to do a data check. green on the screen, up 34. what do you see? why are we lifting? guy: people are waiting for powell. chinese decision to cut earlier has lifted risk assets. those concerns, the

fact they are taking action now. copper is trading higher. it did have an impact on european markets as well. tom: i am glad you're wearing a white shirt. i am wearing a yellow shirt and i got all these emails. it is a statement on friday. let's go to a single best chart. this is a chart guy johnson cares about. the balance sheets of our central bank, the red line is the japanese struggling with their deflation. the blue is the ecb, the line is going up. is thessman, there victory lap, the white line is the united states diminishing its balance sheet. let's call it the anguish of central bank. is chairman powell

and the other central bankers? anguished.all that they are seeing a well-balanced economy. it has been much more orderly. tom: chair yellen, chairman bernanke, bernanke has been adamant that the balance sheet will be fine. it is not a big deal. do you agree? james: he is right and the way things have been playing out has been validating that. a couple of years ago you might have been worrying. taking assets out pushes long-term rates down. that has not happened. so important because carney has got a small matter like brexit. for mario draghi, this is an issue, isn't it? guy: it is but it is not draghi's problem, is it?

draghi is about to exit. successor is going to have to deal with the balance sheet. beld the fed like rates to higher than where they are now? would they expect rates to be higher than where they are now given the length of the cycle? james: there are a lot of things going on, it is not just their policies, it is the global economy. they probably expected rates would be moving higher because the analysis of qe indicated they thought qe pushed rates down. they are probably surprised rates are not moving up. i think they wish the economy stays where it is and this expansion continues, in contrast to every single cycle in the past has ended within a year or two of reaching full employment.

they have got a lot of reason to be optimistic. tom: this has been wonderful. thank you so much. getting ready for jobs day, alan krueger scheduled to join us. on china this morning, the central bank of china coming out with a set of headlines. , toa to boost management deepen market oriented reforms. they are going to open up the sector in 2019. it sounds like new year's headlines from the pboc. alan krueger, we will do that next. this is "bloomberg." ♪

david: that's

break.arkets get a just to the rescue, investors look to plummeting reports to provide direction, and the chair in the hot seat, the fed says it is data dependent and now fed chair day -- jay powell has to prove it. david: welcome to bloomberg daybreak on this friday, jobs day in the united states. i'm david westin alongside alix steel. jay powell has to prove their data dependent. alix: that was interesting, a cut, ais point rrr sickly meaning banks can lend more. the interpretation is that they need the stimulus that they are going into the loon your desk lunar new year, where liquidity is tighter. we might be over interpreting it. david: you know