♪ >> are the bulls back? stocks in asia jump. back to the table, washington in beijing resuming trade talks in the first formal meeting since the 90 day truce was a great to back in december. and president trump renews threats to bypass congress to build the wall while the shutdown interest it 17th day. good morning, everyone. good afternoon, if you are watching from asia. this is "bloomberg surveillance." i'm francine lacqua in london. let's get a look at what the for the firsting

proper trading day. european traders are back from holiday -- a little bit of movement on the dollar. u.s. futures are pointing to a higher open, and i looking at the dollar falling against a lot of its peers and you can see the trading session is pretty much flat. and it sentdging up yields soaring back to .67%. coming up in the next hour, we will be talking global risk. let's get straight to the first word news in new york city. topresident xi jingping's economic advisor reportedly attending the first-day of u.s.-china trade talks. they are in beijing for face-to-face trade talks, the first formal meeting since presidents trump and xi agreed

to a 90 day tariff truce. china iss that attaching high importance to these talks. theresa may has stepped up her battle to persuade the u.k. parliament to back her brexit deal she wants the country -- brexit deal. the u.k. prime minister says she will give parliament a bigger say over any feature and says she will seek fresh assurances from the eu wall 200 lawmakers from both parties call on her to rule out a no deal brexit. they say it would threaten voters livelihoods. on,f the deal is not voted then we are going to be in uncharted territory. i don't think anyone can say will happen. >> president donald trump says planning a steel barrier rather than a concrete barrier on the border and is threatening to invoke a national emergency to circumvent

congress. he says it will depend on what happens to end a partial federal government shutdown, now in its third week. democrats have already threatened a legal fight if trump tries to declare a national emergency. >> we will build a steel barrier, steel. it will be made out of steel. it will be less of truth is and it will be stronger, but it will be less of truce if, stronger, and we are able to use our great companies to make it by using steel. we will be doing a steel barrier and it gives us great strength of the border. >> in an unprecedented move, the king of malaysia has abdicated. the sultan steps down effective immediately. butatement gives no reason the move follows media reports and rumors of his marriage to a former russian beauty queen. the position is mostly ceremonial but does hold some discretionary powers.

book, about race relations in the 1960's, and "opinion rapidly," the biotic about freddie mercury, emerge as the top winners of the golden globe awards. wins golden globe for best actor in a drama. sandra oh wins for best actress. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you so much. asian stocks surging as they struggle to find direction after searing comments from jay powell on friday and a better-than-expected jobs report. fed policy is flexible and officials are listening carefully to financial markets, so are the bulls back? ahead of the u.k.

investment office for ubs. thank you for joining us. let's start with the main trends for 2019, what are the markets looking at? >> i think a lot of the cynicism has split up into four. remember that the s&p experience its worst december since the great depression. a lot of pessimism. the market is pricing a slowdown in the economy, this is probably striking but nevertheless we are .acing a challenging year by december the u.s. economy will have enjoyed the longest growth cycle ever and you can't concernsthink that the about a downturn are going to stick around. year.lenging

>> we must be on the same page, stay invested to diversify, looking for pockets of value. it's a time for stock pickers to be selective in they need to manage volatility. >> let me bring you to a market's chats, one of our questions of the day. chart, it is amy simple chart, we brought it back but first let's get to the chart and it shows that has to slump, losing eight months on average, more than twice as long. are you expecting more of a market correction? >> overall, markets have realized throughout the new year that there was to sharpen divergence in that was reinforced, so we should see

positive momentum filter through. idiosyncratic,e notwithstanding the end of the market. overall we want to focus on the fundamentals, but nothing so sharp to war in -- to war and markets crashing. market strategist -- and today we ask how far can assets go on a dovish powell? i see that the bond market has already priced out, you raise steady rate hikes for 2019. if anything the market is starting to price the chance of a cut in to 2020. so how dovish does the fed need to be for equities to rally on a sustained basis?

i have my doubts. it's not just the fed recognizing the tightening of financial conditions, it's a risk that clearly could impact, could have an impact on the past policy, but will need better economy data. we had a slow down last year in europe, in china, and now there are some concerns that the u.s. economy might slow because of the fiscal stimulus impact diminishing. , fees were helpful but earlier that week, we also have that 5.2 drop in the manufacturing, and that is the type of data we don't want to see. >> but going back to the question, you can have bad data. >> you can never rely on central bank data alone.

to the pointk about financial conditions, that's the dollar as well. if you think of dollar weakness, not aggressively, but no more dollar strength. that in itself precludes further tightening. i know some dollar weakness can help with financial conditions, and we can have a less dovish fed. >> do you see a repricing of treasuries are german bunds in 2019? you have been expecting it for a while. >> we did have that correction last year, we had an increase in bond yields but i still see no , or real rates around -1%. i see no value and with the ecb kiwi ending, we do see a bit of a rebound. the lesson from last year from treasuries in particular is that yields cannot increase sharply in any rebound will be limited.

last year on two occasions we had a 40 basis point correction and that was followed by a sharp equity market correction. -- thes you something equity market could not sustain a large increase in bond yields. >> thank you very much. up next, back to the table. u.s. and chinese officials resume trade talks for the first time since a truce was agreed to in december. we will have the details next. this is bloomberg. ♪

♪ finance, politics. this is "bloomberg

surveillance." the u.s. and china begin talks today aimed at reaching a trade truce or trade deal during a 90 day truce. both sides face the resumption of tariffs in march as they don't strike a deal. a number of issues are on the table, including u.s. accusations that china forces american companies to share sensitive technology. here is what we have been saying about the trade talks. >> i have given each other 90 days and we should use that time. very often these agreements are never done early on, they are always done on the last leg of negotiations, and it's a at some signal that lower level of government there are ongoing negotiations. >> you are quite right to deliver a win, and it is probably possible for chinese negotiators to offer it to declare a win. we will probably see ups and downs between now and the end of the 90 day. >> this is a very short

deadline, so we can to be too optimistic about a whole lot, but it would be nice to see some progress. it's a lot about ego but ultimately there's a lot on the table and that is pushing the two leaders in their teams to find a way forward. >> we are not seeing a collapse in global trade but what we are seeing is companies struggling to find ways of getting trade taxes, less efficient production , and that's is primarily falling on american companies. >> it will probably take a little bit of time for fiscal and monetary policies to filter into the economy, but we believe overall that investor sentiment is what needs to be lifted, and clear messaging around the trade disputes and in particular the is necessary to lift the investor sentiment. >> let's get straight to enda

curran, our bloomberg chief asia economics correspondent, joining us from hong kong. happy new year. what are we expecting from trade talks? we saw president xi. showing up. does that mean they mean business? >> happy new year, francine. indeed, i think one of the key takeaways people are looking for is not an outright conducive agreement but a sign that progress was agreement but a sit progress was made to get these talks to the next level where more senior chinese and u.s. officials will be involved. our colleagues in beijing are reporting the top economic ofisor -- at least some those meetings indicate the seriousness that china is attaching to all of this. it is positive that they are having this first instance in the changing economic environment and economic

sentiment probably means both sides still want to reach an agreement, but what kind of agreement and how durable that would be remains to be seen. >> and a, thank you so much. enda curran from hong kong. let's get back to our guests. is it look at china, tedious see will sustain economic growth in china? >> it is going to be domestically driven factors, a combination of what the pboc is doing, and the follow-up needs to be on the fiscal side, infrastructure announcements. >> you will get apple and the disappointment of high-end products -- is that symptomatic of something going badly or getting worse in china? >> it's possible from consumption to investment.

6% is clearly still attainable at this phase. the next phase is what can we thato assuage concerns, will deliver demand for the economy? let's make sure they do not retrench, and what happens in march will be important. >> do you think they will .etrench >> what we are seeing of the military policy side is not what we saw in the past. there's already a lot of debt in the system, particularly on the corporate sector. they need something more balanced now, and in particular they need to support the consumer. it's a long-term thing to support the consumer. you need to reinforce social benefits and that is going to take time. they are moving in that direction, and in the meantime, we have a military policy report, we have that old spending, that

is also going to help. we take a fairly piecemeal approach are now, probably enough to sustain growth about 6%, but it is still going to be a difficult environment. >> ok. thank you. up, 2018 was a tough year for hedge funds, but not for ray dalio's friendship -- flagship fund. we will discuss that coming up next. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance." i'm francine lacqua. last year, bridgewater associates rose 14.6% according to documents seen by bloomberg. big gains from their pure alpha strategy came as other friends were hit by volatile markets, resulting in the industry posting one of its worst years ever. joining us now is mark gilbert. he writes about hedge funds, and is a columnist for bloomberg opinion. very briefly, because i know this is not your focus, how do they compare to its peers? >> they beat the aggregate losses last year by about 7% and what we are seeing is a broad dispersion. big winners in big losers.

we are seeing a lot of funds losing money and so that dispersion and returns shows what a difficult year was for global markets in particular, where the trend was never your friend, was never anything to jump onto, that could deliver sustained, persistent performance. >> mark, here wrote an article on friday about the risk of losing money by shorting bonds. while custer your arguments. expect ofr people bond yields to sustain, they have been had. when we saw that 3% level eight on a ten-year treasury, that was supposed to signal the bull market. the 30 year treasury was a poster member the bull market. it hasn't happened in the past three months and we've seen a debt,se in negative it is up to $8.4 trillion.

they have continued to persist in a downward trend and that is partly due to the volatility with people doing perceived income fixed is an, because the economic backdrop is worse. we saw synchronized economic growth last year and you are now seeing a synchronized slowdown in the fed's reaction in terms of scaling back expectations, and it turns out betting on rising bond yields has turned out to be a bad trade, in this year it looks like much the same. >> much the same of next year? is there a catalyst that could change things? >> you could start to see inflation pick up, bond yields will nudge higher. expectationsment in the u.s. and eurozone have started to turn down and you have brexit which will have an impact. fed be are seeing from the

in terms of scaling back its expectations, that's an acknowledgment that may be the u.s. economic growth picture has turned. i don't think anyone is predicting a recession but if you see that change, if you see the jobs growth we saw on anday, that's a harbinger you could see economic bond yields edged higher. i don't think we will see anything like the armageddon people were predicting at the middle of last year when they were seeing those key levels breached on the 10 year u.s. treasury. those trends have reversed and i don't think we will see much of a gain against bond markets. >> thank you so much. mark gilbert, talking about the bonds. up next, the partial shutdown of the u.s. government enters its the president edging closer to a radical move to escape the impact. we will discuss that next. we will also have a say on what

the dollar does, if you get dollar right, you can get emerging markets right. but how do you bet on currencies, and how does that affect the rest of your positioning? u.s. 10 yearhe yield at 2.64%, we also have a good brent chart i want to look at. goldman lowered its breadth forecast. they say it will be stronger. we will discuss your markets, your outlook, and much more. this is bloomberg. ♪

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rhapsody" beat "a star is born" to win the golden globe. our most read stories, and it isplace, goldman says great to bet on a weaker dollar. president trump says he is planning a steel barrier rather than a concrete one with mexico. hedge funds lost over 6% on average. first rate is in new york city -- let's get to first word news in new york city. theresa may warned of the country will be in uncharted territory if her plan gets voted down. she says she will give department a bigger say over any future eu trade deal. she also says she will seek

better assurances from parliament. >> if the deal is not voted on, then we are going to be in uncharted territory. i don't think anybody can say that -- iana: tesla is finally breaking ground on it a gift factory. is in shanghai today to let the foundation for the first car manufacturing plant outside of the u.s. car sales and china's economy are both slowing down amid the trade war with the u.s. tesla has lowered its forecast for 2019.

the bank expecting the market to know balance at a lower marginal --t due to elevated k" and "bohemian rhapsody" emerging as the top films of the 76th annual golden globes. rami malek winning the best actor golden globes. sandra oh winning the award for best actress in a tv drama series. 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. francine: thank you so much. president trump has renewed his threat to a vote in national emergency as a way to circumvent congress and build a wall on the southern u.s. order. -- border. onsays that will depend

ongoing talks in the partial government shutdown. >> i made it clear in national emergency depending on what is quick to happen over the next two days. we have a meeting. to aroup will be going certain location and having another meeting. you don't expect to have anything happen at that meeting. have think we're going to some very serious talks come monday, tuesday, wednesday. francine: democrats have already threatened a legal fight as trump tries to declare a national emergency. stephanie, is it likely president trump will go through with this threat? both sides have backed themselves into a corner here. neither are willing or seemingly able to back down without betraying promises they made to their base. it ist a compromise,

likely that he would go ahead with that move. the president does have wide discretion under the emergency powers act to take action might this, but it would most certainly be challenged in the courts, which can take many weeks or months. politically, even some republicans would challenge the wisdom of going down that route, removing funding from the department of defense for agreedrm projects, national security issues and averting that to the order. francine: what happens next? how long can this last? already, it has exceeded the 2013 shutdown. trump has said he is willing to let this role on for years. we are in uncharted territory right now. it seems that both sides are willing to a this out. follow willcost and put increasing pressure, particularly on moderate

republicans editors -- senators, to try to forge some kind of compromise. the senate has passed a bill that trump rejected. they could always back to that and try to force the president hand and override a veto. francine: thank you so much. us, jeff, at what point of the shutdown actually hurts the u.s. economy? think the date is when to be a bit patchy over the. the numbers coming through, especially on this oxidative side, inthe data terms of economic forecasting, now forecasting really starts to work.

francine: dream agreement that? -- do you agree with that? >> i do. it should end soon. message. a positive this is not a good start between trump in the house. that tells you that the coming here and even into the next election is going to be difficult. you're not going to have great cooperation there. francine: when you look at the u.s., there is also the challenge of the central bank independence with powell saying, even if the president asked me to resign, i won't. do we put that to one side? geoff: i don't think we can never put that to one side, especially in the age of qe. possible.ime, it is on the list of things to be concerned about, i think for now, that ranks relatively low. are you-- francine:

worried about it at all? vincent: it is easy for trump and the fed to point fingers at each other. truck could say the stock market is going down because of the fed. on the other side, you could say it is the trade war. it is the end of the fiscal stimulus that is causing all of that. hopefully, they're not going to set us up on a crash course. i'm not too worried. i think it will show with trump trying to point fingers. francine: thank you both. us. stay with coming up, theresa may steps up

her battle to persuade the british parliament to back her deal. we will discuss brexit next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash. viana: a singapore investment firm is exploring options in its stake. it is considering possibilities

in the retail group including a partial sale. it has more than 14,000 stores, including the super drugstore in the u.k. bridgewater associates rising 14 14.6% as stocks rose. documents seen by bloomberg also shows it has made an .verage 12% 2018.funds losing 7% in apple and samsung half rate any partnership. the iphone maker is thinking itunes music and tv shows to its archrival's television set. sears is up to be preparing a wind down after the chairman's bid to buy several hundred

stores out of bankruptcy fell short. of the baker's qualifications -- banker's qualifications. tesla finally breaking down on it $5 billion factory in the world's biggest car market. after four years of planning, elon musk in shanghai today to lay the foundation for the first carney factoring planned outside the u.s. the ceremony -- car manufacturing plant outside the u.s.. francine: thank you so much. with less than three months before britain is set to leave the eu, there is still no clarity on how the divorce plan will pan out. the prime minister stepped up

her battle to persuade opponents to back her brexit deal in next week's vote, warning that the consequences if they reject it. >> if the deal is not voted on, we are to be in uncharted territory. i don't think anybody can say exactly what will happen in terms of the reaction. francine: joining us now is emma, who covers exit for bloomberg news. year, but still the same concerns when it comes to brexit. do we know when the boat is? emma: next week. theresa may said around january 15. theresa may have not secured what she had hoped to secure by now, which is some assurances from the eu. basically, what she is saying is that if a deal is rejected, the message is very much that we

will be in uncharted territory. that appeals to the whole birth of spectrum. -- brexit spectrum. that is the message she will be taking to lawmakers. i think one of the main conclusions towards the end of last year is that it is very much in doubt whether or not brexit will actually happen on march 29. extension seems to be coming best case scenario. scenarios wef the are thinking about for this year , a lot of them would involve some kind of extension. what we are seeing is parliament becoming more assertive. we are seeing that at the end of last year and now with maneuvers to basically stop no deal from happening. i think that is going to be one

of the themes. francine: depending on the arithmetic, does pound fall? geoff: it is more volatility. i think the pound will face more downside is we're headed toward a crash out. that is not our base case. if you can rule that out, think of the medium to longer term. the pound is very much on its own if you look at the positioning data. the assets are on their own. what is your take on where pound goes from here? vincent: i agree. there is room for the pound to go lower, but i don't think that is what you happen. i agree that the discussion we is parliamentave needs to stop no deal being the default solution.

right now, if they don't agree on anything, by default, you have no deal. i think the parliament has little to stop that and no deal happens only if parliament votes for, which is very unlikely. i think this is a step we're going to see very soon. parliament china to make sure that no deal cannot be easily default. francine: how? ing article 50, or forcing theresa may to extend with the eu? emma: there are various options. one would be an extension would have to be agreed with unanimity on the other side. you can imagine that if there were a general election for a second referendum, the eu would say yes to an extension. they have always said that if there was a dramatic change in the domestic political live date, that would make --

landscape that would make a deal makes sense, they would be ok with that. as to what president can do, we're seeing lawmakers -- estimate parliament can do, we executing lawmakers any of the no government is without parliamentary can. sure parliament is against no deal because of the havoc it would wreak. are seeing investors and lawmakers using all of the pool apartment to try and tie the government's hands. it seems like every year there are new tactics. all of these veteran lawmakers and lawyers are using the tools to try and shift policy. francine: you have to make an educated guess as to this vote getting through parliament? what are the chances? geoff: i think the probability is pointless right now.

some kind of agreement will go through under braced for alternative probabilities. be braced for uncertainties and -- we diversify your portfolio. francine: let's say they vote on january 15, it is a no. what do they do? emma: she was with a coy and her interview yesterday. there is a bit of academic debate whether she can playback unchanged or not. the view is that she would go back to brussels and china get some kind of additional session and try again -- try and get some kind of additional concession and try again. the truth is that no one really knows what theresa may's plan b is. she is keeping her cards very close. francine: what does that mean

for your investments in the u.k.? vincent: as we move closer to the precipice, markets are going to be very nervous. let's not forget that often with the eu, you have a last minute agreement. very late negotiation. i think what happened is that she would go back to the negotiation table. there is probably room somewhere to make sure that, to reward the backstop make sure it is only temporary. i don't think the withdrawal agreement should actually include some form of a trade deal because the desktop is a kind of trade deal. even the logistics of probably not very comfortable about this. i think there is a bit of room to report that. francine: thank you so much. geoff, and vincent.

when will also continue the conversation number of the with the u.k. trade secretary -- conversation of brexit with the u.k. trade for terry. -- secretary. this is bloomberg. ♪

>> the market, in my view, is taking in fairview on the economy. the economy is still doing well, i think the sentiment is not as good as it should be because we are still in favor of a growth environment. that was the ubs chairman speaking exclusively to bloombergtv. the that of uncertainty when it comes to the european market. the dax down. european 600 starting on a high and now turning lower. let's take a look at your stock

movers. annmarie: let's kick it off with out them down 3%. the article is saying that they failed to convince the code european commission that their planned merger should be approved. the next i have is ams, up more than 8%. technology stocks are higher today. arena across what happened on friday with apple rising represent. trade tough taking place in the u.s. and china, that could be positive for the tech sector. the u.k. energy company has downgraded signing earnings risk and limited market to market benefit. for that, they are getting a bit under pressure today.

francine: thank you so much. let me give you a roundup of some of the other market we're watching out for. searching risk appetite we saw on friday may have been a little short-lived. we saw a little bit of gains at the open. now,toxx 600 was gaining, it is down 0.4%. it was boosted by monetary easing policy in china. u.s. equity futures reversed some of the gains. the dollar is actually falling to the lowest in more than two months. one thing we watching out for a some of these top is in the u.s. and china on trade. that helped that demands for the greenback and dollar. you can lawmakers are seeking to avoid a no deal brexit. i'm looking at euro for a couple of things. euro up as even as we saw

some data showing that german factory orders saw more than expected in november. bloomberg surveillance continues in the next hour. of keene joins me out newark. it will be talking -- new york. will be talking to the former great finance minister -- greek finance minister. we will talk china, the u.s., the mexico wall and everything in between. will talk about populism as well. this is bloomberg. welcome to 2019. ♪ amazon prime video is now on xfinity x1.

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that's how xfinity makes tv... simple. easy. awesome. francine: welcome to a special "surveillance."

we will be looking at the eurasia group's top risks for the year ahead. european equities and u.s. futures turn lower. president trump renews his threat to declare a national emergency to bypass congress in order to build a wall. the government shutdown enters it 70 day. -- 17th day. tom. new year, we have a lot going on. are looking at the market, the politics in risk to 2019, also some of the more nitty-gritty moves in currencies. tom: wonderful to be back here. and his strong with ian team at eurasia group. it was nice to get a little brexit news overnight, just enough that london was back after 2018. francine: certainly back and we

now understand the vote could be january 15. let's get straight to the bloomberg first revenues in new york city. viviana: the trump administration is to have bring look at its decision to leave syria. weeks ago, president trump said he was pulling out of syria and declared the islamic state was defeated. as a partial government shutdown has into its third week, president trump says the administration is now planning a's deal barrier on thie mexico border rather than a wall. the same time, the president will roll out declaring a

national emergency so he can cut congress out of the equation on border funding. renewed and china talks today on the trade deal. a number of issues are on the table, including u.s. accusations china forces american companies to share sensitive technology and steal intellectual property. in the u.k., lawmakers are calling on theresa may to will out a no deal brexit. more than 200 lawmakers are stepping up a campaign against an outcome they say threatens the livelihood of voters. the letters of thousands of factory jobs will be at risk if there is no brexit deal. 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. thank you so much.

rail client in the market as opposed to what we saw for the first five or six trading sessions for the year. euro is stronger over the last year four days very well, this has been one of the quiet tories trade oil with a list in consecutive days. that should be right on the screen and four basis points. lower yields, 2.94% on the 30 year. this will their close watching throughout the week. i put sterling in there. i think that is a great litmus paper for this entire week as we get ready for what i believe is a key vote in a week or so. week.ne: this week, next

that will probably be a lot of volatility in plowed by march 20 -- #march 29. monetary policy in china reversing in the last hour or so. european stocks down .5%. i'm looking at the dollar falling to lows. also looking at what is happening in u.s. 10 year yield. oil, both of us showing the 49.2. we are not going to talk about death much on some of the geopolitics of 2019. flashed oil price for brent saying it will average around $52 this year because of

shale price cuts standing for high-cost. very good grade one of the toughest things to call going into the vienna meeting in april as well. we begin our coverage today on international relations, folded in with what we see on global wall street. they're going to do that with meredith sumpter. in london, it is a good time to take to john, at pimco as the vice chair. encyclopedic on the fabric of his london but also up to become the tone of mergers and acquisitions in banking through 2019. to both of you, good morning. within the cacophony of the weekend, and open question to look at the risk of washington and president trump in a new washington, what stuck out this

weekend? we are starting off what is going to be a very volatile and chaotic year for the u.s. five, which is what we call the u.s. at home. president trump is winky face an adversarial congress for the very first time. we're seeing the effects of that now. it is just going to get worse from here. the democrats are going to use their control of the house committee and peanut our to investigate -- subpoena power to investigate the president. in a went to hit back hard way that is going to further strained ties between the executive branch and congress, courts in the medium. you don't mince words about the idea that the president would resign. do we have the institutional strength to withstand any presumed resignation?

meredith: u.s. democratic institutions -- the risk is that there will be certain point where that fact will not be so readily apparent and market will take note. we do think there is a 40% chance we're going to see article of impeachment brought against the president. it is highly unlikely the senate is going to back the house move given that republicans increased their majority in the senate in the midterm. even if it is hard to imagine trump being removed from office, it is not difficult to imagine a constitutional crisis that will arise following legal proceedings or legal investigations against the president. that is the risk. u.s.-china, have cyber concerns, the u.s. home. innovation, winter. it seems like it is a lot about int we saw and the 18 --

2018. john: i'm a great fan of ian bremmer and i follow the eurasia bible weekly. i think the reality is this year, geopolitics is in an unprecedented focus by market. let's remember the last 10 years, markets have really been guided by central banks, interest rates, an unprecedented economic expansion where there was a lot of global coordination among his decisions, -- institutions, where had concerted effort against the alliance. with that already government youg much more fragmented, know that markets being very

frustrated at how to assess geopolitical risk. i think the risks that are laid out in this report are excellent, but you are really looking at the fact that market can't assess this the same way they could a year ago. francine: fragmented, encapsulates all of the terms we have into a holistic -- in geopolitics and markets around the world. does it hurt the number and the way the economy run? john: i think it makes people more cautious about investing. there is no question of the last several months, there been a very strong bias towards looking at cash as king or cash equivalent investment. people want to look at the market. they know they are not going to be this artist in the world in the terms of calling, but it is the next quarter or year.

people have made a lot of money in the last 10 years. wealth has been accumulated by sovereign wealth runs, -- funds, by big pension funds. people are looking at short-term volatility and taking cash is king for the moment or cash equivalent instrument, but also if you other sectors -- a few other sectors. people are quite diverse in this environment this bike that you are still seeing the u.s. consumer been relatively robust. francine: john and meredith stay with us. coming up next, we will focus much more on your market. of it later on, we will be joined by ian bremmer of the eurasia group. as we talk top risk to 2019 carried this is bloomberg. ♪

viviana: this is "bloomberg surveillance." sears now preparing for a possible liquidation that could cost tens of thousands of jobs. the plan to buy several hundred stores out of the has fallen short. sears will now begin liquidation sales. ubs is in no hurry to replace the ceo. bloombergan telling ubs is at a very early stage of planning for its next leadership.

tesla finally breaking around on a $5 billion factory in the world's auto market. elon musk is in shanghai for the ceremony. it is the carmaker's first planted outside of the u.s. that is the bloomberg business flash. much.hank you so we welcome all of you worldwide. john is with us. us this also with morning as we celebrate the work of eurasia group and their top risks of 2019. china front and center. advantage.huge you are more than fluent in mandarin. what do you read when you read mandarin that we don't read when we read in do english as well?

what is the advantage you have and what these the in the tone of beijing? rating chinese domestic press gives you a different flavor than what you're going to get mainstream press. u.s.-china is our number two risk this year. let's be straight. this is not about tariffs or even trade. something more fundamental is broken in the u.s.-china relationship and cannot be put together. tom: this time unlimited trust means it's been president trump and president she. meredith: the relationship has been based on a. constructive balance between competition and cooperation there was a semblance of trust that existed between the two capitals, not full trust, but enough for both capitals could find a way to work together.

the path constructive tone to hear at the top of the relations ship with president trump and xi, that trust seems to have been lost. more fundamentally, any deal that we are going to see on trade or tariffs, is not going to resolve the trust issues. it is not going to resolve the economic and strategic competition issues that we now see plaguing the relationship. francine: when you look at china, is it an economy question? the fact that there are more headwinds to grow, authorities need to continue stimulating it? or is it geopolitics? john: i actually think you have to take a step back cannot be hijacked by the short-termism of this whole discussion on trade. let's remember you have two great countries, both of whom are heading towards a conflict. that is not just an economic

conflict. times heard me say many the chinese government is one of the most impressive government, in terms of people being trained to play a number of roles so that everyone is moved carefully. they take a long-term view. they are still very focused on china made in 2025 and the belt and road initiative. they're not going to deviate from that. what is new is that you have a president who is not taking an elegant, diplomatic approach the way that reagan might, the way he did with the russians. you have a president who is very focused on trade and is using that to highlight other issues like intellectual property, cybersecurity and a broader can earn about america and the security of america. that is where the rubber hits the road. there is no question china is going to be the largest economy in the world.

you might be able to delay that, but you're not going to stop that. francine: going back to what you said about the friendship between china and the u.s., does foreign policy change if the chinese can them are starts spending more? how futile is the chinese consumer? john: this is a lot anyway. -- they save a lot anyway. meredith: the chinese spend.r continues to there also looking at the rise of nationalism in china as the tray confrontation drags on. regardless of whether or not we get a deal, in the next 50 or so days or the next year, the fundamental tensions and strategic competition between these two economic powerhouse is israel. -- is real.

we are still going to see a fragmentation of supply chain, technology cooperation. that is not going to change. tom: i remember a year ago, two years ago, eurasia group was talking to us about angela merkel optimism in your. -- europe. here is the graphic of merit under's 40's -- meredith sumpter's 47 reasons why we are in trouble with china. taiwan has come up again. is this the surprise of 2019? tangible risk and debate about taiwan? meredith: taiwan certainly is going to become more front and enter for xi jinping. for xi jinping. tom: if you claim to a domestic audience or international? domestic, but i think

he is also sending signals internationally as well. childhood. like my meredith sumpter of eurasia group to get us started. john of pimco is in london with francine. please stay with us. really thrilled to have the former vice chair with us on innovation. stay with us. this is bloomberg. ♪

tom: good morning, everyone. this is "bloomberg surveillance." i'm tom keene. francine lacqua on queen victoria street in london us well. with this is john of pimco. you and i were talking about the 1962, of october 20-28 in the cuban missile crisis. how close are we to the tensions we saw across 90 miles of the caribbean? i think in the context of referencing the cuban missile crisis, i want to keep in mind that if one looks at geopolitics and how it is reference impacted short-termism in markets, that was the last time there was a major market correction. you're looking at more than 10%. there hasn't been one since then.

i guess i'm not a predictor of volatility, but i am a predictor of the fact that we now have many more geopolitical issues overlapping than we have ever had in the last 10 years. tom: maybe when you and i were hero gregory head was our -- peck was our hero. what about this is the ability of the white house to address any international relations crisis in the coming year or two? n: i think we have to take a step back and say, is it really about just the white house or the fact that there has been a breakdown in international coalitions, nato and the global order. longer al order is no u.s. led leadership landscape.

it has moved into a trump tribal landscape with a group of personalities that really vary from issue to issue, region to region, depending upon the short-term concern and problem. continue.ll where going to do that. joining us as well is the vice chairman of pimco. the former finance minister of greece joins us. stay with us. this is bloomberg. ♪

tom: good morning everyone. popular shows of the year as we look with ian of 20. at the top risks

francine lacqua in london. right now with first word news. viviana: president trump will not roll out a controversial approach to could help him get his wall. the president says he may declare a national emergency. that would help him circumvent congress and would trigger a court fight. democrats say no progress has shutdown.to end the joe biden is close to deciding whether he will run for president in 2020. heen has been telling allies does not think other democratic candidates can defeat trump. biden will decide within the next two weeks. in france, a emmanuel macron's government is counting on a public debate to keep his presidency on track. discussions will promote his plan on taxes and public services.

that comes after almost two months of violent protest and billions of euros in tax cuts. tomorrow in tokyo, carlos ghosn will speak publicly for the first time since his arrest almost two months ago. he will appear in a japanese court, where his lawyers will say he is declaring innocence. his legal team wants an explanation for why he remains in jail. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thank you. populists and protest movements in europe are stronger than ever, the warning presented in groups risks for 2019. the movements will gain even more traction in in the late -- in italy and france. now, is the practice

head. thank you for joining us to talk about europe. what are the main pitfalls of 2019? is it brexit, italy, france? >> all of the above. think about the context, merkel working through her succession, brexit and the risk that will manifest in march. ,uropean elections taking place a lot of eyes on emmanuel macron and people were looking at him to renew his mandate as well as and thepean mandate context in which he finds himself. statesf problems in the and in that context, a strong showing of populists represents

a problem. francine: you wrote an essay which was pretty emboldened it is tougher euro skeptics, for euro loyalists. where do we go from here? yanis: 2019 is going to be l.vota never before has there been such incongruent he for reforming the eurozone and the complete incapacity of the liberal establishment to come up with the goods, to bring about political coordination. you mentioned emmanuel macron. agenda has been jettisoned by berlin. is berlin government navelgazing and they are more interested in who is going to .ucceed merkel -- secede

politicalcity of the class to deliver upon it is the ,reatest gift to the populists to those who feast on the incapacity of europe to present itself in the eyes of europeans. francine: if you look at the far right and far left, are they convalescing? -- is there more commonality between those two and far right and far center? yanis: there is no such thing as far left in europe. ?ho are you referring to the only forced to fear at the moment is the racist right which , feeding off the

inability of the political class that is still running the show, tocome up with the goods, fulfill the necessary conditions for ending the stagnation of the majority of europeans. yorkgood morning from new and the offices of eurasia group. things is the idea protesting international relations folding over into riot. you lived at this as a child. protests inhe france, are these legitimate that could turn into riots? well, we have make the distinction between legitimate motives and legitimate actions. violence cannot be legitimized. are demonstrators and there have been different friday's within the movement.

in my mind, they are children of stagnation. we have tried to impose a gold eurozone andhe just like in the interwar' perid , when you try to do that, you create stagnation. within france, there are areas ,f france that are depressed where people are finding it difficult to make ends meet and , suddenly theynt say people in france, they say, we pay for the banks and that we have to pay for the environment at a time when austerity is out of capacity. tom: this is so important to hisoln his -- link in

experiences with the children of our stagnation. the in the context of european elections, we are going to see cooperation between the left and right parties as a result of this problem with immigration. this yearique about is we see in the increased presence of eurosceptics in the parliament. we are going to see better organization, populism infiltrate the commission and i think it is corporation across the institutions that makes 2019 unique. for thees it harder european leadership to move forward with a project of renewal. john is a student in history. let me give you the continental update on capitalism. what is the state of capitalism within this new europe?

inn: i was going to chime and asked the question -- and we are question, celebrating the 20th anniversary of the creation of the european union and it was a great success story initially with the euro being seen as a reserve currency faster than anyone had expected and it was underpinned by germany, france, and the u.k. 20 years later, it is like a house that you have owned for 20 years, you refurbished it, you need to think about the plumbing and everything else. to beropean union needs rethought as to how it is going to continue to exist over the next 20 years. there is no clear leadership.

relied on germany as the biggest economy. there is no leadership coming out of germany. i agree with the comments made about macron. brexit is such that you have the populists movement, poland, hungary, italy, austria becoming a lightning rod. this is one of the biggest trading blocs in the world and one that investors felt comfortable with. a clarity ofs leadership, people are going to be more skeptical about the european union. francine: where does the clarity come from? that notlow me to say all left-wingers are going to be co-opted by the right. the movement is running in the european elections. symbolicndidate in the point that there is no clash

between the greeks and germans. we are going to run on a progressive transnational, anti-populist, antiracist campaign. you mentioned the euro. living -- a complete paradox -- on the one hand, we have, as europeans, a shouldonsensus that we get more integrated, closer together. instituted a monetary union, a common currency, which is pulling and tearing people apart. this is the greatest challenge for our generation, how to create the large-scale investment program, a new deal for europe that is going to create good quality jobs so as

to stop the stagnation which is causing the rise of racism and populism. francine: is this a euro area concerned or is the rise in china? mij: there is a journal context that is challenging. that the euro area remains a half built houses and until that is a properly functioning currency area, it will disappoint. john: you have also got one other thing going on. you have got this questioning of the breakdown of the liberal democratic order and in the context of that, truth and what is truth and how is fake news has become such that even if someone came out with a disclosure, a large percentage

of the population might question it. you are living in a different world right now in terms of the traditional notion of trance -- of democracy. is there a brussels consensus? brusselsink people in are very concerned about what is happening with emmanuel macron because people were pinning their hopes on his ability to regenerate the european project on the back of a strong showing in the european elections. that seems unlikely. these will be a challenge for him, one that he will probably fail. if you can trust salvini, the dominant political prayer -- player in italy, he will outperform. build coalitions at the european level to advance his vision. what is concern about

happening in france, not really germany because we have been in this cycle for some time. baacron.y, micron francine: what happens with the brexit? not pass, shewill will seek more concessions, brussels will not afford her anything that cuts across the substantive withdrawal agreement. parliament,to structurally this is going towards a second referendum. brexit?: is going tonk she lose the vote in the house of commons and allow the clock to and she willme bring it again with the delay

interests national and have a poster exit -- post brexit deal go through parliament. we know she is committed, loyal, and she will not give up until she has completely prosecuted her proposal. in terms of every aspect whatsoever. tom: this has been wonderful. thank you so much. this is what we love. we appreciate the attendance of yanis varoufakis. to a good 2019. thank you so much and congratulations. we will drive forward this conversation on the risk, the south china sea.

we will speak with kevin rudd in the 6:00 hour. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. let's get a business flash. value has built a position in dollar tree and is urging the chain to sell one of its units. the hedge fund has nominated seven directors to the board. star board wants dollar tree to explore charging more than one dollar for its part of experience in a year when stocks fell, bridgewater associates stood out. are alpha strategy fund rose 14.6 percent. it trades globally across more than 150 markets. bridgewater is the largest hedge fund manager. apple and samsung have announced a deal that would have seemed unthinkable. the iphone maker will begin offering tv shows on samsung sets. it symbolizes apple shift.

thank you. francine, i want to point out o.at she said about ray dali he has been open to criticism over the last three years. that is an extraordinary return by his hedge fund given his competitors. francine: it is. let's bring our guest on. i will let you do that. tom: mina patel with us. we have 15 things to go over. good morning. could you help me with pound sterling? is the brexit thermometer, what is the jpmorgan call on sterling? mina: it is difficult and it is the brexit barometer. parliament has been out for the

break and they are back again. it is going to be interesting to see how it works this year. it is going to trade in line with how that politics evolves. endhink sterling will higher than where it is. we know she is going to parliament with a deal. we do not expected to get through the first time. the headlines we had were suggesting the conservative party membership would prefer a no deal. if push comes to shove, they are do thinkhave to -- we the e.u. will make a few enough for the deal. the risks of a no deal brexit are far too high and we think she will get this deal through. how will brussels react?

risks of is the top the year? how does jpmorgan presume europe will respond? meenal: it is an interesting point. it has worked nicely for europe. parts ofe been other the union which have been pushing along similar lines. is not anreminder it easy process to leave the union. it is dangerous and it is dangerous to the economy. we have seen what has happened to the economy. all of these things show the rest of europe that pushing for an exit is difficult and this has played nicely into the european union's hand to stop that swing. the euro doat does in 2019 and his is a dollar call or is it link to geopolitics or the ecb?

meenal: it is linked to all of those. we see, with the ecb, we think the ecb will move in line with guidance they have given. they have suggested there will be a hike. put that into contrast with what is happening in the u.s., we expect the u.s. to slow down in the second half of this year. that could see euro-dollar moving slightly higher. that could give a slightly supportive move there. this depends on what happens with global growth. if trade tensions increase, if the escalation sees china growth falling, that will have knock on impacts and that could mean the ecb has to calm down the hikes. toncine: is the biggest risk

global growth china or emerging markets? meenal: in some ways, the biggest risk is coming from trade. if you think about the trade tensions and what has been happening, what we saw is that we believe it is a political tool. that is not the case. there is more depth and this is going to go on for longer. there is focus on what happens with the talks this week. markets,an appease the that will help calm down the story. you could see further ramifications. have two fold in the work of john norman and jpmorgan -- to fold in the work of john norman and jpmorgan. , there is alar-asia blended dollar index as well. for theld you see

dollar in 2019 given the many dollars that are out there? meenal: there are different things you can look at. if you talk about the dollar in a broad context, you're talking trade weighted. themately, in terms of dollar from here, what has been priced into the u.s. dollar so far? if you look at last year, there was positivity around u.s. data. dollar andt into the into the expectations for rate hikes. the market was thinking the fed was on course to hike every quarter. we have seen that coming off slightly. the fed has come back with their language, the dots have been revised lower. when you think about the dollar from here and look at what is happening elsewhere, for example, europe, there was the

reverse story last year. ty, dated negativi disappointed. data disappointed. year, u.s.to this could underperform and europe could outperform. tradeould lead through to weighted dollar starting to move lower as well. risk for is your top 2019? for me, i still think it is the trade story and the politics around that. a signal was very much to help politics can impact markets. timeve lived in a previously where we try to stay away from politics when making calls. we looked at fundamentals,

economics. driving ands are that is a big risk because politics we are seeing are becoming difficult to predict and trade is an example. generally, how does it evil from here? we talked earlier -- how does it olve from here? we talked earlier, it is difficult to see from here. tom: thank you so much for being with us. it is one of our favorite shows of the year. bloomberg surveillance bringing you the top risks of 2019 from eurasia group. coming up, ian bremmer. this is "bloomberg." ♪

tom: this morning, 2019, the top risks forward.

in this hour, ian bremmer and eurasia group's top risks, president trump front and center. china, brexit, how about america's debt and deficit, it is not urgent. the shutdown is real, look at your local airport and tsa. good morning, everyone. we live from the eurasia group world headquarters. francine lacqua in london. the joy of this annual show with group.a what is your top risk? francine: fragmentation. on brexit there may be a fragmentation between parliament and citizens. the same with france, italy, the u.s., and china.

if i were to choose one word, it would be fragmentation. what about you? fragmentation of confidence at 1600 pennsylvania avenue, the in's abilities we have seen -- the instabilities we have seen. here is video on the or title. a. vivian viviana: john bolton saying -- the trump administration appears to have rethought its position on withdrawing from syria. john bolton saying the u.s. will remove its troops from northeastern syria in a way that ensures the islamic state is defeated. forces will stay until turkey promises not to go after allies. president trump said he was pulling out of syria and declared islamic state was defeated. as the partial government shutdown has moved into his -- its third week, president trump says the administration is planning a steel barrier rather than a concrete wall, the white house hopes that could attract democratic support.

the president will not rule out declaring a national emergency so he could cut congress out of the equation on border funding. the u.s. and china began talks today aimed at reaching a trade deal during a truce. both sides facing tariffs beginning in march if they do not strike a deal. a number of issues are on the table including accusations china forces american companies to share sensitive technologies. in the u.k., lawmakers are calling on prime minister theresa may to rule out a no deal brexit. more than 200 lawmakers stepping up the campaign against an outcome they say threatens the livelihoods of voters. a letter says thousands of jobs will be at risk if there is no deal. 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.

equities, bonds, a, coming out of december. we have called down. coming out of december. we have calmed down. american oil up. screen showing the better market, up 700 points on friday. 30 year gets my attention. we are lower by four basis points. francine? francine: i'm looking at a similar data check. oilde a point of showing but we started the trading day in europe with a risk asked type -- risk appetite and that was set on by easing of monetary policy in china and we saw a turn. european stocks reversing that

gain and dollar falling and asnd, trying to find a bid we're looking at the vote in parliament next week. tom: very good. it is a joy always to come to the eurasia group and speak to about ther risks. angela merkel was extraordinary about seeing the fracturing in europe. ukraine coalition, of the unwilling. we will speak on innovation winter. key risks, looking at the u.s., european populism, and u.s.-china front and center. we begin with the many and countless bad seeds out there. congratulations. everyone reads at this.

from your -- everyone reads this. from your book, "us versus them," i love this quote, we learn geology the morning after the earthquake. how close are we to earthquakes? ian: 2019 is not the big risk year because the economy is going well but our ability to respond to the next shock when 2008,s like we did in like we did after 9/11, not just what ever thetes, next shock is, we do not have the capacity to respond because pretty much every geopolitical development that we monitor, for the first time, we are heading in a negative direction, losing our resilience. of yourthe middle

report, the great unspoken, the instability at 1600 pennsylvania avenue. how do you gauge the instability there and the instability of this president to leave the office? we: it is the first time have ever had a u.s. domestic risk on the list. number five.t is given the size of the united states, the most important economy in the world, it is not what we are most concerned about. to recognize that with the investigations coming after business, family, his his willingness to react by escalating against those that are trying to hurt him, using the powers of the presidency in ways they could be unconstitutional, you have to recognize it is a possibility.

happen, it goes into the court system. i believe if that occurs and we have a constitutional crisis, the judiciary is more powerful than one guy. the most important take away has been how strong american institutions have been. it is not for ordained that american institutions come out fine and the u.s. is the democracy was in 2018. francine: good morning. if there is a constitutional crisis, what does it mean for u.s.-foreign policy? does the u.s. distract by attacking china? ian: i do not think so. i think his distractions are domestic and his need to go after people is at home. that is his experience. he is pulling out of syria.

he wants to pull out of afghanistan. he wants to use drones and bombers for the small strike. this is about what he needs to do to keep the media attention focused on him. you will notice he has never said a bad word about xi putin like.ost he wants to get to a deal on china. by the end of the first quarter, we will have trump announcing we are in a better place with the chinese. we will have problems with them on technology, on security but like with the north koreans were nothing has been accomplished but we are looking at a second summit with kim jong-un, that is what trump and that's to do with the chinese. francine: going back to your top political risk, where you say

there is an overwhelming majority of geopolitical dynamics headed in the wrong direction, what would put them in a right direction? is there a catalyst? get worseuld have to before it gets better because these are structural. of alltalking first about the populism and nationalism undermining legitimate government institutions and leaders across the industrialized economies. that is not just in places where but itve been voted in is also in places where the establishment has been voted in, they are weaker than they used to be. think about merkel. and the geopolitical relationships, u.s.-russia, u.s.-china, the transatlantic relationship. not one of those is moving in a direction that looks stabilizing. go down to 10.

nigeria is a risk? ian: it would be higher if people cared more. economy, wergest have an election, it is going to be close. tom: there are other elections. ian: that is right. 2019 is less important in terms of elections globally than 2018. in nigeria, it is a close election and neither outcome is useful for market indicators. there are going to be challenges around that outcome. francine: thank you so much. ian bremmer stays with us. up next, we will talk about the dollar dynamics and some of the underlying strengths of the u.s. economy. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. let's get the business flash. sears is preparing for a possible liquidation that could cost jobs. chairman eddie lampert's plan to buy several hundred stores out of bankruptcy fell short of bank qualifications. sears will focus on getting ready for liquidation sales. they could begin as early as this month. ubs is in no hurry to replace the ceo. the ceo telling bloomberg ubs is at an early stage of planning for its next leadership. he declined to comment on speculation ubs is looking at christian meisner as a potential ceo.

he is the former head of bank of america investment banking. tesla breaking ground on a $5 billion factory in the biggest auto market. elon musk is in shanghai for the ceremony. it will be the carmaker's first factory outside the u.s. having a plant there would shield tesla from tariffs. china's car market shrank last year for the first time in two decades. that is the business flash. tom: thank you. francine lacqua in london and i am at the eurasia headquarter. we moved to the key focus of your life, my life and that is technology. , no one needser an introduction. as well the former ge vice chair, in her book was a pleasant surprise, imaginative

forward was a breath of fresh air. you have got the courage within your report to get away from the normal. why did you go to innovation winter, did you address technology? ian: the technology is fragmenting into a china led space, the american led space. you want to put that together. tom: here is the phone. here is the phone right here. more importantly, here is the sketch rate here -- right here. that is the reality of the technology world, the complexity. illustration,reat where the pieces of the iphone come from. one of the pieces i took from the report is we are underestimating the pace and

speed of china's innovation in technology. it is a challenge. it the supply chain? do they take a year or can you move it at the margins to make it easier to control? i think we are looking at a world where people are going to have to be faster. we're underestimating the flexibility needed in supply chain. technology is going to help us. that is something most businesses are unequipped for now. francine: how does this hurt in china more than the u.s.? ian: it is going to hurt both, frankly. , this is going to be the backbone for the internet and smart cities.

the chinese are developing a 5g americans ande japanese and europeans will not participate in. have the backbone to understand how to build all that ourselves. those are interlinked. have theot going to ability to do the cross investments between china and the west in the critical next phase of technology that is coming out. you talk about innovation, they are doing securities research. i had to use a slide rule and you used a calculator. the technology overlay industry country to country, nation to nation, it was the theme of last year. what will be different? >> this continues.

is to takewhose job this column and move it to this column and divide and multiply or to write research reports, the technology is able to take this over. we can put together more customized investment portfolios. tom: you are one of the few people that has run the company and four conference calls to get the message out. are the digital crew, are they going to win? sallie: the client is better off and can provide a more customized portfolio. for a fraction of the cost and so the savings go into the pocket of the investor. technology is great for that. it may not be as great for individuals on wall street. not be a greatht

industry to invest in as a shareholder but it is great to work in and that could be shifting. francine: how will that shift and how quickly will that shift? it does not seem to go very fast until it is over. do not disappear at once but when we look back, we will see a wall street that is different than today and some of it will be the old guard retiring and the new guard coming up. francine: this is systems on how you trade? is a regulation? -- is it regulation? moste: where i see it clearly is in the wealth management industry where there has been a high cost of delivery, which is the financial advisor. the client wanting to go to was provide me with lower cost data.

i do not want the person doing the soup to nuts on investment policy. that is something computers have the ability to do. they take emotion out of it. francine: how should big companies look at tech? are we going to see chief executives come from the tech world being in charge of real companies that do real things? you will see more ceos come from tech companies. that is not enough. ian points out, talking about risks, so many business people who think they are in the business of risk mitigation, that is over. navigating risk, the unintended consequences, unlikely partnerships. if you hire ceos who have a digital background, you are creating a world where you think

you can control things and that is a challenge for business. francine: going on to your number three risk, do we know a lot of these attacks? we clearly know that most of these attacks are happening and the big ones are in the public space. it takes a while for them to come out. the united states is focusing on offense. you remember obama, russia interfered in the election. it was late and it was light. the trump administration believes they need deterrence, they need to give cyber command the ability to do that. malware, find there is do early attacks against enemies. that implies deterrence is going to work. it is not. risk,ng this to the other

innovation winter, if you are thatg chinese companies are world leading in some of these technologies, what you would want to do is invest in your own companies and make them more strategic. lashe same time, the tech in responding to companies that are undermining liberal democracies, whether you're talking about facebook or twitter, that implies you move in a different direction. when you have those coming together, that is going to undermine how attractive these stocks look on wall street. tom: let's fold this into news. showresident is doing a tv and you have got innovation winter. the application of this winter is different. there are the have's and the have-nots. how do we get the have-nots into

this society? ian: it is hard. the number of students that are applying to top universities from china, india, other countries, going see that toronto has created more technology jobs than silicon valley, it is not because companies are not attractive. it is because the united states .s seen as less the place the perception of building a wall does not help. tom: we have a biologist from william & mary, someone who used a slide rule, that was me. how do we get the non-elites into the game? sallie: a few things have to change. we have got to change our educational system. when my son went to high school,

he was not required to take coding, personal finance. he did take woodworking. he went to school in manhattan. if he uses it. we have got to change education from the bottom up in the other place that needs to look inward is silicon valley. they are capital investing in startups and it has been scooter companies and food delivery. right? beth: it is also a wall street issue. we need patience. the profit margins are different, the expenses are different. we may need to look at a couple of different speeds of innovation in terms of where we are investing and is wall street ready. last week, it was apple is not growing. we have seen that coming. it was a surprise with a system that was not willing. sallie: the quarterly earnings

cycle was a problem. tom: you lived it. sallie: i lived it. tom: francine, jump in. ask how: i wanted to you make it more long-term? if quarterly earnings are a problem, are we going to see a different status? sallie: i would be in favor of reporting on a longer-term basis , whether it is twice a year, once a year. taking back earnings guidance. those, to do both of when i was at citi. how could you know what you're going to earn in any given quarter? there seems to be a move occurring now. if you are reporting quarterly earnings and do have a big ,ompany and you've got expenses to make the estimate, the

easiest thing to do is to move one penny from this quarter to next quarter. and leadership is able to say i have different speeds and i'm going to allocate capital. tom: we have got to go. comstock and sally crum stock with us. risks ofroup, top 2019. coming up, the former prime minister of australia, kevin rudd on the south china sea and the top risks of asia. this is "bloomberg." ♪

y95óóo francine: this is bloomberg surveillance. a special edition. top risks by19,

eurasia. let's get the first word news. viviana: president trump will not rule out a controversial tactic that could help him get his wall. the president says he may declare a national emergency. this move would allow him to circumvent congress on border funding and would probably trigger a court fight. democrats say no progress has been made to end the shutdown. former vice president joe biden is close to deciding whether he will run for president in 2020. biden has been telling allies he does not think other democratic candidates can defeat trump. biden will decide within the next two weeks. in france, emmanuel macron's government is counting on a public debate to keep his presidency on track. discussions will promote his plan on taxes and public services.

that coming after almost two months of violent protest and billions of euros in tax cuts. tomorrow in tokyo, carlos ghosn will speak publicly for the first time since his arrest almost two months ago. he will appear in a japanese court, where his lawyers will say he will declare his innocence. his legal team wants an explanation for why he remains in jail. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." francine: thank you. todaynd china begin talks during a truce. face a resumption of tariffs in march of they do not strike a deal. on the table, including accusations of the china forces american companies to share sensitive technology. ,urning back to eurasia group

u.s.-china number two on the list. let's get to kevin rudd. ian bremmer is still with us. thank you for joining surveillance on this early day. what is your risk in 2019? does china make it in your top three? very much so. i put china at the top because it has an intersection point not just with geopolitical stability but also global, economic growth. if the chinese economy continues , if chinadomestically is suffering economic damage at home, will it continue to pull its weight globally on climate change? i put china at the center of the risk matrix. francine: as we have more chineses towards

growth, can china keep supporting the economy? kevin: this is the dilemma which xi jinping faces. he has got advisors saying the only way to grow the economy give greater space, freedom, and incentive to the private sector. that is what chinese entrepreneurs are calling for. hand, you have a chinese leader who has been controlo reassert the of the chinese communist party across the fabric of chinese businesses. what is the solution? going private sector is to go on strike in terms of investment activity, xi jinping must pump a new wave of stimulus into this economy. will it work? it is tough. tom: good morning.

late --train to -- what do you need from america given the realities of the south china sea? xiin: the bottom line is jinping is not a status quote political leader. in his first term -- status quo political leader. onhis first term, it rolled because he made a judgment strategically that the united states and president obama would not act militarily. he was correct. we sought unfold over two to three years. pause during to waia the trump administration. willey challenge will be

be united states begin to challenge more aggressively the chinese in terms of freedom of navigation operations in the south china sea and if so, in the current relationship between beijing and washington, will china respond more nationalistic late than in the past? thanre nationalistically in the past? i have medium concern and your into the business of crisis management. that is what keeps me awake at night. i want to lincoln with the former prime minister of australia, i think of the return of marco polo's world. everyone is focused on that freedom of navigation in the south china sea. is that one of the risks of this year? ian: the potential for accidents

between the united states and china -- tom: even britain. ian: absolutely. when you have government consolidated under the power of one man and he is content to change the status quo in china's favor, their military space is growing. on statement that was made taiwan a week ago saying this is going to change, taiwan will become a part of china. a sleep are we with the south china sea as the focus point of risks of asia? ian: we are not expecting this is going to blowup in 2019 but the likelihood there is going up. a deal andrump wants will announce one on trade. the good news will be compartmentalized. it is not going to spill over into good news on tech or cyber

or on south china sea or any issues. the trajectory for u.s.-china relations is negative. tom: how do you respond to a president who is deal based, transactional-based? that is not my reading of south asian history, is it? has a president trump transaction mind on trade in tariffs. that he is has said likely to do the deal when it comes to tariffs. transactional modus operandi does not provide you with a way to deal with a rollingper, profound, strategic challenge of arriving -- arising from china expanding, its overall perimeter of the stay but -- of east asia

operations in the pacific. it is not just in the south china sea, it is the east china sea as well. requiresunited states is a coherent strategy to deal with the other dimensions of chinese power. what you have seen are statements from washington proclaiming the end of a 40 of strategic engagement. rufar, we do not yet see new les for the road. it adds to the sense of strategic instability and risk rather than reduces it. francine: what will the new world order look like -- go ahead. problem, on the one hand you have the nationalism and populism that president trump and allies are throwing down which is moving

them towards more transactionalism on american alliances. what does that mean? the japanese,t to the south koreans, pulling out of the trans-pacific partnership , less desire to build up a strong europe. those are the things you need to do to deal with a more assertive china. every single one of the challenges that kevin rudd raised is made harder to do with by the structural impulses we the united states and almost across the western nations. if this was just trump, we could say once trump was gone, we could get back. it is more structural. francine: this is a question to both. what does the new world order look like in 2025? they have 8 -- the

chinese have a view that their moment in the sun is going to come. 2025 is too early. it is unlikely it will surpass the size of the united states. that is more likely to occur into the 20 30's depending on growth assumptions. china'srategy -- strategy is for china to exercise more strategic influence outside of the framework of the existing world order, hence exercises of chinese unilateral power and influence and the creation of new institutions like the asia infrastructure bank and for china to use the existing rule of the system to advance china period interests -- china's interest. we are in a period of transition to something new.

transitions tend to be unstable, where everyone is looking to everybody else and certainty. american allies and friends see a lot of instability in washington. francine: ian? ian: the one point you need to answer when you get to 2025, we know that china is going to be playing a significant role in determining what the shape of the new global order will look like. what we do not know is whether the united states intends to have the most significant seat at that table in a post-american order or is the united states going to react against a world order that the chinese are trying to develop. now, if you had to answer that, you would say the americans are in reaction mode. it is unclear if that would be

the case. until you know what the united they going to be constructing this new order with others, including the chinese or are we going to be reacting against that. you cannot answer what 2025 looks like. you one final question to as a former prime minister, do you look at president trump as a one-off or is there a permanence to his kind of populism? kevin: i am not an american even though i have lived in new york. i just happen to be back in australia on holiday. the view from asia is that everyone here is in the business of hedging their bets as to sort of emerging

isolationism, protectionism, nationalism is simply associated with this unique trump phenomenon or whether we are about to see a much deeper reshaping of america's view of its role in the world in the future. tokyo, theyre to are scratching their heads wondering which way either the next u.s. administration reacts whetherphenomenon, there will be a return to what se've seen with previous' period of american leadership or whether this is a new world where everyone has got to carve out their own future. resumes itsamerica

global leadership. francine: thank you so much. he is from the asia society, the former prime minister. m&a news on this monday. buy loxos agreed to oncology. we'll be talking to a chief executive later on. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. in theransaction pharmaceutical industry. eli lilly has agreed to buy loxo oncology for about a billion dollars in cash, representing a premium to the closing cost him friday. it develops cancer drugs. in a year when stocks fell, bridgewater associates stood out. bridgewater's pure alpha strategy fund rose 14.6%. it trades globally across more than 150 markets. bridgewater is the largest hedge fund manager. apple and samsung have announced a deal that would have seemed unthinkable. the iphone maker will begin offering movies, tv shows on samsung tv sets. the arrangement demonstrates apple shift to developing into a

medium service company. that is the business flash. ray so glad you mentioned dalio. francine, go ahead. francine: i was going to bring you up today with some of the headlines we had from the spokesperson of theresa may, saying they will set up a cabinet committee of no deal preparations. they said theresa may has spoken to angela merkel and president juncker. at the moment, we understand the u.k. and irish officials are in talks over brexit. for the moment, we do not have a date of when the vote will take place. we know it will be next week. we understand it will be next tuesday but we do not have confirmation. we are expecting theresa may to

take the podium shortly and address some of these concerns. tom: very good. thank you. ian bremmer with us as we sum up the top risks of 2019. there is a course in international relations where you look at statistics and certitude. this is what is going to happen and there is that world of what is not going to happen. ?hat is the not of this year what is the surprise? ian: there are some big things, iran is not going to happen. tom: what do you mean? that theite the fact united states has withdrawn from the nuclear deal, it is standing are tryingiranians to roll out the clock on a trump administration. they are hoping he is gone after one term. if you talk to mike pompeo, he admits if trump does not get a

second term, their strategy is -- a democratic president will come in and the americans will be back in a deal and we will be back to where we were and there is not an iran risk this year. another one, saudi arabia. the crown prince is not going anywhere. the reason there is a cease-fire is because mbs got that cease-fire done. i suspect we will have a reduction, maybe an end to the blockade on qatar. the kingdom is not falling apart. of theat is the not-not white house? what is the thing that is not going to happen within the madness we are living every day on mr. trump? ian: most things do not happen in the white house. trump look at the things

has said that are stupid, they do not happen. do not happen in part because he does not have the attention for it, they do not happen because his cabinet prevents him from doing it, they do not happen because stuff gets leaked and you get back question backlash. they do not happen because he is not xi jinping. he is one guy and he is one guy we are excited about in the media. he is one guy. ultimately, in five or 10 years time, we will be looking back and saying, how were we also insane with this one president when the issues were about how , underminingrump that, as opposed to who trump was. francine: will there be a wall,

be it's a mentor steel? ement or steel? ian: who cares? why people are so excited about the question of whether there is going to be another five kilometers of fencing element put up between the united states and mexico. how long will the government shutdown last? a different question, that is one of how long before the republican senators decide that they can cry uncle and they are done and want to cut a deal. you have got three republican senators that have backed away. it might be one more week, it is not months. as you start--

having a month of no pay from thousands of perfectly patriotic americans in the government, those republican senators, especially those that are in up for election, they are going to scream. me about, as you go out with your top risks, what are you hearing from the clients ? what is the message you are hearing from them? ian: timing. we'll know that the world is heading in a dangerous direction now. tom: your lead phrase is it is not urgent yet. to: what the clients want know is what makes it urgent. it is geopolitical climate change, that is what the clients want to understand. 30, 40 years ago, we were talking about climate. no one was paying attention. is this going to go on for 30

years or 30 months? i am in the 30 month camp. tom: president obama, pivot to asia, we have got the post-american world, can there be a phrase in the madness we are living now? ian: that is why i mentioned geopolitical climate change. it is not urgent until it is. it is not going away. the idea that the growth of populism and nationalism inside the united states of america that people feel like the system is rigged against them and they are not run. in thegest relationships world, u.s.-china, u.s.-russia are heading in a direction that is unsustainable and negative, that is not going to go away and clients want to understand timing. 2019 does not look horrible. the markets continue to bounce

back. there is upset, panic, but there is not this selloff. francine: let me cut you off because i want to talk about ukraine and i want to bring in my single best chart. this is ruble. it weakens as the oil falls. the concern about ukraine, what happens in the ukraine? you have it as your ninth biggest risk to 2019. which is major since no one really cares about it. you have presidential elections, parliamentary elections. russians werehe interfering in american elections, you have seen nothing until they interfere with ukrainian elections and that will impact their economy in a big way. 1% of theks, took

ukrainian gdp. i think 2019 is the year where ukraine is in trouble as the russian vice gets tighter. tom: thank you so much. we have got more on bloomberg surveillance and radio, we will continue our conversation. we will do that with jonathan ferro. in foreign-exchange exchange, what am i watching? i am watching pound-sterling. stay with us. ♪

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premier in china going to trade talks. the hedge fund firm bridgwater raising 14% last year. and its main fund had its best performances 2009. the new powell put, the fed chair listening to market and highlights possible flexibility. did he help equity find a bottom? david: welcome to "bloomberg daybreak." it's monday, january 7. i'm david westin with alix steel. the record is -- alix: 21. david: saturday was the record. alix: look at that shot. it looks like independence day. the idea that yes, we know the government shutdown does not do anything for gdp and markets, if people do not get a paycheck, what happens? david: