xfinity makes tv... simple. easy. awesome. president trump wants a trade agreement with china. s&p futures are agreeing. a borders there is crisis, in his first oval office speech. the crisis is manufactured. the prime minister loses another vote in the commons. she has five working days before parliament votes on her agreement. welcome to "bloomberg surveillance." i am francine lacqua in london.

here are the markets, stoxx 600 gaining 0.8% as there is more belief in the market that president trump will focus on stock markets as he sees it as a stamp of approval on his presidency. this is for wti, the first time saw it abovet we $50. we are looking at pounds because of what we saw in parliament. we are a couple days away from the crucial vote on the theresa may deal. speak to the , youg member of the fmc can catch that exclusive interview later on at 6:30 p.m. london time. let's get to the first word news. in a primetime television

address, president trump has demanded congress provide billions to combat illegal migration. trump said funding for the border wall was the only way to stop the partial government shutdown. democrats rejected his description of a crisis. lawmakers say he must stop holding the american people hostage. walldent trump: the border would very quickly pay for itself. the cost of illegal drugs exceeds $500 billion a year, the $5.7re than billion we have requested from congress. the wall will be paid for indirectly by the great new trade deal we have made with mexico. should pound the table and demand he gets his way or the government shuts down. herding millions of americans who were treated like leverage.

tonight and throughout this debate and this presidency, president trump has appealed to fear not facts. may suffering a defeat in parliament last night. rebels from her party voting to restrict her room to maneuver in the event of a no deal brexit. 20 conservative lawmakers voted against her deal, the u.k. prime minister has five working days to convince lawmakers to support the exit agreement she has negotiated. the vote in parliament takes place on january 15. the world of banks cut its view of the world economy. sappedinterest rates momentum. downside risks are more acute, including disorderly market movement as well as the escalating trade dispute as global growth is down a 10th

percent from last year. >> i think things are getting worse relative to last year. the title of the report is darkening skies, we see the skies darkening over the global economy, global growth is slowing, risks arising. potential buyers including unicredit and paribas, the bank , andssing interest borrowing costs. -- it'ser was put under main investor blocked a vital capital increase. heathrow airport has reopened after being shut down for more than an hour because of joan sightings. following aesumed police in valuation.

the incident coming after other drone issues before christmas. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. bloomberg. francine: global equities and u.s. futures are in the green. the potential for progress in trade talks between washington and beijing as negotiations extend into a third day. president trump is eager to strike a deal with china, according to people the know white house deliberations. joining me now is mark cudmore, our mliv strategist. also, derek halpenny head global markets research, mufg bank. what deal will the markets like? derek: anything that sends the

deadline beyond march. the crucial thing on trade is terroristssks on from 25% to 10%. that is the first wish. if you want to go further, anything significant in terms of intellectual property rights, something that raises the prospect that this is a temporary pushback but is more permanent would reinforce any risk off in response to that. francine: how do you think markets are taking this? moment we are saying sentiment of cautious optimism. the market is enjoying the signals out of washington that are less combative, and there were signs both sides want to make a deal and truce. no one is expecting any deal announced this week. that talks will continue, that there will be optimism out of the meeting this week, they will meet again, and

there is hope there will be a deal before the end of the 90 day deadline, we will not see an escalation in tensions. that is what the market is looking for and it continues to rally overall. we do not need to see something more concrete to see the market rally. francine: is there a concern that he is targeting market reaction, he will do a deal at any price even if there are global imbalances? yes, whether it will be credible in terms of rectifying the imbalances between china and the u.s.. the consensus of the markets ariffs is that t do not do that. going forward, in all likelihood if there is a rush to do a deal to stabilize markets, if that is

the incentive of the trump administration, then over time it has credibility of being anything meaningful. francine: where will we see the biggest moves? if anythinge upside gets signed, or do you see an upswing in the dollar or treasuries? think at the short-term most optimism is priced in. there is little chance for disappointment if there is no concrete measure. on a medium-term basis we saw the capitulation during december in many markets. people are starting to realize global growth is not collapsing, it is slowing down but is relatively solid. valuations are cheaper. overall, the environment is looking positive, and as long as

we get optimism this week, even if it disappoints a little in the short-term, medium-term we can see that rally. it is important to emphasize a bullish outlook for investors does not necessarily equate to volatility coming down. we are not returning to the low volatility world of 2017 anytime soon. francine: we always give a shout , mliv isr colleagues our markets blog. , andan press that function the question we are asking our strategists and the people who many 2019 fed hikes will follow trade talks? derek: we are penciling in two rate hikes in 2019 with a downside risk of only one. that is on assumption of no

major escalation and the turmoil between china and the united states. that is the answer i would give to you. i would agree with mark. the markets are overdone on u.s. rates where they are contemplating a rate hike is premature, if certain factors pictureplace a big macro assumptions, brexit, china deal, china stimulus, rebound in germany, the things we are expecting, it is much more likely we will get a cautious but tightening from the fed. francine: thank you mark cudmore, our bloomberg strategist. trump gives the first oval office address of his presidency and stops short of declaring an emergency. democrats call it a crisis of his own making. this is bloomberg.

♪

president trump: the federal government will remain shut down for one reason only, because democrats will not fund border security. >> sadly, much of what we hear from president trump is full of misinformation and even malice. the president has chosen fear. democrats inmp: congress have refused to with knowledge of the crisis, and they have refused to provide our brave border agents the tools they desperately need to protect our families and our nation. >> we do not need to create

artificial crises. .e have enough real crises let us and this shutdown and bring the american people together. francine: that was some of the presidents primetime speech, the democrats response. the dispute has seen a partial shutdown of government stretching into the its third week. the impasse looks like we can continue. -- the impasse looks likely to continue. impactingsee numbers mortgages, how long does the shutdown need to last to start changing the economic backdrop? derek: it is pretty minor, but the longer it goes on in terms of 800,000 employees not working, it is going to start having an impact. broadly speaking, i would say it is relatively minor.

in terms of the macro economic impact, i am not convinced it onl have a direct influence asset prices or the u.s. dollar. the implications of it going on partisaninforces politics in washington. there was talk after the midterm of bipartisanship coming back into washington, and moving forward with grace and infrastructure spending. that is high in the sky dreaming -- the broader consequences is a negative for the u.s. dollar francine:. is it priced in? i do not think so. last year all the happenings were secondary to the compelling cyclical positive story for the u.s. economy and the dollar. that was the primary influence.

now with that cyclical story beginning to change, that backdrop is not going to be as influential. other factors come into play and become more influential. ofitical turmoil, departures mattis, kelly. reading what is publicly available, but there is speculation republicans are less willing to support trump unconditionally. there are concerns what lies ahead for the republican party in 2020. francine: more departures from the white house and close to the president, does the market actually change on the back of that? derek: there is greater risk that political uncertainty which has been largely ignored last year could become more influential again. the mueller investigation is coming up.

we have been talking about the mueller investigation for so long, the market will not respond at the moment, but we will get the information from the mueller investigation, and if that raises the prospect of impeachment, which we are not expecting or forecasting, if that comes into the equation of politics in washington, again, it is hardly a favorable backdrop. francine: just to keep our viewers up-to-date, according to abc news, rod rosenstein is expected to depart in the coming weeks. change thealso mueller investigation. there are all sorts of implications. does it change the white house is focus -- the white house's focus? it is difficult to know,

but the obvious point is the worst the information published from the mueller investigation are, the more the focus will itvitably be on that and how unfolds. there are so many different scenarios, a constitutional crisis type of scenarios, that is hardly favorable. the sentiment and behavior has sinceositive and strong the trump administration began, that is turning now and it could be reinforced by that developed in washington. francine: derek halpenny, head global markets research, mufg bank stays with us. deutsche bank is slashing its bonus pool. that story next. this is bloomberg. ♪

francine: just getting breaking passenger vehicles falling 6%, the first annual drop in two decades. this goes back to slow down we are seeing in china. mainland consumers tighten their belt, and we saw that in apples cut in revenue. this goes back to the trade conversation i am having with derek halpenny.

this overall was a figure we were expecting. yes, automakers globally, here in europe, and in the u.k. have been signaling the sharp weakness and demand from china. perspective, it is well-known. part of the lack of response is the hope that the china-u.s. trade speculation, but the other how muchlation is stimulus will come from the chinese government. more stimulus is coming, and the pboc on friday cuts rates. easing is coming, so the weakness of the data behind this. we heard they are trying to boost consumption of cars and household appliances. deutsche bank's management board

is cutting its bonus pool by 10%. they will hold key staff revenue and are in contact with potential buyers. according to a bloomberg source, the bank has expressed interest provided nonperforming loans is included. or blocknland investe the increase. losses in its books from its accounts from complex derivatives. we value anything on italian banks that she says. , is you look at the problem of being a bigl

problem for italy? >> the timing here is key. they have a balance sheet of 24 theion euros, a fraction of italian banking industry. italian banks have been under strain because of the cost they are paying on the bonds they are sitting on. it comes on the back of a number of bailouts. italy put money on the table to salvage, we are at a point it is a delicate time. the ecb is putting administrators to be in a position of control of the situation. resolved in it gets three months we are ok, but if it takes longer we will be in trouble? >> how it unfolds here, you have due process, you have you

ministration trying to find a private solution to reduce the bad loan burden and find potential partners. and at the same time the government putting money on the table if needed. francine: deutsche bank, will we see bonus cuts across the board? >> the devil will be in the details with deutsche bank. bonuses to be capped. francine: thank you very much. derek halpenny, head global markets research, mufg bank stays with us. up next, the clock ticks down on brexit. that is next. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's check in on what is coming across the bloomberg universe on

tictoc. pollution levels increase in the u.s. last year thanks to 2 overlooked sources of co2. deutsche bank's board plans to cut the bonus pool by 10%. our most read stories on the bloomberg terminal. china is set to propose a wider deficit of officials look to boost stimulus. debtrowth of u.s. national is a horrific situation. demands billions more to combat illegal toigration offers no plan end the political impact. na: price conscious shoppers turn to discounters it

to buy their turkey and stocking stuffers. general merchandise sales also down by 2.3%. complaints are rising among the users of some samsung smartphones that they aren't allowed to delete facebook. models come with the app already installed but owners find it is almost impossible to erase it. facebook says the disabled version of the app acts like it has been deleted. trump demanding congress provide billions of dollars to combat illegal migration. speaking from the oval office, trump said funding for a border wall is the only way to stop the partial federal government shutdown. democrats rejecting the u.s. president's description of a crisis on the border. trum must stopg

holding the american people hostagep. >> the border wall would very quickly pay for itself. the cost of the legal drugs --ts the wall will also be paid for indirectly by the great new trade deal we have made with mexico. no president should pound the table and demand he gets his way, or else the government shuts down, hurting millions of americans who are treated as leverage. tonight, and throughout this debate and his presidency, president trump has appealed to fear, not facts. 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. francine: thank you so much. 79 days to go until britain leaves the eu.

theresa may has work cut out to her guilty parliament. last night, she was handed a defeat on her finance bill. barrett,s now is david kle. kristen nicol what is the significance of the vote last night? lost, because of me we can read something into how the parliament vote goes next week? david: it is not anything new that she is losing votes, though we are showing how she does not command a majority. loss. quite a close mps are demonstrating they have the power to defeat any sort of option that is a no deal.

you could draw the conclusion that the threat of no deal becomes less. the problem is that we don't know what the mechanics might be for parliament to actually stop no deal if this vote gets lost next week. but they haven't shown is what parliament might want. what is the form of brexit that is going to get a majority in the house of commons? francine: i feel like we are in the weeds. is, do wee want to do have a deal, no deal, do we crash out? are we wiser now about the possible options and ability we should give to each option? in the end is the only option available. i think we are very early days in terms of public. i think we need to get -- politics. i think we need to get closer to the edge.

ultimately, you have one week before the 29th of march. if by that point we have meaningful vote passing through parliament -- that is the reality of it.we are looking at a massive realignment of the party political space . francine: i have one million questions first. knows whether the businesses are ready for this if there is a crushing out. is it still possible we crash out after the finance bill? parliament can shout and scream into amendments -- and do amendments. countries may continue ignoring the will of parliament, or does she change and start to follow the will of parliament? if the vote is voted down on

the 48 hours following that are massively important because that will determine which direction we are going in. if the focus is extending article 50, not so that. if it is moving toward a second referendum, not so that. if the focus is my deal or no deal, 48 hours later the markets are going to start focusing in a hard brexit. >> we need to get much closer to the cliff edge before we start seeing them supporting that deal because it is the only deal available. francine: can we extend article 50 and if we do, this the eu want something in return? david: there have been reports that british officials are putting out feelers. it.you street denying

would imagine that this is going on behind the scenes . there are talks going on to avoid chaos and can we extend this if we have time for other options. those things are definitely on the table. francine: who wants a general election? david: labour party. there may be some conservatives that would rather -- the offer from downing street is that a second referendum would cause more division in the country. the brexit secretary himself this week said that is what will happen if we have another referendum. we will see increased division in the country. you may argue that a general election is a better way to get a new parliament that can get around some sort of, or coalesce around some sort of different brexit. francine: is there a danger we crash because of a general

election, or does the eu hit the pause button? ansten: i think you get 50.nsion of article think it is much more complicated if you say no referendum we don't have a deal. i think 27 on the other side are going to say sorry. they are a bit more skeptical. readine: has anyone here anything that thinks" goes through next tuesday? thinks" goes through next tuesday? goes throughote next tuesday? david: at which point you say is completely dead? francine: how many votes is she going to do on this? that the market care about this? derek: there is talk that she could lose it by 100 votes.

that is a significant loss. question to bigger me is what happens in the labour party. technically, that would be the moment to go through with a no-confidence motion. that is something jeremy corbyn fears because that could be labour position to go forward. francine: what does pound do on the back of all of this? is a binary? -- is it binary? in the fact binary that nothing is happening until the last moment. i would imagine table below 120. maybe styling takes more of a hit. -- sterling takes more of a hit. we are going to get financial weakening if we are in gridlocked until the end of march. it is binary because cable could be 140ish.

francine: who are the main players we should be watching out for? apart from jeremy corbyn. david: we're going to have another five days of debate. it is like to be interesting to listen to some of the key people, the people who said they are pointing vote against it. has anyone changed their mind? they're going to be standing up in the next few days. has anyone actually changed their mind in the intervening weeks? we have had warm words of encouragement. mrs. may saying there is possibly more to come. is it enough to bring anyone over the line? i think what we are assuming is it really hasn't. i think the numbers have not shifted and she is still heading straight for defeat on tuesday. francine: on the european side, is there anyone who has her back

or understands the impossible situation she is in and trying to get something? rsten: i think a lot of people understand that domestic politics can be difficult. i think nobody on the european side considers that a concession that would be worth it just for a brexit deal. in the end, the adjustment needs to happen in u.k. politics. leo is the person to watch. the country that is going to get the biggest impact is ireland. if there is going to be a change from europe shifting on the backstop, is going to be from them. ndancine: david, derek, adn carsten stay with us. this is brent crude rising above $60 a barrel for the first time since december.

above 50aw wti rising for the first time this year. there is a little bit of a move when it comes to oil price. coming up, emmanuel macron takes on labor. we will discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." does france have a discrimination problem when it comes to employment? study,ng to a 2016

employers are more likely to respond to job applications from candidates with french sounding names than north african names. emmanuel macron is working to fix it through affirmative action. the gap between the house and have-nots in the perception that macron does not care during the yellow vests movement. derek. is carsten and karen emmanuel macron recover from the yellow vests -- can emmanuel macron recover from the yellow vests insurgents? there,: they are still but the overall numbers look to be going down. one thing to keep in mind is the upcoming parliamentary election. it is important to keep in mind that there is proportional representation, which means you can win that election with around 25% of the votes, which is roughly the number macro had

in the first round of electionsn. end, there isthe a majority support. i don't think he is prepared to roll back on his reformation. francine: his popularity wanes even more, or is your in trouble? investors said italy is a bit of a mess, germany is ok, but the numbers aren't great, but there is still france and they want to be reformed. if that doesn't happen, where does that leave the block? reforming france's going to take a lot of time. is going to take time. in the block, it is going to remain a story of very incremental progress. there is no quick fix to the economic and political problems. francine: where does that leave your estimates for euro?

is it just a dollar story or does it move on the back of fundamental european data? derek: i think it does. euro would be hired today were it not for the information that has been coming out of germany during this chatter of potential recession after the shockingly weak production data. i would say there is more germany than anywhere. germany is the engine of growth in the eurozone. when you get daylight we have had of late, it certainly does have an impact -- data we have had as of late, it certainly does have an impact. francine: are we going to see a recession in germany? we have pretty bad economic figures yesterday and there was a lot of anxiousness. the markets didn't really react on the back of it. carsten: i'm not that surprised they haven't reacted.

can i say for sure we're not going to have a recession? it could be close based on the data yesterday. we need to see a pretty chunky recession in december to see the. -- that. there was vacation holiday time which disrupted production. there was one or two other factors. low-level water in the river slowing deliveries. i've never heard that before, but what is missing in the focus on europe is the positive. on the positive side, we are beginning to see wages accelerate. in germany, wages accelerate on an annual basis is up 5%. when energy prices dropping in real terms, you are getting a further boost. there is a good chance that

domestic demand can offset some external negative factors. francine: what you do with italy? we're kind of going around euro. is italy the problem? european parliament elections will be important here. i think in that context, elections,rliament that is clearly the thing to watch in the next couple of months. francine: what does this anti-european sentiment going towards? is it referendums on the european project in europe, or is it a reform of the institutions? carsten: especially in the italian case, it will be difficult to engineer. it is a rallying cry across many member states.

an abstract idea of antiestablishment politics that helps these parties to organize voter turnout. it is much more than enough when it comes to concrete and specific policies. anncine: you don't see existential question on whether we are sticking to the euro? out, ito go that far definitely think there is a risk that something like that could come back. if we have had another global crisis of some sort, or a fairly nasty global recession, with ecb rates where they are now, there are problems i had from a broader long-term perspective. from a shorter-term horizon, i would not be that concerned. i think the btp sprint we had last year -- spread we had last year had some broader financial stability for markets. is anything, i think we get a narrowing back of that spread

after the resolution of the budget complex. carsten: the ironic thing here is in massive amount of economic pressure poses its risk to the euro. it is also what we need if we wanted to see further decisive progress. in the eurozone that is the irony we see. you need additional pressure if you want to see politicians move. politics are much worse than they were five or six years ago. the economic risk would be much higher this time around. francine: thank you both for joining us and sticking around. carsten. let's get a quick look at the markets. there is a little bit of movement when it comes to oil. we saw brent in wti, brent ri above $50efly --

briefly above $50. european stocks up. we think that donald trump will focus on the markets and get a deal with china. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's take a look at which stocks are moving with annemarie. up more thanmler 4% this week. on top of that autos in europe are really moving off of these encouraging trade talks based to beijing and washington, as well as chinese government trying to reboot and revive the car market there. in the oil space, the oil sector up a percent. broke the news that brent crude traded above $50 a barrel for the first time since december. getting those stocks a bit of a

break this morning. the local you take coffee shop have sales up 7%. u.k. coffee shop has sales up 7%. francine: vegan sausage rolls, i never thought the u.k. was so animated. annmarie thank you so much,. we continue in the next hour. tom keene joins me out of new york. later on, we will also be talking to the boston fed president. this is bloomberg. ♪

deal.ne: betting on a

president trump is said to want a trade agreement with china to boost the stock market. equities and futures are green again. trump declares a border crisis. democrats say the crisis is manufactured. theresa may loses another vote, undermining the threat of another brexit. good morning, everyone. good afternoon if you're watching from asia. this is "bloomberg surveillance." a little bit of movement when it comes to the price of oil. it is the first move since december. significant that brent went about $50 and wti above $50. tom: i want to go right to brexit. cap only have one data screen today with better markets. finally, brexit is front and center. we are back to real brexit discussion today, are we?

-- aren't we? francine: i love that we did a show together. i feel like it has never left us. deadline, the the 29th of march, that is some benign days from today. there's a lot going on -- that is 79 days from today. there is a lot going on. tom: i did not realize it was 79 days. francine: that is what i'm here for. let's get straight to the bloomberg first word news. : president donald trump making no new offers to break a skill may over the partial federal government shutdown prompted by his insistence on funding for a wall of the border with mexico. in congress have refused to acknowledge the crisis. they have refused to provide our brave border agents with the

tools they desperately need to protect our families and our nation. the federal government remains shut down for one reason and one reason only, because democrats will not fund border security. iana: democrat leaders are accusing the president of manufacturing words and holding the american people hostage. >> much of what we have heard has been full of misinformation and even malice. this president has chosen fear. the u.s. and china wrapping up three days of trade talks on what seems to be an optimistic note. the countries are closer on areas like agriculture. the talks were extended by a day. china says this shows both sides are serious. another sign of a sales slowdown

that apple. the company told suppliers of the latest iphone to cut production of the new models by 10%. the paper says apple is making the request before last week's reduction in its sales outlook. for the second time in a month, a major london airport had to shut down operations because they drawn was cited. this time it happened at heathrow, the busiest airport in europe. the government said it is ready to call in the military is needed. -- if needed. 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: thanks so much. equities, bonds, currencies, commodities. oil front and center. i will have a chart later advances.e

right now, euro with a little bit of an advance over the last few days. oil moving around so much you don't know if it is an american or brent. i'm also looking at wti. abovebrent because it is $60. stocks advance. is because there is a bit of a more optimistic town that america and china will conclude three days of trade talks with movement. we had that nice scoop that president trump once a deal because he wants to please equities. that is getting a bit of a lift to the market. it seems brexit is back at the forefront of each paper. markets are up. president trump is trying to get a deal with china. he is increasingly eager to strike that deal with china.

peter join us now on set. thank you both for joining us. -- as the market now believes we're going to get a deal, is there anything to be priced in or have a army priced in a deal? alternative -- already priced in a deal? we had a tightening in financial conditions from both equities going down and financing costs from companies going up. we're not back to previous levels yet, neither in equities or corporate bonds. you can say maybe in 2017, the market got a bit ahead of itself. we had the end of the fiscal stimulus in the market normalize, or you can save the market has been pricing and a

lot of tail events, like brexit going that and that u.s.-china negotiations going that. what we have seen now is a relief from these extreme events. we're not back to normal. francine: when you look at what president trump can achieve with think --e chinese just are we going to get a worse deal? peter: i think that is what many chinese hawks think. i think they welcome the concessions, the unilateral concessions that are coming from beijing. they are more concerned about the deep structural issues that have to do with china andidizing its own firms the transfer of technology. right nowe thing is, you have to view this time in

negotiation in the context of a government shutdown. trump is not gaining very much altitude on the shutdown. he did not help himself with the speech last night, so you may be looking for a deal somewhere else. tom: wonderful to have you with us. you mentioned his speech last night. fromn is distant laredo. i would love your thoughts on the ability to put a portable between these two nations. peter: it would take a lot more donald trumpat is asking for to put up a cement or steel wall. that is the view of people who analyze this in great detail. the more important issue is if you look at where members of the house are in those border states, whether it is texas or arizona, new mexico, there is not a whole lot of support for this particular path that donald

trump is taking. there's a lot of reservation about linking the shutdown to the wall and a desire to see some sort of separation there. tom: i am thrilled to announce john ofn i'm in london, the university of chicago will be with us. peter: i'm hosting him at lsc. tom: this is a very good and beautiful thing. it is a realist analysis of relations.al within that is always a multilateral or bilateral discussion. how long is trump-lateral politics going to be maintained? is there a new permanence to this unique international relations of america? peter: i think on that dimension, there is half dependency here. -- pat dependency hereh.

i think trump has changed the international dynamic. i think if a democrat were to take the presidency in 2020, the needle would move in the other direction. i think that there are consequences for these kinds of actions. sense,as changed, in a the political space for his successor. francine: when you look at the time the equation, what can china give the u.s.? at went to give them some kind of guarantees on opening markets, more towards consumption or will it be smoke and mirrors? alberto: the international agreements on intellectual property and open markets, i believe would be hard for china to maintain beyond the level of a promise. let's remember a lot of the

economic stimulus that has from agriculture to industrial production has been based on importing technology. i think changing that business model, the growth model would take a lot longer. is agreement on financial stability. forepreciation on the yuan, example. on the financial side, something more can be done, and also from the plaintiff view of stimulating the economy. year, a lot of the slowdown was from china itself. we now know from the numbers, and in 2009, china was the engine that allow more growth and allowed the recovery. that is something they can do. francine: when you look at the

fact that we are expecting the trade agreement to end on an optimistic note, does it mean that in six months, we can be back to square one and how these two countries fighting? peter: yeah. i think all bets will be off. it depends on what kind of agreement we get. possible one can imagine an agreement where the u.s. side demands that china hit certain goal posts or marks over the next six months. if they don't, the united states and china go back to where they were. i would not be surprised if there is a fuse on the negotiation. tom: too happy with us is a great privilege. would be remiss if we did not ask you about the new theme of brexit. 79 days until the world comes to an end for the united kingdom. what is the number one risk? : one thing that i don't

talk about is, because i don't understand it is british domestic politics. the u.s., i can understand. here, it is pretty hard. a crash out is a problem for her, for the eu, and i think in general,. -- inationally but general, internationally. tom: thank you so much for being with us. alberto, we will get over to bonds. in our next hour, without question, my interview of the day, what do you know about the mexican border?

this is bloomberg. ♪

viviana: in the u.k., a grocery chain reporting a decline in christmas sales. they fell 1.1%. facing tough competition from discounters. are set toegulators decide in two months whether they can go ahead with the planned acquisition of walmart. quick. of herbalife

herbalife calling comments inconsistent with its business practices. michael johnson will be assumed the role of ceo on an interim basis. verizon reassuring investors its growth streak remains strong, adding 1.2 million customers in the fourth quarter. it was the seventh straight quarter verizon posted gains. the ceo now looking forward to revenue from the new 5g network that is being rolled out. 2019 isve said that going to be a very important market for us, but it is not going to be significant on the turnover we have. bloomberghat is the business flash. only 79 days to go until britain links the eu, supposedly, theresa may has her work cut out. last night, she was handed a

defeat on her finance deal. the biggest impact could galvanize lawmakers when a vote next tuesday. rob joins us now from westminster. we have this vote next tuesday, does anybody really think there is a chance she gets it through. if she doesn't, what happens the day after? nobody thinks there is a chance she is going to get it through. i just can't see how she does it. unless somebody really panic. at this stage, nobody looks like panicking. i think the deal is a dead duck. game it'sng, labor the strongest hint yet that they will table emotion of confidence in her majesty's government. today after that would probably fail. the question is, what does labor do? does it move its position to backing a second referendum, which jeremy corbyn really doesn't want to do?

or does the government do something. there is an interesting move this morning to force the government to come back within three days. with its alternative plan and give parliament a chance to vote on. i think things will start to move very fast next tuesday. francine: what are the chances of a general election? can labor actually force it or does it depend on the dep? dup voted with labor, there would be a general election. that seems unlikely to happen at this point. a school of thought that says a general election is more likely because there is a legislative route to it, i have some sympathy with that. i think next week, in a confidence vote, the government would probably win. don't ask me what is going to happen. i have no idea. tom: currently if i'm wrong, but this was an important vote of

finance going back 41 years. i believe three labor members -- labour members can over and joined a theresa may. havingnds me of republicans flee to the democrat side. with this vote, does prime minister may lose her majority or is it a one off event versus what we will see down the road? event. is not a one-off it was clear last night with a series of people who are not traditional rebels. standing up and saying they will vote against the government march.nd again until what they're saying they will vote against is any move to get a note deal breaks. definitely, -- brexit.

definitely what you have is the start of something. it might be the start of parliament taking control of the process. lots of people are cynical about if that can happen. there have been talks that people say parliament cannot take control of the process because the executive controls the timetable. today, we have parliament trying to take control of the timetables. we have moved from uncharted waters to really uncharted waters. ryu are definitely seeing to mp's. there were 20 rebels last night on an anti-no deal brexit. that is my then you have seen on that side before. there are six cabinet ministers. a series of more junior ministers, six former cabinet ministers rebelling. your people in the cabinet saying they would not put up with a note of brexit.

-- a no deal brexit. parliament is taking back control. francine: thank you so much. tv, weup on bloomberg will watch prime minister may answer questions from the house of commons. you can also follow all of the proceedings on live ive go on your terminal. this is bloomberg. ♪

francine: we were just talking about brexit. the end game is nearing. we are now back with alberto. we were just talking about internal domestic politics of brexit. how should the market view this? the prime minister has been using her brexit as a threat against the eu and to try to get a better deal. we know that parliament does not want a hard brexit. we think this is a positive. it reduces the tail event of a no deal. the vote is not likely to pass the first time. we have to see if there is a sweetener from the eu or if there isn't. we think eventually, some deal

will be approved by parliament. the majority of mps don't want to go to a note don't brexit. the market is pricing is very extreme environment with a high percentage of no deal. up.e has been going other assets in the u.k. are still priced for the emergency scenario. tom: thank you so much. we will dive into the fixed income space in a bit. our, the banking the banking00 hour, interview of the day. this is bloomberg. ♪

tom: good morning. a lot going on this morning on brexit. we will do that throughout all surveillance and the debris from the president's speech last

night. >> president trump called the what the only solution to what he says is a crisis of illegal migration in his first primetime speech from the oval office. billionsdent demanded more. he blamed democrats for the partial government shutdown. democratic congressional leaders nancy pelosi and chuck schumer responded. they say he is holding the american people hostage with the partial shutdown. the white house will roll out a bill that will expand president trump's tariffs. the measure would give the president authorities. the president is expected twin bill the proposal at the state of the union address. there appears to have been progress after three days of trade talks between the u.s. and china. 200 positions were closer on areas of agriculture and energy.

negotiators were further apart on the hard issues. ginni rometty says what is important is two sides have been fighting over trade are now talking. >> i spent a lot of time and we believe trade ought to be there trade, responsible trade and what is out there. we prefer people to engage in dialogue and resolve positions because trade is good for us. it creates jobs. u.s. special counsel's team suspects paul manafort gave data with an associate tied to russian intelligence. robert mueller's staff than might about it. the lawyers metaphor did not intentionally mislead investigators. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am viviana rotondo, this is bloomberg.

tom: thank you. let us listen to the president and speaker pelosi and senator schumer. >> the border wall which quickly pay for itself. the cost of illegal drugs exceeds $500 billion a year. vastly more than the $5.7 billion we requested from congress. the wall will also be paid for directly by the new trade deal we have made with mexico. >> much of what we heard from president trump has been full of misinformation and malice. the president has chosen fear. tom: we move day-to-day. the president in meetings on a shutdown in washington continued bargaining and he will travel to the border tomorrow. we travel to london now. francine lacqua joins us.

moment indinary american history last night. was he served well by a short speech? >> not really. it is not seem like he put new ideas forward or carved out a path towards a solution to the shutdown which is in its 19th day. the overall sense is the speech sameflat and rehashed the non-truths and talking points he put forward in the past. they are going to the white house to talk more but there may not be finding a solution to the shutdown. tom: what do we expect tomorrow when he is scheduled to visit the border and it will be a photo event? what is he going to accomplish? kathleen: it is more of a photo

event. the fact he said at the outset of the week or early on he was going to visit the border thursday, that has a telling effect on negotiations because it is unlikely they would reach any deal after he does a dog and pony show at the border in terms of touring around and continuing to practice the case for the wall funding. all we see is both sides digging in on their positions and the reality is trump's leverages dwindling and democrats' is dwindling. whenresident feels behind negotiations should be. francine: what does that mean for finding a resolution? how quickly can it come and what will it look like? kathleen: one of the inflection points to watch is friday. thousands of federal employees are poised to miss their first paycheck. that will have trickle-down effect.

those are people who have to pay rent. we will start to see the pain of the shutdown beginning to impact everyday americans and as that pressure ramps up and more of these effects are felt throughout washington and beyond, that is going to put pressure to find some solution and it may end up being with trump redefining what he means by wall funding. tom: thank you. we will continue the discussion. marty schenker will join us in the next hour. the congress when -- congressman from laredo will join us. now our interview of the day on what to do with yield in europe, alberto gallo is with us. just as an open question, where is the opportunity in europe to find total return in fixed income? alberto: it is in credit. we have seen a lot of bonds

priced for a recession, particularly in the u k, in have high digit yields in europe equivalent to low, double-digit yields in dollars. if you do not have this recession imminently you are return.paid handsome we have seen in their pocket toh the dealers not willing warehouse any of these bonds in october, november, december. prices dropping. today as it happens in fixed income markets, investors discovering they are sort and bonds are remarked higher. it looks similar to the cure we had in 2016. the difference is ism and china fears are better now and oil prices. the price action has been and overshoot. tom: well said.

give us an example of a piece of paper. i do not mean a specific want, but if something is right step are 100, was it 90? and now is it 86 c you can pick up four points on it? alberto: it is more than that. things that were priced at 100 are going around 85. if you look at the high market in europe, many of the higher beta bonds have gone down 10-15 points. if you look at u.k. banks, take barclays for example, with the u.s. division in diversified earnings, the amount of spread you get is similar to argentina. in argentina, collections do not go well in q3 or q4. you can have issues. in its lowdown, barclays does not have solvency. that is how cheap things have gotten particularly in europe

and in the u k and some poor european countries. francine: what do you worry about the most in 2019? alberto: the where we we have is hard to gauge. all the uncertainty we have seen from policymakers on trade, and the u.s., and the u.k., france, and italy, that uncertainty would hurt the economy. if the volatility would reflect into lower growth. the data shows manufacturing has weekend but the service part of the economy and the job in the u.s. remains robust. if it does start hurting the economy, where would you see it first? is there an indicator? alberto: in europe, the key indicator is bank lending. mediumey for a small,

businesses. europe is less sensitive to equity markets. it is a more bank centered economy. if you have bank equities going down, the fears that banks will close their tops for lending will start feeling the pants. we have not seen that and maybe it is because banks have done recapitalizing. , theyf equities go down do not need to issue equity at those levels. there is more of a capital feel in the economy. we think the market surprised a risks of aeme recession in europe. it is a popular thing for an economist. it is hard to be right. we think it is a growth scare, not a real recession coming. tom: thank you so much. very informative.

gallo is with investment -- out to press investments. senator david purdue. look in that 8:00 hour. this is bloomberg. ♪

francine: we are looking at what is going on in the world of fixed income. bloomberg learned deutsche bank's management board is planning to cut its bonus for --

of 2018 by 10%. christian says he has been speaking in an interview. he says the group has cleaned up its finance sheet and is on a good path. we are joined by bloomberg's german bank reporter. bring us up-to-date. this this a surprise -- is this a surprise? >> it is not a surprise to be honest. it was clear we would not be able to keep it at the same level given the weak performance in the investment banking 2018. -- has immersed the bank and a strong cutting drive. banknts to pay his competitively and give other bonus pool.rease of it is a hard balance to's -- to strike. the drum may be stronger than 10% in the end.

that is going to be a disappointment for some people. francine: what are you looking for deutsche bank this year? restructure, is there any more they can do? steven: it is about execution. you mentioned the interview with christian sewing today. going to reach our targets of 2018 and we want to reach targets of 2019. he is not budging. that is what he wants but share prices are at an all-time low and people are demand and what is going to happen with revenue. if he can turn around the situation, the pressure will rise to try something new. we have been reporting on a merger with -- bank. tom: you and i have seen this song and dance 42 times. which body is the ceo most at risk of losing in london?

who is going to walk out the door? what kind of animal? steven: we have seen a few departures, not just a few. high-profile people. in departure of sam wizz mia 2018. they have been cutting a lot and they have been going out, tell people london will remain an important center for them but if brexit happens now, people will be looking for something new. if other banks increase, the bonus school will not help them keep the people they want to keep. the top performers in -- if they do not get paid well, that is something we will monitor. francine: thanks so much. bloomberg's steven arons. alberto, when you look at the banking sector away from deutsche bank, away from the

transmission mechanism banks have to fulfill, there is that concern about italy. now?happens with italy alberto: if you think about european banks, we have a large number of banks and bank branches across europe. some of the smaller not systemic banks are profitable. some were not built to be profitable. they were decided in the u k they were built for social reasons. then is to be more consolidation and we needs banks to go on a diet with smaller balance sheets. from 35 eurosed to 33 euros. that is less than three times. .e need a leaner bank the smaller, mintier, smaller

banks should consolidate and said the nonperforming loans. there will be a continued push by the new ecb staff, the new board members in this direction. francine: we have a story. this is the biggest bank at the moment. the government is behind finding a solution for it. does it make you more guess the people in charge, the populace seem to be in line with what the market wants. the -- wants? we know from the numbers immigration is not the problem. the issues are shifting to the economy, which has been the the populace have

increased it by increasing uncertainty around policy choices. in 2019, the agenda will go back to the economy and then we see which governments have real solutions. it is a good thing because the electorate will unmask. people have been selling pipedreams versus people who have real economic plan. sometimes fall -- small lenders create fear around bank assistance. you have spanish banks treating a wide premium compared to the sovereign. it is a bit like you have a small institution which has a problem in the market gets scared about everything else indiscriminately. here andill continue look to the next hour as well. let us look to our fed coverage. i have been pleased with the quality of the bloomberg interviews as we begin 2019.

michael mckee drives forward the conversation with one of the interesting fed prints from boston. this is bloomberg. ♪

francine: -- viviana: this is bloomberg surveillance. the self driving vehicle is in advance tops of investment that would value the company at $2 billion. capital will need an investment round of $500 million. founders lead engineering efforts. nissan unveiling a new version of its electric car. the company is delaying the launch because of the shock arrest of carlos ghosn. ceo just daily is ready for the worst-case scenario with brexit. been hoping for an organized separation but preparing for a hard one. whether contracts or capital, we for march comfortably

next year if there is a hard brexit. we will be able to do tomorrow everything we are doing today with our client base. viviana: watch all of david jes ons interview with bloomberg tv. tom: thank you. mr. rosenberg with michael mckee today. downu raise rates, slow comes in and he uses the our word of a recession. we synthesize this and i want to take a global view. with alberto gallo, i do not think enough has been said about the ecb and the lack of degrees of freedom. how constrained is mr. draghi in the first six months of this year? alberto: the ecb has boxed itself.

in 2017 with hindsight, they missed the train. they should have started reducing qe earlier. they spent when you're announcing a reduction of qe and started doing it at the end of last year, just at the weakest moment. german data has come out week for the last few months. they started reducing qa at the weakest -- qe at the weakest point. they are trying to get more liquidity to banks by extending the p ltro so the long-term loans to help banks fund. they realized persistently negative interest rates have a bad collateral effect for the economy because there is less lending it inc.'s lose money. they make money by having negative rates on loans. they need to normalize the rates from -40 basis points to something closer to zero.

the degree of freedom is guidance and extension of pr loans. they cannot do a lot in terms of the policy rate. if a recession comes in three years time, qe will remain a justicethe court of established. it is legal to use qe and the president said it is a permanent tool and the arsenal. in a qe infinite he environment -- infinity environment without fiscal stimulus. francine: when you look at dollar, does it go up or down? there is discussion about the weaker dollar. the u.s. economy is outperforming into european elections. there is clear about european elections. we need to have a fiscal policy response. we are looking at that in france with the yellow vest movement.

there will be more spending but we need to have some from germany. that is the key thing we are looking at for an increase in europe. tom: thank you so much. greatly appreciated, particularly the comments on bond. we are going to move forward on the conversation. really a good time to catch up on the synthesis of different markets, particularly his take on commodities. vince reinhardt will join us as well and i want to point out my interview of the date with clear we would do that later. this is bloomberg brexit. ♪

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. 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. ♪ this morning, statistics and anonymous anecdotes, the reasoningdelivers his

for a border wall link to a government shutdown. ofnesday, a meeting bargaining. tomorrow, the president travels to the border. the prma-bear -- erma-bear market. good morning. this is "bloomberg surveillance." , francine london lacqua. 79 days until brexit. francine is fired up today. tuesday is the day of judgment for prime minister may. thatine: we have not heard officially. we are waiting for prime ministers questions. i believe we won't be at westminster for that day. is what ise talk

parliament's role compared to the government if theresa may is weekend? and the real chances of getting it through parliament are slim, so what happens after? a lot of questions amplified. tom: it is amplified. there is a brexit fatigue. also, first word news. >> in a speech last night, president trump making no new offers to break a stalemate prompted by his insistence on funding for a wall at the border .ith mexico >> democrats have refused to ignore the crisis and provide our agents the tools they need to protect our families and nation. the federal government remains shut down for one reason and one

reason only, because democrats will not fund border security. nancy pelosi and chuck schumer accusing the president of manufacturing a crisis, their words, and holding the american people hostage. what we haveh of heard from president trump has been full of misinformation and even malice. the president has chosen fear. wrapped up and china three days of trade talks on an optimistic note. the two countries positions are closer, but negotiators are further apart on the issues. the talks were extended by a day, china saying this shows both sides are series. another sign of the slowdown had apple, the company telling to cut production by 10% over the coming quarter, a paper saying

apple making the request before last week's shock reduction in outlook. a major london airport shutting ,own because of drone was cited this time heathrow, the busiest airport in europe. the government says it is ready to call in the military, if needed. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. tom: thank you so much. equities, bonds, currencies, commodities. michael will be here in a bit. one screen today, market action quiet. oil up a stick. what do you have? above $60brent briefly. also wti.

we need to figure out what will happen with oil. european stocks on the back of buoyancy in the markets we would get a deal between the u.s. and pound 1.27. tom: somebody said where are we in the bounce off that their market. let us look. february, the ugliness. correction in october. bear market in december. here is the bounce. we are almost back to a correction. francine? something -- iis will reprice it for you. the real clear politics , and index of trump approval. tom: interesting. francine: and the dollar index. when he says he is worried about

the stock market, you can see it playing out in the approval ratings. tom: very good. we searched high and low at bloomberg for someone who could read a teleprompter worse than the president of the united states. joining us, martin schenker, chief content officer. what an extraordinary moment. your thoughts, generally. >> it was more interesting for style than substance. on eitherno news made side. i almost had to stop myself from wondering whether i was watching saturday night live. tom: that is a fair criticism, whatever your politics. you wonder what they will do this week. bread with to break

norm pearlstein every day. when did fact checking come in? this is a relatively new phenomenon. it has been driven by donald trump and his tendency to play fast and loose with the facts. fact checking has become a staple of covering this president. tom: remarkable. francine: how did the trump take this? will we know? >> there will be some instant polling. some showed a slight tick up in who is to blame, placed at donald trump speak. i don't think it will sway the base one way or the other. a national address is intended to unify the country, and i don't think it did any of that. francine: do the democrats currently have the upper hand?

rely on their paychecks, right? they are now in question. how does this get resolved? >> the democrats have the upper hand for now. as of this friday, those 800,000 government workers, the largest employer the united states, will not get their paychecks on friday. , wheneek is a little weak real pain starts trickling down to everyday people, people like you and me. if we start seeing delays, loans not being made come it will get messy. tom: let's look at this. i chopped it up, but it gives a tone. this was something. the president is pushing something that polls say is even less popular than he is, so he

managed to rush through it to "tolow energy and appeared be drug to keep him on point" bush in 2001, again in 2004, he went from awful at the teleprompter to being a total pro. fewlt like i was one of americans left watching trump forced himself to finish something he seemed to like any interest in at all. it is interesting. there is a tidbit in the new york times that said donald trump did not want to give this speech and go to texas. he was convinced this is something he should do by his aides. that whole notion he was going through the motions seemed to play out in that speech last night. tom: thank you so much. much more out of our washington

coverage. look at that -- for that on the terminal. we drive forward the discussion on economics. 2019 starting strong. our conversation with one of the most interesting residents -- presidents in the 1:00 hour. brexit in a bit. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. car sales falling in china last year. sales were down 6%.

and a slump in stocks are putting off buyers. quit over herbal life comments he made prior to becoming chief executive, herbal comments in consistent with its business practices. reassuring investors its growth street remain strong, verizon adding 1.2 million customers, the seventh straight quarter posting gains. the ceo says the company is well ahead of schedule when it comes to fiveg. >> we started to years ahead of everybody else. was 2020, andng we proved we launched in 2018. >> that is the bloomberg

business flash. tom: the fed chat was boring. i believe he nodded off at that meeting listening to the news. wonderful to have you with us, particularly after speaking to alan greenspan at the last live fed meeting. where are we now in the discussion of discretion versus rules? how discretionary is chairman powell being? i'm surprised you didn't remember the dead meetings out of 2018. this parrot is really dead, to quote monty python. with regard to discretion, i interpretingover

how much the fed strategy has changed. they were always making decisions data dependent. what they are doing is getting out of the guidance came, changing their communications policy. the problem with rate guidance is when you move, you are signaling your commitment to move again in the future, and you are responsible for figure shock to markets. jerome powell 12% a smaller target for markets and politicians. here is a great -- tom: is it good for you to have less forward guidance into 2019, or are you prepared for a fed shock down the road? >> guidance is a nonconventional policy come up by the way. tom: where is the best policy this year?

>> for them to say they have tightened enough and they feel this cycle is over. the data supports rate hikes, but data tends to peak after markets do, and the december decline rattled the confidence of the fed reserve that it knew what it was doing. francine: how should they view the shutdown? >> has transient. i don't think it should be .llowed to dictate apart from the dollar, there wasn't anything behind the drawdown we saw. francine: if there is a significant slowdown in the u.s. in 2019, does it show up in the

data, bank lending? >> bank lending is a liking indicator. it shows up in markets, then the data. point tohe remember, a slowdown down in 2019 is a good thing. 3.25% realg to print gdp growth, twice the run rate for long-term growth. , youan unemployment rate highost growth that without impacting resources. slowing is also associated with disappointment, and people are disappointed. when gdp growth slows, earnings growth slows more come and equity markets don't like that. tom: i think of lawrence myers alanrful book, and

greenspan's approach, my way or the highway. give us your perspective on this fed, a collegial body, and essentially my way or the highway? >> what is the feature you hear most when jerome powell is talking is he has been involved in the last eight selections of federal reserve presidents. by and large, they look like him. the white house for all the top one criticism of the fed has been helpful to the fed by putting colleagues that jay powell can work with. i don't know he has to exercise any muscle. he has people like him around him who think like him and build , so i think it

is a. tom: raising rates leads to recession, something like that. i am paraphrasing here. if we raise rates, to get to the r-word. >> if you raise them enough, but have they done that yet? they are only at the bottom of the range. i have more confidence in a market economy. i don't see how that rate will dislodge economic activity, especially with inflation close to 2%. we have more room to run. tom: thank you very much. vincent reinhart. we will come back with michael. i want to quiz him on commodities as well. on banking, my interview of the day. that's a grayson in the 8:00 hour. great acuity on the tangible

math of our banks. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine. futures in the green. some optimism this potential trade talk between washington and beijing will turn positive, president trump eager to strike a deal to boost slumping markets. let's get back to our guests, vincent reinhart, and michael,

both still with us. michael, if you look at china and the economy, this number caught my attention, china car sales falling for the first time in 20 years. how badly does china need a truce or deal on trade? >> i'm not sure car sales were affected by trade. paths lastdown two year, tightening internally, then finding itself in the middle of a trade dispute. they have been reversing tightening. i think that will affect consumer demand in 2019. i think the chinese want to settle this trade dispute. i think we will have some deal in place this quarter. francine: vincent reinhart, do you agree? >> i think trade is more

important to our trading partners than the u.s., and right now we have more cyclical momentum mentum, -- momentum, so china is eager to cut deal. it's not just car sales. indicators of activity have slowed. they needed another source of stimulus. they are providing more infrastructure. the core story is they use moral persuasion to rein in balance .heet growth last year it is hard to tell people it is ok to spend after you told them not to. they are having trouble to displace slower exports. tom: is there an opportunity in asian stocks, in particular the chinese market? we showed a chart yesterday. chineseeed to see the clearly reverse course on shadow banking. people don't understand the

degree is used to buy financial instruments. so you saw closures caused by the entrusted loan market. chinese central bank policy has been much more disruptive. if you see not just reserve cuts, which are about the general economy, but a reversal on shadow banking, you have an ok market. tom: do you have any optimism they can clear markets? obtusehere system so they can't do it like we do it? >> they can clear markets. certainly have to the deleveraging within chinese markets. the chinese market lacks liquidity and confidence. you have to put both i can to play and you can have an ok equity market. tom: we will come back and talk with michael.

vincent reinhart, thank you for joining us. mr. reinhardt. my interview of the date coming up on american politics. this is one of the most interesting congressman in the country. the gentleman from laredo will join us, the democrat of texas. much more today. brexit has well. well-time, finally back on the will they2019 when take down the scaffolding on big ben? we will do that next. this is bloomberg. ♪

place, the xfinity xfi gateway. and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything.

leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. click or visit a retail store today. comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. tom: good morning. thank you for being with us. francine lacqua and london. we do economics in the 1:00 hour with michael mckee. really looking forward to that,

after the headline out of the wall street journal. mr. bullard uses the r-word. in new york city, first word news. >> president trump called the wall to a crisis of illegal migration. the president demanded congress provide billions more to prevent people from entering the country illegally from mexico and blame the democrats for the shutdown. nancy pelosi and chuck schumer accused the president of manufacturing a crisis and said he is holding the american people hostage. that.s. has been warned the shutdown could lead to a cut in the country's aaa rating. is becoming ang problem. it may have to be considered

whether the policy framework and budget are consistent with a aaa rating. the white house will roll out a bill to expand president trump's power to increase tariffs, giving him broad authority to increase duties if he thinks other countries are too restrictive. to president is expected unveil the proposal at the state of the union address. some progress after trade talks in beijing. the two countries positions were closer on agriculture and energy. negotiators were further apart on the tougher issues. the ibm ceo said what is important is that the two sides are talking. trade, weture on believe trade to be fair trade, wouldsible trade, so we always prefer people to engage in a dialogue and resolve these

issues come up because trade creates jobs for all of us. >> global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. tom: thank you so much. moment,nal and historic the president spoke. >> the border wall would very quickly pay for it self. the cost of illegal drugs exceeds $500 billion a year, and vastly more than the 5.7 billion dollars we have requested from congress. the wall will also be paid for indirectly by the great new trade you we have made with mexico. tom: the president of the united states, speaker pelosi and senator schumer speaking after the president. he is a democrat from texas, but that barely describes his

visceral understanding of the border. there is no one more linked to laredo than the man from the 28th district in texas, a democrat, a conservative democrat, i might point out. i am thrilled you are with us today. what does president trump get wrong about the people on the border want? it ismakes it sound like a crisis and difficult place to live. the latest fbi stats, murder rape, crime rates, assaults, the border crime rate is lower than the national crime rate. laredo, my hometown on the border, and that rate is lower than washington, d.c. the most dangerous thing the president will see tomorrow is

when he leaves washington to go to the border. tom: you have a visceral understanding of this. , laredo is not marty robbins song. port for trade. we will have funding. ise allen reporting omb talking to pentagon about a military funding of this project. havingld you respond to the pentagon come down into this infrastructure project for your laredo? >> i said it is wrong. there are two different things. we are talking about the law enforcement issue, not a military issue. comeu want to stop drugs the latest dea report will tell you most drugs come through ,orts of entry, cars, trucks and he does not understand a

wall will not stop the drugs from coming in the way he thinks it is. he has to have a better understanding of the way the border works. there are a lot of republicans out there who have moved away from the certitude of the president, the belief in the president. how lonely is this president within his republican party? how many republicans are with the blue doll coalition? >> that is a good point. republicans on a private matter will tell you they understand thisdent is not correct on issue, but many times they have to stick with him because of party. aey understand the wall is 14th century solution to a 21st-century problem. he thinks the only way to secure the border is by having a wall, and that is wrong. wall,t china, the berlin

the germans and french in world war i. technology,ook at personnel, and other ways of securing the border. are callingat you for is more practical border security. what cost, what kind of training? patrolre 2000 border short from the highest we used to have. so what does the administration do? a $290 million contract to hire order patrol. with $14.8 million, they hired two new border patrol. if you're going to spend that much money, you better get something good. ,e have to hire order patrol give them the equipment. a lot of the tech companies have the latest technology that works very well, but again, we can't

play defense on the 1-yard line. we have to expand fat and work with mexico and central america. weouple of years ago, provided 14 million dollars to help mexico to secure the border with quarter mullah. they were able to stop 220,000 people year. so we have to be smart on how we secure the border. francine: what kind of changes would you make to the american detention system? of the things i have done is make sure there is transparency, if somebody in sept and attention, we treat them with dignity and respect. weis important to note that cannot have catch and release. detentione don't like , but you have to have detention beds. if somebody comes in coming you

have to be able to hold them and send them back. tom: i want to go to the 16th district in el paso. the emotion the president talks about. speak to liberal democrats about their belief on the wall. what do liberal democrats get wrong? cushy democrats in california, even fifth avenue in new york. what do they get wrong? >> with all due respect, the extreme right and extreme left don't understand how the border works. some one open borders. i don't want open borders. albert areas are very safe. -- our areas are very safe. the bottom line is you have to

have deterrence. ,f you're going to have a wall and i say this to certain people , i have asked this question to the border patrol chief in bush, obama, and trump, how much time does the border wall by you? " a few minutes or a few seconds". do i spend $100 to buy you a that cane -- ladder get people over that fence. you are elected only because of your affiliation with the university of texas. in texas, you don't do that. he did that. what does it signal to texas that apple computer is going to drop into austin, texas. what does that signal? >> texas some years ago was

creating about one third of all the private jobs in the country. we got trade important to our gas, butrgy, oil and if you go to austin, and i used to work there, i had seen austin forme a held for cash hub new technology startups. tom: thank you so much. thank you for joining us. >> thank you so much. tom: we drive forward this lyrical conversation with the senator from georgia at 8:00. stay with us. from london and new york, this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. aurora is in advanced talks. sequoia capital will lead an investment round of $500 million. they are leading engineering efforts. nissan unveiling a new version of its leaf electric car. it delayed the launch because of the arrest of carlos ghosn. it narrows the driving cap with tesla and gm. barclays ceo is ready for the worst-case scenario and it comes to brexit. he sat down with david westin. >> we have been hoping for an

organized separation, but preparing for a hard one. whether contracts or capital, we are set up comfortably in front of march if there is a hard brexit. we will be able to do tomorrow everything we are doing today across europe and the u.k. >> you can watch all the interview on bloomberg is a decisions at 9:30 p.m. new york time on bloomberg tv. tom: thank you. francine, time for a surveillance correction. saying "it is not big been, it is of this of the tower -- is elizabeth tower/" francine: he is right. it was renamed in 2012 for the

60th anniversary of the queen. keith is right, but you are not 100% wrong. tom: thank you. usually i am 120% wrong. right now, the single best chart. good about been very going cross asset. this is the bloomberg commodity index adjusted for inflation. there has been a broad trend, 30, 40 50 years. we are waiting for a commodity turn. what should we look forward to see an improvement in pricing? 2016, had a turn in particularly post-brexit, a good commodity market, but ran into a wall last year. no significant commodity below where it was in 2016, so you are still in the process of recovery

for commodities. sentimentve shift in towards global growth, i think you could have another run here. tom: you have to get paid while you wait. hattie get paid while you wait in commodities? >> global material stocks have not been bad. 2018. a reasonable i think you are right. you can't just hope for something to happen. one area where things do seem to be getting better our precious metals. gold is a much more attractive asset for portfolios than it has been for years. i think that is an area where people should be shifting capital. francine: if there was to be a downturn or recession worldwide,

would we see it in commodities? would we see it in oil, or is that a supply issue? >> it depends on what is driving things down. i don't see chances for a global recession. a global bear market seems a more realistic risk. i don't think it would be terrible for the commodity sector. has notracking china paid enough attention to the fact that chinese demand for industrial commodities has remained stable, and with the exception of the car industry, most portions of their economy look like they palm and -- the bottom years ago, but have recovered. catalyticwhat about converters, these metals really taking the benefit of these products being used more? >> you have for mediocre overall

commodities complex. the few commodities that have got going, they are the vast majority of active commodity flows. be even made an all-time high last year. what i would be looking for is a point in the cycle that the aggregate money flowing in to commodities starts to increase. it has been many years since you have seen. s been beathe tech up enough? >> if we sold the top in september, and that belief we did, we should be in the process of dividing technology into good and bad technology. a small number of stocks have broken out to all-time highs. they clearly go into the good bucket.

technology,rity of is matched for news. where you have seen disappointing earnings, you have seen a yawn from the market or a small bounce. does the news continue to get worse? tom: you know those bangles, the earrings? tiffany's. this is bloomberg. ♪

>> a step towards meeting the development goal in question. parliament, the house of commons, before prime minister may will begin her weekly prime minister's questions. i can only imagine what it will be like in seven minutes.

we will have extensive coverage of that. a number of options on the table, things we have heard about, including the amendment to the finance bill. brexit saying this is a plan that is meaningless and cosmetic. let's get to our government reporter joining us from westminster on brexit. yesterday, there was an amendment to a finance bill voted in parliament. is parliament fighting the government on the best way to deal with brexit is? >> it really is, francine. it is interesting. would say there is no majority for a hard brexit , and hard brexit supporters say

these people say these things, but never show up, never vote, and it is still true. they are agreed on what they don't want. what you saw last night was normally loyal tory mp's rebelling against the government, saying we will vote against the government any time it brings forward something to help a no deal brexit. they are going to try to take over the parliamentary timetable. francine: does that mean it reduces the chance of a crashing out? that it is off the table completely? is the $100 billion question. really, really, really high stakes poker. it is a massive game of bluff. the tories who say they don't

, arethis, a hard brexit saying they think they can stop one. the government is saying you are not going to be up to stop one, but you might make the rocks britain would fall on a bit sharper if you restrict the ability to deal with it. nobody knows what will happen. inhave seen things parliament we have never seen before. the way the cabinet is behaving. the prime minister's aides said they might as well found and livestream it, because as soon as it ends, everyone tells us what happened. it is an extraordinary time. certitude ofthe the chamber 15 vote -- a january 15 vote? >> i think she has to do it. she said she will not postpone it again.

nothing is certain. she has to do it. nothing is changing. if another week might win the vote, she might put it off. we have had the christmas break, and everybody is angrier. she has to happen the vote -- have the vote and we find out what will happen next. tom: thank you so much. michael, thank you for being with us. we will continue on radio worldwide as well. a most infantile day, look to the washington team for coverage of the president meeting with the democrats. this is bloomberg. ♪ crats. this is bloomberg. ♪ amazon prime video is now on xfinity x1.

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. i am a techie dad.n. 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. alix: talks are serious.

the china and the u.s. extend trade negotiations as president trump is eager for a deal. investors flood back into equity markets. this even as u.s. recession fears are said to be overdone. the first guidance from lennar. the opportunities in real estate and an exclusive interview with the ceo of kayne anderson. david: welcome. i am david westin. this is the day after, the night .efore president trump asked for time to address the nation. the federal government remains shut down for one reason and one reason only, because democrats will not fund border security. simple, mgestion is