>> a flexible fed, jay powell and richard clarida tell markets they are being patient, but the ecb says the weight -- suggest a wait-and-see approach. the billionaire cofounder brushes off a selloff that shed his $6 billion in market value. he tells bloomberg that a smart is coming.in china no sign of an agreement between president trump and the democrats as hundreds of thousands of federal workers won't get paid today. welcome to bloomberg

surveillance. good morning if you are watching from europe and good afternoon from asia. i am francine lacqua in london. we are seeing a lift off when it comes to european stocks, gaining 0.3%, following a little movement when it comes to the asian stocks that were also gaining. renminbi, 6.70 4, 1 of the main points we are looking at to see whether there is a agreement between the u.s. and china, but this goes back to what we have been looking at. inflation data in china and some entry points for investors. pound, 120 -- 1.2734, because we vote andaway from the getting breaking news out of italy which may or may not move italian bonds, but that is something i'll watch in the next minutes. 1.6%trial output falling for december, worse than expected because we were expecting 0.3%. coming up, the u.s. government shutdown drags on and we will

talk to a california congressman at 11:30 a.m. london time. first, let's get the bloomberg first word news in new york stock -- city with viviana hurtado. president trump most likely declare a national security emergency if congress doesn't agree to funding for his wall. trump flied to tech -- flew to texas to rally support for his border plants. according to a source, the white house is considering diverting emergency funds for disaster relief to pay for the wall. >> when i say mexico is going to pay for the wall, that is what i said, mexico will pay. i didn't say they would write me a check for $20 billion or $10 billion. i said they are going to pay for the wall and if congress approves this incredible trade with mexico made, and canada, but with mexico in this case, they are paying for the wall many times over. set tovice premier is

visit washington january 30 and 31st for third -- further trade talks according to people familiar with the plans. he will likely meet with u.s. trade representative robert lighthizer and treasury secretary steven mnuchin. u.s. and chinese negotiators expressed optimism this week after a mid-level trade talk wrapped up in beijing. carlos ghosn has been indicted for a second time as japanese prosecutors continue building their case against the former nissan chairman. the additional indictment is for acts including allegedly transferring personal investment losses to nissan as well as understating his compensation. carlos ghosn, who has been in jail for almost two months, denies wrongdoing. his lawyers say they plan to apply for bail. japan's prime minister says the whole world wants to avoid a no deal brexit. following a day of meetings between shinzo abe and theresa may, abe publicly backed her brexit agreement. lawmakers continue debating may's deal in the house of commons this week ahead of a final vote on tuesday.

>> a no deal brexit will be avoided and in fact, that is the whole risk of the whole world. japan is in total support of the withdrawal agreement right now between the eu and prime minister may. >> president trump's former lawyer agreed to testify next month. may offer aomments dramatic view of the inner workings of the president's business, political, and private life. pr ready pled guilty for making hush money payments to two women. these women, claiming past affairs with the president. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. .'m viviana hurtado this is bloomberg. francine: thank you. the fed chair jay powell has hammered home the message that a is coming as the

central bank waits to see how global risks are affecting the domestic economy. financial markets beginning in the fourth quarter got more volatile and seemed to be pricing in a more pessimistic outlook, which seems to be rooted in concerns about slowing growth and a related concern of the ongoing trade negotiations, but if you look at the incoming data through the end of year and into the beginning of this year, you don't see any evidence of slowdown. powell is one of who made thatrs position. richard clarida echoed the position. >> keeping the economy close as possible.

francine: joining us for the hour, james athay at aberdeen. always good to catch up. is it true we should believe the five days of the trading your are up and it will be a good year? >> if only it was that easy. i don't think so, to be honest. the number of crosswinds globally that we will be facing in 2019, it is very unlikely we would get such a powerful signal at this stage of the year. the fed will either take away the punch bowl, the ecb is no longer providing a punch bowl, or they will have to provide stimulus at the margin because the economy is on a worse cap than we thought. either way, a lot of volatility. francine: what is priced in a moment? one hike from the fed and that is it? james: not even. the fed fund curve is telling

you the fed won't hike in 2019. there is a small hump in the middle of the year and that therefore looks like we are pricing hikes toward the middle of the year and cuts beyond that. we have the first ecb hiking june-july 2020. markets are still disjointed and showing evidence that december was a largely positioning event, a var shock and we haven't found a stable equilibrium in terms of how we process information. francine: is there a data point you are looking for in the u.s. to figure out if there is a recession or are you looking at the shutdown and trade? james: i am not expecting a recession yet in the u.s. my biggest concern has been throughout 2018 and at this moment a reflexive recession. by that, markets do the work for the economy and it becomes negative confidence spiral. what we are seeing globally makes that more likely. francine: are the markets a leading indicator of an

impending recession? james: in a normal world where markets are completely unencumbered by false stimulus, false liquidity, a huge amount of cheap money built up in the system, a massive debt loads, they are a pretty good leading indicator. i find it difficult to believe the fed can engage in such dramatic distortion of bond prices and that leads through to distortion in other asset classes and uses those signals from asset prices as an input back into the rome policy reaction function. that is circular and concerning. francine: james athey from aberdeen stays with us. next, the shutdown approaches a record 21 days with no sign of the impasse breaking. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's get to the business flash in new york city viviana hurtado with. richemontuxury group just shy of analyst estimates held back by protests in france and slow growth in hong kong. 3.90 2 billion euros in the three months to december was as growth and -- in mainland china sped up to a double-digit rate. falling asore sales stores were closed on six consecutive saturdays during the yellow vests protest.

blackrock's cutting 3% of its global workforce, its largest headcount reduction since 2016. a memo says 500 employees face dismissal, though the note doesn't specify which units will be most affected. market volatility has put asset managers under pressure and the industry is rolling out technology to reduce cost. jpmorgan is said to be boosting annual bonuses at its corporate and investment banks as wall street firms share proceeds from a busy year. be ine percent rises will single digits with equity traders and investment bankers given more. stock traders generated $5.5 billion of revenue in 2018's first nine months, 22% more than a year earlier. that is the bloomberg business flash. president trump says he will most likely declare a national emergency in regard to the u.s. southern border if congress doesn't agree funding for his law. the u.s. government shutdown

enter its 20th day and the president flew to texas to rally support for his plan. if we don't make a deal with congress, most likely i will do that. i would actually say i would. i can't imagine any reason why not because i am allowed to do it. the law is 100% on my side, so if we can't make a deal with congress -- we should be able to make a deal with congress. francine: according to a bloomberg source, the white house is considering whether funding for disaster relief can be diverted to pay for the wall as hundreds of thousands of federal workers won't get paid today. with more, our senior writer stephanie baker. still with us, james athey from aberdeen standard investment. how long can the shutdown last? stephanie: indefinitely. the political pressure will start building today because it is the day people will start not getting their paychecks and you can see the stories that will emerge from that of people unable to pay their bills, pressure on congressman and senators to reopen the

government, and it does look like trump has backed himself into a corner and the only real way out is to declare a state of emergency. yesterday, they failed to reach a compromise to exchange border wall funding for citizenship for young undocumented immigrants. lindsey graham tried to broker the compromise and gave up and went to the gym. it was a sign things were not going well. francine: can he actually get funding from elsewhere to fund this wall, or is this something that would be -- institutions would cry out and up in arms? viviana: there are some regulations --stephanie: there are some regulations that could come into play and democrats could challenge his ability to shift funds from one pocket to the other, but he does have wide latitude. if he goes down this path, it will most certainly be challenged in the courts, either by the democrats were by another pressure group.

francine: james, our market whenion on our mliv blog, will the u.s. shutdown matter for markets? james: it matters at the moment, but it is difficult to isolate the impact because the period of down, soas been shut much has been going on elsewhere within the u.s. policy sphere, economic sphere, and globally. screen, a stat on the .1% of gdp a week is a fairly large number so i don't think there is anyone in the u.s. political sphere who wants to carry on. as stephanie said, in terms of resolution, it seems difficult given trump has said all or nothing. i think markets will increasingly become sensitive to this from an economic perspective the longer it goes on. francine: if markets tankfrancine:, let's say it hurt economic growth and markets tank, the president cares about

this, would he backed down? stephanie: he will try to spin this as a democrat problem. they are willing to allow open borders, which is not really the case, and try to blame them. that will add -- the market downturn will add to pressure on both sides to reach compromise. ises: the interesting thing the federal reserve has backed off because of markets. that at facelieve value, it is not necessarily the case the equity market suffers. possibly, we price in more stimulus, a less hawkish fed so you see bonds and equities rallying together. he is very sensitive to what the equity market is doing. francine: one of my favorite charts, thanks, hillary.

.01% every week -- .1% every week. president trump not going to davos because of the shutdown and we are expecting his former lawyer to testify. reached a dealas to testify in an open session before congress. there is a lot we don't know. he has gotten permission from special counsel robert mueller to testify. what we don't know is what restrictions may be placed on him as to what he can and cannot say. we don't know what members of congress will ask him, but they will likely ask about payments to stormy daniels and terry mcdougal. about the camp -- trump campaign manager. whether he will be a to speak on the russia angle will give an indication on where mueller is on the russia investigation. francine: do we have any indication at the moment? stephanie: we find out next

week, which is why it will be interesting to see what he is able to say and not. i think it will go on for quite a long time and members of congress will press him very strongly to see where mueller is that in the investigation. coverse: stephanie baker white house administration for us and james athey from aberdeen standard investment stays with us. coming up, onward and upward. 's founder is brushing off a selloff that wife $6 billion from its market value in three days. our exclusive interview next. this is bloomberg. ♪

is francine: this is "bloomberg surveillance." i'm francine lacqua in london. xiaomi has lost $6 billion of market value in three days, but it billionaire cofounder lei jun is shrugging off the sell off and says he expects the next generation wireless will energize. 5g is coming very soon.

at this point, the demand for smartphones is declining, but i we shoulden 5g comes, expect to see a peak in demand for smartphones. six of the world's top smartphone makers are from china and chinese companies are getting more competitive. it is understandable foreign brands are facing local pressure as local brands are more competitive. you oneanted to push what your priorities were for overseas expansion. you talked about the growth xiaomi has seen in india and companies like spain, but what are your priorities and have those changed at all given the current tensions and environment? for our new priority overseas expansion will be european markets. we hope to choose two or three companies to that countries to break through to prove xiaomi is capable of putting a footprint in european countries. xiaomi is is a claim

in internet services company more than a hardware company. what specifically are you doing to address those concerns and when do you think is that you are putting in place will start to have an impact? : xiaomi is an innovative company that includes the hardware business, and internet. -- in the third quarter of 2018, that increased more than 80% year on year. it is growing very fast. number as manys as 220 million people, which is a large number. francine: that was lei jun, xiaomi and chief executive speaking to tom mackenzie in beijing. atll with us, james athey aberdeen standard investment. when you look at the tech space, and i'll get to those valuation shortly, but the spat between

the u.s. and china, does it mean supply chains have to move? does it mean you are more bullish on the space at all or bearish? james: it doesn't make me more bullish. the problem with the tech sector is valuation. -- hinted at it, but it is can be applied more broadly. the smart phone sector, do are reaching peak penetration for smartphones at a time when the sector is becoming more competitive. that suggests if you project 10-year revenues for the sector, it will longer be a straight line moving up and therefore, there will be winners and losers. they will all have to probably become less profitable tied to margins. valuation at the medium-term is a concern. francine: there are not regional winners because the chinese -- it is u.s. carrier that builds networks?

james: there is a difference between the hardware itself and we have seen how politics can eifringe on that with the huaw situation, the hardware may be doing things that wouldn't be desirable and that could have an impact. a definite black swan i couldn't see coming but what we have done is extrapolated the growth of the sector during a period when the global economy was doing very well, there was high penetration, it can't continue. francine: james athey of standard aberdeen -- aberdeen standard. next, readying a one billion euro bond issue. we bring you the latest on the struggling italian lender next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's focus in on hedge funds as they report 2018 performances.

management outperformed end of this staggering losses. one bright spot was bridgewater. many of its peers did not fare as well. pershing square outperformed the average hedge fund but still ended the year in the red. one of the worst major performers was greenlight capital, which saw the worst performance in its 22 year history. we are also getting breaking news out of the u.k. gdp better than expected. coming in at 0.2% for the month of november. production, much worse than expected. 0.4%.on month is manufacturing also worse than expected. construction, better than expected for the month of

november. pound at 127.30. let's get straight to bloomberg first revenues in new york city -- first word news in new york city. : president trump says he will most likely declare a national emergency if congress doesn't receive funding on his wall. flying to texas to rally support for his border plans. is considering diver in emergency funding for disaster relief to pay for the wall. >> when i say mexico is going to pay for the wall, that is what i said. i didn't say they were going to write me a check, is that they're going to pay for the wall. if congress approves this trade bill with mexico and canada,

they are paying for the wall many times over. powell says the federal reserve can be patient before raising interest rates again. the fed chairman says he is watching and waiting to see how global risks impacts the economy. >> each individual participant submits his or her individual projections four times a year. two rate increases with the median. it was conditional on a very strong median -- outlook for 2019. where in a place where we can be patient and flexible. in the meantime, we are waiting and watching. prosecutorsanese into doing to build their case against the former nissan chairman. accusations are

for understating his compensation. he denies wrongdoing. . his lawyers say they plan to apply for bail. 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 kerry francine: -- this is bloomberg. francine: thank you so much. a newspaper says the bond is being prepared thanks to the state. to report comes after the administrators said they are considering any plan to nationalize the bank even as italian populist leaders say that if the government goal. thank you for sticking around and look at the program. -- welcome to the program.

bank iso: is a systemically important, that goes to a lot of solutions where we had capitalization. if a bank is too small, probably proportionate recapitalization cannot be authorized by european authorities. one of the options we have on the table is the government bankvening in making the state-owned. it needs to be large enough, and that is a very good point. there was an article and an entire newspaper at the beginning of the year where the ecb said it is rea -- regionally important to the bank. this point, it is very open for discussion with european authorities. francine: what is the best solution? i something ugly happens,

don't know whether this is timeline or the leaders of italy not wanting to deal with it in a market from the way, what is the potential pitfall for the rest of italy? does it drive other banks down with it? francesco: i think the big risk is that smaller regional lenders, and there are many of them in italy, they do rely on rates of funding. solution would be potentially a big problem for smaller lenders. i don't think big lenders have a large exposure to the situation. certainly coming back to the government, it was very important to see this piece of regulation a few days ago because it affirms that the government is taking care of the problem. because clear before one of the parties and government in the past

criticized the intervention supporting banks. this is a very strong statement for the government that we are here, and we are ready. francine: let me ask you one final question of how you think the most elegant solution is. what is the best way out of this? finding a buyer? woulds invited? -- who buy it? francesco: of course. if the government foot the bill. you can see from previous deals , that if you ask another bank to please take care of this smaller one, that will probably say, of course.

the most elegant solution would be finding a real private buyer in the bank. ofre is still a possibility sharing this path, even though is becoming less and less likely. the older solution would be trying to find a way to merge it with a larger bank, probably with some form of government support. capital,in terms of that probably also in terms of guarantees for the nonperforming loans. loans offloaded to state-controlled entities. the government, with the recent bill has opened the path to this solution as well. francine: are you buying italian banks? james: absolutely not. it would take a heck of a lot. there are a lot of issues. it is a very fragmented banking system. you have lots of regional banks.

what happens in terms of the solutions we have seen over the last 12 months, sets a precedent. it is almost impossible later in the process to get a purely private-sector solution. essentially, the italian government is finding itself more and more on the hook for a banking system which, during the eight years post crisis where monetary policy was very supported and growth was improving, the clear up has been relatively small. the nominal number that remains is still huge. now you have italy without any growth in an environment where you think germany might run into a recession. lung projections are likely to get worse, not better. moree starting to see strain on the smaller banks. thank you so much for

joining us. in the meantime, we're getting breaking news on apple models. apple is releasing three new apple models this fall. i think it is towards the latter part of the year, but this has huge implications for what happened in china. one of the things i heard is it is not the chinese consumers upgrades.her the warrant the updates do some kind of uptick from chinese and emerging markets. stay with us, much more coming up. parliament in the u.k. looks to vote down theresa may's brexit deal next tuesday. what happens next? we discussed that. companiesay which

are cutting the most. this is bloomberg. ♪

>> every one of us will have to make a choice, of twist which will determine the future of the a choice which-- will determine the future of the united kingdom. francine: this is "bloomberg surveillance." the political stalemate continues to haunt westminster. is vote on the brexit deal set for next tuesday. what can we expect amid all of this uncertainty? the house of commons is currently debating the issue. david, r news is

director for bloomberg news -- our news director for bloomberg news. is it just clear that whatever happens now, parliament seem to be getting much more power? is that a good basis to start on? : that is certainly a conclusion you can draw from. with in parliament in the driving seat telling mrs. may this week, she is budget up to come back to the comments after she loses this vote on. tuesday you can assume that after tuesday, presidents went to take an even bigger role. in this big question of what happens -- parliament is what you have to take an even bigger role. they're going to have to give an indication of what they want. francine: can we infer what they want? david: there are so many options.

i think one key thing is that it slightly depends on the margin of defeat on tuesday evening for the government. votes, mayber 20 there is a way the deal could squeak through with a few more cosmetics. 200, is more than something radical is going to have to change. may and downing street saying they do have a plan b, we don't know what that is. that may become apparent in the coming days. we have heard all of these arguments many times already. expectsthink anybody anything in a chamber to happen to change anybody's mind. francine: what does it all mean for the market? pound is actually flatlining this week. david's point is important.

the market is going to have to stare down into the of this. -- abyss. the issues are that parliament is only in control in terms of what it doesn't want. there is no consensus on what parliament does want. their squabbling. veryabour party has been unclear as to what official policy is. jeremy corbyn finally came out and said his plan would be good to go back to brussels and get a better deal than theresa may. that is just not credible. francine: that is his election campaign, isn't it? means that the labour party is just as divided as the tory party. that is not going to wash. francine: given that we have too

many parties that are extremely divided, do we have any indication on how they will vote? david: one of her strategies at the moment is to reach across the aisle. if she has been any hope of getting either a close margin or a win, she has got to get a significant chance of -- number of lab members to vote with herour. members tof labour vote with her. many mps come from very strong constituencies. ur is a sniffing the possibility of a general election. listening to jeremy corbyn and how he has framed this debate, he is really eyeing the bigger prize, which is getting power and enacting his policies. brexit is a means to an end. francine: what does pounds move on the back of?

it is almost impossible for this deal to get through on tuesday. if we havellying more sense that we are avoiding a hard brexit? what are the fault lines? david: think it is more the margin of defeat. those are still the four options available. jeremy corbyn certainly fancies a general election. lead tol ultimately more tory mps having to grudgingly support the steel because the alternative is essentially, potentially communist member 10. that really is the worst of all possible outcomes. i think is very notions about what is left if you get rid of theresa may's deal is too concerning to too many people.

francine: are we hearing of any tory mps that would rather have germany carbon come in? dav -- jeremy corbyn come in? david: we will find out on tuesday. the dep has said they would rally behind mrs. may. few tory mps to say that we care about this issue so much, we're going to blow the whole house up. we're not sure if any of them are going to go that far. the polls are neck and neck. the government may well win the. someshould give mrs. may confidence to maybe come back with a deal a second time. this is what will really sharpen tory mines. -- minds. francine: thank you so much. of next, jobs on the line after last is volatile market.

some financial firms are eliminating positions. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." are just getting breaking news out of angela merkel, the german chancellor saying they are preparing for a no deal brexit. this is us angela merkel is visiting athens. i don't think that is what she means that it is her base case. let's check in on what stocks are doing. annmarie has all of the details. annmarie: let's kick it off with the luxury sector. reporting sales just shy of estimates. the key takeaways, chinese consumers are still buying. lafargeholcim looking at.

. daimler to the downside. left our, bloomberg news reported that he will close to geely isr said cutting a stake in the company. francine: thank you so much. financial firms are starting to feel the pain of the recent market turmoil since the start of the year. we have had a lot of job cuts. here's a sample of some of these announcements. blackrock's undertaking its biggest workforce cut since 2016 with around 500 global employees at risk. state street beginning to trim its senior ranks. morgan stanley has cut underperformers. of japanese signed is reportedly downsizing its european

operations, focusing instead on asia and the u.s. always great to speak to you on finance and some of the restructuring going on. is there a common thread? >> i think you have to distinguish within the financial sector. a shift toward more passive management. that is translating into more cost-cutting. we have also have the market turmoil and asset valuation. .quity markets have come off we have had a very difficult fourth-quarter. we will be hearing more about that with earnings from citigroup. will get a sense for this have had the volatility has been for trading. when you have the commercial and consumer lenders, which have

seen their margins remaining squeezed amid interest rates. that continues to push the banks to review their call space. the way things are looking right now, particularly given the global economic outlook for growth is somewhat slowing, your got to expect that the very heavy crawlspaces will continue to be a problem. francine: in any particular reason or across the board? elisa: in europe, in particular, you have institutions faced with a very high cost space. it is an overbank region. we are getting a sense of the ecb's rate increases. francine: thank you so much. hour.tinue in the next tom keene joins me out of new

york. we will be talking about the u.s. government shutdown amongst other things. this is what our markets are doing. we are seeing market a little bit on the upside. we are pointing to three main stories. jay powell giving us an indication of rate hikes being caused, the u.s. government shutdown and brexit. we did have some pretty concerning economic data for construction. this is bloomberg. ♪

francine: a flexible fed. jay powell tells markets they are being patient.

the ecb also suggests a wait-and-see approach. a billionaire cofounder presses off a selloff that says $6 billion in market value. of smartphone revival in china is coming. of an agreement between president trump and democrats as hundreds of thousands of workers won't get paid today. good morning, everyone. good afternoon if you're watching from asia. this is "bloomberg surveillance." we will look at monetary policy of u.s. politics. we look at u.k. politics with brexit. tom: lots going on. there onw your banner santander and poland doing layoffs. lots of rightsizing going on in this january. francine: yeah, and we will look through on who is cutting and

why. first, let's get straight to the bloomberg first word news in new york city. na: u.s. troops have begun pulling out of syria. a spokesman for the u.s. led coalition says the u.s. has started what he called the process of our deliberate withdrawal. the u.s. has about 2000 troops in syria. president trump said he was bringing them home because islamic state had been defeated. president trump would potentially use the money after declaring a national emergency. he has won congress he will do that unless they reach a deal of paying for the wall. bloomberg has learned that lou will meet with steve mnuchin and

robert lighthizer. tokyo, the former nissan chairman has been indicted a second time over allegations of financial crimes. he is accused of allegedly transferring personal investments to nissan and underreporting his compensation. his lawyers say they will apply for bail. 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: thank you so much. let's look at the data here. features don't tell us the story. curve steepening over the week. the vix under 20. the dow finally eat out at 24,000. i have the two starlings there. is still can't figure out what the day when i'm in london with the currency. is it right that we saw a little bit of sterling weakness in the

last 24 hours? francine: we did a little bit. if you look at some of the actions, pound traders say what will ultimately decide movement is by how much it theresa may was is the vote in parliament, how much she loses it by. that is one thing to keep an eye on. yua andat pound and renminbin. here in europe, stocks are up. tom: everyone this jan uary managing. we see it with a plethora of fed speakers. here is the chairman and vice chairman. >> each individual participant submits his or her individual projections four times a year. two rate increases with the median.

it was conditional on a very strong outlook for 2019, and outlook which may still happen. we're in a place where we can be patient and flexible and wait and see what does evolve. i think for the meantime, we are waiting and watching. a thing for us to be patient and see how the data involved in 2019. tom: managing the methods yesterday. great analysis of that at bloomberg. , -- ofow in london jpmorgan asset management. we are thrilled to welcome james bevan. let me go to you first. on the managing of methods of central bankers, their degrees of freedom have shrunk dramatically over the last four, have a big?

have, indeed.y it seems clear to me that central bankers are not critical, but also aware of the critical nature of their wrong. i suspect that the fed has learned that they need to be careful with what it says. tom: has it changed asset management? is jpmorgan made a change with drug in the other central bankers? >> the cautious stance we held before december and before these recent comments still remains in place. we are still cautious on equity markets after the downdraft we have had. i would say powell's comments and reassurance to markets in a portion foris risk assets.

we think we are in the range of neutral already. there could be some near-term upside for risk assets. the question now is once they territory,ing tight was the impetus in that environment? francine: what kind of economy are you seeing in the u.s.? thushka: we are seeing very small recession risk in the u.s. it has risen modestly. we have no raise that to about 35%, purely based on financial conditions having tightened. it is not our best case scenario. we still see consumers being relatively strong, the fed having changed its stance, can a cycle.e the we talked about october

2018 of being a critical month given we had the federal reserve and u.s. treasury both putting their hand up for more money. that critical risk this year like the life between march and may. that is where i think we will have a reasonable rent a thing. -- run of things. francine: what do you see dollar doing? shka: 2018 was very painful for us in terms of the dollar view. that was because of u.s. exceptionalism, u.s. growth and asset exceptionalism. 2019, we are seeing more factors that support dollar weakness. yen.y the majors like the the euro has political headwinds it faces in the near term. we could also see it appreciating less. what is your to do list

right now? you have cash you are ready to deploy, where did you go with cash this january morning? regard thentinue to intersection between quality and growth in equity space as the right place to be. we will clearly see more negative guidance at the first quarter from u.s. companies in particular, but only back to levels which are never going to be unreasonable in the context. this is not for me the right time to go back to the bond market.i expect that we will not expect a material deterioration in the long-term real yields across the world are simply too low to interest me. strong cash flow yields. i look at five gmt the growth option that represents. as the free cash flow yields of

around 8%. i think that is too cheap. tom: there again. us.s and thushka with we've got a lot coming up. lots to talk about on brexit in the next week. we have all that is going on in washington. also, we are looking at companies. what a shift and an announcement yesterday. this is bloomberg. ♪

viviana: this is "bloomberg surveillance."

we begin with breaking news on the bloomberg. of red wiser brewer considering an apo of its asian acquisition. nbev may tightly via divide its entire asian business at $70 billion. deutsche bank was at the forefront. now, the german lender is taking some of those jobs out of the country. bloomberg has learned there off shoring 60 accounting positions from jacksonville to mumbai. a number ofetting updates from general motors on financial reports in the next few days. next week, the north american international auto show kicks off in detroit. wall street is looking longer-term. it wants to know gm strategy for dealing with a fast evolving market. coming up later, we will speak with the gm chairman and ceo.

that is the bloomberg business flash. tom: thank you so much. president trump, an event for the yesterday. a salute to a helicopter on the rio grande and back home. here is the president of the united states. >> if we don't make a deal with congress, most likely i will do that. i can't imagine any reason why not because i'm allowed to do it. the law is 100% on my side. if they can't make it in with congress, and we should be able to make a go with congress. tom: we need expert advice and perspective on shutdown. stephanie baker joins us, our bloomberg senior writer with true expertise on some of the affairs of the president of united states. monday.got to get to i would like to think this is also by monday. , i am dreaming aren't i? stephanie: it looks like that. this is set up to be the longest

shutout in history if it passes through the weekend. the pressure will mount today as and federal workers are unpaid and don't get their paychecks. i think they will start clamoring to their members of congress to come to a compromise on this. it does seem like trump has backed himself into a corner. the only faces sitting way out of it is for him to go forward with declaring a national emergency and iparty are the military funds or funds for disaster relief to try and build his wall. it is more than likely to be challenged in the courts and bogged down. tom: everybody that rights or , all of these people say congress have to take back authority from the executive privilege we built up over 60,

70, 80 years. is that doable? stephanie: i think this is why the trump plan to declare a national emergency is so crucial. it does undermine congress's constitutional authority to authorize spending. because he has not gotten his way on the wall, that he is trying to declare a national emergency, diverge funds because congress won't approve the use of money for the building of his wall, and campaign promise he's in mexico would pay for. crucial.hy this is so it will become a huge fight in big legal battle. francine: talk to me about the muehll investigationer. where are we at? stephanie: the most significant thing that is happening is that michael coh has agreed to testify to the houseen oversight committee. he has clearly gotten permission

from robert mueller to testify. it is unclear where he will be able to say in public. i suspect that his testimony on the russian investigation, trump campaign contacts with russians, that that will be reserved for the closed session. if he is able to say more about that in an open session, that would indicate to me thatmueller is more advanced in concluding his portion of the russian investigation. francine: going back to the shutdown -- we also found out that president trump will be traveling to davos. stephanie: he could easily reverse course if he is able to strike a deal. does he leave and go to davos after declaring a national emergency? that seems unlikely that he would politically be able to save face and do that. that has indicates me that he is planning to pursue that course. tom: thank you so much.

and thushka.mes what is a shutdown before jpmorgan strategy? hka: two main things we focus on, some of the data will be delayed. we get cpi today, the retail sales will be delayed. the high-frequency data distortions have an impact on housing market will react when the data does come out. the second is in terms of the shutout itself on growth. our previous experience with shutdowns have been that you would see a drag on growth in the quarter, the current quarter, but it gets paid by very quickly in the following one. the thing we're watching very closely is initial jobless claims. they can be distortion in that indicator because of the

shutdown in the near term. es: i'm here of a different perspective and that is mr. , the not going to davos living the world economic forum is not really relevant to the outlook of the united states. since mr. powell has indicated a much more flexible policy towards monetary positioning, and the whole challenge of tricking the fed's balance sheet.i think what will be really important is that mr. powell says about the reaction. tom: that will be interesting to see. if there is a shutdown fix, i can't imagine the present avoiding the frenzy of happy valley in switzerland. th will continue here withuhs -- we will continue here with thushka and james. coming up, an eventful conversation.

a former all-american lineman want to shut down the san francisco 49ers. bloomberg. ♪

francine: this is "bloomberg surveillance." as we have been discussing, a budweiser brewer is considering an initial public offering of its asia operations.

its shares jumped the most since 2015. thushka and james are still with us. when you see a headline like that across the bloomberg terminal that imbev is considering ipo-ing it asian operations, what does that tell you? is that mean they can unlock more value because asian operations are invaluable? james: i see a company responding to his on problems, having built up a lot of debt and clearly needing asset cells in order to better position -- sales in order to better position themselves. it is abundantly clear that the story of a greater profit motive or greater appetite to be prepared to export deflation have been reversed. we are seeing big economies a nation exporting deflation.

the saying let's get them off the boat. francine: do these kinds of operations unlock value? markka: as erp is normally peaks,. in a sense it is a concern. em is a focal point for us as well. when we look at the macro outlook we have for emerging markets. china is pivotal, but we are not seeing china be able to bring all the rest of asia, as has happened previously. it is much more domestically focused. view, emp-down macro is not a preferred market for us. tom: we were mentioning davos earlier. one of the shares i have seen is that the five-year business plan has become three years.

these guys are moving at light speed. is that what we're going to see in this quarter? corporations strategically moving at light speed? james: i think that is so. we are seeing a pullback of investor numbers that don't match expectations. i think we will see more companies in the first quarter being punished harshly for not delivering against investors' u nreasonably higher expectations. it likely means low single-digit earnings numbers for 2019 overall. francine: where do you see value in emerging markets? james: if he wanted how you might play best result, i will be looking at santander. shareholder value sentiments driven off a european baseplate. francine: thank you so much.

both staying with us. later this morning, henry mcvee. will talk about the fed and some of the markets out there in dollar dynamics. that is coming up at 10:00 a.m. in new york. this is bloomberg. ♪

francine: hello. it is bloomberg surveillance, tom and francine from london and new york. tom is ready to come to london and then onto davos.

as hedge funds report emerges.ce, a chasm dalio's.t spot was ray purging outperformed and one of the worst was green light worstl which saw the performance in its history. is the hedge fund performance manager. if you're a bloomberg user, you should check out his day out. you're either winning at this game or you're doing badly? >> absolutely. if returns were bad, it became terrible in december as volatility returned. in the industry

complained and waited for this volatility to return and when it arrived, they were on the wrong side of it or they could not exploited and that led to losses for some of the best-known hedge fund managers in the world. it started in february when short volatility trades inched lower and many hedge fund managers were smashed. again, it happened in october and december was bad. francine: does it mean the trend is back towards it being a tough year in 2019? nishant: it should not. 2018 should not have been terrible. what they'll wanted, rising volatility, interest rate increasing, everything happened in 2018. maybe it was not the right kind of volatility that they expected but hedge funds should not be

expecting the right kind of volatility to make money. 2019 presents another good opportunity. trade risks, trade wars, and you have the return of which seems to sustain and therefore, it should be a better year. article, therer is a chart that shows the -- hedge fundunch theatically outperformed standard & poor's 500. are people asking too much of these? that is the beauty of communication and marketing from hedge funds. when market rallies, they forget about relative performance. when it crashes, they talk about relative performance. we know that they are not immune

to chaos in stock markets but they should not lose more than markets. int is what happened december, many hedge funds lost more than the s&p 500. that should not be expected. by thewas sobered underperformance. because underperforming they are undiversified? i think of the movement of 300 holdings in a mutual fund down to 100. is the poor results because of a lack of diversification? nishant: we do not get much visibility on hedge fund allocation. they should be well diversified. be diversified on both a long and short side if they want to be called a real hedge fund. results show that is not always

the case. tom: we saw yesterday on the buy side, rationalizations, state street and america with rationalizations. we have seen bodies move out the door operationally -- are we going to see bodies move out the door operationally? nishant: it is hard to forecast but that is the way it seems. we have seen cuts in the past. years of growth has led them to boost their teams. times are tough and that is the way to go, i guess. across all read him of bloomberg if you are part of global wall street. right now, first word news, here is viviana hurtado. policy: federal reserve makers are signaling the central bank will be cautious about interest rate hikes after raising them last year. here is jerome powell. submits hisvidual

sore her individual projections and we did that in december -- individual or her projections and we did that in december and it was conditional upon a strong outlook. we can be patient and flexible and wait and see what does evol ve. we are waiting and watching. viviana: president trump wants he will probably declare a national emergency regarding the southern border that is what it takes to get a wall built. foxnews theump told law is on his side when it comes to using his emergency powers. some legal experts disputing this. speaking after going to texas to examine border security. the trump administration's moves to lift sanctions on three companies tied to der pascoe. major rolees play a in the alumina market.

steve mnuchin said companies restructured in a way that he is not in control. oil is headed for's longest streak on gains on record. the price of brent is up for a 10th day straight and cutbacks are holding down supply. will behas indicated it patient about raising interest rates, soothing anxiety about growth in the u.s., the biggest consumer. 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. china's second-largest smartphone maker, show me -- xiaomi has lost money. off theder is shrugging slow down. he expects the next generation wireless will energize. >> 5g is coming soon.

at this point, the demand for smartphones is declining but , we shouldes expect to see a peak. chinese companies are getting more competitive. understandable that foreign brands are faking pressure in china as local brands are more competitive. wanted to push you on what your priorities were for overseas expansion. i know you have talked about the growth you have seen in india. what are your priorities and have those changed at all given the current tensions and environment? >> the new priority for our expansion will be the european market. we hope to choose two or three countries to break into to prove it is capable of putting it footprint -- putting a footprint into developing countries.

about thepticism claim that it is an internet services company more than just a hardware company, what specifically are you doing to address those concerns and when do you think the steps you're putting in place will start to have an impact? an innovative company that includes the hardware business, e-commerce, and internet. it is a new creature, taking the internet business as an example, it had revenues of 9.9 billion yuan. that increase. it is growing fast. our active internet users number as many as 220 million which is large. that was the chief executive speaking to tom mackenzie in beijing. let's get to our bloomberg opinion columnist.

are waitingvestors for 5g to boost fortunes that they might as well take their money elsewhere. the chief executive needs to find a new driver for demand. this model depends on it. that nicely encapsulates the concern that investors should have. what is the outlook for new smartphones for this company? 5g is not here yet. the uptake will be next year and after that. 4g was a big 3g to boost, so we tend to get that uptick. bigs not going to be as because it is not as big a speed boost. is going to be focused on

cars and doorbells and other devices connecting to the internet, less so focused on smartphones. those are important to keep in mind. it does need to keep selling more phones because the services business model is based on the fact they will ship a phone, they will have it in their hand and then they can feed them other services. they need to make sure it users have a phone in their hand before they can do that. they've got to keep that going. buycine: will europeans xiaomi? it seems the chief executive wants to forgo the u.s. to focus on europe. tim: i reckon you will see them gaining market share in europe. look, they have good products, no doubt. they are well priced, nicely designed. android phones are a dime a dozen these days.

xiaomi does stand out well amongst them. keen ons will not be buying a chinese branded smartphone. others will not care. we will see them getting good traction. the holidays, the feature i saw from president xi was his discussion of taiwan. how is taiwan business reacting to the tensions between the mainland and taiwan? tim: a smooth segue there. jinping's new year's quick one from taiwan where she said, look at hong kong and how it is working in hong kong. it is not working and it is not going to work for taiwan. the taiwanese reject the idea of one country, two systems.

xi jinping ratcheting up the days,re on taiwan, early speeches have only happened in the last two weeks, it has backfired. xi jinping's speech and the rebuttal has boosted her popularity in taiwan. now, she is popular again. tom: very interesting. thank you so much from taiwan. the interview of the day if you are in politics, someone democrats and republicans respect, leon panetta, a chief of staff that got things done. yes, on the shutdown, with david westin in the noon hour. this is "bloomberg." ♪

francine: this is bloomberg surveillance. tom and francine from london and new york. touchednty over brexit every corner of the u.k. economy in the fourth quarter with just 77 days left until the deadline. the vote on theresa may's deal is planned for tuesday. movingentum seems to be against her. let's get straight to push the bank and james bevan -- straight to thushka and james bevan. what will the markets discuss next week? is it a possibility that this deal gets through and if not, what happens to the pound? back to af i think month ago, when they postponed the deal, it was discussed she thought there would be such a

risk she would lose the bow. it does not feel like that has changed at all. it is likely that deal does not get passed and the margin of defeat would be significant. what would move the market? what would be positive first sterling would be any relief coming from that vote. in terms of vote difference or that there are signs of concessions coming from a. the -- coming from may. otes this week are positive. sterling would be the main asset that would react. the deal james, if gets voted down, theresa may has three days to come up with a plan b.

what is that? james: the no deal is considered to be a bad outcome. there will be an attempt to avoid that. leaves three choices, a revision to a norway plus type arrangement. would continue to have to pay contributions. there would be freedom of movement, all sorts of things brexiteers do not like. the second choice would be to call for another referendum to break the deadlock. that would require article 50. a lot of people have complained of this is an attempt to take back the vote. the third would be a general election. i think to get this deal agreed requires more pain before there is preparedness to be serious. i think more pain before we get any outcome. tom: i am baffled.

what is so wrong about having a new general election? why is that bad, james? james: there is nothing wrong with a general election. what is challenging is what does that say about the debate? going to assume that the general election is the only issue. imagine she were to win that. does that mean she has a mandate to push through her view or are there other views as many brexiteers would hold as to preferred -- as to the preferred way forward. francine: no one wants a general election apart from jeremy corbyn. if jeremy corbyn becomes the prime minister, is it a done deal? what does that mean for markets? james: we have not seen his manifesto. let's stay with the things we know.

policy, of mr. corbyn's he would be hostile to industry, market, because he is said proceeds would be paid t, not in cash. tom: bring up this chart again and i must ask you to comment on the certitude of no deal means chaotic exit. says who? how do we assume that no deal is a chaotic exit? because there are no mechanisms to determine how we would deal with cross-border trade after march. we are out. what happens to trade that wants to pass from the u.k. to europe? you are assuming that we will continue to be able to operate

in the way we are today. no deal means no such thing. tom: well, we will see. it will be good to be on the green at westminster in a number of days. james: just one final thing. if no deal means we cannot pull article 50, i agree that is no big deal. tom: i do not know. find, francine, that this is chaotic compared to the stability in the united states. to move: i know we need on to other subjects. if you do not have a deal, even how do get a truck to dover is going to be problematic to get them in and out. we will be back. this is "bloomberg." ♪

francine: this is bloomberg surveillance. tom and francine from london and new york. news, getting breaking i'm not sure what we should do with it but this is on brexit.

delayed beyond march 29, according to cabinet ministers. we will get back to brexit and talk more with james melvin -- james bevan and thushka maharaj. they said they are not looking at any nationalization plans. it pushes back against populist leaders who have said date -- who have said state ownership or the bank is legal. what does that mean for europe as they are involved in negotiations with brussels? when you look at the combination of a brexit debate and the ,oncerns in italy and elsewhere are you downbeat? thushka: yes, europe has been a concern. we had thought you would have the growth rebound. lackluster and in many

cases, we can see germany weakening in the near term. global trade weaknesses, on top of the domestic political risks are a headwind for europe and they remain a headwind. the ecbhave heard from has more sanguine on the growth picture than i would have expected, when reading the minutes, they were up the don prospects. -- were upbeat on growth prospects. --lationary per fresher inflationary pressure is less than we would've expected given the economic outlook. the ecb is in a tough position. growth is weakening, wage pressure is significant but it is not declining. tom: thank you so much. bank and james bevan,

thank you for the perspective. a and james bevan, thank you for the perspective. we have got sterling on the move. i have trouble with the phrase cabinet ministers. tong up the chart as we move the next hour, with more on washington, sterling from the trading zone and we have got a nice pop up. it is almost a 1% pop. nevertheless, sterling range bound over the last three or four days and then we get a strong sterling pop. stay with us, kevin cirilli on washington. ♪

tom: this morning, could you meet without the next

paycheck? republicans, democrats, confront the failure of u.s. government. the president says there will be no talks today. the fed is patient, flexible, aware of the crosswinds. messageis managing the for the january meeting in this hour. , it will be solved next week. remainersavers and would figure out what to do. the uncertainty of brexit. good morning. this is bloomberg surveillance, live from new york. the evening standard shifts the debate. the evening standard was an important piece because it is saying that brexit looks increasingly likely to be delayed be blonde -- beyond the deadline.

according to cabinet ministers. on the back of this headline, the pound rose. let's have a check on pound, it is at 128 something. if you look at the evening standard peas, they said it would be delayed because you have a lot of bills -- piece, they said would be delayed because you have a lot of pills. -- a lot of bills. e.u. have any say in this date? francine: this is what is in the cards. the e.u. would have to agree for the brexit debate to go beyond march 29. , if you're going to extend it, maybe you need

approval from the parliament on the extension. lawyers are having a field trip. tom: we are going to have a field trip to london. we have got excitement in london and news from washington. here is viviana hurtado. viviana: u.s. troops have begun pulling out of syria. a spokesman fighting islamic state said the u.s. started the process of our withdrawal. the u.s. has about 2000 troops in syria. president trump says he was bringing them home because islamic state had been defeated. the trump administration is looking at ways to use money from a disaster relief bill to build a wall on the mexican border. president trump would use the money after declaring a national emergency. he has warned congress he will unless it reaches a deal on do that unless it reaches a deal on paying for the wall. china's vice premier will visit washington at the end of the month for more trade talks, a sign there has been more progress in ending the dispute between the countries.

bloomberg has learned he will meet with steven mnuchin and robert lighthizer. in tokyo, a second indictment for carlos ghosn over allegations of financial crimes, accused of transferring personal investment losses to nissan and underreporting his compensation. ghosn has been in jail for almost two months. his lawyers say they will apply for bail. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: thank you. a data check quickly. a little bit of curve steepening. oil with a lift over the last week. .68.vix comes under 2019 there is the lift on sterling, out to a 128 level. francine: what i'm looking at is

pound. last fiveed in the minutes after we had that report from the evening standard saying that ministers expect brexit to be delayed. at the, i am looking rest of the european market but i am looking at remnimbi. joining us to discuss this story on brexit from the evening standard, let's get to the bloomberg brexit at the girl appeared i am surprised the pound move so significantly. -- brexit. i am surprised the pound moved so significantly. when the u.k. leaves, they could not get it done. the story is talking about cabinet minister expectations. this is not policy, a decision, this is cabinet ministers saying

this is the expectation and it does not look feasible. issue is if this deal does not get through, you have to ask what happens next and if you look at the options, a lot of those will involve a delay. at rewritingking the divorce agreement, a second referendum, all of those include a delay. what we have seen is that theresa may has been less categorical in ruling out some kind of delay. when asked about it recently, they chose their words carefully and say it is government policy. there has been this increasing expectation that brexit will not happen on time. the elections and in the -- and in the extension would be problematic. have some kindan

of deal and then it is technicalities on when you leave or could be an extension tied to we do not know what kind of brexit we will have but it will not happen on march 29. emma: it is worth bearing in mind that any extension would have to be agreed by the e.u. members unanimously. the feeling has been that if something had fundamentally yes.ed than they would say to gain a negotiating advantage, the answer would be no. looking at the market reaction, in terms of that 128.1 5, does it point to the nervousness on the markets? in the markets, markets are now positioning themselves

for the exit date to be postponed. i agree, this reaction today was slightly -- tom: thank you so much. setre advantaged to have on a brilliant call on lower gdp. john ryding with the punching of the clock on the federal reserve system. let me start with the immediate news. governor carney is an impossible position. what does the bank of england past? -- what is the bank of england path? john: you talk about options but right now, there are no options other than a no deal. that is the default. when the vote fails, and the

vote will fail. tom: this is a critical question featured by all the different newspapers. -- do you, strangling straddling the transatlantic ocean, how do you feel when you see it will drop because of a no deal? what we do know is the economy has been shown to because of the article 50 declaration to go out of the e.u. most of us felt it would have pushed the u.k. into recession. the projections the gdp will number%, and unthinkable on a no deal brexit seems to be overcooking the figures. there is going to be uncertainty. people, a number of people within the conservative

party want a no deal brexit, going to wto terms will not create a disaster, it will not create a disaster in those scenarios. outside of that, nobody in the , nobody wants a no deal brexit. there has to be an extension. tom: you have nailed gdp in the united states. the telegraph talks about german recession. do you forecast a set of global recessions? you have a set of synchronized global slowdowns leading onto a global recession within the next 12 to 18 months. terms ofxception in the major countries, you have china slowing significantly, europe, you have had decline in german gdp, the latest numbers

have been poor. i believe, if in fact the march 29 date is postponed and there is little prospect of something positive to release, the fall in gdp will be substantial. that there isar not going to be a relationship with the e.u., you have a decline there also. the answer is, there is no relief anywhere. relief -- a lot of mystery here and the mystery in washington. francine: we will have more on this evening standard piece saying brexit will be delayed beyond march 29. we will be back. both are staying with us. coming up, mary barra, general motors chief executive, she will have a few things to say about the u.s. economy. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. budweiser bruiser ab inbev's considering an ipo of its asian operations. the brewer is looking for ways to unlock value after a string of acquisitions left it with debt. a.b. inbev may try to value its entire asian business at about $70 billion. deutsche bank was at the forefront when wall street began moving jobs to cheaper cities in the us. now, the german lender began moving jobs to the u.s. it is taking jobs out of the country. deutsche bank is off shoring 50

accounting positions from jacksonville to mumbai, part of a shift that will see more jobs moved to india this year. president trump warns he will probably declare a national emergency regarding the southern border if that is what it takes to get a wall built. i cannotd say would, imagine any reason i would not. i am allowed to do that. the law is on my side. if we cannot make a deal with congress, we should be able to. viviana: that was president trump speaking about the u.s. southern border. i'm going to send it over to tom keene in new york. tom: thank you. important headlines from the government of the united kingdom. francine: this is on the back of a little bit of a swing in the price and pound and we are seeing reversal. the u.k. government is saying that they are not extending article 50 but the devil is in the details. the evening standard did not say this was policy.

story was clear, cabinet ministers have break them saying they wouldthe time, not have time to pass the legislation that would enable the u.k. to leave. it is not government policy. it does not mean it will not happen. it just means this is not there base case now. tom: let us turn to washington which is calm versus london but that would not be true. kevin cirilli is our chief washington correspondent. is the leadership of the senate are they sleepless? they all look so collected. what is the stress level of senate republican leadership? kevin: i have got to be honest, i do not think they are feeling this as much as the employees who are not being paid. that is on both sides. the perception is that this is

going to come down to a deal between policy and trump and as of now there has been no incentive for compromise. we talk a lot about president trump's lack of incentive to compromise. speaker pelosi does not have one either. to have a tried compromise, do you think that progressive wing wants to see this new speaker make a deal? tom: we kicked the can down the road. published we get a solution by the end of the week. how does that begin? what is the process where they get together? kevin: if you look at how the president has been trending in terms of his rhetoric, he has taken a different approach since the holiday and backed down in terms of saying this has to be a wall.

the rumblings inside of congress, the president might use that as an opportunity to use emergency powers. he has said that would set up a ,assive debate with the courts a side step towards congress. i heard from a source yesterday evening that the president, for his part, the coverage inside the media has been dominated by the shutdown and no one is talking about mueller, michael cohen testifying. are senators who have said, we are not going to do this. be an presume there will add-on to the number of senators under pressure from their constituencies who will say, enough? the longer this goes on, you're going to hear more from other senators up for tough reelection's. is really just the

and you are seeing democrats united but the notion they are completely united on issues a policy is a dream. we have got wonderful guests and john ryding and it is the follies of london and kevin cirilli's washington. an eventful friday, michael barr -- over bloomberg radio them bloomberg radio saying the president may be will not have talks on this subject. we will drive forward this john garamendi of california, in the crosshairs of this shutdown. we will do that in this hour. this is "bloomberg." ♪

rubensteineak, david speaking to the chairman. here is jay powell. submits hisvidual or her projections and we did that in december. it was conditional on a strong outlook for 2019, and outlook which may still happen. we are in a place where we can be patient and flexible and see what does evolve. we are waiting and watching. tom: patient and flexible, with

us john ryding and sri komar. what mixed ordinary moment for central-bank policy. how do full did in with what we do with us economy? komal: the federal reserve has added to the market uncertainty, when you compare what happened when a confident general powell a confident jay powell told us there were going to be more rate increases in 2019 and the reduction was on autopilot. what happened between then and early january when they went mode, the markets changed and present from continue to keep criticizing the fed. -- and the president continue to

keep criticizing the fed. we are not just looking at employment and inflation. we are reacting to the market and if the president criticizes loud enough, the fed chairman can change his position. that is what the market deals with. you cannot have the same confidence of running with the fed policy as you did before. francine: john, do you agree? john: the fed is probably not going to consider rates until june of next year. about, we had a strong outlook which may still happen. since that number came out, we increase in7,000 370,000 when you

add in increased. the fed is saying we can afford to wait and see. watchd is in wait and mode. think, what did the fed see? are they looking at mark volatility? john: market volatility has made them uncertain about what the outlook for the market is. i do not think it is political pressure. i do not think that is the case. i think it is about the markets. the equity market is either going to stabilize and put in recovery and profit margins are going to continue to expand and the economy is back on track or the markets are right and there is a recession. say, we are going to take six months. it is clear from powell, from step back,y are

watch which one of these outcomes unfold and they can afford to do that because inflation is not running ahead of target. komal: i would take a different position. from the fact that what the fed ,as done under three presidents , theng about a pause markets have taken that as meaning no rate hike, possibly a rate cut. it is going to be difficult to say we are going to go ahead and increase it. tom: we are going to come back. 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. francine: it is a beautiful morning. we will push it out on social media. eresque picture.

we had a lot of news out of brexit, the parliament continues to debate the doomed brexit deal. cabinet ministers had briefed about a possible delay and the spokesperson of theresa may saying absolutely not. they will not extend article 50, tom. tom: very good. let me go to sterling, i want to show this action. 127 earlier. note bringsstandard it back up. . battles like a friday and there will be three more today and five on monday. francine: it is funny to look at what we were talking about that could move the pound. yesterday, it was flatlined, a

lot of people saying if theresa may loses, it will be the margin it will she loses it by give the indication of what traders will do. any article that captures the imagination moves the pound significantly. tom: here is viviana hurtado. viviana: president trump wants he will probably declare a national emergency regarding the southern border if that is what it takes to get a wall built. he told foxnews the law is on his side when it comes to using emergency powers. legal experts disputing this. the present speaking after going to taxes. oil is headed for its longest streak on gains on record. the price of brent crude is up for a 10th day straight and cutbacks are holding down supply. the fed has indicated it will be patient about raising interest rates, soothing anxiety about growth in the u.s., the biggest oil consumer.

the cofounder of xiaomi is shrugging off a share slump that office marketon value. it is expecting the advent of next generation wireless to boost sales. he spoke in an interview. >> 5g is coming soon. is demand for smartphones declining but i believe when 5g comes, we should expect to see a peek and demand for smartphones. continues on to say xiaomi will expand in europe but his passing on the u.s. market 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. we have talked to texas, south dakota, how about somebody in a 50-50on who has got district, that would be john garamendi, the third district of

california, think north and northwest of sacramento. you are wonderful to talk to because your district is divided republican and democrat. what do your constituents say about this shutdown? john: they are concerned. everything from research at the university of california davis, butlargest in the region you get into something that is important, coming to the end of duckhunting season, the refuges are shut down and they cannot hunt. won it by a football a few years ago. help me with the football analogy tickets trump and pelos onthat gets trump and pelosi

the same gridiron. john: i was down to the second all-american. the reality is that this is a fighting it out on the 50 yard line, neither team is getting close to the end zone. we have got to find a way to get past this and we will do so. is talking about a hail mary into the end zone. what is the ball? where's the money? here is a problem for that district that you described well. valley is the most flood prone part of america and we have a need to improve our flood control systems. the president and the army corps of engineers are looking at $2.5 billion dollars out of the flood program and building a wall on the southern border. you are putting us at risk.

tom: there are liberals and but i look at the more conservative rational republicans. democrats, how do get the moderate democrats to move the discussion to get to some solution? john: open government. reopen the government, get those agencies opening. that isy say it is 25%, 25% of the money. ofhappens to be about 85% the activities of government, to research, two national parks, you name it. all of those are shut down. it is a serious problem across the nation for the operation of this government of this nation. how do we do it? open those programs and let's continue negotiating. we can find a solution but this

deadlock on the 50 yard line is not going to solve this. francine: what is more dangerous? isn't the shutdown lasting for another 10 or 15 days -- is it the shutdown lasting for another 10 or 15 days or is it money being taken from elsewhere? from my point of view, there is no reason for the shutdown. government,the negotiating solutions to walls, we have done that kind of thing and we can going forward. why would we hold the american , the operations that is, hostage for a wall that most everybody says we do not need. i had a conversation yesterday with key people at the coast guard and they said we are a wall, we are 1500 miles out to the ocean because we provide a

drugs,ere we interdict more than that the border with mexico. this are many pieces with that we need to deal with this and the drugs, the illegal entry occurs through the existing ports of entry which are undermanned francine:. . francine: so why are we having this shutdown? mr. garamendi: there is an issue about how best to spend money. do you spend the money on the kos guard where we could do drug interdiction -- on the coast guard where we could do drug interdiction or do you spend it on a border wall. there are some places where we need to repair fences or build additional fences.

mexico and down into arizona, there are walls. can they be extended in a useful way? there has been no study to indicate that would be a useful place to build a wall other than the promise. by the way, it is the american taxpayers, not mexico, that is going to wind up paying for this. tom: one final question. what is the to do list for nancy pelosi? mr. garamendi: hang tough and continue to talk with the president although the word is the president is not going to talk to anybody. i guess he will tweet out some obnoxious tweet. is, open the government, continue to pass the legislation. andthe senate sit there realize they have the opportunity to send a bill to the president to reopen

government and the ball is on his desk. e-mailjust got any from kevin in washington, just san francisco 49ers and raters and we will all be happy. mr. garamendi: they shut themselves down. he is a democrat from california. mr. grassley, a senior senator providing leadership in the senate. on the shutdown, a different view. worldwide, this is bloomberg. ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. jpmorgan plans to increase bonuses at his corporate investment banks. percentage increases will be in the mid-single digits. equity traders will get more. the division accounts for more than one third of jpmorgan revenue. ceo is rewarding investors must duck with him three structure and. he expects to buy back shares by the end of the are credit suisse falling 30% last year. -- end of the year. 38% lastuisse falling year. tom: how about a talk on economics? chart, it is a chart john ryding as attached to

his left arm, this is the fed funds rate adjusted for inflation, up higher. i am sorry, it is not normal, real rates are nowhere in your were they should be, are they? -- are nowhere near where they should be, are they? komal: how do you do it through of monetary period easing. to expect that can take place and you will still have a soft isding for the economy, that mutually inconsistent. we are afraid to clear markets. are we still at a point where jay powell has a risk about instability if he raises rates? john: we know that real rates should be high. we have seen that in the marketplace.

the 10 year has risen. in this bond market rally, it is not the real rate that has come down, it is the breakeven inflation rate that has come down. if you have got a real rate at 90, how much of that is being repressed by the balance sheet? we do not know where that real rate goes. how do get from here to there when it looks like we are going to take six months off on the fed? now, the 10sght are only at 40 basis points. now, the fed is talking we are in the range of neutral. from thatll a way central rate and we will fall behind us inflation picks a. komal: more problems, they have

said they were far from a neutral rate, the rate at which the economy is neither booming nor falling apart. now, and they are said to be close to it. contradictory set of messages which makes it more difficult to increase interest rates. if you're going to be increasing rates substantially, then the economy, you have to be ready for a recession quickly. the fed is trying to avoid that. a no-win situation because of the contradictory set of targets they work with. francine: given all of this, what does it mean for asset prices in 20 and for the dollar? komal: two things. in terms of asset allocation, it does not bode well for equities. we saw that in december and it took jay powell going back to

push up the equity prices. that could divert again once you see the economy is going into recession. -- diverge again once you see the economy is going into recession. as far as the dollar is concerned, we have had the spot index above 2.5%. if you have problems with brexit next week and the eurozone members, the european bank deciding they are going to stay h stance into the future, you are looking for the dollar rally to continue. tom: thanks for being with us yesterday with jonathan ferro. john ryding, where is nominal gdp? where are you modeling nominal gdp? .ohn: 5%

i do not think we are looking at recession. i think the powell communication was an issue. he misspoke when he said he was a long wait away from neutral. away from neutral. in that environment, -- tom: you are not at 5% gdp? inflation is not going to pick up in real growth is coming down. -- and real growth is coming down. tom: inflation is not picking up. do we revert back to good disinf lation? john: i do nothing so when you look at input cost measures. if you look at the business sector, real growth has been running close to 4%. komal: the growth is going to

slow down. we are looking back when you look at the second and third quarters, when you look at the most recent jobs report, that is a lagging indicator. none of these tell you that 2019 is going to be a strong year. tom: 12 months forward, your real gdp number. .5%.l: 1 2.7%. difference on what we see on real gdp. john ryding, thank you so much. komal sri-kumar , thank you so much. david westin with important interviews in the noon hour. this is "bloomberg." ♪

francine: bloomberg surveillance, tom and francine from london and new york. the earnings season kicks off on monday, with fixed revenue likely to be lower than last year.

reports asmorgan doubts over the growth prospects mounts. looking to see if the decline in average loans continues. we have bank of america telling bloomberg last month he expects revenue to decline in the fourth quarter and that reports wednesday with goldman sachs. thursday, we get morgan stanley, which has seen upgrade in a season of pessimism. there is a lot to look at next week. and we will summary drive for the conversation on and thethrough the week future of global banking. about, including european banking with all the challenges that deutsche bank. att a celebration this week eurasia group, the top 10 risks

of 2019. thank you for your response. to the director of russia and the challenges of ukraine. utin update? how popular is he in russia? 60% range, that is down from where we saw him in the last couple of years. there was a drop this year. that is domestic factors at play. many have said about raising the retirement age as part of tension reform. the ukraine or syria, it is domestically focused and it speaks to the challenges facing the economy going forward over the next few years. tom: president trump may not go to davos because of the shutdown. goes, how will he be greeted? alex: there is tension between

him and european leaders, certainly. there are other leaders he has good relationships with who he can work with. that is something we have noticed over the last year or so, we would see a trend into 2019, that there are leaders would beed, bolsonaro an example, who can find common ground. his relationship with the e.u. is tense. it has a lot to do with what is going on with the ukraine. if we go back to russia and vladimir putin, what is on his to do list? domestically, there needs to be solutions to try to jumpstart the economy. growth remains below 2%. there does not seem to be a lot going on in terms of policies, at least in the reform area,

when you look at some of the efforts that the russian government is trying to undertake, national projects to boost growth. we do not see much in terms of structural reforms that might draw in foreign investment. he has to deal with sanctions that have been limiting foreign investment,u.s. european investment, and others. there is no way out at this stage. there is no change in russian form policy. francine: i was going to ask you about foreign policy in the middle east? putin and russia continue to be a key player in syria. we are going to see that continue. i would not expect changes were russia expects it will be a broker of any political solution. russia is trying to reach out to other countries, saudi arabia,

while having a relationship with that trying to be one anybody could talk to in the region. tom: thank you so much, and thank you all of eurasia group. send our regards to ian bremmer. next week, too much fun with francine lacqua in london. we are on the green. what do you expect? francine: we have that vote, parliamentarians will vote on the budget deal. there are a million things that can go on between now and then. tom: have a great weekend. this is "bloomberg." ♪

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flexible. -- we are flexible. warns on inflation with cpi on deck. nupathe forward. -- nor lindsey graham path forward. federal workers missed their first paycheck. jobs, lowerants cut price forecasts and pulp land because of market volatility just days before earnings season kicks off. -- pull plans because of market volatility just days before earnings season kicks off. david: the pound went up and the pound went down. alix: