>> coming up on bloomberg best, they stories from business around the world. hopes rise for a trade deal as the u.s. and china returned to the bargaining table. >> both sides said there was progress made. >> more signs of a tech slowdown . tesla breaks ground on a factory in shanghai, and the u.s. government shutdown drags on. >> both sides doubled down and dug in their heels on the current strategy. >> special perspective on where

policy is heading. >> we are trying to get to the point where we are very consistent. anchor: plus, are the markets overreacting? reasonable people can disagree. see the likelihood of a recession anytime soon. >> the risks, things can get ugly. anchor: it is all straight ahead on "bloomberg best." ♪ anchor: hello and welcome. chin.salind this is "bloomberg best," your weekly review of business news and analysis from around the world. let's start with a day by day look at the top headlines. on monday, investors found reason for optimism as delegations from the u.s. and

china began talks aimed at trade impact. guy: u.s. and chinese officials begin face-to-face trade talk today. it began sense present trump and president xi announced their 90 day standstill. with six weeks to go, they have a lot to sort. the fact that china's top policy advisor arrived early reinforces the idea that the chinese are taking these talks seriously. >> this would seem to be a gesture of good faith that china is taking these talks seriously. what it will come down to is that china is willing to make these big changes to its economy and that is what is going to be hard to achieve. >> trump administration has reached optimism it can reach a deal with china. >> the fact that these talks are happening, there is potentially

a deal to be done, certainly points towards some progress. we know there are trade thoughts on both sides of it. we have not heard from lighthizer and navarro. the sentiment is better on this story. we are still a long way from signing off on a conclusive and final trade agreement. >> president trump will address the nation tonight in his first primetime speech from the oval office. he will make the case that there is a national security and humanitarian crisis at the u.s.-mexico border. are we expecting him to say there is a national emergency? kevin: at this point, trump's allies are urging him to short-circuit congress. however, we are told he is not going to do that or he is still trying to put pressure on democrats and use the oval office address to make the case to the public that $5 billion

should be spent on the wall. president trump: the federal government remains shut down, for one reason and one reason only -- because democrats will not fund border security. schumer: our suggestion is a simple one. mr. president, reopen the government and we can resolve our differences over border security. >> the president did not offer anything new to democrats or the thought that there would be much of an all a branch. suggesting he would have the wall made of steel instead of concrete, which is something the democrats don't want either. both sides doubled down and dug in their heels on the current strategy, so we are nowhere further than we were almost 19 days ago when all of this began. >> in just moments, the federal reserve will post minutes of its december meeting where it called

for further rate increases. michael: the fed was much more straightforward on december 19 when they announced their rate move than the minutes suggested in the meeting. a lot more caution and concern, including a few members of the committee who wanted to keep rates unchanged at the december meeting. inre was actually no relief the markets that anybody would do that. they were concerned about what they saw in financial markets even at that time, and the worst disruption came after the fed meeting, so fed officials very much on top of uncertainty about the economy, the minutes show that, and it does suggest that their caution was warranted. the markets reacted badly to jay powell's speech. now everybody is talking about the possibility of the fed on hold for quite some time. >> the china-u.s. trade talks

got mildly positive reviews. described them as broad, deep, and detailed. the u.s. trade representative said the two sides explored ways to achieve fairness and balance. >> it seems that there was an agreement for both sides to buy more agricultural products and energy products and other related products from the u.s. in a sign they are trying to move to an agreement. both sides said there was progress made. the real question is, how much and can they get this done by march 1? it is not just dealing with the tariffs, they have to come to some kind of agreement on business and industrial practices in china that the u.s. says needs to change. that is the real question. march 1 is not that far away. >> there are a growing number of

signs that parliament has rejected theresa may. this time losing control of the timetable if the vote next tuesday does not go her way. , where arethe case we? >> what happens next, that is what everyone is scratching their heads about. it certainly seems impossible for her to win this vote. if you see has happened in the last couple of days, the amendment has passed. she is unable to really control any of the legislation at the moment, so it does seem likely. that vote will be lost. the question is, how much is she going to lose by? what does she do next? downing street yesterday for the first time admitting they are contemplating losing this vote and said prime minister will come back with some sort of plan b. what is she going to do? is she going to call a vote? is she going to dissolve

parliament with a general election? >> jay powell stepped back into the spotlight again today, saying that the fed can be patient and flexible when it comes to interest rates. >> the strategy was to play defense, to reassure financial and say we do not see the economy changing substantially and there could be some room to this expansion. vonnie: day 21 of the partial government shutdown, and no end in sight. south carolina senator lindsey graham says both sides are stuck. >> it would be last resort. i spoke to a staffer earlier this morning who said essentially democrats want to be

with dealing with president trump, and his trip to the border where he all but declared that if no deal is imminent, then he is going to declare a and buildmergency this wall by bypassing congress. they are hoping cooler heads will prevail. they do not see any end in sight. guy: another day on the brexit front, theresa may's office has ruled out extending article 50. this idea of extending article 50 seems to be getting traction. >> absolutely. may'strue that theresa spokeswoman today ruled it out, but i think what we have seen in the last week has been from theresa may and her director is they have been rather careful with their words. steven markley said it was not government policy to extend. theresa may has become a lot less categorical about

extension. it is worth remembering that the eu is not against an extension. it would have to be unanimous, from the 27, but the reporting from brussels suggests as long as it was quite short, then an extension would not be out of hand at all you. >> still ahead as we review the week, an exclusive conversation with eric. plus, the bright side of the 2019 economic outlook and of up next, more of the week's top business headlines. >> markets are shrugging the data off today. it is a known narrative. >> this is bloomberg. ♪

>> this is "bloomberg best." let's continue our global tour of the week's top business stories. >> 2019 off to a big start when it comes to pharma m&a. >> this is the largest transaction eli lily has ever done according to bloomberg data. it is a really edges and deal and investors like it.

it is a big premium, but they do have an improved product. >> it is an incredible little company that took advantage of breaking science that allows doctors to identify the exact your tumor's growing through genetic testing and then they made drugs. it is entering the world of precision. this adds to oncology. strong innovation, compelling data in terms of survival. david: german industrial production took a big step down at the end of last year, raising the prospect of a technical recession, and european confidence has fallen to its lowest in two years. what is going on? >> this is data from november, and around that time, both the

bundesbank and the german finance ministry warned that germany would suffer through a slowdown in the latter part of 2018 due to some idiosyncratic factors that would lead to a slowdown. i think as a result of that, markets are shrugging the data off today because there is a known narrative. it is something they have been prepared for already. you have to look at this data point and as a result, i think that is what markets have taken this in stride. >> signs that the trade war is hurting china, manufacturing continuing its slowdown now for six straight months. >> more concerns that china is entering this scenario once again. >> we hear from the likes of cicc, the chinese investment

bank saying it is building as you see a slowdown in demand and external demand is looking weaker as well. in terms of consumer inflation, that fell as well. it is now concers about deflation that are front and center. swungsung shares have todayn losses and gains after quarterly profits and sales missed estimates in the last three months of 2018. i thought this is a big mess and yet, we are not getting a hugely negative reaction in the market. >> it is the big miss. on the operating level it is a miss of about 20%, the biggest miss in 10 years.

on the buy side, the investors, they have been selling stocks. in october, the told us what they were expecting and that was 10% below what everyone else have been expecting. samsung was cutting the spending by even more. that indicates they knew there were tough times coming. they are preparing for it, battening down the hatches by reining in spending. >> the opposition leader of the drc has been declared the surprise winner of last month's election. if the court validates the

results, it will be the first time of transfer of power by the ballot box since congo gained independence nearly 60 years ago. how much of a surprise was this? >> the favored candidate of the outgoing president, he came in third which is usually influential. it was really unexpected and unfortunately, and a lot of analysts believe the results may have been altered because he is seen as a safer candidate and might be willing to do a deal with the outgoing administration. vonnie: the white house is

announcing a former federal reserve economist yang is withdrawing from the board of governors. why is she withdrawing? >> her area of expertise is regulation. some people who watch this say this was the result of a concerted lobbying effort on the banking industry is part, that it sort of conduct her nomination process and kept her from getting nominated. she said she is looking at this as career limbo and that is why she is withdrawing her nomination. as hedge funds report their 2018 performance, one bright spot was bridgewater, but returned alpha fund 14.6%, but many of its peers to not fare as well. the average hedge fund ended the year in the red, one of the

worst performers. >> everyone complained and waited for this volatility to return and finally when it arrived, they were on the wrong side of it. that led to huge losses. it all started in february when short volatility trades imploded and many hedge fund managers were smashed. again, it happened in october and december, it was really bad. emily: 2019 supposed to be the year of big tech ipos. but, with the u.s. government shutdown hitting its 19th day, the u.s. ipo market could be facing a slowdown. the sec is down to a skeletal staff. so just how bad is this situation? >> what this shutdown means is that none of that paperwork is getting looked at.

with all the staff furloughed, there is no one to review them, no one to communicate what else might be needed before they move on to the next step. >> asset managers are under pressure, blackrock cutting 3% of its workers. there are a litany of issues. you are worried about volatility in the market, disruption of technology. what seems to be at play here? thesethe memo announcing layoffs today, the president of blackrock cited a number of things including investor preferences, market volatility and uncertainty, but in the bigger picture, they are trying to trim down headcount as they move forward.

this is the largest layoff since 2016 at the firm. ♪

>> you are watching "bloomberg best." i'm rosalind chin. a week ago, jay powell said the fomc would be flexible with its 2019 rate path. we sat down with an exclusive conversation and asked him to clarify how the fed's patience

may play into policy. >> we are trying to get to the point where we are very consistent and at a time when forecasts are telling us we are not likely to have a good and outcome. at the same time, the financial data is much weaker. it is implying a bigger slowdown in the economy, so when we have these two differences, i think we need to get a little bit more understanding of why they are different, and my guess is that we will see in 2019 the economy will be reasonably strong and the financial markets will recover. i also realize that my forecasts can be quite wrong, and the financial markets have a different view. i have to take those considerations into account. assuming we don't get some but they come in forecast, how long?

is it a quarter, half of the year? >> i would expect as we get into the second quarter, we will have more information. my best guess is we won't see that much of an impact and as we get into the second and hopefully other markets will reflect some of the tail risk they are pricing as it turns out to be much lower probability. michael: you have a slowdown in china. the market volatility, the yield curve flattening. are markets seeing something you might not be? >> they may be placing the risk more likely than i would expect.

if you look at the fomc forecast, if you look at private forecasters, they are basically not seeing the risks we are not seeing. i can tell it more dire story, i just think it is less likely. my baseline expectation is that markets will reflect that the economy is doing better over time, but there is certainly risk. china is certainly slowing down. there are financial stability issues that i think are relevant, so they do have concerns about whether that slowdown will be more substantial, and they are engaged with united states in trade negotiations. if they go poorly, it will have a much more dire outcome and we would be impacted as well. >> coming up, more of the week's most compelling conversations. ceo's hold court at jpmorgan. and ubs thinks markets are over bearish. >> overall, i think the sentiment is not as good as it

should be. >> this is bloomberg. ♪

rosalind: welcome back to "bloomberg best." i am rosalind chin. leaders in the pharmaceuticals and healthcare industries gathered in san francisco. research was a central topic of discussion. also global policy. taylor riggs spoke with several top executives at the event. let's start with her interview with glaxosmithkline ceo. taylor: what are your contingency plans to prepare for any brexit scenario?

>> we have known for some time we have until the end of march for the u.k. exit. there is some uncertainty as to the votes that will come over the next few weeks. we have been preparing with the british government about contingency plans. that is on public record. our number one concern is to make sure that patients and consumers can get their medicines and vaccines that they need. we are well prepared for that. gsk is a global company. we have less than 4% of our global sales in the u.k. it is a very important country for us. it is my home country. it is where we are listed. we have a lot of employees there. this is something that we are prepared to navigate. taylor: what are your contingency plans if there is a repeal of the aca? about 20% of your operating income comes from that. how concerned are you? >> i am not.

i am never going to say it is bulletproof. nobody on either side of the issue believes that it will make not be reversed, not at the appeal level, not at the supreme court. i called our investors to its ago and said this judge will rule that way. everybody knows it. they filed in that court because they knew the outcome. they already filed the appeal. it will go to the appeals court. if the appeals court reverses it, the supreme court will refuse to see it. >> the drug pricing debate is not u.s. only. it is everywhere in the world. there is this issue of health care financing. i think our strategy, our

response is to deliver highly innovative medicines that are highly impacting the lives of patients and pricing them in a way that is sustainable for the health-care system. this is a reminder that we have. it is important that we find this balance in the u.s., especially, but everywhere. if we don't find a balance, eventually the r&d will be impacted. we need to find a balance between investment and reward. taylor: talking to me about that balance in japan. bloomberg is global. your headquarters are in japan. what are you doing to conquer the pressures from the japanese government about costs? christophe: there is recognition

that innovation exists, and innovation should be rewarded. highly innovative medicine can have a good price and a good reward in japan. it is finding this equilibrium in order to make the health-care system sustainable. rosalind: ubs held its greater china conference in shanghai. exclusivelypoke with bloomberg television. the global economy is stronger than recent markets suggests. axel: the market in my view is taking too buried a view on the economy. the economy is still doing well. there are difficulties we need to watch but overall, the sentiment is not as good as it should be. we are still in the favorable growth environment. that seems to get overshadowed by most of the discussions. >> what is the environment like as we speak to all of these companies in china?

axel: monetary policy and the retreat of monetary policy, the fed raising rates and possibly going into a pause now, the european central bank stopping its purchase program, those are all events that have changed what the global economy was driven by for the last couple of years. markets have to get used to that. i think markets will manage. monetary policy will be very responsive to economic situation. the economic situation is cooling off somewhat. there is less of an upswing then we might have seen last year, but there is no reason to be skeptical. we still have a relatively good global economy. we still have relatively good performance on trade. yes, there are trade disputes, but at this stage, it is really setting the stage for the future collaborations of the major economies rather than already embarking on some confrontation. there are some ongoing discussions.

as long as they are ongoing, we are in a good place. >> by central banks being responsive, do you expect the fed to react to the downtrend in the global economy? calling off rate hikes this year or changing the timing of these increases? axel: our economists had already penciled in a pause for the fed in the last quarter of the last year. that did not happen because some of the impact of the trade dispute has been less frontloaded than expected. we clearly expected for the first half of this year for the fed to be data dependent. since inflation has not really surged and is not really a problem yet, the fed can take it in stride. i think they will be cautious in the first half of the year and look at the data. i think that will lead them to a pause in the march meeting. i think it is unclear what the second half of the year will bring.

i think the market has run a little bit ahead of itself with the expectation that there will be a rate hike on the horizon. we do see the economy less dynamic going forward. we don't see any likelihood of a recession anytime soon. i would have a question mark around the fed moving in the opposite direction that quickly after they continued to raise rates. we see less rate hikes in the future but not clearly a change in direction. bullish: axel weber's outlook was somewhat undermined on wednesday. the bank slashed its estimates for emerging market growth by half a percentage point. they cited the downside risks have become more acute. they said that is our market movements. one of the leaders of the report spoke with us.

>> we have downgraded our global growth forecast relative to last year. growth will slow down from 3% to 2.9% this year. see aed economies will slowdown. emerging markets will see a stalled growth. we reduce our growth forecast by 0.5 percentage points. when we think about global economy, we had three major engines. the united states, the euro area and china. these three together account for about 50% of global gdp and 60% of global growth. all three will see lower growth this year. given the risks, things can get ugly.

>> what are the upside risks, if you see any? ayhan: there are major upside risks associated with these trade tensions. we see that the united states and china are talking to each other. so far all signs indicate that talks have been productive. if the united states and china resolve their differences in a timely manner and then take this risk off the table, the global economy can get a kick out of that. the confidence can again go up. if trade tensions escalate slowdowi in the u.s. and china. the impact on other economies could be quite significant. ♪

rosalind: this is "bloomberg

best." i am rosalind chin. let's resume our roundup of the week's top business stories in europe. among the stories we were first to report, plans to slash the bonus pool at deutsche bank. >> the management board is planning to cut the bonus pool by 10%. sources say rewards will be made more selectively in an effort to keep top bankers around. they have to get costs in order and they have no other option than cutting the bonus full. is that right? >> that is right. they are facing a situation where morale is already low. they want to keep the top people. it is a delicate situation. you need to bring costs down. you need to keep the good people. they will cut the bonuses and try to give those people the money that they really want to keep. they will monitor for the rest

of the year if that strategy will pay off. rosalind: now to a bloomberg scoop. an activist says that he has lost confidence in his dealings with this british lender. a 5% owner says that he will seek 5% approval for board changes. this will become a nine second director. -- nonconsecutive director. >> an activist ratcheting up pressure. the ceo of barclays has been resistant to any kind of change. he believes that the investment bank is the core and the linchpin of his strategy. this activist investor wants him to shrink it. they are at odds on a very fundamental issue. lenderne: failing italian is said to have had contact with potential buyers. according to a bloomberg source, the bank has expressed potential

interest provided that they reduce nonperforming loans. is this problem, maybe not systemic, but a big problem for italy? >> the timing is key. carige has a balance sheet in the order of 20 billion euros. it comes at a time when banks have been under strain. administrators are still trying to find a potential partner. at the same time, government is putting money on the table should that be needed. guy: ford announcing it will cut thousands of jobs in europe. it may close production plants. jaguar is announcing that it will slash jobs as well. >> there has been rumblings along these lines for quite some

time. that is why we have seen jaguar and ford be the first ones here. they depend on the u.k.. brexit has been a factor. you have other factors as well. in the case of ford, an aging model lineup. popular suvs that are with consumers at the moment, and a focus on smaller cars that are not very popular with consumers at the moment. they're going with a focus on smaller cars that are not very lucrative. >> elon musk breaks ground on a $59 company in china. this has got against all of the powers that elon musk has been experiencing. he has had some great successes, for example of spacex. will this be another success? >> he has been coming along on the tesla side. the big question is going to be are we talking in musk time and whether or not this factory can deliver for him in the time that they are talking. they are being aggressive.

there are talking about starting initial production of the model three by the end of this year. they have a long ways to go to get this factory built. getting model three assembled in china to avoid import tariffs regardless of whether they're coming down a little bit, it is still really expensive for them to be trying to sell that car at the price point they are at right now. >> the engine for the world's car industry has been thrown into reverse. china has reported its first yearly falling sales in decades. this day had to come at some point. when you look at the numbers and break them down, what is the narrative at play? >> i think there are a couple of things in play. first and foremost is the trade friction. it has slowed down the chinese economy. it has dented consumer confidence. there has been talk that the chinese government will

implement another oil stimulus. chinese car buyers are pretty savvy these days. they have been accustomed to these incentives. they may be waiting for new incentives coming up. gher.e: shares of gm are hi the automaker issued a surprise forecast for profit gain this year helped by pickups and suvs. >> this is the result of what we have been working on since the 2015 timeframe. we have been working to transform both the core business and investments we're making in e.v. connectivity. we are seeing that come to fruition. we have more work to do. we are focused on this transformation. we are making sure that general motors is strong. we are demonstrating that we can continue to deliver results. francine: carlos ghosn says he

has been wrongly accused in his first chance to give his version of events after his arrest in japan. the former nissan chairman appeared in court today to deny allegations of undisclosed compensation and says he had acted honorably and legally. what did we learn? >> there wasn't a lot of legal precedent from this appearance in court. it was chosen by carlos ghosn's defense team to give his side of the story. in the japanese legal system, the narrative really is dictated by the prosecution. he is continuing the fight. he has given no indication that he is going to sign any sort of confession. it doesn't look like the man who once headed nissan and mitsubishi motors is going to give up the fight anytime soon.

>> despite carlos ghosn's pleas of innocence, japanese prosecutors are adding to the serious charges against him. members have been removed for breach of trust. he will apply for bail after he was indicted. the prospects of that being granted is slim to none at best. he has appealed to a higher court. >> pg&e plunging today. the utility giant stock falling over 20%. it is reportedly considering whether it should file for bankruptcy. it is facing wildfire liabilities. >> what is happening right now is pg&e, that is the largest electric utility in california, is facing massive problems from a string of wildfires in

2017 and 2018. they are looking at $30 billion in liabilities. the company may not have a way to pay off all of these claims. now what we are talking about is the state legislature and the state regulators may have to step in to provide some financial support for the utility if it will stay out of bankruptcy court. emily: the richest person in the world is getting a divorce. amazon ceo jeff bezos announced on twitter that he and his wife mackenzie have decided to split years. 25 mackenzie played a significant both at the company in the early years and was there when he wrote the business plan. currently jeff bezos is worth more than $137 billion. if the couple split their fortune equally, it could live

leave mackenzie with $69 billion, making her the world's richest woman. divorce law is set up quite equitably between the spouses when it comes to property acquired work obtained during a marriage. how this will play out, we will have to see. there could be a prenup in place. if that is the case, they have already decided what will happen. there is this law that things should be split equitably if there is no agreement in place. we have seen it in prior divorces when there have been couples that were worth quite a bit of money. there are many ways that you can slice and dice fortunes that are that large. >> a number of retailers released seasonal sales figures today, stoking fears about a consumer slowdown and prompting a sector and broader market selloff. macy's is the worst offender. shares plunged 19% after cutting annual sales and profit forecast. >> what went wrong was a loss of momentum.

their ceo said the holiday season began strong. what we heard today is after black friday and by monday and cyber week, momentum dissipated. they did not see the sales they had been expecting. we heard from target, kohl's, all of them doing poorly in the market today. ♪

gc3d have got here the function. got the bundso n the chart. you can see that if i go out even seven years, we are still negative. we are still below zero at seven years.

rosalind: there are about 30,000 functions on the bloomberg. we always enjoy showing you our favorites on bloomberg television. maybe they will become your favorites. here is another function you will find useful. quic . it will lead you to our quick takes, where you can get some important context and insight into timely topics. >> late last year, jack ma was confirmed as a member of the chinese communist party. he has a very un-communist worth of 50 billion dollars. even though china remains committed to a communist future, its history of capitalistic compromise has made it the place to turn personal millions into buildings. this is the quick take on china's billionaires. by one estimate, china creates a new billionaire every two days.

1960, the communist party picture opened the country up to private investment. since then, china begin moving away from agriculture and ng.ning into manufacturi eventually leading to growth that turned the country into the second largest economy behind the u.s.. >> there is this discussion of what socialism is with capitalism. they are not poverty. >> the lines between business and politics have become increasingly hazy after xi jinping led a campaign to make sure that the communist party leads in all aspects of society. >> there is the shining example of what china hopes it can become. cutting edge, smart, people doing cool things and making products that people around the world want to use. they are a lot less enthused with massive amounts of wealth. >> china has not given up on communism.

it made full communism a goal. on the roadmap to communism, the country will have to become fully socialist first. >> china is a communist country. it is a one-party state. in that sense it is very intensely focused on making sure it can maintain control and stability. expense of civil rights some take for granted. >> jack ma is one of the men who was honored. evidence that on the issue of communism, china is more than content to wait. rosalind: that was just one of the many quick takes you can find on the bloomberg. you can also find them at bloomberg.com along with all of the latest business news. that is all for bloomberg best

this week. thank you for watching. i am rosalind chin. this is bloomberg. ♪

♪ carol: welcome to "bloomberg businessweek." i'm carol masser. jason: we are here at the bloomberg headquarters in new york. carol: in this week's issue u.s.-china trade talks front and center. jason: the magazine has several stories enter into a relationship with big tech and its impact on the digital economy. carol: on the cover the technology giant, we're talking about zte. jason: