francine: theresa may opens cross party talks to forge a new brexit deal. her government survives a confidence vote. is said mounts, huawei to be the target of a pro and an indictment could come soon. -- atlantaatlantic fed weighs in on the shutdown. we speak to dennis lockhart. ♪ good morning, everyone. good afternoon if you're watching us from asia. this is bloomberg: surveillance.

we saw the end of the rally in there is a lot of downward pressure down 0.2%. i'm also looking at the pound, all depending on whether theresa may can bring the parties together to try and find a solution. for the moment, jeremy: is not part of those talks. 108.8 three, always good to look at yet as a litmus test. coming up, in the wake of last nights's confidence vote, we speak to conservative lawmakers. first, let's get straight to bloomberg first word news in new york city. reports washington say federal prosecutors are pursuing a criminal investigation against china's holiday alleging theft of trade secrets. deviceechnology for a

t-mobile used to test smartphones. sources are quoted saying the probe is advanced and that we could see an indictment soon. theresa may is said to be prepared to blur a red line to find a compromise that could get through parliament. the u.k. prime minister holding discussions with other party leaders about a way forward. after surviving a no-confidence vote in her governor. however, the leader of the main labour party jeremy corbyn refused to take part, demanding may rule out a note deal brexit. the leader must return to parliament with a plan b by next monday. >> i am disappointed that the leader of the labour party has not, so far, chosen to take part. but our door remains open. it will not be an easy task, but mps know they have a duty to act in the national interest, reach a consensus, and get this done. won a fourthpras

vote of confidence, the latest challenge to his government. he got the challenge from 151 lawmakers, triggered by his landmark accord with the neighbor to the north and the government coalition partner pulling up in protest over the agreement allowing the country calls of the republic of north macedonia. the record shutdown drags on with no obvious signs president trump or congress are ready to speak. does not include money for the president's border wall and is unlikely to survive the senate. considering using $14 billion of funds previous he set aside for the army corps of engineers. democrats say that would be illegal. a nigerian business tycoon and main opposition presidential candidate says he would appoint a new central bank governor if elected. in an interview with bloomberg, he also said he would sell a stake in state oil companies and

reduce the government's interest in the company to a minority, saying there is really a mafia in there. nigeria, africa's largest economy will elect a new president on february 16. mafia,e is really a people who benefit at the expense of the country. so i know they're going to resist. they can't do anything. >> but you think you can do it? >> of course, why not? i have the political will. >> china valeant to push ahead with opening its bond market. , a pboc at an event deputy governor saying that it was crucial for the development of the nation's financial market. he said that china is planning to issue new index products such as bond etf's. surveyors say that u.k. housing market optimism is at its lowest in almost 20 years. institution of chartered surveyors is blaming abrasive security and a lack of supply for the malays revealed

in the latest monthly survey. sales expectations fell to the lowest since 1999. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine. francine: think you so much. some breaking news out of hitachi, deciding to shelve its u.k. power project. remember, this has been the talk of the town in a lot of the u.k. press. expected to scrap this plan to build a station in wales, but it goes to mounting costs. the governmente a bit of an indication of what happens if briggs it is not dealt with. the decision was seen as a serious blow to the energy strategy, but possibly, a blow

to the hopes of attracting major investment post-brexit. theresa may has survived a vote of no-confidence, but with her deal all but dead and the eu refusing to renegotiate, her options are dwindling. bloomberg understands she is prepared to blur her red line to find a compromise that could get through parliament. some of her rivals have been quick to lay down conditions. could the eu meet the u.k. somewhere in the middle? let's ask our next guest, heart of the brexit steering group for the european parliament. thank you for talking to us, where the see this going -- where do you see this going? can the eu meet the u.k. halfway? philippe: you should differentiate between the solutions to the solution. an extension is only a means,

not a solution in itself. the three possible outcomes remain as theresa may has described them. it is a negotiated brexit. brexit or a note deal brexit. need toa deal the mps strike. unable, what i see from strasbourg is political games. theresa may appears like she is opening the door. she is saying it has to be brexit and it has to be a customs union. she stands by the red lines while saying she would pronounce them. on the other side of the aisle, you have jeremy corbyn playing

games as well. he obviously does not want to engage and take his share of responsibility. this is not glorious either. >> we are hearing that theresa may could be ready to blur some of the red lines. that is the case, what would they do? when you think of it, it seems like a permanent customs union might have a majority in the house of commons, but actually, it needs and requires a withdrawal agreement to be in place. it has to do with the future relationship, and actually, when you look at it, a permanent customs union is making some provisions of the irish backs up permanent. there is also a great deal of the irish border problem, not all of it. for a regulatory alignment needed between northern island in the republic.

that seems to be a lesser problem than the customs aspect. would mean the u.k. is not allowed to strike free trade deals with any other part of the world. it has to be through eu free-trade agreements. francine: the fact that the prime ministers talking to other parties, is this a good sign? that if: i would say there is a bona fide process underway, in the coming that process may require some time. then again, it tends to be time limited and there has to be a plan. asking for more time for the sake of asking for more time will not be well received in wessels while saying, ok, have a clear plan with a deadline.

give us enough time to achieve that plan is perfectly acceptable. francine: could that go beyond july when the parliament reconvenes after the election? yeah, but that would mean the united kingdom would need to organize european elections, in a context that this is not conducive to a .eaceful debate that is one of the difficulties but as long as you are not gone, you are a member and you are bound by all the obligations of a member, including organizing the elections. you also have the rights of a .ember state they are a member and have to behave as a member. francine: would be easier to get a deal with a different prime minister? philippe: i'm not sure, the constraints remain the same. thefact is that you see leaders of both parties being obsessed by the interest of their party and not by the interest of the country. that is the problem. you might say that while putting

someone who is more of an adult in the room and the head of both , because you need both, you need both responsible leaders for tories and for labor, that he might have a climate that is more conducive to a cross party agreement. we have seenment, a theresa may obsessed by keeping the tory party together it seems to be composed by but jeremyble plans, corbyn is assessed with keeping the labor party together which is equally divided on the issue. francine: thank you so much. joining us now for the hour, hans redeker from morgan stanley. let me bring you over to my chart where we can look at some analyst forecast. are we underestimating the possibility of a hard brexit? i think the probability

fall hard brexit has declined. we have to take into account where is sterling in respect to the valuation. we come to the conclusion that recent market activity gives us a very important idea about, especially, real money accounts and the positioning of sterling. you have seen the news coming out on tuesday evening. you did to see sterling driven by fast money to lower levels, but next year it is not sustainable. that tells you that many are not involved, people want a better clarity. but that means that there is very little to liquidate. francine: what are the chances of a note deal brexit? there was one interview that caught my attention yesterday with steve eisman.

he was saying the concern is that a lot of pensions and money managers will remain, so they do not see the possibility of a no deal brexit. but something could go wrong and there is still be crashing out, we are 10 weeks away. right, there it could always be a terrible outcome. we have time to think about the probability. wasn't that probability higher a couple of weeks ago? are we not moving towards a much more constructive environment? consider thatl to there seems to be a majority for brexit with no deal. so we have to take all of that into account. when it comes to the currency you also have to think about from which level you are starting. sterling, valuation wise, is very cheap. when you look into the equity market, you have the dividend yield. into the yield differential amongst g10 and

sterling, you can see that sterling stands out. that offers protection, and therefore, analysts are right and the market is not positioned according to the consensus of analyst expectations. francine: thanks so much, we'll talk more. hans redeker from morgan stanley. next, trade talks resume, we had to washington at the end of the month. more on china and the slow down and trade concerns. this is bloomberg. ♪

francine: this is "bloomberg: surveillance" china, the chief

trade negotiator is headed back to the u.s.. the chinese government has learned that the vice premier will be in washington at the end of january, coming at a time when china's economy has slowed and added pressure of negotiators in beijing. still with us, hans redeker from morgan stanley. first of all, does redmond the touch of seven -- does renminbi touch 7? actually, you are right. a couple months ago people were assuming we would exceed seven. thinking in the context of diverging monetary policies easing aspects and that the tightening. the argument i was taken against that was that, for china to environmentbe in an where his has developed significant debt levels and funded those levels

domestically. the banking sector seems to have reached a level of liabilities relative to profitability where it is going to be very difficult to translate an increase in chinese base money into banks. i'm saying that the velocity of money in china is in decline. in order to get that economy back on track, you need to have imports. there is an important situation taking place. i wonder what people are not asking why dollars in the -- d ollar-renminbi is not taking off. you have seen that some exporters are taking dollar revenues and keeping them in dollars that is something like 63 billion. butl wait for confirmation, i would not be surprised if corporate china has been changing those dollars. whatext thing is that

china needs to do is to borrow the balance sheet from abroad. that actually means that there are imports coming in. francine: let me bring you to my chart. you can see them guiding casts down. how many more tools they have to guide the economy? infinity? han: when you look at monetary that there issume usually to potential solutions. one would be injecting equity into the sector like what was done in 1992. which, i think, would be far too ambitious and would have significant implications on the stream of global liquidity.

is that you turn china today capital importer. the balance of payment in china is suggesting record highs and flows are rebounding sharply. francine: thanks very much. up next, more bad news for huawei for allegedly stealing technology. this is bloomberg. ♪

francine: this is "bloomberg: surveillance". let's roundup today's big tex stories. cut down ond to hiring after selling fewer iphones. huawei is under investigation for allegedly stealing -- stealing trade secrets. tsmc, the sole supplier of the main processors, grapple with plateauing demand. for more on all of these stories, let's bring in alex a web, a tech columnist for bloomberg opinions. what does this tell us about their customers? indication of how the next quarter might be shaking out.

they make a lot of the components that apple designs. they manufacture them. so their order book can get a read on what apple might be betting itself heard -- itself. their other biggest customer is huawei, who is not had a good week either. so my be a combination, this is not a pure breed from apple. doesn't huawei allegedly stealing trade secrets confirmed the u.s. is worst suspicions? >> not really, no. what we have seen them doing his crating a backdoor for chinese intelligence. this implies there is bad acting but it does not show the link. it is not good news for quality. -- huawei. but they are not proving the worst allegations that they have been confronted with. francine: thanks so much as always, bloomberg opinions alex webb. up next, breaking brexit deadlock.

theresa may holds cross party talks after narrowly surviving a vote of no-confidence. how far away is she from having a plan b? we discuss that next. looking forward to my ,onversation with hans richter a cross-section of where politics meets economics. in the meantime, stock futures down, euros down. the concerns are about rising tension between america and china. what are the impacts of this better than expected start? pound, whileat the theresa may looks at talks with political rivals. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's get straight to the bloomberg first word news. viviana: report from washington

say federal prosecutors are pursuing a federal investigation against china's huawei. it also includes technology for a robotic device t-mobile use smartphone. huawei previously denying wrongdoing. the great prime minister winning a fourth vote of confidence. k got the backing of 151 seatkers in the 300 chamber. the government's coalition partner pulling out in protest . the french finance minister calling for the dismissal of carlos gohn as chairman and ceo of renault. it has a 15% stake in extra

voting rights. the chairman has been in jail and denies wrongdoing. in a bad year for hedge funds in 2018, one hong kong-based fund is reportedly increasing its workforce by about 70%. this brings the number of employees to 67. reportedly making a mid-single-digit return last year. about 70% of asia focused hedge funds lost money over the same period. surveyors say u.k. housing optimistic outcome is at its lowest in 10 years. sales, expectations falling to their lowest since records began in 1999. the founder of vanguard group and lifelong advocate of low-cost index based investing

has died at age 89. under his leadership, the company introduced the first retail-based fund in 1996. his formula turned vanguard into the largest u.s. manager of stock and bond funds. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. much.ne: thank you so the case prime minister has survived a vote of with herence, but brexit deal all but dead and the eu refusing to negotiate, her options are dwindling. with only 10 weeks before the deadline, can theresa may really find a way forward? joining us now is the senior advisor law firm covington.

he has held a host of high-profile government positions. fxo with us is the head of for morgan stanley. what is the next step? what will it take for jeremy corbyn to play ball? s: it will clearly need the prime minister to drop some of these red lines. these red lines meant that if you are at insistent that she was that there must be a free movement and two people, that meant that the trade-offs were all going to be in the economic entry field, which was a negative for the economy. she will have to give on some of this. is the customs union, the single market? think you have to think about what the labour position is.

jeremy corbyn has said that labour wants a permanent customs union. for the kind of policies that a corporate-mcdonald government would want to introduce, they would need to introduce capital controls rather quickly. you can't introduce capital controls if the u.k. is in the eu or the single market. they would be much more comfortable with britain being in a customs union than being in the eu. francine: where the chances of any of this being done in the next 10 weeks? francis: i don't know. i have spent a lot of my political career dealing with european matters. under the masters treaty, a lot of the negotiations of the single market as well as being minister for europe. that reality is that if there is a will, and the real prospect of

a deal being done, it will become possible because everything can get telescoped very quickly at the end. francine: is that why there is belief in the markets that there is almost no chance of a no deal brexit? francis: is a very little chance. what you have seen in recent days is that the speaker of the house of commons has been willing to abandon prec edent and reduce what has historically been the government's strict control over process in the order of business in the house of commons. to allowtalk of moves members of parliament to introduce legislation that could change the dynamics very dramatically. i would say the chances of a note of brexit happening are very slight. i think that is actually a pity

because i think the thing that is most likely to lead to a deal is if there is a real prospect that no deal could be the unfortunate and much to be avoided outcome. francine: what are the chances of a note to brexit? it seems to me the impartiality of the speaker is coming into question. so thatstake happen there is not one thing done right and we crashed out? francis: the only certainty here is uncertainty. sayn his years somebody something can't happen, you happen, youour should put your money on it happening because -- --

given that there is a clear majority in the house of commons against us leaving the eu without a deal, i think ways will be found, effectively to rule it out. the chances of a note of brexit are now vanishingly small. francine: we are also hearing from the french prime minister commenting and saying a hard brexit is less and less likely and his job is to prepare for a hard brexit. means onok at what it how you value risk, there are three options. is kind of like a deal brexit, a note of brexit and a fudge. half or in advance do you need to figure out the probability? what is the best outcome for the markets based? if we were to go to a second referendum, does it mean uncertainty? hans: he would assume there is more uncertainty and also think about what are the longer term and locations of the referendum?

thed take the country into more divided situation? the referendum result, many people say it had been a -- vote. to bring many people to vote? for the referendum is going to show a different result. french primet the minister is saying is that a hard brexit is less and less unlikely. which means that it is more likely than it was before. is the pay ready? i know it is a small chance, but are we ready? rancis: think a lot of businesses are ready because they tend to take the view that they have to be prepared for the worst.

is the government completely ready? i doubt it. is a chance of it happening are not very high. on the point about a second referendum, i think it is really unlikely that it will happen because there are so many questions about what the question would be. my gut tells me that if there ,ere to be a second referendum it would be a bigger vote to leave, not to remain. i don't think it would change because the argument would be, you are talking about us going back into an eu which has gotten worse and become more integrationist then when we left with are influenced that the diminished because of what we have been through. the chances of making the work are slight. if we weres me the to have a second straight binary

referendum, and i think it would be a bigger vote to leave. i think the chances of there being a second referendum are quite liked. -- slight. francine: thank you so much. tomorrow, speaking to the cofounder of europe's biggest activist fund. that is at 8:00 a.m. london time. coming up next, as the fed gross the cautious, we hear from former atlanta said about whether a pause is coming. this is bloomberg. ♪

francine: this is "bloomberg

surveillance." the former atlanta fed president says he wouldn't rule out a pause in rate hikes in the first quarter. he added the fed have justification to do so citing the u.s. government shutdown is one. >> they have a number of reasons if they wish to pause in march, they certainly can do it with justification. the first quarter is going to be affected in all likelihood by the shutdown. i will point out that for several years, but not last year, but for several years, the first quarter in the united states was sort of an unusual quarter. it was difficult to understand sometimes weather events, sometimes other factors came into play, but the first quarter was somewhat of a puzzle. if you have shutdown plus other

aspects creating a very soft first quarter, it would be perhaps more difficult to go ahead and make a rate move. they have signal patience and no , flexibility. i would not at all rule out a pause at the end of the first quarter. francine: so you will join a --k between fed policy and >> i wouldn't necessarily say longer, but i think taking a stance at the march 20 meeting of wait and see, take a little time to evaluate the effects of a shutdown, but also an expected slowing of the economy. they have every justification,

if they wish, to not proceed in lockstep with their earlier increases, but rather to simply take a pause and wait and see. it would not necessarily signal an end to rate increases. it would simply be a cause to evaluate. francine: those the former atlanta fed president speaking exclusively to bloomberg. for more on the fed and u.s. dollar, let's bring in han what is your bests. case? u.s. we are bearish on the dollar. we were saying when talking about the renminbi, that people do not ask the question why something happens. the equity market decline we have seen in october into of this year of 20%, i do not see the people trying to

get down to the bottom of why this actually happened. we went into the flow of the u.s. economy. the flowdo see is that in respect of long-term capital coming into the united states is easing. a debt donation, the willingness of others to fund you is very important. the willingness of others is going to determine the price of local assets. this funding is coming in less and therefore, surprises have to decline. the side effect is going to be in the medium and long-term, a lower u.s. dollar. francine: also want to ask you about yen. -- says the yen is likely to

level.ts strongest where do you see it going? argument is completely different. you can turn it however you like to. if you take it according to what a previous member of the boj , when itay about that does decline, it has to be repatriate. you may recall when the yen was declining in the early 1980's. we did see a 70% depreciation of the japanese yen. when you look at owners in japan, they are pointing lower. there is an indication into that direction. you can also take a demographic will view.

funds arean's pension abroad, of which 80% are in the united states. the assets under management of the industry in japan has rolled over. a people are not taking into account how much of repatriation is required. the total number of dollars held by pension funds in japan is about 220 trillion yen. i think that could be heading ion is thatatrat society goes into retirement. francine: thank you so much. next, to no end in sight for deutsche bank's troubles. will talk bank earnings, divergence. this is bloomberg.

♪

francine: economics, finance, politics. this is "bloomberg surveillance." topped $100has billion in profits for the first time ever in an earnings a season that kicked off monday. profits are piling up as shares advance. jpmorgan reported a record year. yesterday, goldman sachs clock its biggest earnings day gain since 2008. bank of america and also gained. morgan stanley is up next. is likely to add to the record quarter for u.s. banks. why have investors reacted so positively to earnings? start think you have to to take into account that we are starting from a very heavy selloff in the fourth quarter. investors were beginning to question whether this profitability could be maintained. a they took away from the

results this week is that so good.o there not seeing what they were concerned about which is the consumer credit deterioration. strong commentary on the consumer from the executive. individually, the banks doing very well in various pockets of business. the advisory business doing very well. overall, a reassessment of the very negative outlooks that have kicked in in the last quarter. francine: how much in europe should we be worried about what we heard this morning? they have indicated that the markets revenue will all probably be down 20%, which is a bigger attitudes in what you saw for the u.s. banks overall. the read not being very positive.

if you combined the difficult trading conditions with consumer businesses in europe, they're still great pleased by the low interest rate environment. francine: thank you so much. hans from morgan stanley. i wanted to ask you about the italian banks and the impact on euro. we had a great viewer questions. this particular viewer wrote in to ask hans' vie on central banksws. his asking about riksbank in the -- impact they can have on the respective currencies. hans: we are a situation where banks wanted to normalize. we also have to consider that sweden and norway are a smaller economies.

the point here is that the relationship between europe and china have been very often discussed at this point. a lot of economic weakness we have seen in europe have a lot to do with the situation in emerging markets, in particular, in china. you have to have a rebound taking place before you get optimistic. currencies, we have expressed a positive currency view. our has a lot to do with environment of funding in those two nordic economies. you know that the banks have been lending in the past domestically. banks are now in a weak opposition. asset prices in the region are high.

entitiesies for local to generate liquidity in norway or generate liquidity in the swedish krona. it may be in the future much more difficult to generate the local banking sector. what you can get instead of that is that they go outside into dollar areas and swap it back into local currencies. that could be quite a surprising development in a positive way for both currencies. francine: thank you so much. hans staying with us for the hour. we continue in the next hour. tom joins me here in london. will be talking to deutsche bank's head of european strategy. this is bloomberg. ♪

francine: finding a new plan. theresa may opens cross party

talks to forge a new brexit deal that can pass through parliament. had government survives a confidence vote. at theseems to be forefront of the -- good morning, everyone. good afternoon if you are in asia. this is "bloomberg surveillance." tom keene and francine here in london. a lot of a quieter day when it comes to brexit as theresa may tries to get her ducks in order. tom: the quieter day, but within this constitutional crisis, now what? francine: also, i have very important conversation with the european minister under margaret thatcher. one of the things i try to ask so sure thatrket

we have a note of brexit and you're a clear the procedure. who revokes article 50 if it were to come to that? contaminant do it -- can parliament do it? were you on tom: the conference call with the chancellor? francine: i was not, where you? -- were you? tom: i was not, i am an american. francine: let's get straight to the bloomberg first word news. : theresa may faces tough talks with opponents to get a new brexit deal. the departure deadline is just 10 weeks away. isomberg has learned may ready to blur her own red lines to find a plan that will get through parliament. that could mean keeping closer ties to the european union. china's chief trade negotiator is headed back to the u.s. for the next round of talks. the chinese government confirmed that the vice premier will be in

the u.s. on january 30 when negotiations resume. he will meet with u.s. trade representative robert lighthizer and treasury secretary steven mnuchin. a federal investigation as legitimacy to the case that the u.s. has been trying to make for is a threathuawei to national security. an indictment could soon come. a french bank saying it expects a 20% decline in trading revenue after market volatility cap quiet on the sidelines. will look a $200 million charge related to the stake in its two businesses. the founder of vanguard group has died. he popularized the low-cost mutual fund based on indexes.

that turned vanguard into the largest u.s. manager of stocks and bonds funds.he was 89. 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. the attributes come in. bloomberg has done a fabulous job of combining all sorts of bogle.on mr. hadimpact that john bogle is the greatest of the industry, not only how he changed global wall street, but how he changed every single viewer and listener's perspective of what you do for a rainy day. francine: how many people are like that? that can change the way you think, especially when it comes to the markets. i handful. -- a cancel.

-- a handful. tom: i'm trying to get out a video of five years ago. it was a wonderful moment, a long interview. they argued about the best way to invest. in will get to that as well. right now to a data check. wei du one because it is showbiz. futures down 10. the euro fractionally weaker over the last few days. i think one screen is all we have got today. i will let you do sterling. francine: sterling is kind of moving sideways at the moment. i think we are waiting or expecting or hoping on when jeremy corbyn or what it will take to actually get him to the negotiating table. overall, european stocks are falling. u.s. futures are also down.

think that is due to rising tensions between the u.s. and china. dollars study. treasury edging higher. there was an important interview we did. tom: flat sterling. in the real story of the last four days, sterling has shown none of the emotion we saw in the green at westminster. that is a 30 day chart. importantwe had an interview with the former central bank official from the boj. this is a chart we may on the back of it. he basically says that the yen is likely to reach its strongest level as japan enters a recession, which could come as early as follow this year. you can see we put some of the ranges where it was in late 2012. let's go back to brexit. the uk's front pages are dominated by the prime minister's no-confidence

victory. the guardian says, may survives .he vote highlights may's overtures to opposition mps and jeremy corbyn's refusal to attend any talks the far. joining us now is anna edwards and simon french and sebastian, the head of european strategist at deutsche bank. what will it take for jeremy corbyn to actually weigh in? he keeps saying he wants assurances of a note of brexit. anna: it is amazing. only in you can politics cannot be -- can there be such animosity between the two sides. and then only from a no-confidence vote there be a call from the prime minister to

put aside differences. yesterday, they were certainly invited and then refused to go because they have lay down their own red lines and say she has to say there will be no deal brexit before they will come to the table. sturgeon is saying that may isn't listening, but only to those who are in agreement with her. that takes us to the big question of whether she will move on any of her red lines. and is one thing to talk. francine: i'm confused about what happens next. there seems to be in the markets a little bit of hope that we are avoiding and no deal brexit. how can we be so sure? simon: we can't because of you just put down the legislative clock towards the 29th of march, the u.k. leaves, come what may. what i think is interesting is the labor party

opposition are trying to create a trap for theresa may to fall into. i think sterling potentially moves on monday because there is the decision point. is the prime minister pivot towards softening her version of brexit are actually pursue -- actively pursue a hard brexit? we're almost into the weekend, and i guess almost into february and then on to march. i since nationwide brexit exhaustion. how does labor deal with that? what is the to do list for labour over the next two days or two weeks? anna: we have to remember that the guiding force is to try and trigger another general election. that is what they want above all else, above perhaps even fixing what is going on with brexit. you have to ask yourself, what is in it for jeremy corbyn to work with theresa may. point, this trap that

she could be let into if she moves too fast, she loses the right wing of her party, who simon said could come back and vote against her. the no-confidence vote we saw yesterday from labour is not a one and done a fair. play to come back with another move like that. theresa may is very mindful that she would still need the numbers. tom: are we going to get another no-confidence vote in the next number of days? it took a long time to get jeremy corbyn to the point where he pulled the trigger this week. we have been talking about it for a long time. they said they would do it when they have the numbers. they didn't have the numbers. may be something significant would have to shift to give them the numbers. if she leaves her red lines, with that give them the confidence to call anyone? -- a new one? francine: what does this all

mean for european, but also u.k. equities? sebastian: there's a lot of focus on brexit. what is far more important is what is happening to global growth. there are little pockets that are sensitive to the brexit situation. are strategists think a soft brexit has become more likely. if that were to be the case, there are be pointing to the scope for more sterling at sign. there isngly, significant potential for domestic stocks in the u.k. that have suffered to outperform. their already at 10% since the start of the year. thank you so much. i'm digesting up 20% as well. up, the federal

reserve bank of japan president. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." facebook has taken down two fitness campaigns linked to russia. spreadingmed at discord between the baltics in eastern and central europe. retailer seeking bankruptcy protection. gymboree filing for chapter 11.

it plans to use fund to wind down all of its storess. it has nearly 900 locations. j.p. morgan chase expects to see big growth in china's so-called panda bond market. regulators making it easier for foreigners to sell new debt in the country. we spoke to jpmorgan's china ceo. >> we are very optimistic. given allngs equal, the interest from everyone pulling their effort to make the market more transparent and efficient, i think it is not surprising. viviana: that is the bloomberg business flash. tom: thank you so much. sebastian with us. i first want to get to him with deutsche bank. simon french with us. thank you for being with us in our year-end show.

what has changed since your brilliance of december 31? i think the big change is that investors are starting to price in a harder landing for the world economy then just a -- tom: central bankers have shifted as well? simon: correct. you see under mario draghi starting to talk. where it to moderate should to the downside. your notes has got to be the most bullish note on wall street. morgan stanley goes completely the other way. stake thebull case. sebastian: the global economy has decelerated at the fastest pace in more than two years. when i was predictably happens

at that point, people extrapolate. this dax got down so they think it has to continue going down. look at the details. finish.: let him sebastian: europe has been hurt by the euro strength by sharp turn in the industry cycle. the u.s. momentum hasn't slowed because of the strong dollar. the drive is now coming up. we are seeing improvement in all three, so we think this is the rate of change in growth momentum, and is going to improve. francine: i also have a taiwanese chipmaker. it is a pretty dismal outlook because of demands. having a china is not going to get much worse? sebastian: if we look at company guidance when momentum was strong, people saw the real economic data. does has very little

forward-looking capacity. what you have to see is what are the drivers of the economy and what are they doing? that is the credit cycle and inventory cycle. simon: to look into the second half of 2019, we are going to see some of the stimulus measures already employed in china. some of the established look from central bankers starting to come through. for thethe outlook second half is the point that investors need to be reassured. i have some sympathy to the argument. francine: what is at the moment overvalued? weon: i personally feel that still have a further to run down within the u.s. equity market space. if you look at the long-term relationship, 40-50 years in the u.s. equity market, is still decoupled to the upside.

there is further deregulating to come. that to me is the relative trade you play out. you may see some of the better news coming through the second half, that start to pick back up through corporate profits and equity prices. tom: given multinationals in europe, i could pick on 30 other stocks, they are in massive bear markets with the banking system not as robust as what we see in the united states. do you pick blindly, or where you have to pick to enjoy 10% or 20% up? sebastian: think the best methods we have is what are the reliable relationships and there are some meaningful dislocations we see. they have significantly overshot the relationship with bond yields and growth momentum. you have got some stocks that have upsized 10%, 15%, even as

growth momentum stabilizes. tom: this is too much optimism. after the green, the world is coming to an end at westminster? shall we go back to the shorts on brexit? coming up, we will do our level of doom. sebastian and simon with us. at imposing of the peterson institute for international economics. posen on the choices of central banks moving forward. please stay with us. from our studios in london, this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom inferencing from london today, and then someday we will migrate to davos. tsmc has forecasted a quarter of revenues sharply under projections forecasting a slowdown in smartphone sales in the global economy. onarately, we have the story huawei any possible indictment coming soon. joining us now to talk tech, alex went. -- webb.

what does this dismal outlook actually mean for china and for apple? alex: it is not good news for apple. tsmc, apple is our biggest customer. when they are forecasting in this march quarter, their numbers are not going to be as good as they would have expected. there is a certain rate across apple. seond is tsms's biggest customer. going forward, there might be a dual effect there exacerbated the problems. francine: huawei is set to be a probe for trade secrets, does that mean if it were true and i were to be an indictment, it crystallizes the u.s.'s worst

fears? alex: of don't think it crystallizes the worst fears. this is clearly something a bit different, particularly pertaining to t-mobile, which has the device which tests the endurance of the smartphone. found guilty to excellence on that technology on a civil basis. that is extending to an actual federal prosecution. a lot oft do huawei favors in the u.s. when it comes to public perception. francine: thank you so much. for that that mean for tech stocks in valuations in europe? we don't focus on tech stocks because our big thing is to see which of the sectors is vulnerable to death

there is very little that you could ask. the only text of sector is interesting is software, which is a defensive segment in a very cyclical sector. upside.e actually see francine: thank you so much. simon and sebastian stay with us. check out the latest edition of bloomberg businessweek.it hits the stands now. a lot of the focus will be on the medicare and the government shutdown. this is bloomberg. ♪

♪ tom: good morning, everyone. washington, the shutdown. we are looking at the green, all of brexit.

taiwan semi conductor news. our first word news with debbie anna hurtado. viviana: theresa may will have to walk a type wrote dust tight rope together brexit deal. linesst blur her own red to get a deal, but would be loads by hard -- lowest by hard time members -- a second meeting between donald trump and kim jong-un could happen soon. withde is expected to meet the president and mike pompeo. passing its latest plan to end the partial government shutdown but it does not include money for the border wall, so the senate will not consider it. only six republicans voting for

the bill. u.s. airports for security officers are climbing and they are not just calling in sick. tsa, many sayhe they cannot work due to financial hardship. shortages are leading to longer screening lines. tsa, many say they cannotfrance is turning ons ghosn almost two months after he was arrested. they have called for him to be dismissed as chairman and ceo of --enault. mitsubishi has artie fired him. -- already fired him. 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. i am viviana hurtado. francine: let's talk a little bit about interest rates at the european central bank. a little bit earlier on we heard from the latest senior ecb

official to suggest there is a case for hiking rates this year. is there a case for hiking interest rates? the german economy is falling off a cliff. the populist movement is gathering momentum and there is no inflation. simon: we should not necessarily with the dramatic aspect of the european government counsel wanting to leave on the table for investors that we may get some normalization. i do not think it is plausible given the economic data we have seen over the recent weeks. core inflation, for the last four years the average core inflation is 1% in the eurozone. they cannot start to tighten monetary policy and retain a near to 2% inflation.

francine: what impact does brexit have on these european economies? simon: it is the right time to look at some of the paths, the asymmetric impacts it has on the eurozone. if you think about the major trading relationships with belgium, the netherlands, and ireland, which probably are the three with the most economic damage. in terms of ranking, islands are most exposed, -- ireland is most exposed. sitsverall ruling power with the european union because 2.2% of the gdp is trade with the u.k. trade is withs the e.u. always do it ugly, but

we clear markets. that has been able to happen in europe and the answer is chronic low interest rates in germany. that cannot continue, can it? simon: if you extend from that point, you are advocating abolition of the monetary system where the germinating -- german market -- on the monetary side, the exchange rate side, the german economy benefits. on the fiscal side, they act as a guarantor. that needs to be explicitly addressed if we are going to finalize monetary policy. francine: i want to come back to brexit. when you look at european equities, what are the pricing in, in terms of the type of

brexit? could there be a big repricing if we get a softer brexit or no deal brexit? sebastian: there is very little priced in. if you look at where the macro economic indicators stand, 3% to 4% below value. we would expect a hit to the for a hard brexit. model andhat into the the historic relationship with european equities, it would shift down with the past by around 6% to 7%, a meaningful impact. francine: some of the u.k. equities, the u.k. housing market gloom seems to be deepening in december. at the possible brexit deals, theresa may has to

bring people together from all parties to try to figure out a way forward or give an idea to the e.u. what kind of vote parliament would say yes to. issue the right prime minister? john: that is good question. the problem she faces, as we saw with the vote of no-confidence last night, she owes her survival to the democratic unionist party. they have so far been insistent that any kind of brexit that should happen should be a hard noxit and there should be hard border in northern ireland northernbetween ireland and the rest of the united kingdom. she is beholden to them. the labour policy has been pushing for a softer brexit and the only way i can see a commons majority is for her to tech towards a softer brexit -- tack

to a softer brexit and leave the gop to the site -- dup to the side which means she could lose a no-confidence vote. francine: the concern was that she was losing votes. what are the real chances of a softer brexit? john: if she is going to pass her which all agreement, she will have to tack towards a softer brexit. given that the brexit she has been proposing has been pretty hard, it this free movement well end and we will leave the single market essentially. even with that political declaration, she has lost hundreds -- 117, 118 of her party. tom: i am thrilled that you are here. the center for european reform, this is a chart that should be on the cover of every britt magazine.

there is before brexit and after brexit, and you can see a little sketchy, the widening gap of 2% in economic growth. those are linear functions that seem to be persistent. if we get no deal, what happens to that difference in economic growth that you beautifully posit? john: according to our modeling, if we end up with no deal and everyone seems to think that would imply a hit to u.k. gdp, then we would see the gap widening. it is true there is a global slowdown and the eurozone is slowing down potentially quite significantly, and there would be a hit to other countries. as our synthetic u.k. is based on other countries, then we might see the gap widened. widen more the gap

and more if no deal persist. tom: if everything you said is correct, we will adjust, we will move on. within the voluminous research you do, what is the likelihood and the speed of moving on if you go to no deal? john: what we know about trade integration is that you end up with the level of gdp being higher than it would've been if that trade integration have not happened. that is true of trade disintegration, which is essentially brexit. the timeframe for moving to that lower level of gdp other than where you would of been is about five to 10 years. the problem with no deal is you have trade barriers going up immediately. that will probably be a shock to the demand side. tom: everything i have heard, all the stuff on the green and the networks and newspapers,

what john said about a timeline of five to 10 years, it is what no one is talking about. there is a massive quiet about the pain and how long that will be. francine: a lot of people have been talking about the fact that it would take at least 10 years to get into some of these -- it depends on where you sit. a lot of people on the remain side have said this is far-fetched. if you were to look at trade deals, a wto agreement and then trade deals in 10 years, will exporters suffer the most or are they immune because they sell globally? sebastian: that is the irony. typically what is negative for the economy is positive for the equity market. remember the brexit vote and the ftse 100 strongly performing the european equity index.

you benefit from a weak sterling. sterling tends to be the primary instrument -- tom: that is right where i wanted to go. douglas erwin will tell you currency, adjustment. is that the bottom line? sebastian: we have had a 30% devaluation of the u.s. dollar over the last few years. we have not seen the balance of payments improvement you would expect because it is a service-based economy. a lot of the effect is not impervious to other groups. brexit is introducing frictions into the free transfer and production. what no deal brexit looks like depends on other things. the migration policy, the labor supply picture? that chart is excellent on the ,ong-term path of u.k. growth

will be predicated largely on what the migration policy looks like going forward. that is separate to the deal. tom: a brilliant conversation with john springfield. that was just fantastic, that is what we love to do. by -- wander under by. americanon the political economy. this is bloomberg "surveillance." ♪

♪ "surveillance." tom keene and francine lacqua on the green, freezing.

it is wonderful and beautiful. francine: so good to be in the studio. tom: a warm studio with coffee not six blocks away. us, andatheson is with the coffee is close by. simon french also with us. it is nice to get off the green. it is quieter. in washington, a shutdown continues and i notice a nuance from day 26 to 27. roslyn: at the same time, the house is passing bills to reopen -- tom: with six republicans helping. roslyn: but no sign publicly that congress and the white house, the talks that proceed will end this. it looks like there is no solution in sight, certainly no

border wall funding in any of these bills. tom: what will be the catalyst to get the common sense? rosalind: we might see something around the state of the union at the end of the month, which nancy pelosi has suggested delaying for his own good. there might be some pressure around that, to come to a resolution. francine: is this impacting the president's popularity? rosalind: very little seems to impact his pilot air -- popularity with his base. it's things like anything that is thrown at him, be it about the mueller investigation or whatever, it seems to slide off. you might say he is standing his ground against the democratic

held congress on this issue. francine: how is this impacting fed thinking and dollar? simon: let's take the fed thinking first. we can anticipate a slowdown in gdp in the first quarter, but you are going to get some slowdown in the first half anyway given the strong inventory build into 2018 that is going to unwind. to understandis the degree to which that under shoots to the downside as the sugar rush gets withdrawn. i have been able on the dollar for years. thought.t pauses for i do not see the appreciation i saw in 2018. tom: what are you looking for today? i read the newspapers this morning and it seems like it is total stasis in washington.

there are people with no paychecks. obviously, the president does not care. rosalind: the white house has had to double its estimate for the economic hit because it did not take contractors into account. donald trump signed a bill to allow backpay once the shutdown ends. tom: that helps. rosalind: in between, contractors and other workers are suffering enormously and that will only continue. tom: i cannot convey how this goes back to a core theory 30 years ago by ronald reagan. government is bad and we need to fix government. the president and his supporters think they are benefiting by having bad government workers not working. francine: a lot of people would say that his original thinking, even if it harkens back to the reagan era. thank you both. evans,up, charles

federal bank president will be york.4:00 p.m. in new this is bloomberg. ♪

♪ this is bloomberg "surveillance." apple will cut back on hiring after selling fewer iphones than expected. tim cook making the disclosure to employees earlier this month. he said a hiring freeze was not the right spots. some apple units will continue to add employees. apple's main chipmaker forecasting quarterly revenue lower than expected. taiwan semiconductor's verdict growth is the -- predict growth is the worst in decades. they are counting on high performance computing to drive future growth. aluminum is about to get cheaper. consumers ared by expected to continue to decline.

up more supply. democrats trying to keep the sanctions in place but that failed. francine: thank you so much. as trading slumped revenue slumped 20% as volatility reduced activity. prefer to -- would joining us now is bloomberg finance reporter. when you look at societe generale, should we worry? >> all of the banks are struggling in terms of trading revenues. generale one not be the only one this quarter

forecasting a slump in revenue for trading. of course, the conditions in the market are not favorable and the hasd income asset classes been more of a battle by traders. francine: when you look at -- the french banks were doing so well. one bank not doing so well is deutsche bank. will they merge and who will want to buy it? stefania: they said they will company european union to be merged with deutsche bank because they would prefer to have more financial integration in europe. it is difficult to find. it will not be an easy merger considering the participation of deutsche bank. potentialuggest the accommodation. tom: socgen is a derivatives

powerhouse. what is their future versus bnp paribas? how do socgen fit into european banking? socgena: we would expect to follow what bnp is doing. they shut down proprietary trading. bnp is one of the most aggressive in trading. tom: where does socgen fit in? where do they strategically fit in to 2025 banking? stefania: in terms of trading? tom: wherever, where does it fit in? stefania: i would say in terms of positioning, it is not one of banks and the european landscape.

it is becoming weaker and weaker because with deutsche bank, the paribas, if we consider european banks are in trouble or getting more expensive. european banks, they are weaker. tom: this has been wonderful. we will look at american banking in the next hour. gerard cassidy with us as we see the big banks report across america. stay with us from our studios in london. this is bloomberg. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience.

my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. ♪ tom: this morning, the house votes to end the shutdown.

a mere six republicans joined. the president called back unpaid workers to pay -- to work. day 27 of the shutdown beckons. the prime minister says thank you to the mp's of northern ireland. come on down, the chancellor of the extractor -- the chancellor of the exchequer says, let's make a deal for no deal. disinflation is tangible. what is a central banker to do? "surveillanceerg ," live from our london headquarters, tom keene and francine lacqua. that was something. we are not used to this in america, mr. corbyn going after the prime minister and the gentleman from scotland was vicious. francine: michael gove probably

gave the best performance yesterday in the commons and a lot of people are saying if one person could take over from theresa may and unite the parties -- tom: it would be mr. gove? francine: yes. will be a million calls because theresa may needs to try to get people to talk and give her an idea of what they would vote on more favorably. tom: absolutely historic, unbelievable. right now, the privilege of our first word news in new york is the the anna hurtado. -- viviana hurtado. viviana: the departure deadline for brexit is 10 weeks away. she is trying to blur her red line to make a deal in parliament.

negotiatoref trade is headed back to the u.s. for the next round of talks. the government confirming the vice premier will be in the u.s. january 30. he will meet with robert lighthizer and steve mnuchin. former atlanta fed president dennis lockhart would not be surprised if the fed puts its interest rate increases on hold. >> they have every justification, if they wish, to not proceed in lockstep with their earlier increases, but rather to take a pause in wait and see. it would not necessarily signal an end to rate increases. it would simply be a pause to evaluate. says thelockhart government shutdown will have an impact on the economy and the first quarter is often a puzzle because of bad weather.

societe generale hit some roadblocks. they expect a 20% decline in trading revenue aftermarket volatility kept clients on the sidelines. he upended the investment industry by suggesting most money managers are not worth the charge. john bogle has died. vanguard into the largest u.s. manager of stocks and bonds funds. john bogle was 89. 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. i am viviana hurtado. this is bloomberg. tom: much more on mr. bogle through the day. the funniest john bogle story, i get an emergency phone call, pickup john bogle at the waldorf-astoria so i race down

park avenue, i get to the waldorf, and he is right there. we walked back up and i realize walk,ocks in a 10 block john bogle had no idea there was traffic in new york. francine: you were walking? tom: we were walking up and mike two blocks into this -- like two blocks into this i realize, he is going to die. i played traffic cop to john bogle. he was oblivious to traffic. francine: legendary in the investing world for inventing a way for individuals to invest in a low check -- low fee market. futures, -10,n curve steepening over the past few days. oil going nowhere.

i just have one screen today. pick it up with sterling rallying. francine: the pound has losses -- is trimming the losses while theresa may began talks with her political rivals. the yen holding onto gains. european sovereign bonds are a mixed picture. crude oil, 51.72. tom: this is a joy to bring in david page, a senior economist, emma rossoining us, thomas. i am going to start with the basic journalism. what is the last three days been like? emma: it has been fast-paced. i think well there is a temptation to see that the way ahead is perhaps toward a consensus and softer brexit, the

path ahead is still pretty perilous. of: who is the most fragile the 5, 6, 7 constituencies? which constituency is the most fragile in this historic debate? emma: in terms of the ones most likely to lose, probably the brexiteer hardliners. of course, them being in danger means they can pose risks to theresa may. one thing may could be worried about is if she has a softer brexit, she may have more cabinet resignations. as the next prime minister, and a validity? emma: it is a theory, another rumor doing the rounds. up asludington could end some kind of caretaker prime

minister. theresa may is not a born , notiator, a charmer necessarily the person you would choose to get a lot of people around. tom: prime minister may is not a charmer? that is an exclusive. emma: somebody like david will be leading some of these talks. before we write theresa may's obituary, she has clung on and broken all of the rules of british political history, so let's not rule out that she will continue. francine: the market believes we are going through a softer brexit. how can we be sure? emma: we cannot be sure of anything. what seems to be increasingly the base case is that there probably will be an extension. people are talking about an opening, and the spanish foreign minister saying that was the only way. it is sort of chatter

rather than firm policy, but an extension could last until september. that would be months of said -- extension. tom: i do not know the name david ludington and emma ross thomas is teaching me. francine: i thought you were looking up the cats. tom: what does larry the cat think? no deal? francine: there are some good deals -- videos. what is the most elegant solution now? david: we are way beyond that. it is a mess. it was relatively easy to see the focus on the irish backstop would lead us into political crisis but it is not easy to see how to get out. conventional wisdom has it that you will see a shift where theresa may lanes a little more heavily on parliament -- liens a

little more heavily --leans a little more heavily on parliament. francine: we have a bloomberg scoop on societe generale. societe generale said to consider shutting its prop trading unit. been clampinge down more and more on proprietary trading since the financial crisis. in france, lenders must place their biggest trading businesses into separate capitalized units. tom: what is interesting is the cultural heritage and that socgen is known as a derivatives powerhouse in prop trading, descartes trading, is considered a powerhouse. there is not an ego thing but a heritage thing going on. thank you so much. what are you going to do in the next six hours?

who are you watching? emma: labour later jeremy corbyn is speaking now. -- leader jeremy corbyn is speaking now. tom: this is amber rudd's constituency? emma: she is the leading soft brexiteer -- one of the leading soft brexiteers in the cabinet and an ally of may. corbyn is holding out, saying he does not want to join the talks and last -- unless she takes no deal off the table. they are playing hardball. tom: are you ready? francine: yes. tom: decapitations is what they call it because they get in front of amber rudd trying to get to be prime minister. ross thomas, thank you for

leaving our brexit coverage. the control room says let's decapitate tom. this is really important, a timely discussion with chicago fed president charles evans on the challenges for the federal reserve. stay with us. in london, this is bloomberg. ♪

♪ is "surveillance." facebook has taken down two fake news campaigns linked to russia. one is linked to sputnik, aimed at spreading discord in the baltic and central and eastern europe. gymboree filing

for chapter 11 and plan to use funds to wind down all of its 900 plus stores. they came out of an earlier chapter 11 filing. j.p. morgan chase expects to see big growth in china's so-called panda bond market, making it easier for foreigners to sell you on debt in the country -- yuan debt in the country. >> we are optimistic. it is the third biggest on penetrated by foreign investors. , the think ital is not a surprise. viviana: that is the bloomberg business flash. francine: we are just getting an update. we have been following brexit and this is one. understand,is, we

ready to blur some of the red lines and there will be a vote on her plan b january 29. the week after davos, a vote in parliament. we do not have confirmation. tom: do we know what her plan b is? francine: we will find out on monday. thata leadsom was saying will give the house time to devote -- debate. move from the chaos of london to the quiet of washington. a morning must read from the historian of note, john steele gordon, terrific work. 1977, congress has only four times managed to pass 12 appropriations bills on time. as a substitute for budget discipline, congress has relied on debt.

the media has been calling the current shutdown a crisis, but it is merely an annoyance. the real crisis is the misbegotten postwar push to marginalize the president from the budgeting process has destroyed america's fiscal discipline. that has got nothing to do with the immediacy right now. how does the president save face to end the shutdown? kevin: i totally disagree with that column. this is a huge problem, especially if you are not getting paid or are the owner of a small business and no one is showing up because thousands of workers are not showing up to work. the job i yesterday in washington was palpable. you have speaker of the house letterelosi sending a baiting president trump to delay his state of the union. secretary nielsen of dhs tweets

there is enough security. now you have the dynamic where you could have the situation where the president shows up at the capital and speaker pelosi, who is in charge of the floor time, she holds literally lived , we -- literally the keys are not allowed to show up year. tom: how do we get the president to save face and make an accommodation? kevin: no one knows, to be blunt. yesterday the president met with a small group of democrats in the situation rome. problemre the same solvers who tried unsuccessfully to get speaker pelosi from regaining the gavel. the president is having communications with democrats but it appears this is at a stalemate. francine: does the president

scrap or delay his state of the union, and have we ever seen that happen? kevin: i would have to dig back to find out if that has happened, but i would be surprised if president trump delayed his state of the union address simply because the state of the union address is an opportunity for the president to make their case and lay out their agenda and priorities for the next calendar year. the president is required to submit a report to congress detailing and outlining the state of the union or the country. it was not until the creation of the television that this has taken on new meeting. this is a president that loves to have a national televised address and will love the opportunity. it is not just all about the shutdown. he has to make his case on trade, on the economy, and beyond that, yesterday was a

fourfic up -- report where americans were killed in syria. the policy to remove troops, people want to hear from their commander in chief. tom: many other topics away from the single-story of the shutdown. kevin cirilli, thank you so much. david page with us. continue on a greater economy and a limited choice for central bankers. coming up, steny hoyer, democrat of maryland. look for that in the eleven o'clock our. this is bloomberg. ♪

♪ "surveillance" from queen victoria station in london. tom keene and francine lacqua off the green. the brexit day continues forward. theorys a central-bank -- and a number of central-bank theories -- and it is important to hear from all of the president's. dennis local -- dennis lockhart spoke to us. >> they would have every justification, if they wish, to not proceed in lockstep with their earlier increases, but rather to simply take a pause and wait and see. it would not necessarily signal to rate-- an end

increases but simply a pause to evaluate. tom: i think we should follow up , we spoke about economic theory. ram --a of difficult a disequilibrium, there is always difficult of ram -- disequilibrium. we in a disequilibrium stage where we are making it up or some kind of theoretical structure? david: what we are seeing is a cyclical move upwards and the phillips curve which is building inflation pressure. the fed is treading more calmly. very differenta point of the economic cycle to elsewhere and where that plays is in fx.

it has played primarily through the dollar and that swing in the dollar, like we saw in 2015 and 16 is what snaps back. tom: if we have technology as , thef our reigning themes disequilibrium is ever larger with gains to the halves and ves and less- ha gains for the have-nots. the savings are tightly controlled by those very much at the high-end of the scale. those at the lower end do not have a buffer so when you have shutdowns and things that disrupt income, that can hurt quite quickly. francine: what happens to euro-dollar?

is it a euro or dollar call? david: the back end of last year we saw euro weakness. the dollar is strong against a number of economies. china is slowing and elsewhere, so dollar trade weighted -- will rise. this year, i think the move switches and we will see dollar expectation come off. tom: david page with us. bloomberg businessweek out on the stands, a great overview of your week. front and center, the theme, the challenge of government. this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. francine: this is "bloomberg surveillance." we have been covering brexit yesterday. we were at westminster the day before and today to watch with the prime minister as he tries

to get all parties to talk about what kind of printed yield it would go through. jeremy corbyn speaking right now with a lot of people from his party backing him to try to get the prime minister to say there is no possibility of a no deal brexit. he says that is the only way he will come to the negotiating table. a lot of people in his party want mr. corbyn to try to end the impasse, basically back the final say on the referendum. social media is saying a new deal is the only basis for his -- no deal is the only basis for his brexit plan. americans have an idea of the conservative -- francine: he has never been a big fan of the eu. it is unclear.

he has never been a fan of the eu but he wants to make sure there is a no deal brexit. tom: let's bring it up here on camera five. watch carefully. this wonderful book is dropped on every desk worldwide. anand giridharadas, do wonders around msnbc from time to time. the has put out "winners take ," about the inequalities of social good of the elite getting it all. my father lectured me a million years ago on exactly what you're talking about. winners take all. how did we get to this point in our society were so few gain so much? anand: two nights ago i had the surgery privilege of being in the house of commons during the

historic vote and watching this country have its argument about turning the english channel into a seawall while the u.s. government to shut down because of another wall fantasy. it seems this is happening because for 30 or 40 years we have been living a winner take all society, do an extreme extent where the very few, the people on the right side of globalization and digitalization have fought for a set of economic arrangements, taxation, labor policy, monopoly, antitrust, and lobby for rate systems theygged guarantee people benefit. you thinkafter time, of the gilded age. how does it end? how do you move from the imbalances to a beneficial

outcome? anand: i think when people stop believing the bs of every age. every age of savage, unequal distribution has its own bs. if you watch "downton abbey," there was a set of beliefs that held the upstairs-downstairs world together. everyone sort of believed the story. the people who have monopolized progress, to have stolen the future from the britain and -- fromwritten in the u.s. -- britain and the u.s. are changing the world. throughrand themselves programs to empower some people here and there instead of being brought to justice. tom: i do advocating some form of anarchy? anand: i'm advocating the restoration of democracy in the united states and elsewhere we

have leaders who reflect the aspirations of regular people. francine: there is one number i can't reconcile, life expectancy. it has increased to 71.5 years. are we having collectively a better life? anand: our world is not whirly -- really a world. the aggregate number is largely because of what is happening in india and china. each has their own particular policies theyy got rid of and having some mix of capitalism and a lot of government action in those countries over the last few decades. my focus is many advanced countries of the west which have left most of their people feeling and often it is true that the world is rigged against

them. there is no correlation against the effort they make an ability to live a good life on the other side. even for the people watching this -- tom: you are not a business channel guy with a code like that -- coat like that? francine: are there actual barriers? anand: it is true. what is the core belief of the united states? the american dream. you end up where you end up because of what you do in your life. that belief is least true in the united states among the rich countries. the thing americans think is most true about them is the least are. -- we are on our way for to davos, and i want to know what your message is to the elites were frankly many agree with you and would like to see a s ofmnist for -- calmnes

these excesses. anand: time is running out for them to get on the right set of history. should bedavos canceled this year. tom: i've already made reservations. anand: you should just go and enjoy the town. tom: the takeout pizza is awesome. why should they cancel this year? anand: because the united states government is shut down. because brexit chaos. because of what has a happening in france. tom: that all the more reason to have its of the elites can argue? anand: eating something different that is the anti-davos , representatives of people around the world that have seceded from -- francine: it is also emerging-market economies trying investment and

showcase to investors the reforms they are doing. it is not only about the elites. its about attracting capital. anand: doubles as a family reunion of the people who broke the world. is a family reunion of the people who broke the world. they work for a narrow slice of people, as your dad warned you to expect. that did not just happen. we often talk about the forces. these were outcomes designed the policy and fighting for policies -- tom: you show up on msnbc saturday morning. you are going at it on msnbc. the basic theme is democrats to the rescue. can democrats come to the rescue? will the polarity of speaker pelosi and the congresswoman from the bronx -- can the democrats actually get it done with the new liberal order?

anand: it is not a foregone conclusion they can. when i was in the house of commons two nights ago watching the prime minister and the opposition leader, it was like watching a competition of people trying to be the more uninspiring avatar of the 1970's. there is a real problem with inspiration. with the democrats also. most of the people i criticize probably voted for democrats. you have a koch brothers billionaires who are clear about their efforts to hijack public policy, but you also have the kind of democratic plutocrats, the mark zuckerberg's, the michael bloomberg's since we are who, the jeff bezos types have been just as much a part of building this winner take all infrastructure. are basically trying to explain the backlash against the global elite. that is populism. are the populists of this world, president trump, the pre-brexit arele and the italians,

they helping out the common person? anand: there is everything in political life, good populism and that populism. part of what -- bad populism. i think she is in much better populist than donald trump. tom: does she have a democratic mass? anand: she has changed the democratic party quite a bit just from actually staking out civil positions on instagram to explain marginal tax rates. people 20 years older than her, when they announced they are running for president, they are first being asked whether they agree with her position. i'm not endorsing any particular position, but she is an example of how you can actually speak to some of the same emotions that

brings it speaks to, that trump speaks to, a feeling of being shut out of progress, but there is a big choice when you speak to those emotions. you can leave people to punch up at the plutocrats who helped get us into this, or help people punch out. tom: can they legislate forward to a common outcome or is it just noise as the elites move on? anand: if you look at her proposal around the marginal tax rate, at first everybody said this was crazy. guilty democratic leaders said this is not wise, then they pull it and surprisingly it polls much higher because most people don't earn $10 million a year. i have spent time traveling the country the last year in the united states. if you take issues like monopolies, antitrust, crony capitalism, corruption, lobbying, there are interesting,

creative possibilities on the left and right. there are a lot of people the right who love business but don't love big business buying access in washington. there are people in the right to love entrepreneurs, but don't let monopolies. -- love monopolies. there are smart people on the right than donald trump, that there are people smarter than bernie sanders elizabeth warren. francine: education. anand: right now the united states funds education. let's give you a better public school. you live in a poor neighborhood with a low-cost, let's give you a worse public school. that's a dumb way to organize. tom: clear six weeks from where john locke lived. that's what this is about, the philosophy of the 17th century. i suggest you go to davos.

anand: i don't think i am welcome in davos. you bring more luggage than me. tom: i am bringing seven back this year. "winner takes all." anand giridharadas. it is a controversial book. we have more to talk about this morning. stay with us. is --s bloomberg and this ♪

francine: "bloomberg surveillance" with some headlines.

we have been covering brexit extensively. the u.k. government is still committed to leaving the eu on march 29. we understand in terms of the timeline she is speaking today, and she will propose a plan b as required by parliament on monday. we expect around -- we expect round two on january 29. viviana: another second summit between president trump and kim jong-un could happen. 's top aides will be in washington on friday. he is expected to meet with mike pompeo. he is in the u.s. for talks on the nuclear program. absentee rates for u.s. airport security officers order to work without pay during the shutdown are climbing, and they are not just calling in sick. toy say they can't work due

financial hardships. shortages are leading to longer screening lines at airports. -- after turning on the audit executive was arrested in tokyo. they called for him to be dismissed as chairman of renault. auto alliance altogether --global news 24 hours a day on-air and a tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. they are said to be shutting down proprietary trading units. fabio. us from work is first of all, why are these --nch franc's shutting down french banks shutting down?

week: we reported last they were closing its trading report ofhere is a today they are considering a closer. they kept this business because in france the law allows them to do it, but in. units -- but in walled off units. they kept it while in the u.s. they have been for been. not very big,,'s profit -- not much profit. it could be useful to be used somewhere else. that is potentially one of the reasons. francine: they continue doing prop trading.

they are the biggest investment banks in france, the biggest in europe. their activities were reduced a lot after the financial crisis but there was a trade-off four years back. in reality they are completely shutting. there was opportunity and an option to create a separate unit required by the law. they did it. over time it never really resulted in big profits. combined about one billion euros in this unit. the story of running this unit is coming to an end, potentially. tom: thank you so much, fabio. interesting future for the french bank. david page with us from axa, another french institution.

it is the single best chart. it's an american chart but it speaks to the challenge of getting back to normal unreal rates. it is the fed funds target rate adjusted for inflation. we have shown this many times. the yellow circle is stan fischer in a moment of being ultra accommodative. we are much better than we were then but we just can't get it together. what is the number one constraint to getting to a normal inflation adjusted real rate? david: what you have got is a high level of debt globally, but in the u.s. as well. you also have slowing trend growth rates. both of those are combining at the moment to cap the level of nominal interest rates. at the same time you have a fed that is wondering probably for political reasons -- tom: exactly. david: why it is unwinding its balance sheet. you have the fed tightening on

two fronts. if you look at the scale of tightening we have seen over the tighteningyears, the is a relatively quick tightening from a low level. that is what the economy is trying to digest at the moment and why you're seeing -- tom: all the central banks are dealing with the politics of the moment. the populism of the new terminal rate of gdp growth just isn't acceptable, is it? david: growth is very low. governments have built up debt and need to see a higher nominal growth rate to a road that and it is -- to erode that. tom: david page of axa. much more coming up at the top of the hour. always fascinating to see what morgan stanley does with their heir risk, and also with t asset management. gerard cassidy is next.

this is bloomberg. ♪ ♪

tom: an eventful "bloomberg surveillance" on brexit and the shutdown.

we are on our way to davos next week. from portland, maine, gerard cassidy. morgan stanley out in a bit. do you expect to see cost rationalizations across the major banks after the trading shortfall? i don't think so because i believe you will see many of the senior management teams will see it as a rebound. as you know from some of the reports from goldman sachs and others who were seeing better equity trading. if it does not pick up, i am with you. i think there will be bodies out the door later this year. francine: talk to me about what you looking for. we may see a drop in investment banking and trading revenue. wealth management is pretty big. gerard: you bring up an interesting point. when you look at some of the wealth management numbers, whether from bank of america or wells fargo, both companies have

lower numbers because of what quarter.in the fourth i would expect that to be the same for morgan stanley. we expect to see strong equity trading numbers. also strong advisory numbers for morgan stanley. tom: are there too many banks? gerard: when you look at our banking system, as you and i know, we used to have 14,000 banks in the 1980's and now we are down to about 5700. we have 5700 chasing 2000 bank'' worth of business. tom: you look at the canadian model of six banks or whatever. there is almost a nostalgia to get to that as well. what will be the strategy of our major banks and superregionals out two years to five years? thatd: our biggest banks are not permitted to make acquisitions, like it bank of america, they are growing organically in markets in which

they are not located such as columbus, ohio. our big regional banks are very likely to join forces with one another to get the economy to scale so over the next three to five years they can deliver the profitability they need to deliver. tom: gerard cassidy, thank you so much. we will look forward to morgan stanley earnings this morning. coming up, john and i will argue about brexit and english football and hopefully about something american as well. stay tuned to bloomberg's special coverage of morgan stanley's earnings. this is bloomberg. ♪ amazon prime video is now on xfinity x1.

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warren buffett called him a hero. trade war part two. the government could indict wobbly technologies for espionage. this has the vice premier repairs to travel to washington. morgan stanley on deck. the bank said to report earnings at any moment. the last of the big 6 wall st banks. david: welcome to "bloomberg daybreak." we waiting for morgan stanley earnings right now. so far it is not been better the banks. alix: you have to wonder how much of that is the expectation game. they had such a horrible run of the last four or five weeks, but before that they were so hammered. you have to wonder how much it will take for them to rally at all. david: they have shown they can make money without fixed-income trainin -- trading. alix: a big part of that will be loan growth.