[indiscernible] caroline: trading higher on the back of china trade deal influenced by wall street journal headlines. managed to shake off concerns about huawei. focusing on u.s. economic data. scarlet: we did grind higher. we closed the dow adding 152 points and the s&p adding 120 points. dow was up by 1%. only 22 of the groups in the s&p 500 declined. >> we are getting mexico's worth quarter numbers coming for the financial results. we have been digging into the press release. putting out a number from netflix saying they have reported their fourth quarter 2018 financial results. we are waiting for bloomberg news to report these numbers.

fourth quarter paid streaming changes 8.8 million to the fourth quarter. looking for an overall number of 9.2 million for international and domestic. the earnings per share number a point 8overall with million. it looks that revenue is $4.2 billion in line with expectations. we are falling after hours as we how many viewers and subscribers we have. the market was looking for 9.2 million. >> looking at the 8.8 billion as the total number added which was expected to be 9.2 million. their streaming that change was up 8.9 million. that was higher than what analysts were looking for. based on their estimates we were looking for a .5 million.

netflix is a changing quarterly guidance. you continue to see her credit card charge you $10 or $12. >> this is a stock that has rallied $.49 since the december low. it is falling 5.6%. billioncoming in at 4.2 shy of 4.1 billion. overall going to be a pickup for the fourth quarter numbers. , fourth quarter earnings coming in at $.40 a share. as though it could potentially be a better set of numbers going forward in terms of the addition that not in terms of earnings per share. >> looking through the numbers now.

we added a .8 million memberships -- 8.8 million memberships for the quarter. we are looking for the breakdown of international versus domestic. the market is getting saturated. it is a mature market. interaction is where the growth is but they have to continue paying for licensing rights and cranking out content. >> this was concern about why they are raising prices, was it because of a slowdown in growth domestically and this is the only way to recuperate that? maybe we were not getting it on the international side. i would be interested to see what they would have to say about one q in 2019 going forward. >> they are continuing to look ahead to the overall call at the moment. when it comes to our blog, it seems the fourth quarter numbers , $.30 is a beat for fourth quarter memory -- fourth quarter back in line.

for the fourth quarter, a .8 million is less than expected. >> more details on the first quarter forecasts, a .9 million is total. the breakdown for international would be an increase of 7.3 million globally, 1.6 million in the u.s.. analysts were looking for 2.3 million for the u.s.. that is lower than expected. they were looking for international estimates of 6.7 million. the 7.2 million is higher. >> let's bring in dan chung and his perspective. did netflix need to beat significantly? or do they have room to run? >> i do not have all of the numbers. [laughter] those sound like very good numbers. if the estimates you are using are correct, they represent people at the high end of the street. the average is lower. for 6 milliong

u.s..ational, 1.5 the average comes lower. anything around eight is a great number. how important is the current quarter, previous quarter compared to what they look forward to? it looks as good -- as though they are missing $4.9 billion where netflix sees its first corner revenue but estimates have been for 4.6. a glassnot want to be half-empty but there was concern it was as good as it gets. it is not the seller growth market had gotten accustomed to. sector byou look at a sector breakdown, where do you really see growth for investors? >> health care should be an intense person -- and hence

focus for investors. see steady growth there. it is less economically sensitive and not entirely inflated. it is extremely u.s. centric. if you are worried about global trade, you have less of that. ,t is innovation happening genetics, software, clouds, the data, telemedicine. they are big trends in health care. >> we want to keep this going. american express is also out with earnings. they are beating their key metrics. eps for the fourth quarter, 230 tuition. the estimate was for $1.80. revenue at 10.5 billion below the $10.6 billion estimate. it looks like they're metrics came in above what wall street was looking for.

innetflix down 2% after-hours trade as numbers for the additions for fourth quarter and first quarter outlook seem to be trailing estimates. dan chung is still with us. is netflix a tech company? thing tohe first big report and people were anticipating what they would say. how much of a read there is there for the rest of the tech sector? >> netflix is not a tech company. it is a unique media company. a global media company. their international subscribers and revenue are a big growth opportunity. half of the company's revenue is more than half of its international. we are looking with excitement to their international growth. the u.s. is reaching saturation

but continues to grow at an impressive rate given how many americans use the service. will flow through at high margins in terms of profitability. they raise prices, people said, they will go along with it. look of people do not even -- i do not even what -- know what netflix is charging. >> $13. >> looking at the resilience of the trend line that we had in 2018, do you see that continuing? not just for netflix but for other consumer companies? >> across the consumer space it is a battlefield. a lot of consumers are moving away from traditional brands and the price competition is intense. the consumer landscape is uneven with clear winners and losers. netflix, in terms of value, is

offering a a lot of value for content. it is raising prices but they will spend most of it on content. >> we are getting great features from the live blog if you want to track, go to the blog and see the numbers. bird box, a blowout success with sandra bullock, 18 million people watched it. seems to be winning in terms of films overall. 8.9 million subscribers -- subscriber additions is but they are forecasting, and 8% increase. we seem to be saying growth will be better than you thought. our revenue may be lighter. >> a lot of it is driven by which shows are released and what quarter. iced not see bird box but -- but i spent my break watching ozark. >> the other day i watched roma. you can get that on netflix.

you don't have to go to the theater. that is value. >> what do you watch? >> the last kingdom. >> the problem with these thrillers is that they cost money. cash flow from netflix went through $1.3 billion in the third quarter. >> thank you so much for joining us, dan chung. he is the cio and the cio of alger. that does it for the closing bell. how a voting member of the sec is looking for rate increases. chicago fed president charles evans is with us next. from new york, this is bloomberg.

♪ >> u.s. stocks closed today. we are in the green. makes headlines -- mixed headlines. breaking news on netflix numbers and it is a mixed bag, down by light. revenue is subscriber growth in the fourth quarter is on track. let's have a fed discussion with kathleen hays in chicago. >> thank you so much. i welcome our bloomberg television and a radio audience to a special conversation with charles evans, president of the federal reserve bank of chicago. we are in the lobby of the building.

thank you for having us. >> francine: thank you for coming. >> it has not started to snow. >> it has been a mild winter. not a mild time for you. >> what has been resonating with that you were now .t the december 18-19 meeting i assume you were on board with the december hike. said, weks later, you juneait as long as until to make any more decisions about rate hikes. from december 18-19 to last week, what changed? why this shift for you and other colleagues? >> that is not hard to explain. the economy is doing well. we saw strength in the december

employment report, 312,000 jobs created. 2018 afterhinking the rate increase in december was 75 basis points from being at a setting that is a letter bit restrictive. almost neutral. that with myetting outlook for a good economy, i would say, we could sit at that into we see the economy decelerate to trend inflation, hang around 2%. the unemployment rate continues to be good. timing is not a big deal. were to increase rates in june, you have june-december. a lot of it is timing. i do not have a lot of rate increases slated for 2020. 2020,happens in 2019 or with all of the uncertainty with other things going on, europe's

softening, we are well-positioned to assess how the data are coming in, whether or not business contexts see things proceeding differently than the national data.'we can respond appropriately.'we can be patient. back, preceding the december meeting, we knew there was a trade war going on. we knew there was a global slowdown occurring. the shift at the end of the year was a falloff in stock. wondering, was that what precipitated this sense that we now need to communicate to the world that we are on pod's, we are going to wait and see? the evidence until then was not

new get there seems to be a shift. all of those issues you cite are important. the slowing of growth in europe that has been going on for a little bit, as it continues, you realize, i have more confidence. having anive tariffs effect. we know there has been uncertainty about how trade discussions are proceeding and what that means for future investment opportunities. should they go ahead with something or wait? the supply chain dynamics could be moving around depending on the outcome of trade discussions. that is important. financial markets exhibited more volatility. what is it that the markets are seeing that we may not be putting as much weight on? you want to ask the question. maybe they are taking data they have seen before we assess it as

being on the softer side. slower may have been toward trends. it may not be that different in outlook but we are assessing it differently. that is a benign interpretation. us in a situation where if i am comfortable with the setting that funds us now, i do not think there is any hurry. we can look at the data coming in and be cautious. you see ansaying economy that is fundamentally strong that could warrant three more rate hikes in 2019 as long as the factors that are worrisome dissipate or do not get worse? is this not step a -- such a double sense from you and the feds? is it putting it off a little bit? >> i don't know how to evaluate the double stance.

moment where growth is good and employment is good and the consumer is strong and is this is have a lot of wherewithal from tax reform and good conditions, my outlook is for continued growth above trend decelerating to trend. there is uncertainty. we are at a point where if there is a shock nobody is expecting, may be the global slowdown is a more severe, that could take on more of an effect. we are at a good point for pausing, looking at the lay of the land. i am not worried about inflation getting out of hand. the data have -- has been softer than i was expecting. i am going to be cautious and take a little more care to make sure inflation will continue up and above 2% so we ratify are symmetric objective. >> would markets be ill advised not to entirely discount the

possibilities that the fed will hike great two or three times next year? >> i do not know how it will play out. we will be patient and look at how it plays out. markets are going to inshore against outcomes that they cannot control. >> it could happen? >> it is still the case -- we are at a moment where we are looking at the data. i am going to update my forecast. the median number of dots for this year is to. that is entirely possible. it could be less than that. >> china. how concerned about you -- are you about the global growth slowdown in china? has turned to softer. people doing business in china is a more of a problem for them. haverade discussions contributed to that.

the global slowdown has been part of that. they are a big player in the global economy. we have to look at all of that. that is an important thing to assess. >> how concerned are you about the possibility of transmission effects, the weakness of china to the u.s. economy? they imports fell more than 7%. it seems weakness is hurting apple revenues. could there be fx that will concerned outlook? >> another challenge we are facing is the trade discussions are affecting some company is more than others. when you look at what the effect of the trade issues are for the national economy, a lot of things net out. there is substitution. in an economy wide setting, china is important.

all of the issues could weaken my outlook by a few tens of a percentage point but you can with alerts. you net it all out. or more.be less we have to how this plays out. there is a lot of commentary in the trade discussions. they are still taking place. it seems every week there is a repositioning. >> you have spent a lot of time looking at it. this was a message manufacturers are concerned about. particularly to the chicago fed, figuring out the impact on the importance in this region.

how big of a deal of that is that for the district and how big of a deal is the shutdown the longer it lasts? >> the longer it lasts, it creates more problems. it is the case that the government is providing insurance payments to different people. when that is not taking place, we know there are parties that the funding in a timely fashion. it becomes more important. prices continue to be relatively low. thelonger it goes on, uncertainty is main people will delay making certain types of investment. that is not good for the outlook. when you see a strong economy

, low unemployment, you wonder why people worry. on the other hand, looking at the yield curve flat or inverting, the big bubble risks, what do you think the odds of a recession are? >> recessions are typically a surprise. we are going on looking at the economy and it is either doing well and if something happens that you were not expecting to and the consumer decides to become pessimistic like in 90-91. the fundamentals are good at the moment. with is reason to believe assessing the circumstances, settling down a financial , figuring out if borrowing conditions are tighter is that is helpful for the economy or the other way, that will make a difference. recessions are usually

surprises. the yield curve is going to get flatter in part because long-term interest rates are coming down. whether that is a precursor to slowing, we have to see. >> a question for the federal , we saw a story that president trump is taking another look at the nomination to the board of governors. our story is getting commentary that it is to hawkish. what do you make of that? history inas a long the federal reserve. he is a top-notch economists. he understands how the economy look -- economy works. >> to the question of rate hikes as you watch, what ,re the most important factors

i am going in and hiking the rate hike at this meeting? >> whether it is arguing for a rate hike or things continue to look good and we should continue assessing data, i think continuing to confirm the consumer is strong in spending ,nd supporting the economy continued employment growth is an important feature. we are expecting to decelerate mature you get to a point, 312,000 is a lot and you do not expect that to be replicated. businesses choosing to undertake continued investment decisions and expand or replace important equipment and structures is a very important aspect. things that confirmed the economy continues to be growing above trend. inflation continuing to move up andsolidified around 2%

going above 2% with healthy wage increases could be another sign the economy is on track and we are looking forward -- >> do you think will get there this year? i would not be surprised if at the end of the year we have a fun rate higher than where we are right now. that would be associated with a better economy. charles evans, thank you for having me to check out the fed. we thank you so much. sending it back to bloomberg world headquarters. kathleen hays reporting from chicago, an interview with charles evans talking about hikes being plausible. we have to keep looking at netflix. billion,e is a 4.9 below where analysts were expecting. negative free cash flow.

ahead read from new york, this is bloomberg. amazon prime video is now on xfinity x1.

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its all included with your amazon prime membership. that's how xfinity makes tv... simple. easy. awesome. >> bloomberg's first world news, transportation security administration officials say the rate of airport stringers desk screeners calling in sick is higher than normal it down from last weekend. a test could be facing friday of its ability to process crowds with your workers. last year, 8 million people flew between friday and monday of the martin link -- martin king junior federal holiday. has toldent trump nancy pelosi postponing a trip to plan to take to belgium, egypt, and afghanistan because of the shutdown. pelosi would have been expected to fly on a military plane.

she is allowed to request the least -- the use of military air craft. the president told policy to stay in washington. president wrote it was not a publicte to take relations event well 800,000 americans are not being paid. policy is not saying what she will do if the president insists on delivering the state of the union during the partial shutdown. she sent a letter suggesting he postponed the address until the government is up and running. in a news conference policy was asked if she has received a response. >> we will cross that bridge will cross that bridge when we come to it. heard. not no, we have not heard yet. speaker pelosi says federal employee is required to provide security during the state of the union should be paid.

,he shutdown, the longest ever is now in day 27. and twople were killed dozen injured after a car bomb exploded at a police academy in -- it was a deadliest attack in colombia's capital since the government and a rebel group signed a peace deal in 2019. investigators say a investigation is underway. theresa may is canceling her trip to a next week's world economic forum and will stay in brexit. to handle the crisis. she is holding talks with rival parties trying to find a planet that can win support. may has until monday to come back to parliament with a plan b. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. netflix shares are falling

after hours. it reported fourth-quarter earnings. we have gone through numbers. we want to talk about the context of the numbers. here with more is paul 20, the cohost of bloomberg surveillance and bloomberg markets on a bloomberg radio. i noticed isng that they are adding subscribers at a healthy clip. they are expecting a modest increase. there is still concern they are spending a lot of money. when do we see balance? >> most investors are focused on the growth of the company. the subscriber growth came in a little bit light. that is what we are seeing. there is a revenue miss and the quarter. guidance was not great.

there are great growth numbers with revenue up 27%. the issue is a growing competition over the next couple of years. every week, we hear a new media company talking about entering the streaming business. spentg reason walt disney $7 billion to buy 20% ray cox -- 21st century fox was to launch its streaming service to compete head-to-head with netflix. netflix is performing well. they are a leader in the global marketplace. they are the number one showing brand. competition is coming. >> interesting that walmart pull back on their idea of going into streaming. -- we have start more than a billion in cash now. as long as you have 18 million people viewing breadbox, we don't care. >> cash flow is an issue for

investors. $3 billion of negative cash flow in 2018. they are forecasting a similar number four 2019. not until 21 or 22 where the company produces cash flow so they go to the bond market. they have been funding this in the bond market. bond investors are saying we know there is no free cash flow but we have $150 billion of equity and believe in the financial number -- financial model. >> should investors be worried about competition? smart tv,pen your five years ago there were two things. now there is a plethora of options. -- the company acknowledges that cap -- that competition is ramping up. one is launching services and making it more competitive.

the second is a lot of traditional media companies that have been providing movies are pulling the content back for their own services. netflix has seen that and change to focus ongy original programming, house of cards, oranges the new black and movies. lot of the 10 or $12 billion of programming spending, a lot is going to original programming because they are losing access to a lot of content from third-party media companies. >> i am looking up on prices. they seem to be faring up good to 2020 -- 2028 obligations. talk to us about stock pricing leading up to this. it was a significant rally this december. off the was up 50% december low. faang stocks leaned the marketplace back. nasdaq has been outperforming the s&p and faang stocks just like we saw.

it has been netflix as a great performer. 10 or 15% off the all-time high. this is arecognize company that is delivering larges growth, has a global market, and looks to be a solid growth story again. >> it was great to get your perspective. take you. -- thank you. u.s. stocks closed higher today following reports. what about those headlines? we will discuss next. this is bloomberg. ♪

>> the u.s. has been trying to make the case that what way is a threat to national security. they are said to be the target of investigators for stealing trade secrets. here on the latest is a reporter from bloomberg intelligence. casemind our viewers, this that the u.s. appears to be pursuing is related to civil lawsuits that have already been out there related to t-mobile. >> that is correct. lawsuitlated to a civil that both parties have settled that while way and t-mobile about bets. came to aes settlement and it was supposed be closed. they reopened the case. >> how much of a threat to wobblies business, 25 rollout,

whether being canada -- how much will this be a concern to not only the u.s., but trading partners? >> in terms of 5g, the concern independent from what is happening with the doj case. on the case is focused ip theft. that while way has conducted, not only with t-mobile that other companies in the past. if you think about 5g, it is about surveillance and spying ahead of the new network. the u.k. is considering banning their corpsman. those are independent of what is happening with the doj case right now.

how is while way happening at an international level? i think against the majority of its revenue from china. if you think about the history hauwai, it was a 3g to 4g transition. they won't with inexpensive gear relative to a nokia and caught up on the technology. they lead on the technology forefront. the second leg of their was low-cost premium smartphones and they became the smart from provider

globally. from a technology standpoint, they stack up well with leaders. in that vein, they should being consideration for global contracts. >> we are starting to see more transparency -- more speaking out coming from the company, but china in general. china's ambassador to canada is warning about excluding huawei. founder, the the father of the cfo who is on bail in canada. pushinghear the company back on allegations particularly when it comes to reap -- to criminal repercussions? >> i am not surprised about the huaweiand opening of when it comes to a global nation. 5g transition, we are still talking about significant

revenue that while way -- huawei could miss out. they came the number two player in mobile infrastructure by winning the 4g transition. if that they miss out on the 5g transition, they could slip to number two or number three player and have others like nokia win out on meaningful global contracts. >> the u.k. has been doubling down on it -- on huawei systems. we thank you. we got breaking news saying it was considering rolling back tariffs on china. then we got a denial of the news from the treasury.

we have a professor of trade policy at cornell and a senior fellow of the brookings institution joining us on the phone. when we look at the varying types of headlines, what is going on between the china-u.s. talks? >> the fundamental shift taking place -- that has taken place is a balance of leverage. of last year, it looks like the economy was slowing down and china had incentive to make a deal. showsth the u.s. economy signs of that slowing down later this year with the stock market not doing so well. it is in the interest of both sides to make a deal. while the chinese have been willing to make some confessions, they are not willing to concede to all of the demands the u.s. has put on the table. made, anddeal can be

less china can make some concessions without capitulating totally is the question. potential concessions, which ones do you think china would be most agreeable to? signaled it is willing to get into certain u.s. demands. it is easy to find more u.s. products. they indicated they are willing to make concessions in terms of providing market access to what u.s. and other firms and -- firms to migrate into china markets. they will put in a better intellectual property right regime. on issues such as intellectual property rights protection, it is difficult to come up with a verifiable standards that the chinese can commit to. that is a legitimate concern

among those in the administration who believe china in the past when it has make commitments has not kept to them . terms of letter of the law, it did not meet them in principle. those concerns remain a question. >> it seems as though there is pressure on investing in china coming off with a weakening dollar in emerging markets. a concern as it for those who want to dabble have year in the market? a significant move and hung stock desk in hong kong stocks. they continue to side sweep investors. how difficult is it to get into the world's market? , howis is a conundrum international investors can make money off of china's growth? the chinese stock market has certainly not track the economy.

huge upside and downside swings. china has opened bond markets to foreign investors. given concerns about investor protection, there are issues. numbers have not been beating down the doors to get into china fixed income markets. a challenge remains if china is ready to make the financial and at therms institutional reforms necessary to give foreign investors confidence in china. the indications are no. >> they are about to become the second visit -- biggest bond market in the world. great to get your expertise. a quick check on the latest business headlines. the company has agreed to sell its smart watch intellectual company to google.

a portion of the team will during google -- will join google. tim cook joined and calling for legislation in a column published by time calling for to monitor how they use people's information. considering bonus cuts for traders. the majority of french banks may get no discretionary. businesses.ose and that is the business update. a could be as easy as investing in blago. in threereturn decades. >> i encourage people to be the report. the mn of detail -- the amount

of detail is fascinating. lagos, ones of hundred pieces, do better than bigger pieces. 2000 pieces do better than other ones. i do not know the purpose, but alternative investing works. >> bestsellers are harry potter, and indiana jones. what hasn't done well are the simpson's. i knew this before because my husband's company -- he used to have someone who did this, collected lagos and set up an entire trading platform for them. he would track on mine whether price points had changed. christmas would come around and everyone would buy lego pieces. people are making money out of the is and collecting -- >> we saw this with magic the

gathering cards and the beanie baby boom and bust. >> those are toys. >> i guess so. don't open them. [laughter] >> preserve them. coming up, big falls for hong kong stocks. what is beyond -- behind at the drama. this is bloomberg.

♪ >> it is time for asian ahead. a number of hong kong stocks plummeted. stocks fell more than 75%. sydney and heidi are here. i want to start with you, sherry. tell us exactly what is happening, how many stocks are being affected? no one knows what exactly is

happening. we're talking about these companies plunging more than 75%. technology long, plunging more than 20%. there are guesses. one is a could be because of cross shareholdings. if one comments, everyone wobbles. some people are pointing to gel young. they have $350 million of maturing debt that could have caused panic problems. no clear answer. we have talked about chinese markets and how transparency is not one of the biggest assets. we have talked about surging and falling stocks without good reason. you have 80% drops. this was not the first time this is happened. we had a crash a year ago. >> that was a different thing where they saw some of these nefarious money managers trying

to transfer public shareholder wealth into private hands selling or buying massive valuations or under valuations. share is a thing that gets done when you pledge or share for loans. there are no requirements to disclose that. if you are a money manager, you do not know what risks are associated with what scott -- with what stock and other connections with companies. this is the world's fourth-largest. you do not really see this happening in a develop market. >> what sort of wealth corrosion are we seeing? we saw 80% down but what does that mean in terms of value? >> these are market caps of $4.8 billion in the hong kong market. gel young lost more than 26 billion dollars in one session.

this could be the beginning of something bigger. have talked about this in the past. we are talking about $600 billion or more of chinese equities being pledged as collateral for loans. this could mean a huge downside to the economy. 2015 when we saw a $5 trillion selloff, we saw the national team by the state owned enterprises. can they do that with private companies that are riskier? we have seen the government tried to curb this. hashe securities commission tried to widen the disclosure rules. so there is more transparency. institutions push back against it. if you are an investor, you should be careful looking at small companies in hong kong.

you should be looking at what you are doing. if you want chance privacy on this, daybreak asia 6:00 p.m.. >> bloomberg technology is up next. have a great evening. this is a bloomberg.

♪ >> i am emily chang in san francisco and that this is "bloomberg said -- women technology". we will break down disappointing fourth-quarter results. could an indictment be coming soon? u.s. authorities are investigating whether the smartphone giants way way stole trade secrets. a push in the middle of an iphone down for --