>> trade optimism starts amid rollingmnuchin plans back tariffs, but is a deal in the work? charles evans says the fed can be patient, even as the vice up -- and we will speak with the cofounder of europe's largest active investor. what opportunities does he see in 2019?

good morning for everyone in europe and in the u.s., if you are watching from asia, breaking news out of sweden after its longest political impasse for the country in its history, sweden finally has a government. the parliament in stockholm voted to let the social to let l democrats become prime minister. at the same time keeping the democrats away from levels -- we can see the euro against getting breaking news out of the reports. economic slowdown for now. we want to find out whether there is a difference on the slowdown doing prices is on a supply issue. that could be one of the first indicators. crude oil at $52.

later we will be speaking to neil atkinson the head of the oil industry markets. in the meantime, this is the markets are doing. theresa may has decided not to come to that level and is facing a political impasse. i do not know what her plan b will look like. we will get a softer brexit. questioning the market. stoxx 600 gaining some. we will talk to andrew wilson. and the deputy had of global macro strategy. don't miss our exclusive interview.

our erik schatzker will bring you that interview. theresa may reportedly promising robaxin conservatives she will not agree to keep britain in the customs union with the eu. the u.k. prime minister told lawmakers there will not be an extension to the deadline. it would be impossible for her to rule out a no deal brexit, as jeremy corbyn is demanding. he is boycotting the talks. economists are brushing up the risks of a shutdown to the u.s. expansion. according to a bloomberg survey, if the closure lasts through to march, it will cause -- donald trump canceling the u.s. delegation trip to the global economic summit in davos after denying nancy pelosi a plane to visit troops in afghanistan.

opportunity for erickson, 5g takes off and faces problems reaching the market. in an exclusive interview, mark says he thinks the swedish network equipment maker can see margins of 20% or more. in or to be great and thrive into the future, you need to deal with certain issues. i am happy to see in our main industrial holdings, the right in 2018.were started we will see the effect of those. >> chicago fed president says the u.s. central bank can easily take a patient stance with further rate increases.

speaking in an exclusive interview with bloombergtv, he says the fed is in a good place for pausing. at a good point for pausing. let's look at the lay of the land. i am not worried about inflation getting out of hand. the inflation data is softer than i was expecting, and i will be cautious and take more care to be sure inflation will continue. >> swedish parliament has voted to let social democrats lead a coalition that straddle both sides of the political divide. it will be a government that keeps the swedish democrats away from the levers of power. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. the u.s. is debating rolling back tariffs and spur a

deal according to the wall street journal. the treasury department has been quick to deny this. despite confusion, stocks are rallying. bhanu bawaje and andrew francis wilson join me. markets are focusing on the trade deal. what deal do you want to see that would help markets? andrew: anything that gives a certainty. we have been living under the shadow of tariffs. how much that will be extended. anything that preserves certainty. preferably sticking at the 10% additional 200, nothing on the balance that would be bullet -- that would be viewed positively. something that provides clarity and certainty, markets which year.

manus: how can we bhanu: there is a debate in the white house. leadership,at the lightheizer is a hawk. some of these are difficult demands. agricultural more products. but it is difficult to say this issue will go away. for the markets, they will cheer in the near-term because this has been hanging about confidence. in the medium-term the biggest issue is the economic slowdown in china which is monetary policy driven, that has been tight and that is the bigger issue. unless we see a change in china's credit profile, you are likely to see a rally in the market. main risks in

2019, starting with china, is there a concern they stimulate the economy so much that reforms theya backseat? andrew: have been balancing risk for some time, and they may go too far to stimulate the economy to prevent the slowdown. the 6% growth is a redline for them, they want to achieve 6% growth, they will continue to press on these measures. i do not think we are so concerned for 2019, but the longer-term concerns i see this debt buildup we have seen in some of the reform measures particularly in a phillies. in soe's.larly i think it is already happening. the impact of the slowdown in china is clearly evident in europe. there is not a big problem with

domestic demand. the problem, primarily china. the chinese slowdown has had an impact on the global economy. but every global pickup and cycle has been in beijing. the slowdown does matter for the u.s., and that is why they struggled. francine: is that why we are hearing from the fed officials on hiking now. the markets, and china has had an impact as well. the markets are reacting to global data. the u.s. economy is fine. what is giving the fed officials this opportunity to sound relaxed, that is not just the u.s. banks, in japan this morning you are seeing that in europe. that is a global phenomenon. directlynot

responsible. i think that officials believe the u.s. economy including housing is in a reasonable shape. andrew: we agree with that, it is slowingd and has slowed versus last year. eultimately the fed is tightening policy to bring down any inflationary pressures, but we are not seeing those pressures pick up. that itself reflects a slowing global economy. the fed can afford to pause here. we have not talked about the shutdown but that confuses the picture. the fed is trying to look through the data in the context of the shutdown, it will not be easy. francine: we spoke to fed president charles evans in chicago and he is taking a patient stance. we are at a good point for

pausing, let's look at the lay of the land. i am not worried about inflation getting out of hand, if anything it is softer than i was expecting, and i would say i am going to be cautious and take more care to make sure inflation will continue above 2%. view the how do you shutdown? they are trying to figure out what the shutdowns impact is on chinaonomy, and they have to contend with. bhanu: they have a lot of balls in the air. in terms of the shutdown, the direct effects are clear, the indirect effects about a 10th of gdp per week. some of that activity will come back, but some of it will be lost. the difficulty is in reading the numbers, and as we sit here, it is not obvious the end is in sight. how much longer does this go on?

it could impact payrolls at the end of the month. it will be difficult for the fed decision incisive ness.ontext of opaque fedu: this ratifies why the should pause. the markets are pricing in the pause and looking for the fed to cut rates in the future, which i shutdown,here is a the indirect impact could be higher than a 10th of a percentage point. they are slowing because of inflation. francine: thank you bhanu baweja , andrew wilson. both stay with us. we will be speaking to chief

executives at the world economic forum from barclays next week. up next we talk brexit. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance." let's get to the bloomberg business flash. >> ryanair has cut its profit guidance for 2019. europe's biggest low-cost down from $1.2 billion. ryanair forecasts futures will fault 7% this year more than the 2% drop. newd box" helped attract

viewers to netflix. high in recent weeks. in december but shy of expectations. this suggests the spending free on new content may not pay off quickly. comments oncfo on the youtube page. >> our aspiration is to be self funding, and we will do that over time with content investments. interim, i do not foresee any change to our approach. we talked about the fact we have accessed the markets, and we will continue to do so. that is the optimal cost of financing and funding, and we will continue to pursue that path. >> that is the bloomberg business flash. francine: thank you so much.

theresa may's bid to break the brexit block faltered yesterday. she refused to compromise with her political opponents. may says it is not within the government power to rule out, jeremy corbyn's additions will not be met. andrew wilson, ceo, global head of fixed income, goldman sachs and bhanu baweja, global head of emerging markets, ubs join us. there seems to be in the markets, we are going to a softer brexit. how can we be so sure? andrew: if you think about it enough, it will make your nose bleed. the markets are trading on the probability of a no deal brexit. the probability is going down. that is one thing the parliament agrees on. the question is if they can get this from the pm and say this is something we will work on, and the first thing they need to do is get more time. the market believes the probability of a no deal brexit

is going down. i think the probability of sterling doing well is higher. if you move toward the possibility of a referendum, that does not solve the medium-term issues. there will be a democratic deficit if the markets rally in the short term. francine: do you agree with that? we know what the government does not want. we do not know what they will sign off on. the probability of a no deal has increased? i think the probability of no deal has increased. no deal is bad. theunanimously, but majority in favor. what we do not know is what they agree on, and there is a broad range of outcomes. some form of compromise and a softer brexit is likely, but i think the markets, the reason we see the bounce in the pound is that no deal looks less likely than a week ago.

we are still in a position to price what is the likely outcome , whether a second referendum and the outcome of that, highly uncertain. i am not sure that is the end of the debate even if that went through. the form of the softer brexit does leave a potential upside, but there is a broad range of outcomes. there is a bit of an impasse and there is no plan b. francine: what is the most elegant solution for the markets? bhanu: the parliament decides there will be a second referendum, and there is a second referendum. the minute you announce a second referendum, i think you will get a rally, because the market will begin rising in the possibility we get 55% remain and brexit can be stalled. between now and then, there is a lot of would-be chop -- there is a lot of wood to chop.

francine: what are the chances of a second referendum? you cannot go back to the same people you ask in 2016. andrew: it is almost impossible to put percentages on it. pivoting to some other deal remains an option. break these down is almost impossible. that is what markets are struggling with. how do you quantify the possible outcomes? and then of course, what is the result of that question mark do the europeans even agree to that ? some delay looks teasingly likely. -- some delay looks increasingly likely. yesterday, we can to 10 weeks. andrew wilson, ceo, global head of fixed income, goldman sachs and bhanu baweja, global head of emerging markets, ubs stay with us. this is bloomberg.

♪

francine: this is "bloomberg surveillance." i am francine lacqua here in london. we are back with andrew wilson from ceo, global head of fixed income, goldman sachs and bhanu baweja, global head of emerging markets, ubs. we are talking about sterling. the point you were making, as you look at euro pound, nothing has moved. what does it take for that range to be broken? bhanu: we need to see better

growth in europe. at this minute, growth in europe which is very low. draghi will have to knowledge that in the press conference next week. the market is pricing nothing on arrival, but in euro terms your sterling level against in the u.s.. you will need to see better data. the fact that sterling has moved has done nothing for euro. francine: what does it mean for mark carney? wherewe see a scenario inflation is shoring up, and we have to hike rates? you would not want mark carney's job right now, very difficult. francine: whose job would you want? a falling you have

pound which is likely of a no deal brexit, you have inflationary concerns and the economic slowdown. the bank will look at how this inflation spike is, do they need to do something, or worry about the growth consequences over the next 12 to 24 months? muchll depend on how sterling moves, but they will be trying to balance those factors. francine: thank you so much, andrew wilson, ceo, global head of fixed income, goldman sachs and bhanu baweja, global head of emerging markets, ubs. both stay with us. coming up, we will speak -- ♪

♪ economics, finance, and politics. i am francine lacqua in london. we are getting breaking news out

of the u.k. come retail sales should be out shortly. breaka may's bid to britain's brexit gridlock seems to have faltered as she refused to give up her red lines to compromise. than 24 hours after the prime minister started talks with senior politicians from six parties in parliament, especially with the later of the main opposition party, labour. we just got retail figures and they are worse than expected. out, -1.3%. auto 0.8%.e expecting minus the pound not really moving on the back of it. we are having a nice conversation about what will .ove euro-pound

we will get back to the market and a couple of minutes but let's get to the bloomberg first word news. are largelynomists brushing off the risk of the continuing government shutdown to the u.s. expansion, but according to a survey if it last to march, economic growth will dip below 2% this quarter. tripd trump canceling the to the global economic summit in nancy pelosienying a plane to visit troops in afghanistan. the u.s. central bank can easily take a patient's camp. speaking in an exclusive interview, evans says the fed is in a good place for pausing. >> we are just at a good point for pausing. let's look at the lay of the land. i am not worried about inflation getting out of hand. it has been softer than i was

expecting and i will be cautious and take a little more care to make sure inflation will continue up and perhaps above 2%. viviana: sweden's parliament voting to let a social democrat become prime minister after the longest political standoff in its history. it will be a coalition that keeps the nationalist sweden democrats away from the levers of power. confusion in washington about the u.s. tariff strategy on china. steven mnuchin wants to lift some or all tariffs to move trave talks -- trade talks forward. the reports did move markets. jump and mnuchin -- trump and mnuchin are meeting today. bangkok's error has turned gray and thick, particularly during the mornings as seasonal weather changes to prevent pollutants

from dissipating. the list does the worst days have seen air-quality standards worse than shanghai and new delhi. 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. francine: 20 saw activists investors moving to europe like never before. with the likes of telephone a tally a. your biggest activists fund prefers a private list fund. -- owns some of europe's biggest names. what companies is it looking at for 2019? erik schatzker spoke with lars forberg. lars: there has been a lot of change for us.

we have an hour for main holdings, there have been large corporate change programs announced. throughe been pushed and some are in the process. erik: thyssenkrupp is breaking up. this is a historic move. no one ever thought this would happen. is this what you wanted? is this enough? the stock price does not suggest it is enough. lars: the old strategy of thyssenkrupp was not working. froms a conglomerate elevators to auto parts. they were trying to weave synergies at of this. that was not working and it was having lower profits and no growth. there was a need for diversification and making the businesses more entrepreneurial. this breakup is a step. erik: last year the stock was 26

euros and you said it should be north of 50. where is it today? lots of things happened during the year. when this was announced this fall, everyone thought it would never happen in the stock price soared up 17%. major restructurings are not made for the myopic stock market of courtly thinking. this will take time, a year or so or more to get this through, but this is needed to make thyssenkrupp a great company. erik: what will it take to catalyze a repricing? lars: it needs to be pushed through. i fully support what the ceo is doing. that chairman is coming has great industry experience and an understanding of how organizations should be driven to get performance. same, selling the

power grid. lars: the downturn of the stock during the year was because of the headwinds in the industry and cyclical companies. the announcement of the restructuring came before christmas. it is two things, selling the power grid and a complete reorganization. the old matrix organization structure of abb is going to be wound down and we are creating -- independent divisions four independent divisions within abb. erik: anything else you want to see? lars: i fully support this process that management is driving. largedays ago, another position in your portfolio received a takeover bid, 170 francs a share. is it high enough? lars: you have to think, does

this make industrial sense? all observers including us, people in the know think this accommodation would make great industrial sense. there would be significant synergies. trend these companies into becoming global number three in freight forwarding. it is a great combination because nlp and a has great customer relations. they are really good at converting their revenues into profits. if it happens,n has great opportunities. erik: the stock is trading north of the offer. should the board hold out for a higher bid? lars: the reaction of the market is interesting because the share alpina shot up

and the share price for the buyer shot up. testamentis is just a to the clear industrial logic. francine: that was cofounder lars forberg speaking with erik schatzker. italy has suffered another blow. fitch has downgraded a struggling bank, citing prospect growth andg european talking about the euro. when you look at europe, i don't know what you do with the italian npl's. it seems like things are getting better and it flares up. how do you look at europe? andrew: we are still pretty cautious, but the growth picture has moderated significantly. that has big implications for a country like italy that needs growth to work its way out of

these broader debt issues. significant implications for the ecb. that is very hard to see on what basis will they justify moving rates away from these negatives. ecb, mario draghi would like to see rates back to zero, but without growth and without any pickup in inflation, it is going to be hard to justify any meaningful moves. we are cautious on the growth and inflation picture. francine: are we good as markets or investors trying to figure out what some of these populist movements mean for growth longer-term? even some of the protests in france. bhanu: i think the markets are unlikely to reassess. as you see what the pricing of the o.a.t.'s saying we will allow more spending, it rallied. it is also the market telling you they will look through that

in terms of short-term growth rebound. perspective,an ecb we really have to focus on inflation because it is an obvious point, but the fed has two pegs to hang its hat on -- the ecb's mandate is difficult to get hiv see higher. higher. there is no inflation so this is a global phenomenon. all core inflation in europe is at 1.2%, 1.25%. it is difficult to see how the ecb with slowing growth and inflation where it is, difficult to see how they don't communicate slightly differently. what you need is global growth impulse to get better and that goes back to china. is this the number one

concern in europe at the moment, and what needs to happen for investors to flock back in? somew: there is uncertainty around that political outcome and more agreement broadly across europe. you touched on france. that has provided some cover for italy in the markets are looking for austerity and ability to generate growth. if we don't get growth, italy will come back onto the agenda. francine: thank you both for joining us, andrew wilson and bhanu baweja. coming up, crude concerns. oil demand growth defying slowing economic activity now. we will speak to the head of the oil division of the iea. this is bloomberg. ♪

♪ this is bloomberg "surveillance." global oil demand remains on course to be stronger this year than last is a boost from lower fuel prices counter slowing economic activity. that is according to the international energy agency. crude prices remain 30% below the four-year peak as concerns over economic growth in china and the u.s. joining us is neil atkinson and still with us, bhanu baweja. great to have you on the program. you about the oil market in 2019? when will supply and demand match? neil: we think during the first

quarter of 2019, supply and demand will be fairly closely matched on the assumption that the production cuts agreed by opec and non-opec producers are implemented. on the basis that they are and that carries into the second quarter, we expect the market to hold the current numbers and move into deficit. the oil market reports this morning, it will take its time and it will feel more like a marathon in a sprint. sprint.a francine: you are maintaining your outlook for global oil demand but the iea noted a number of warning signs. how likely is it you will lower your forecast? neil: i think it is highly likely that if we do make changes to the demand outlook, it is far more likely to be on the downside than the upside.

i do not think there is a great controversy about that. what we were saying in the analysis is that we note there are headwinds. china and trade disputes and slowdowns in other economies and so on and so forth, and we were taking very close watch of that. on the other hand, we have seen prices fall significantly since the peak at the beginning of october and that is providing some relief to consumers. we are watching this and as we say, we are keeping our current levels of demand growth in our forecast for now. francine: opec has said they are willing to consider deeper production cuts if needed. will that be necessary? as if that market is coming into balance and possibly going into deficit later in the first part of the year, so it is a question of how much stock they wish to drain from the market and whether they

have any specific price target in mind. that is a matter for them. francine: thank you so much for giving a little bit of your view today. neil atkinson at the international energy agency. i want to ask about oil -- and i feel like i ask every time -- it will be a litmus test for global growth. bhanu: it has been a good test historically and it is more clouded now that you have supply factors back in. oil prices held up quite a long time because of supply cuts so i think the demand signal from commodities has been compromised in the last few years. the same thing is true for pmi. pmi's are responding to commodities and have overestimated. the hard data has been a little weaker. a verytorically has been

good signal for the global economy in the same thing is true for semiconductors. consumption is moving away from stuff to fluff, if you want to call it that. commodity that we would focus on as a symptom of demand. one thing about oil is that consumption is a much bigger driver in china and india than investment, so while it is sensitive to global demand, it is a little bit less. the consumer holds up in china relatively speaking compared to investment. it is right to expect demand to remain more robust and oil prices to recover 10% to 15%. i think it will be a slow recovery. francine: i want to go back to china. you are one of the experts and you are concerned the economists and markets misinterpret what is

going on in china. tell me why this is not like 2016. bhanu: in 2016 when china eased, it was because the housing market was distressed. it is the collateral of your credit. you cannot let the price of that full. therefore, that time china took out a shantytown scheme and increased mortgage lending. house prices are falling again. growth rates are falling again, but this time there is no distress. they were dousing distress claims about time and now there is no distress. the willingness of the chinese to give you that same degree -- in 2016, tonal find a dutch total financing -- total financing picked up. the willingness is lower. toncine: they are trying focus their efforts domestically so the rest of the world will not benefit?

bhanu: as you move away from housing to fiscal, that sounds like you are taking down one but increasing other investment opportunities. housing has much higher upstream and downstream multipliers then fiscal spending in china. urban society and fiscal spending is about urban services. the help from china to the rest of the world diminishes the eps of the rest of the world. if china is giving new stimulus, even if it is modest, that is the best way through china. francine: bhanu baweja stays with us. shutdown day 28, president donald trump and house speaker nancy pelosi are engaged in a bitter tit-for-tat. what could break the deadlock? this is bloomberg. ♪

♪ economics, finance, and politics, this is bloomberg "surveillance."

the longest government shutdown .n u.s. history entered day 28 donald trump and nancy pelosi are engaged in a bitter tit-for-tat as the shutdown drags on. donald trump canceled the u.s. trip to the global summit endeavors after denying nancy pelosi a plane to visit troops in afghanistan. baweja.th us, bhanu we are heading into a long weekend, a lot of people not paid. what will break the impasse? >> it is unclear, because to get to the end you need to be at the start. once you get into a negotiation, i want some money, we will give you a bit more or less, it is a negotiation. here it is, i want money to build a wall, no. there is no negotiation. the house is trying to pass bills to reopen the government

but the senate does not passing anything. the republicans do not plan any votes. many republican senators may not be in washington. francine: it is about the wall but it is about republicans against democrats. is it who will blink first? what question should we ask? when does it start damaging the problem -- popularity of donald trump? rosalind: he seems to think many of these workers are democrats so what will not hurt him and it might put pressure on the democrats to find a solution to get the voters paid. the increasing freeze between nancy pelosi and donald trump is a concern because it means there is less dialogue at the house level, even if the attention is on the senate. francine: what does that mean? we talked about the impact this has on the fed. does it just get worse? bhanu: the council of economic

advisers estimates the direct impact is about seven basis points a week but the indirect impact is about 15 basis points a week in terms of growth. economics 101 tells you that temporary shocks to income our savings or come out of savings so the market will look through that. we do not know how temporary this is. the rates market is reacting as if that is not happening. francine: thank you both for --ning us, rosalind mad then rosalind mathieson and bhanu baweja. tom keene joins me and we talk about davos and trade. ♪

♪ francine: trade optimism.

stocks and futures jump at the reports of rolling back chinese tariffs. the treasury denied the story. charles evans says the fed can easily be patient as the vice chair randal quarles played up the strength of the u.s. economy. we hear from the cofounder of europe's largest activist investors. what opportunities does he see? our final day in london for we migrate to davos, tom and francine from london. traders thinking there could be a softer brexit that the political impasse is getting bigger. tom: a more optimistic tone in this speech today. a leadership bid, what is that? francine: i want to be prime minister. tom: no one else is going to davos.

maybe boris johnson should go. we are starting early and davos with the global conversation and then the important conversations tuesday through friday. and whatr is different i love come up by wednesday it will be told lee different than we expect on monday. be interestingll to have a discussion about the political sphere because donald trump is not coming. his administration is not going. theresa may of course is not. tom: it says boris johnson. francine: they need to stay in london to negotiate brexit. let's go to the bloomberg first word news. viviana: in the u.k., theresa may's attempt to break the brexit deadlock has faltered. she is refusing to give up her red lines to compromise. she will not agree to jeremy corbyn's demands. she rolled the possibility of a no deal brexit. she is standing firm.

nancy pelosi not visit u.s. troops in afghanistan. an hour or so before she and a congressional delegation were scheduled to leave, president trump told her she could not use military planes because of the partial government shutdown. after pelosiday suggested he postpone his state of the union. steven mnuchin reportedly wants to roll back tariffs on china. robert lighthizer has reservations about the idea. this report moved markets. the treasury department denies it. china warning canada other welby there willn -- we -- be repercussions if huawei is banned from the network. they say there is no evidence huawei represents a national security risk. two canadiansined on national security issues.

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: thank you so much. breaking news, important news for america. this is the percent of employees in tesla, to cut about 7%. is what you normally do at the beginning of the year, but tesla will right size the company. last year was the most challenging in their history to retain most critical contractors. bring up the chart in london, the tesla bond, not the stock. moving down to some kind of stasis. what is important is the idea that this stock is doing better than good. you do not see that in the bond this morning. they are basically

putting off in email that they sent to employees. they are pulling out the profits and figures that tesla will pull out. they will cut full-time employees by about 7%. i wonder whether we will see an impact on some of their global competitors. tom: challenging at the beginning of the year for autos. it is a challenging day to check right now, equities, bonds, currencies, commodities. futures up seven. curve steepening through the week. -- 1.14. above 114 did thatan predict 100% in jpmorgan. sterling, i will let you discuss, a life of its own. francine: i mentioned bandh

deals because they seem to be rising. this is my main data check. stocks are up following optimistic regarding a u.s.-china radio. i do not know how rational it is, but that seems to be what is doing it. oil nudging higher, oil extent -- the dollar nudging higher, oil extending gains. political battle lines in brexit are hardening. then you look at the deadlock in westminster and it could get ugly. the u.s. is debating rolling back tariffs on china to spur a deal with beijing according to "the wall street june -- journal

go -- journal go -- journal." us.k you for joining the market wants this trade deal. it is latching onto the fact that president trump wants higher markets so they will get something done. what if the trade deal is nothing? john: then you will see this move and markets over the past few weeks reversed because you have more downside on global growth. the main reason markets have been rallying as if you can draw a line underneath this slowdown in global growth, these markets are pricing and something worse. stability for macro data is important and all of that falls apart if there is no deal. linkine: is there a between the shutdown and what is going on in china?

because there is a shutdown they want to be more friendly? >> you got it all wrong. something he has not been able to do is find common grounds with the democrats. the chinese issue, he can find common ground. the market is looking for it and the political market needs to find something they can work on. putting the market around china for sureall, i am not they can walk and chew gum. if you look at what he has done on his nafta trade, the renaming , ithe not really doing much am not expecting it to be a lot better than the china deal. what we can help is there is a china deal that the markets can be happy with and we can move forward. you are hereilled because i am certain braun brown 31-daye appalled by a

shutdown. what with mr. brown say to speaker pelosi right now? he would take her head off. morris: i think he would take both people's heads off. nancy pelosi has been formidable. what changed for donald trump's he never worked with a nancy pelosi. this is his first time in politics and never had anyone on the other side of him with real power. he was able to intimidate republicans in a lot of ways, particularly on twitter and the bully pulpit. an adversaryis that actually has the power to do something. i am not for sure he quite understand how to deal with that. tom: this was in the zeitgeist last night, zeitgeist speeding on and on. john norman, here is the letter. i will not go into its pay full detail -- painful detail. come on, mr. president.

break up your first paragraph. the fact is, you are dealing on a major desk with the president, loc, boris johnson -- pelosi, boris johnson. how does it change what you do? john: it means you have to be much more attuned to the headline risk. they are of a nature around issues we have never experienced before, so it is difficult to decide what the right risk premium is for these types of distortions into policies the president is introducing. is the market ignoring it? john: i think they are ignoring the shutdown because the markets were so cheap in december. as we move to february, the focus will intensify because the macro data will refract this -- reflect this record long

closure. they will be focused on the debt ceiling debate which is important in terms of credit premium. morris: the market is not paying attention because it has not affected them now. right now, trump does not care because he does not feel it is impacting his voters. as the impact starts to hit, particularly in the states he ohio,politically, pennsylvania, wisconsin, when they feel the pain he will care. the market will care when there is a political sensitive situation, they will care a lot. francine: how long will we have the government shutdown? six months? morris: sure, i think six months. tom: six months. phrase,getting this trump lateral policy. there is almost trump tail risk.

you cannot even measure the thickness of the tail. this is quite stuff off the gaussian curve. the measure of the risk about, premium. find the risk we go into february and have no idea what those tales look. tom: we have only seen -- john: we have only seen one meaningful market move and that was in 2011 under obama. maybe that is the dresser her soul for this spring. -- dress her soul for the spring -- rehearsal for the spring. you canere's no way close the u.s. government for six months and not have a meaningful slowdown. francine: that means the fed does not hike. morris: six months. tom: six months? francine: there is no president with brexit. there is a lot of stuff there is

no president with. tom: this is serious. we have headlines from tesla. i want to show the chart on tesla. it is very salty. this is the premarket on tesla, migrating down near 4%. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." breaking news this morning on the bloomberg about tesla. car companyelectric plans to cut full-time employee headcount 7%. they have roughly 37 thousand employees.

-- 37,000 employees. ryanair lowered its profit view for the year. they will not rule out a further cut. they expect winter airfares to fall 7%, three times more than forecast. the ceo says guidance could be lowered if there are unexpected brexit or security developments. investors in netflix have pressed pause on the rally that has seen the stock gain 50% in recent weeks. netflix revenue growing 20% in the fourth quarter but that missed estimates. fund the quiet activists and the largest one in europe. simeon capital holds big stakes in companies like erickson. the cofounder speaking with erik schatzker about activist activity in america. >> we have seen that some of the american activist funds are

moving opportunistic into europe. the american market was very expensive at one point. that is a consequence. the market is big here so there are plenty of opportunities. viviana: that is the bloomberg business flash. francine: thank you so much. theresa may's bid to break brexit gridlock faltered yesterday. she refused to compromise over her political red lines. she said it is not within the government's power to rule out a no deal divorce. still with us are john morgan and morris read. i am a little bit perplexed about the markets because they seem to be pricing in a favorable outcome for brexit for the economy, which is either a second referendum or a soft brexit. i do not see a way out of it. john: i would characterize it as less catastrophic outcome.

a better outcome would be confirmation there is a soft brexit. francine: in 10 weeks, the u.k. leaves the e.u. so if we do not have a plan b, what happens? john: the markets may be getting overly hopeful but realized that sterling is not far off the low and the u.k. is not far off the low. tom: where is the opportunity right now? jonathan ferro has a wonderful idea that the year does not start until the second quarter, there is so much turmoil. do you have a belief construct, a best trade or set of trades on the jpmorgan desk? john: i have a set of trades that have slightly more upside than they have delivered this year. a of markets, credit, equities, .p 3% to 5% you can see a doubling of those moves assuming the government shutdown does not become the

real binding constraint on the economy. and it up those moves barely reverses what we had in 2018 so it is a mean reversion from oversold levels, not really the start of a relentless bull market across all asset classes. francine: let's play multiple-choice. brexit, general election, or second referendum. morris: hard brexit. i am completely excited. i do not understand why people are not -- excited about taking control of their lives. the government has handled this wrong. they should have been preparing for the worst case scenario from the beginning so their plan b would be in place. there is no incentive for the european union to give them away out because that opens pandora's box. i think the government has mishandled this. there has been a crisis of

leadership. i don't believe it is in the best interest to go to another election because you have the potential of civil war because you are not honoring the will of the people. francine: is the u.k. prepared for a no deal brexit? morris: it is not. francine: what happens march 30? .orris: they start negotiating they need to recognize the fact that will be a hard brexit and need to start to get ready and put the politics aside. there is no aspiration here anymore. this is one of the greatest cities in the world. what will happen to london? nothing. tom: i have always felt like that. for ourthe difference global audience? reid has an affiliation with the democratic party. what is the difference between the left here and america? morris: i think there is

confidence in the left in america right now. if the politics of the government changes, the political establishment and business establishment will have confidence in the left. i do not believe they have that in the left in great britain. this is a crisis of leadership. you have a certain segment of the party that takes over and blocks and tackles. this is happening in the democratic party where you see far left guys positioning themselves. the real problem is a lack of leadership across the spectrum from the people, from government, and the business community. francine: tom made me a chart. let me ask you about it. spread between the two and 10 year. tom: this is the ability of my wall to be intact coming out of harrods. francine: is this where you are seeing distress, because of brexit? john: this strike to the yield

curve flattening? that is consistent with the global trend. if you have polity rates anchored, growth expectations will lead to a rally and the flattening of the curve. it is a global problem. tom: the u.s. headlines are extraordinary. francine: thank you so much, morris and john. ubs set to plan a management higher -- tom: that means they have already done it. francine: this comes on the back of an interview with the chairman when they said they are looking at secession -- succession. this is bloomberg. ♪

♪ "surveillance tom: it is the time of year where banks make statements. we saw something from santander and we saw jpmorgan move the deck chairs. ubs announced some set of ceo succession. him.is not about francine: this is through our bloomberg reporting. we have tried to reach ubs for comment and they have declined. i suggest everyone read it. this is our reporting thing that planning top management hires as part of the chief executive succession. what would be logical is bring new managers in and get them at

a level for when he leaves in two months, two years. we do not know that. tom: what is the distinction you see in your work in zurich, between ubs and credit suisse? francine: if they were two economies, they would be in different cycles. the ubs shift toward wealth management started earlier than credit suisse so they are a couple of years behind. her strategies are quite different. -- their strategies are quite different. tom: we will be in davos on monday. who should we speak to? someone who knows every canal of venice. anthony gardner will be with us. this is bloomberg. ♪

tom: good morning, everyone. bloomberg surveillance from queen victoria street. i'm tom keene. francine lacqua as well.

boris johnson speaking it in the next hour. we will do davos in a moment. your first word news. breaking news this elon musk'sm tesla, 11 -- car company is cutting 7% of their workforce. preliminary results indicates fourth-quarter profit will be less than what it made in the third quarter. tesla will boost production of its model three city am. a top aide to kim jong-un meets with president trump. this is the state for a possible summit between the leaders. he may be looking for the position on the nuclear arsenal. sanctionsconomic lifted in return for any concessions on nuclear weapons. to lient told his lawyer

to congress about talk to build a trump tower in moscow. the president told him to say conversations ended months before they did. no one is commenting. it was the deadliest attack in colombia in years. killed, more than 60 wanted in a car bomb explosion. betweendecades long war rebels, the government, and traffickers, bombings were frequent. the 2016 peace treaty was supposed to end this violence. the longest political impasse in sweden is over. letparliament voted to stephan loewe and become prime minister. the national win democrats will not play a role. nationalist swedish democrats will not play a role.

global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." at the tesla news, down 5.6%. the road ahead is difficult, we saw yesterday. now, foxconn this morning. are two. i think there tesla has had its problems. .ou look at foxconn this goes back to the first big story of the iphones in china. that is more to do with demand of these phones is. tom: what we are about is good conversation. we have got a terrific team with us. morris reid with us and john anthony gardner joins us, a former ambassador. he speaks the six languages i wish i could. he joins us. what is the secret to learning five languages? anthony: having an italian

mother helps in marrying a spaniard helps. francine: it always helps. tom: we can stop the show right now. morris reid, save me. we are here. 4.0.e having globalization has there been a shift in the concept of globalization in politics and economics? anthony: there has been. there has been a move of being ande are looking challenging the precepts of an open world trade sitting -- world trading system. that is on the agenda. the side talks are the death of the liberal order. define that. define how that has changed. anthony: the importance of rules, like the wto, of the

multilateral system as a way to deal with disputes. country after another, not only the united states, has invoked national security. russia and saudi arabia are saying once we invoke our interests, rules to not apply. judges cannot rule. that undermines the basis for a free trading system. francine: are we less multilateral now that we were pre-trump election? are much more personality driven. if we look at some of the strongmen, at the beginning of the trump administration, if you wanted to get close to him, you had to appeal to his ego. having a seat at the table is important, when you're dealing with a guy that looks from his vantage point first. are there opportunities? for sure. does it give ammunition to the populace? anthony: they might but i think

has tried to open up two notches the business community but others. ngo's. just thep to not business community but others. s.o morris: they want donald trump there. you have to engage. whether someone wants to go left or right, you have to engage them because there are opportunities to make a deal. when people ignore them, this is why democrats are having problems. they are ignoring him instead of engaging. when you look at opportunities, you get things done. tom: ambassador? anthony: that is right. this is a fine line for democrats to manage. how do we be tough ending gauge with european allies and say to the chinese, you need to reform

by that the same time defend the system we built together? these system has benefited us beyond any other country. we are not making that case in a good way. im: this idea of be tough and think of ron brown as a tough kid out of harlem. he had opportunities and then he landed in vermont. he has learned along the way a pragmatic approach which was the ron brown method. you have done the same. where does the pragmatic approach go to an american shutdown that will not attend davos? started when people started to focus on personality driven politics. when we were in government, we did a lot. we got them done for the benefit of things. now, people are focused on themselves first and where things go. francine: it also gets people to

vote when they have not voted in 10 years. social media is a tool to get people to vote. morris: this is interesting. hillary clinton got more votes than donald trump. this is what people keep forgetting. she ran a populist campaign instead of an electoral college campaign. this about being on twitter, just because you're on twitter does not mean people vote. do the democratic candidates learn anything from the election? are you going to run for election? did they learn from secretary clinton? of course not.: you look at some of these younger stars saying we have got to be on twitter. you know how you win? you talk about issues that matter, strategies that matter. anthony: i agree.

are we supporting the interest of our exporters and ranchers. about the trump tactics is we are not. i am all for opening up the chinese market and bringing more cases to the wto. i think the electorate will have to as the question, are these working. this is why i believe it is going to be shut down for six months because the people you outlined this is supposed to help, it is hurting them. the background, take a green book, imf approach on the global financial stability given his common on a shutdown and the tension he speaks up. do we have a system that can withstand this? john: it depends on the country and the shock. every election is not just about policies. it is about the system itself.

it is why you have the pricing in of regime change is with trump and brexit. these are things we have not seen in the global economy and that is why you're getting repricing of markets. francine: what is relevant and devils? .resent -- in davos president trump is not coming, theresa may is not coming. tom: i will be there. francine: tom is not going to be there. what are you looking for? john: the big stuff is happening on the slopes. francine: central banks? john: central banks are acting uncoordinated fashion, but in the same direction. they are turning dovish. it is because it is the right policy for each economy. tom: we have got to go or we can extend this conversation. morris: if they want to make

news, they should be focusing on who should be the world bank. and they are facetiming me and saying will you guys shut up. coming up in the next hour, we speak with a chairman of hotels. he is an italian immigrant who campaigned for brexit. he will have an interesting take on brexit and what is happening now. this is "bloomberg." ♪

francine: this is bloomberg surveillance from london. on sunday.o davos

erik schatzker spoke with the cevian ceo. he is an activist investor. >> there has been a lot of change. four maiden holdings, there have been large change programs that have been announced. some have been pushed through and some are in the process of the push through. is linking up, this is a historic move. no one thought this would happen. is that what you wanted? is this enough? was clear that the old strategy was not working. it was a conglomerate that was from cement factories to auto parts. they were trying to reach synergies. that was having lower profits than its competitors and low

growth. fore was a need simplification, making the businesses more entrepreneurial. this is a step. >> when i was here last year, the stock was at 26 years. where is the stock today? 16. >> that is right. lots of things happened during the year. when this was announced, early this fall, against what everybody thought, the stock price went up 17%. we had a major restructuring. we are not made for the quarterly thinking. the time plan takes a year or so or more to get it through. this is what it needed -- what is needed to make it a great company. >> what is it going to take to catalyze a repricing? >> it needs to be pushed through.

,e are having a new chairman she has great industry experience and a full understanding of how organizations should be driven to get performance. , same story, selling the power grid business. the stock is down. what more do they need? >> the downturn was because of the headwinds in the industry. the announcement of the restructuring came just before christmas. two things, one is selling power grids and the other is reorganizing. that has been in place since the inception is going to be wound down and we are creating four independent divisions within abb . >> anything more you want to see? >> no, i fully support this process. the 70 anbang was

co-founder. cevian co-founder. markets are gifting lower, that is the reason the fed is going to bpause. from jpmorgan is john norman. we had a lot of weaker chinese economic data. what do people misunderstand? is there a difference between china 2016 and 2019. how much will they probably economy? misperceptionest is that they are stimulating the economy to drive an upturn. this drives bullish view some people have on assets. they are providing stimulus as the economy disappoints to stabilize growth. that is a bullish outcome.

upside.rains the to me, these are trades that might generate 5%, 10%. francine: is the slow down significant enough to knock off world growth? john: it has been reducing world growth. we are at the limits of how much damage china is going to do. month, the chinese are giving you more stimulus. the are trying to stabilize economy and that is important. global risks are diminishing because of chinese activism. tom: the dollar call from jpmorgan for the year? john: the trade weighted dollar is uninteresting. it drift lower over the next few months because there is a fed pause in motion while the activity data are going to stabilize. g10 currencies is

a range. it will not be unusual to see a disconnect versus the major currencies. tom: and the yen call as well, that seems to be the greatest disagreement. john: i think it could go up by a couple of percent. as the fed gets back into motion. if you're looking a year out, the end of the fed cycle, that to me means of dollar much weaker versus the yen. tom: for hedgers, trying to figure out what the yen is going to do, for the corporations that need to hedge business transactions, is this the toughest is has been? john: most of them would think the global financial crisis is the toughest. difficulty in trying to understand and model these policy decisions being made.

you get occasional respites. it is not a continuous down drafts. that is the one silver lining. seconde: what is the common misconception apart from china? is there anything they are getting wrong? john: the market curve which is inverted. i think that is wrong, to believe that, you have to believe there is nothing around stimulus measures that are going through in china. you also have to believe there is no hope of u.s.-china reaching any accord. if you believe those, fine. if you believe where getting stability around growth, you have to think the fed comes back in because real rates are low and the u.s. economy is at full employment. at some point, you should be shorting bonds. it should be closer to the point the fed is going to resume

tightening. that is important. francine: thank you so much. we will talk to john about german bunds. bloomberg users can interact with the charts using gtv . you can browse recent charts. tom made me a chart on the flattening yield curve when it comes to gilts. tom: you came over and asked and i went, order. ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. slowdown in iphone sales is have an impact on apple suppliers. workerseporting 50,000 have been let go at foxconn's most important factory in china. the seasonal worker cuts are not deeper than in previous years. they are taking place earlier. godiva chocolate maker has come up with a shortlist of bidders invited to make offers for asia-pacific assets.

private equity asia and cbc are among those making the cut. the assets could bring in as much as $1.5 billion. francine: thank you. ubs is set to be planning top management hires as part of its succession planning. is the swissw finance reporter, patrick winters. there have been a lot of rumors. what is going on? we have a story which hit a little bit less than half an hour ago. directors and executives have been convening over the past week. succession is being discussed. privately, executives are talking about the need for bringing in outside help to

strengthen the team. though that there is going to be no immediate change at the top. that is what we are hearing. francine: do we know if they have hired people to come in? stage, they are talking to people, looking at who they might bring in to the board. the question is, who would you people, what some retire, would you be looking at bringing in an investment banker or would you rather be looking at a big name in wealth management. that we need, what kind of character, what kind of background and how could they fit into the executive board? tom: i like the phrase, fit in. what kind of bank does ubs want to be in five years?

if you talked to people are ubs, they would say their biggest peers are the american banks. have itican banks easier, the regulatory situation is a little easier. they would want to be like a bank of america or a morgan stanley. if they do want to bring someone in, those might be the bankers they would be talking to. tom: thank you so much, patrick winters with us. the future for ubs. , capital, roger bootle economics, a cautious view. this is "bloomberg." ♪

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senators ripple before monday? come monday, -- revolt before monday? come monday, one month of government shutdown. adjustst trump pelosi's plans. will make apeak, he leadership bid, a distraction is prime minister attempts to construct plan b. is avalancheua ready. she will brave the swiss alps. mnuchin, the u.s. delegation, not winning. they cannot get through the tsa. good morning. this is bloomberg surveillance live from london. thrilled to be here with francine, what a week. francine: every year before davos, i said i wish i could the magic mountain.

i never do it because the news is so big. we have the shutdown, we talk about the fed, about china. what do people care about? they will win the hard rock oh tell chain, it has opened a -- hotel chain, it has opened a hotel in davos. also bring youll serious chief executive interviews and money management. now, here is viviana hurtado. viviana: breaking news from tesla. the car company cutting its full-time workforce by 7%. tesla has 37,000 employees. elon musk says the company did manage to make a profit in the fourth quarter, smaller than the third quarter.

it says it will make lower-cost versions of its model three to appeal to the mess market. in the u.k., theresa may's attempt to break the deadlock has faltered. may is refusing to give up her red line to reach compromise with opponents. she will not agree to jeremy corbyn's demand she should rule out the possibility of a no deal brexit. may is firm on a possible delay. nancy pelosi will not be visiting u.s. troops in afghanistan this weekend. an hour before she and a delegation were scheduled to leave, president trump told her she could not use military planes because of the partial government shutdown, a day after pelosi suggested the president postpone his state of the union address. steve mnuchin reportedly wants to roll back tariffs on chinese products. robert lighthizer has reservations about the idea. this report moved markets.

the treasury department denies it. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." tom: thanks. equities, bonds, currencies, commodities. a friday into the weekend with futures lifting slightly. currencies not part of the story. the vix showing better equity 1796.ts, under 18. modestly above that 24,000 level. i will let you talk about sterling. we have got the weekend as well. francine: the dollar edging higher, oil extending a further week of gains. pound, it ist the more optimistic than it was on the possibility of a softer brexit at a time when we are seeing a stalemate when it comes

to politics. we are trying to figure out what the positioning is going forward. are risingurope after gains in asia and that is about optimism for trade talks between america and china. it is wonderful to have a distance to the follies of washington, to be in london is a nice distraction. kevin cirilli is in washington. from the distance of the atlantic ocean, it was shocking that set of letters back and forth between the speaker and the president. what was the impact of the president's letter? kevin: to be candid, for a , isident who likes to tweet can tell you that democratic staffers politely rolled their laugh at thisut a

clap back from president trump to speaker pelosi. vice president mike pence spotted after this letter was along with mick mulvaney and jared kushner, negotiating with mitch mcconnell. a lot of folks have been asking, where is mitch mcconnell, working behind the scenes to negotiate. this is between nancy pelosi and president trump. tom: what is the count right now? are republican senators wavering and can you count them? yes, it is more of a ripple, not a wave. i would say anywhere between 3 o vocal, are becoming more like senator lindsey graham, susan collins, and lisa murkowski. to pose a major political divide on the shutdown

in the senate. francine: good morning. we also had morris reid and he was saying the shutdown could last six months. what are people telling us in washington? itin: i am not sure would last six months. president trump has said he would be prepared to do this in the long haul. i do not think there is in the toetite from president trump have this go much longer. i spoke with a source who said that there is communication happening now but it was remarkable, i want to put this in context, there was a bus about 50 feet with staffers on s-- pelosi'o see office on it and they were told

and found out this trip was canceled. francine: what do we know about the u.s.-china trade? the markets are moving on the back of this wall street journal which was denied by treasury. do they want to deal because it would be good for the stock market? kevin: yes, they do. we have seen this time and again. the administration tries to have it both ways. they have this report come out and the treasury department says they want the stock market to go ok and then they back off. kevin cirilli, look forward to seeing you in davos. our chief washington correspondent. we continue forward strong. with us now, roger bootle of capital economics. call onnning one person gdp, writing essays in the telegraph, the one newspaper

that come straight out and hits you in the face. we will talk about brexit. with us, with the sleeper book malgham.ear, pippa what i want to talk about is your book. read but itirplane reason like it is wisdom. you have crammed it with vignettes almost all the way through and you start out right at the top with the heart of the world which isy this information overload. that is where we are. how does information overload affect -- how has information overload affected our markets? our leaders are discombobulated by having too much stuff going on.

part of it is they have this mindset and operating on assumptions that are out of date. the book is how to restore people to today. tom: this is great, understanding a new world. andou like roger bootle ?rite your essays with a quill there is too much overload, a nostalgia to want to go back to a different time, mr. johnson speaking about it. boris johnson wants to go back to another time, right? roger: the key thing is, you have to be six sing to him brief , otherwise -- to be six think uccinct and brief. francine: this is president trump's motto, right? roger: i will not be following president trump. pippa: it is no longer about the

facts, it is about the feelings. trump is good at the emotional interplay and that is why he is pick the timing to end that trip for nancy pelosi. he picks the most rheumatic moment to do this. from a is part of a skill set that one has to learn -- drama is part of a skill set that one has to learn to manage this. here is boris johnson commenting on brexit, saying he believes the e.u. will be flexible as time runs down. we are 10 weeks away. we expecting a leadership challenge. expand his. johnson group in the coming days? roger: i do not think so. what might expanded is if britain goes back and tries to get flexibility and they do not give any. tom: that could be one of the theories.

it is a joy to be here. up, we decided to be there monday in davos to start the week strong. a lot to talk about. markets fold in including our many interviews. s, francine lacqua, myself, and jonathan ferro. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. ryan and lowering its profit view for this year. the discount airline will not rule out a further cut. ryan air expects winter airfares

to fall 7%, three times more than forecasted. the ceo says it could be lowered if there are unexpected brexit or security developments. investors and netflix have pause in the rally. shares are down in premarket trading with revenue growing 27% in the fourth quarter. that missed estimates. the estimates for current quarter sales coming up short. it is the quiet activist fund and the largest one in europe. cevian capital owns stakes in ericsson. the cofounder speaking with erik schatzker about activist activity in europe and american funds. >> we have seen that some of the american activist funds are moving opportunistically into europe. the american market was expensive at one point. that is a consequence of that. the market is big here. there are plenty of opportunities.

viviana: that is the business flash. francine: thank you. became the latest to cancel her trip to the world economic forum. she has to stay home because of the need to address political drama. leader to dropd out of the annual gathering. roger bootle of capital malmgren and pippa still with us. talkinghnson speaking, at a brexit delay would weaken the bargaining position and extending article 50 would be shameful. is he the next prime minister? roger: i suspect he is not. .e has been popular he could get it. there are candidates. he would not be the most likely. options, there are new

new elections, a softer brexit, a second referendum, or a hard deal. what is the outcome? roger: i do not think there is any standout. i wish i knew. things could happen. when you say hard brexit, i take a you mean a no deal? i think that is likely. it is a possibility. the way things are going, reading parliament, you have to imagine a delay to brexit has got a fair chance. tom: you wrote a brilliant essay in the telegraph, you talk about the alarm bells and the lessons learned 20 years ago. i remember the panic there would not be a team, the world was going to come to an end. mr. johnson has been vocal about where is the courage? can mr. kurt develop courage, can mainline conservatives

develop courage? -- can mr. corbyn develop courage, can mainline conservatives develop courage? roger: if we left without a deal, things would be fine. temporary be disruption, it would be minor, we would be ok. the mps are living in a different world, another planet. the british people are getting sick of what they are up to. francine: i want to get to pippa because people would push back against this. tom: you are reading your book. that is amazing. francine: what is the sense, the markets believe that a hard brexit, or a no deal brexit would be disastrous. are they right? pippa: i have argued from the start that the country is going to be fine with no deal. i am with you on that. is interesting is the way

the market is presuming there are different outcomes to these options. going tos britain is be fine, no matter which avenue we take and effect we're getting twice as much foreign direct investment as anywhere in europe tells you a lot. ideal directly with some of the biggest investors in the world and they are saying, every time sterling's fall, that is an opportunity to buy assets. be one of the largest economies and we want to be part of it. they still say the direction of travel appears to be less business friendly. that is going to become an issue. today, the e.u. is not the same as the one the british signed up for. you think the u.k. will be fine on a no deal brexit, how painful will be the adjustment? there must be disruptions because legally you do not know

what happens. roger: we do not know so we are speculating. i suspect within six months, it will be over. there is the medium and longer-term question is whether businesses are going to want to move operations. we will not know for some time. equally, there will be good news, there will be free trade agreement signed, hopefully with the u.s., good news to offset the bad. nostalgic, the desire for a wto, how do you respond to that? roger: i do not know anyone who wants to have a trip back to the british empire. maybe this has appeared occasionally. forget the british empire. we do want the wto. tom: that is the fascinating thing about brexit. pippa: one of the pieces of the

puzzle is there is a difference between trade policy and trade promotion. one thing brexit has done has caused the british business community to start looking around the world to do more trade with other parts of the world from africa, china, and you do not need a new deal for that to happen. we have the investor action now. francine: thank you both for joining us. up, the citigroup vice-chairman for institutional clients. we will ask about this u.s.-china trade spat. what the fed does next. tom: the book, sounds like a stupid idea but remember to smile. forget about that. i am not smiling. ♪

>> we are at a good point for pausing. look at the lay of the land, i'm not worried about inflation. the inflation data had been softer than i was expecting and i would say, i'm going to be totious and take more care make sure inflation is going to continue up above 2%. economistreshwater from chicago, he is president of the chicago fed. always interesting when charlotte seven speaks.

, roger bootlenow of capital economics. we get in the hundreds and thousands of statements. on europe jumped right out of the pile coming in. 1% gdp from europe does not get it done, does it? roger: know, that is a weak figure. have givenple excuses, things like problems with the car industry. it looks like a broad-based weakness. germany looking weak. the other countries are going to be in trouble. germany may be weak. francine: how do you jumpstart growth? thet the incentive, are populace right that you need to put a stop to austerity? roger: where do you start? there are so many structural problems and if you started with

a blank sheet of paper, you would not have the euro because it is holding back growth. ands still clobbering italy it is still, indirectly, clobbering germany. what has happened in germany is a strong deutsche mark has transferred to consumers who have spent the money. what you have in germany is german companies that are not spending money. francine: we will come back to that and talk about german bunds . shortly, rocco forte, we will talk to him about brexit and politics. this is "bloomberg." ♪

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will be talking to money managers. tom: are you going to be keeping us on separate planes? francine: nothing stops us from telling a good story. let's get to first word news. a london mosque is warning the road ahead is difficult for tesla. several thousand workers will lose their job. tesla will cut 7% of the full-time workforce. in a letter, musk says preliminary results indicates fourth-quarter profit will be less them what the company booked in the third quarter. tesla needs to make lower-cost versions of its model three to appeal to the mass market. a top aide to kim jong-un meets with president trump. this sets the stage for a possible summit between the leaders. he may be looking for the position on the nuclear arsenal

is softening. it wants economic sanctions lifted in return for any concessions on nuclear weapons. president trump reportedly telling his lawyer michael cohen , to lie to congress about talk s to build a trump tower in moscow. the president told him to say conversations ended months before they did. no one is commenting. it was the deadliest attack in bogota, colombia in years. 21 people were killed, more than 60 wounded in a car bomb explosion. during the decades long war between rebels the government, and traffickers, bombings were frequent. the 2016 peace treaty was supposed to end this violence. the longest political impasse in sweden is over. the parliament voted to let stephan lofven become prime minister. that ann's four months of uncertainty. his coalition straddled both side.of the

the nationalist swedish democrats will not play a role. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is "bloomberg." thank you. appreciate it. roger bootle with us of capital aonomics and is has taken broad global view and that means china and the knock on effects to europe and america as well. china-u.s.,lk about which is the dialogue in the united states. trading in the conglomerate called europe as well. not gone tomp- xi europe. that theu will find direct trading relationships are not huge. an overall global slowdown, so far the u.s. is an exception, is

slowdown in the eurozone, in china, in japan. anything that is bad on top of that is hitting a week target. francine: we are getting breaking news. health and walmart reporting new pbm pharmacy packs. i do not know whether this is costs. tom: it is consolidation of american health and a deep distrust of accounting and where is the prophet being made within the system. rofit being the p made within the system. thising this to china, and goes back to every conversation, is the new overlay of technology. is it the same in china as an america?

us toent trump wants believe they are using, stealing our technology. nation that can use modern technology or is it different? roger: the answer is yes. china has got internal divisions. there are parts of china that are right up there with the first world. you have got some parts that are primitive. at what: if you look happened in 2016, the chinese economy was slowing. why is this time different? if you look at the housing market which is the linchpin of what they are looking at, it is not falling off a cliff today? roger: you will find the authorities loosening policy, they will throw money at the problem. there is a difference. as the years have worn on, china is becoming -- china is coming

to a structural malaise. to maintain growth rates, it has got to reform and the government seems to be taking china in the opposite direction. francine: what does that mean in terms of the impact the slowdown could have on the world economy? are they not going to stimulate enough? roger: the sustainable growth rate is coming down. you can throw money at it. you will not do anything to change all that. china is big for europe, for the world, for germany because german exports are substantial. it is a factor in the slowdown. that is not the single reason why the european economy is slowing. tom: i want to revisit your word malaise, they have done the experiment of capitalism. is the malays because it is -- it is something

different and you cannot do without that motivation of the microlevel? roger: it is a halfway house. bits of it are capitalistic and it has opened up and a huge proportion of the economy is state owned and controlled and inefficient. tom: isn't it that they are unable to clear out their screw ups? roger: they have got a problem in the financial sector. that is a part of it. the problem is allocation of capital is poor. countedure, which are in gdp figures, are bad investment. tom: boris johnson just out with a headline, said he does not want the government to call a snap election. is a snap election a general election? francine: yes, it is what happened last time. you say, i have got this, let's

go for an election. she can't call an election just like that, can she. because of the fixed terms of parliament act. the same thing as long as parliament agrees. she has to do that with the support of parliament. it is not as easy as it used to be. in the old days, she could call an election. francine: there would be the appetite, wouldn't it? all week, folks. all week, listening to the brexit debate. i feel like i am at wimbledon. francine: this is the reality and markets have to trade on the back of it. roger bootle, thank you so much. next week begins our coverage of the world economic forum. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. i'm viviana hurtado. cvs and walmart reached an agreement for walmart to keep taking part of the pharmacy network. said walmart was reached -- was leaving over a price dispute. that slow down in iphone sales is having an impact on apple suppliers. nikkei reporting 50,000 workers have been let go at foxconn's most important factory in china. industry sources say the seasonal worker cuts are not

deeper than in previous years. they are taking place earlier. premium chocolate maker godiva has come up with a shortlist of bidders invited to make offers for asia-pacific assets. bering private equity asia and cbc are among those making the cut. the assets could bring in as much as $1.5 billion. that is the business flash. francine: thank you. we are getting breaking news out of tiffany. this goes to the luxury sector. the lower end of the prior earnings-per-share view. i do not know if they will break it down in terms of regions that are doing well. it is something we need to keep an eye on. tom: the note from tiffany talks about china was not all that bad. it has a lot to do with the new luxury of luxury retail.

you wonder what are we going to see from the other purveyors. we have done a lot with the burberrys of the world. something weis need to keep an eye on, whether we are going to see a slowdown. onto brexit and theresa may's bid to break the lock down. boris johnson repeated his view that the u.k. needs to escape the trap of the irish backstop. said the backstop is the issue that needs to be dealt with. joining us now is rocco forte. his portfolio includes brown's hotel in london. also in edinburgh. thank you for joining us. brexit andks about

the hospitality business. how do you see brexit unfolding? is there a likely outcome? rocco: it is difficult to say. i do not know what theresa may is consulting apparent there is no -- about. there is no firm opinion in the house of commons as to what should happen. the conservative mps should realize that what they stood on in the manifesto which was to isve the customs union something they stood on. it which got to change would change the whole denomination of the comments. i do not know what is going to happen. brexitlity is, a no deal

, a wto-based brexit would be fine. this idea the businesses against it, businesses not. big business is against it, , who isted by the cbi looking after their own interests. it was wrong after the factory economic policies, it was wrong about the euro and it is wrong this time. rules, whatder wto would happen to nationals that are working here? rocco: that is up to us to decide. we can say to nationalists, you can carry on working here which we should have said from the beginning. you were more than acclaimed in fencing. who has the sword this weekend on the debate, the advantage of attack on brexit? rocco: i do not know because

there is no one with a clear view of where to go. tom: how do change it? how do get a negotiated view to moving forward? rocco: a negotiation is not going to deliver brexit. they want a softer view than the one she negotiated. does a no deal advantage united kingdom tourism? rocco: it does not make much difference. people cut into this country. caraveled across europe by in the late 1960's without any problem. we went from the european union then. british tourists traveled through the united states, to russia, to all parts of the world.

to have anyseem problem so why should they have any problems traveling to the european union or the u.k.? francine: do you see it affecting the people wanting to come to london if there is a disruption? it could be as short as two or three months. at the moment, we do not know what happens if we go to wto rules. wto,: if we move to the why does there have to be a disruption? all this stuff about the borders is complete nonsense. dover and calais said they are ready. 94% of businesses in this country is not involved in trading with the european union and they represent the bulk of employment and the bulk of the economy. at your: when you look

hotels around the world, we were talking about the openings, wanting to be more present in china, you are opening something in sicily. where do see the best value? people are changing the way they want to travel. is it american tourists, from the far east? of business into our european hotels comes from outside of europe. the united states, 11% is from the middle east, 5% from russia, 4% from china. that is no reason why going to change. the american economy is booming. we have had double-digit increases in american tourism into europe in the last three years. in the to travel agents

states are important to us, they are bullish. tom: how do you compete with the marriott combine? rocco: we do not. i cannot compete directly. with aa family business spirit in our company. it is through service, delivery of service. tom: i was going by mozart's house, where is your next hotel in venice? rocco: i would love to have something. francine: tom loves venice. rocco: i am working on something. i am already in rome and florence and i bought this hotel in palermo and i am in sicily. we are doing a hotel opening in may. tom: you have got it covered

with hotels and italy. where would you put a hotel in venice? the canal?be next to -- do you want to be next to the canal? -- they areld not starting to do something about these daytrippers they come in. 33 million visitors to venice last year. and, very few of them -- francine: they are talking about taxes, right? we are going to move away from venice. tom: what do do worldwide about the competition of the modern world post-cruise ship industry. is it your friend or foe to have this modern cheap tourism? rocco: i think it has to be kept under control, these historic

cities like venice and florence, have to find some way of controlling flows, otherwise the cities will disintegrate. business, it does not affected directly. -- affect it directly. francine: do you want to be in emerging markets and what looks attractive? rocco: i am a small business and i cannot expand to quickly. europea concentration in , the cities which are representative despite the difficulties of doing business in europe compared to this country. i would like to do more in this country. as far as emerging markets, south america would be interesting. i would like to be in the states, i would like to have a hotel in new york.

a step in shanghai is our first step into that part of the world. francine: thank you and happy birthday. tom: greatly appreciate it this morning. please stay with us. this is bloomberg. ♪

francine: this is bloomberg surveillance from london today. to figure to davos out what will be the risks in 2019. elon musk is cutting tesla's workforce i 7%. joining us now is the bloomberg auto editor. how much of this is a problem of tesla and how much of this is an auto industry concern? >> good question. this looks to be tesla compensating for the model three. they told us they are cutting prices in the u.s. to compensate for lower federal tax credits that are going to drop away this year. at the same time, elon musk told us they have to get their model

three into the mass market. they have been selling this at the lowest price of $44,000 but the bases price is 30 $5,000. he has not been able to get there yet. -- $35,000. he has not been able to get there yet. is the financials as well, the single best chart which is on tesla. differentction looks than the equity and stock action. the bond is lower in price and higher in yield while the equity price has held up. how much of this is about the next cash call? guess he addressed a that today. he said that the profit for the fourth quarter was going to be smaller than the third-quarter and during the first quarter this year, he was expecting a tiny profit. he has got his eye on generating

the cash necessary to satisfy a future bond calls that he needs for expansion into europe and also, he has got the expansion in china with the factory there. tom: very good. thank you so much. on tesla. we have got more coming up. francine and i will be working and reading, getting ready for a week in davos. getting there is a mystery with the snow. we fly on sunday morning and we are expecting more snowfall. theresa may saying she cannot go because of brexit. no trump administration officials there. tom: so beautiful.

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single move up on a report from secretary mnuchin suggesting the u.s. back off from chinese tariffs. speaker pelosi tries to take away the president's state of the union address. 800,000 federal workers continue to go without pay. netflix adds 9 million new subscribers, but falls short of as we turnectations, from financial earnings to the faang. westin, here with carol massar. carol: another busy friday. david: another busy day for the president. carol: i was thinking about all the timelines you just talked about. market sentiment still positive. david: perhaps on the one report that secretary mnuchin might be recommending something.