brexit plan. chip fears. until 2019 outlook missing estimates. outlook missing estimates. ross says a deal could get done. oneal is possible but hinges a visit to d.c. next week. tom: welcome to "bloomberg daybreak." news and evolving the white house. -- involving the white house. arrested,e has been indicted in fort lauderdale, florida. a big development, potentially. this could connect the campaign --the wikileaks league of leak of all these dnc emails.

alix: when does it impact the white house? it is far from that, no? david: i have no idea. we don't know. there was a lot of speculation about roger stone. i have on tv and said some influence here. we glanced through the indictment. they seem to have him dead to rights, specific emails back and forth. alix: that's why we have a lawyer on set with us. we will discuss with that could mean for president trump and uncertainty in the white house. you have day 35 of the shutdown. it feels like we are paving the way for another rally here. semis getting hit pretty hard.

euro-dollar up .4%. mario draghi sounds dovish. may be range bound is the name of the game. crude also flat. calm week.ke a david: a calm week for the markets at the moment, but not a calm week in washington. kevin, we knew about roger stone. did he have something to do with the release of these emails? how important is this advance in the story? kevin: it is crucial. swamp creature here in washington indicted in florida this morning. he will face a court appearance in fort lauderdale later this morning. if you read through the 23 page indictment, it has specific

examples, text message citations and a portion of an interview conducted between investigators and roger stone in which they explicitly ask him, did you have a relationship with organization one? roger stone says no. those text messages and emails suggest otherwise. during the campaign, the longtime personal confidant to donald trump, one of his earliest advisors, says he did not communicate with julian butnge or an intermediary, suggested to media and other folks that he did have those connections. once the campaign ended, he backtracked and the investigation heated up, and now, he finds himself facing jail time. david: one step that clearly

implicates a connection between the campaign and julian assange. now, we will turn to bloomberg first takes. we will start with brexit, going from washington back over to london. there's reports that may be the will go along with a modified version of the plan. the pound has had the best we can a year now on speculation that we won't crash out without a deal. >> it was pretty telling when you have a huge, nearly unprecedented defeat for theresa may in parliament recently. it is suggested may be the worst was over until we hit the next landmine. the clock is ticking on this. thele are starting to think hard brexit option seems to be

everyone's least favorite scenario right now. alix: there's a contingency and the if is if, something they said, no, we are not going to do it. stuck between a rock and a hard place on this one. the eu saying a backstop is a backstop. yet, this concept of a time limit is something the dup has its own constituency back in northern ireland to consider, can get behind this timeframe. interesting sort of issue here where there seems to be some agreement emerging there. we did see a large inflow into the united kingdom focused etf last week.

haven't seen any outflows this week. alix: early to say. intel dragging down the chipmakers overnight after reporting a 2019 outlook that disappointed estimates. stocks getting totally creamed last year. some chipmakers doing well. intel not. >> you look at the past few days, we've had chipmakers do ok on the sense that things weren't thend as people feared, you have intel come out saying things are worse than we feared for this one company. businesses there, google and alphabet offerings, will they be expanding? that's one area of everyone's business that has been strong. we think it will be structurally strong for a while. what does it mean for tech, for

cap x generally? david: the thing about the intel nonsense, maybe that is getting a little soft now. >> this is going to be an interesting story going forward. where do we see areas for growth? that is still up in the air. resultsee really good from other semiconductor makers. big rally in semiconductor etf's, we saw the premarket earnings come out and the post-close trading, we saw those days raised. intel is a large holding. you are diversified in a fund. if intelng to see leads the direction downward.

david: let's talk about china. i got to talk to wilbur ross yesterday. he said they have to make progress on things like intellectual property and tech to get a deal. he said he thinks they will get to a deal because they want to. wewe want to make a deal, believe the chinese want to make a deal. hopefully, those two general impulses can result in a very finite, very detailed, very enforceable set of commitments. david: at the same time, he says it's going to take a long time. we are not going to get there next week. is the market prepared for a long, drawnout series of negotiations? >> it is difficult to say. we still do move on anything related to china trade headlines. what's been interesting, the change of tenor and how the markets are reacting. it seems like em is totally over this. yesterday, when we had the u.s.

dollar up, miles away from an agreement coming from wilbur down, ie s&p 500 is don't know what's happening there, but it does seem to be the tender has shifted to more what does this mean for american margins and american earnings growth, and he's already priced that stuff in. alix: volatility higher for dm then em. >> this is big rotation from developed market focused etm's. yesterday, we saw a big outflow millionckrock's, 300 going into emerging markets. which a traden havend u.s. exceptionalism been the themes.

stocks.ing american imagine that. alix: check out all the charts o>.

>> this is "bloomberg daybreak." shares of intel falling in premarket trading. the world's largest chipmaker came out with forecasts for the quarter and the year that missed estimates.

they cited softness in demand in china. credit suisse taking a beating when it was left holding shares of canada goose late last year. the bank lost about $60 million on the luxury parka maker after underwriting a share sale. walmart pulling out of the google effort to challenge amazon.com, removing products from google shopping action service launched last month. walmart has built up its own e-commerce capabilities. may have reduced the need to join forces with google. david: the british pound climbs against the dollar overnight on one report that the small but critical eup has privately agreed to support a version of theresa may steel -- theresa may's deal.

there is no good alternative to the deal. leaving with no deal is a very bad outcome for the u.k., but not leaving would be also a very bad outcome that would undermine our democracy and destabilize our political settlement in the u.k. david: emma, give us a sense over there, are we moving closer to approval of a deal? there are two subplots now to the brexit saga. there's increasing pressure on theresa may to take the no deal option off the table. he has refused to rule out resigning. he joins one other high-profile cabinet minister in the same position. next week, parliament will try

to take no deal off the table, effectively. a group of ministers wants to vote freely for those amendments. markets iftive for those amendments were to be supported, but the market fears that catastrophic, messy no deal scenario. next tuesday, there's an amendment gathering support that would tell theresa may to go back to brussels and renegotiate the irish backstock. it's not clear whether the government will support this amendment. if they did, what could emerge on tuesday is a clear idea of what the u.k. wants. both of these strands, no deal is being taken off the table at the same time that there could be some scope for a compromise

over reworking the deal. david: it's all fine and good, you negotiate with those people in brussels and get this thing but there's this toxic issue of the backstop with northern ireland. therding to the reports, dup says we want a deadline on that. is brussels going to change their mind? >> brussels has long said they are not going to change their mind. there was a proposal floated last week to go to some deadline of five years. europe, the- in view was that is not viable. the irish government is very much against no deal. at the moment, because the u.k. parliament is pushing to take no deal off the table and

potentially delay brexit, that means there's no incentive for the eu to come up with a becausesed proposal, that's exactly what the eu wants, pushing for closer ties to extend the deadline to allow for time for that to happen. david: thank you, emma. that's emma ross thomas from london. alix: brexit only one of the concerns affecting the global economy. that was one of the big topics at the world economic forum. >> the global economy is in ok shape. >> it is pretty clear that the world will slow down in a synchronized manner. >> if there was to be materialization of the risks we see on the horizon, the point is this horizon is getting closer to what we had back in october. that's why we slightly revised our forecast.

>> i think the economy is slowing globally, slowing in the u.s. and china. that doesn't mean we are in any sort of crisis. >> uncertainty is the greatest enemy of growth. alix: joining us now is emily roland, john hancock investment's head of capital research. emily: i would echo what the ceo's in davos this week -- what the ceos said in davos this week. we see negative data come out of overseas economy. this morning, we got the german iso data, another negative data point out of europe. in the u.s., we've seen a more positive picture this week. look at the pmi data from yesterday. jobless claims at a 50 year low in the u.s. but peekmy is healthy,

at economic growth is likely behind us -- peak economic growth is likely behind us. alix: how do you explain the move out of u.s. equities into emerging markets? >> emerging markets were heavily beaten down last year. you had a 20% decline in em. there was some big macro tailwinds that could be important here. you see the dollar continuing to moderate, and has broken below its 50 day moving average a couple of times now. those could be possible tailwinds for emerging-market equities. to see theneed fundamentals come back and we need to see the earnings estimates start to turn around. david: you say we are past peak growth. what is the slope down and how far does it go? can we have fundamental strong growth around the world without the central bank supporting it?

emily: that is a great question. we could be engineering a soft landing here in the u.s. fed policy will be incredibly important. we think we are getting to the end of the fed rate hike cycle here. as central banks overseas are not going to be raising rates anytime soon. the fed has raised rates nine times now since 2015. that has important implications across asset classes, but particularly for fixed income. we like bonds more than we have over the last several years. there could be an interesting entry point, particularly in the intermediate part of the curve. up, until shares falling in premarket after forecasts show slowing spending among their customers. what this means for earnings season. this is bloomberg. ♪

david: semiconductors had their

best day in the month yesterday, but then intel gave a disappointing revenue forecast for the first quarter, warning that trade and macro concerns in intensified and the environment has further deteriorated. here, emily roland of john hancock investments. one of the questions is how does one invest given your analysis of where the market and the economy is? emily: a bit of a mixed bag with guidance and the overshadowing the geopolitical headlines yesterday, but looking across the board for 2019, we are looking at a barbell approach for sectors. we want to own some sectors for offense and some for defense. technology is one of those sectors we like for offense. one of the key reasons is we want to own quality, right?

if you look across the board, tech names have among the highest return on equity among any of the sectors in the s&p 500. we like tech and health care on the offense side. utilities and consumer staples. alix: what does that mean for the whole earnings season? part of what we saw besides intel, if you aren't terrible, you are doing well. western digital rallied. you are not getting that much more punished if you disappoint. emily: that's right. one of the most important elements we look at, our earnings provisions, we've seen them come down. if you look at the analyst expectations as of september 30, they were for 16% earnings growth in q4. we are coming in right around 12. that is based on revised down expectations. we are a bit concerned about the earnings outlook going forward. we are looking at 6% earnings

growth based on analyst estimates. that is down from low double digits. we don't like the trend there. david: where would you get better earnings then norm and where do you get worse? >> two of the 11 sectors have seen positive earnings revisions . health care and utilities. david: the two barbells. the two ends of the barbell. alix: we've seen a lot of money going to individual stocks. are we in a world where you have to pick and choose a png that has pricing power versus a kimberly-clark? emily: absolutely. this is the perfect environment for active management to really start to come back here. stockpicking will be incredibly important, especially when we get to the end of this economic cycle and we see more convergence between the worst and best performing names. what going forward,

sectors will have the margins and pricing power? emily: again, it comes back to technology. there's a lot of pricing power there, there's a lot of cash on the balance sheets of tech companies. if we continue to have a leg up in markets here, momentum will continue to lead here. of johnily roland hancock investments will be sticking with us. coming up, very important. delegation ofng a vice ministers ahead of the meeting. more on u.s.-china relations, coming up. this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. alix: this is "bloomberg daybreak." markets. to the looks like the path forward today may be an equity rally.

the rally gets another chance. european stocks also higher, having their best day since december. fell for a fifth month. go figure. i have the same question when it comes to euro-dollar. them beingng despite more dovish when it comes to rate hikes. cable, you get the excuse because may be the dup party will back theresa may. who knows? deal brexit off the table. stop paying attention before you get to the if. that's how it feels. david: let's get an update on what's making headlines outside of the business world. informal adviser to

president trump has been arrested. roger stone is accused of witness tampering, making false statements and obstruction. he's given varying accounts of --ther he knows wikileaks aizabeth warren is proposing wealth tax on the richest americans. they would have to pay 2% on every dollar of their net worth above $50 million. the proposal underscores warren's economic populist methods. senators beginning talks to break the impasse after blocking to rival spending bills. -- two rival spending bills. says that would happen only if there was a march payment on a border wall.

global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. david: next week, we will have a big event down in washington as the vice premier of china comes to negotiate trade. wilbur ross gave his view of what they will have to accomplish if they make real progress. thehe harder issues are ones that deal with structural reforms, particularly intellectual property rights. that one is also important to the chinese. as they are moving up the intellectual value added spectrum of the manufacturing, they are developing more intellectual property of their own that needs protection. you are seeing in huge increase -- a huge increase in patent filings by chinese companies. the equal market access is another big issue.

the idea of force technology transfers is a huge issue. how youmily, tell me gain this out as an investor. we have a lot of things to overcome. wilbur ross said both sides want a deal. what does an investor do? alix: when a set of headlines yesterday. emily: it is tough, there's a lot of noise out there for investors. we suggest investors put themselves in the seat of a pilot. watch those gauges, those metrics that make a difference, economic growth and earnings data, and put the noise to the side and focus on the fundamentals. alix: do you want to be more exposed to stocks that have chinese exposure, european exposure or u.s. exposure? emily: we still continue to favor the u.s.

it is a more defensive place to be. we suggested investors stay invested right now but not talk in terms of quality. in the fixed income side, that means owning more duration. on the economic side, that means owning more quality. emerging-market equities have been beaten down but we are not ready to go there until we see a catalyst telling us it's time to get more positive their. alix: what about industrials? a good example of stocks that have been beaten down so much, they could see actual earnings growth versus other sectors. yet, they will have significant exposure to china. emily: earnings growth is pretty decent if you look at areas like industrials, other cyclical areas like financials. us, economic growth

cools, risk mounts, there's a long line of risks on this wall of worry now. it makes sense to notch up in -- even though earnings look decent, we will have to wait and see. alix: emily roland, thank you very much. david: china has grown the most of any economy in the world in history over the last generation with an economy of $300 billion in 1980 to a gdp of $3 trillion today. a remarkable life story in "out of the gobi: my story of china and america." as life provides

demonstration of what is possible when china and the united states come together, even by happenstance. welcome. good to have you here. let's pick up with what janet yellen had to say. we are on the cusp of further negotiations in washington. is there a possibility of these two countries coming together for an affirmative good result? >> there's certainly a strong possibility. at this point, there's incentive to find a resolution to resolve this trade dispute. you have to be prepared for the worst. there are many political issues for them to resolve. they may be able to resolve some of the issues but maybe not all of the issues. david: as you look at china right now, as we try to understand president xi, where is there economy, how much trouble is it in? we had president xi delivers

some stark remarks this week. >> the chinese economy dropped quite significantly in growth rate last year to 6.6%. it is still growing, just at a slower rate. there was a massive amount of tightening, deleveraging. that happened in the past 24 months. then this rhetoric on trade war. at this point, the business sentiment is quite weak. for this year, it will continue to be so. david: how much pressure does that put on china in these negotiations? for china have really dropped off. and they come to terms sooner than later when it comes to trade? >> china has a strong desire to resolve this particular issue.

at the same time, i think the data are somewhat misleading at this point because china is shifting away from being the manufacturing hub in the world more in the direction of a consumer market. ago, 30% of gdp today was only 19%. 35% of gdp is now 50%. more trade is better than less trade as far as china is concerned. the same is true for the united states. the larger issue is how you open up the market for more trade and investments and your consumers. alix: it seems like china is somewhat committed to that. how do you play that, how do you

invest in that? >> for an american company? alix: you. what do you do? >> we look at the chinese economy and think that the growth is somewhat deceiving. it has been growing at a higher rate than any other company in the world. we consider china to have two economies, a good economy and a bad economy. the bad economy, industrial manufacturing firms that have built too much capacity. china's economic growth model is coming to an end. the good economy, the businesses that cater to private consumption. that's where we focus our investments, private consumption. david: you have a special position having grown up in china and being through the cultural revolution and then coming over here and studying our system.

you got a phd in economics at berkeley. before that, you did some studying of u.s. law. you are fascinated with common law and contracts and things. that's really important to investors. how's it going to be litigated if we get to that point? how does an investor in china deal with that? how do you know your rights will be enforced? when china went to the wto, we thought that would happen. our impression is that didn't. growns legal system has quite a bit in china. the issue for foreign investors, that hasent, gotten better but it remains the issue. tooa has two little law -- little law and the u.s. has too much. we tend to prefer to have a

contract in china. whether it's hong kong or new york. it protects the foreign investors much better than otherwise. david: how do you enforce it? if the assets are in china, how do you get enforcement? >> china is a member of this new york convention. if you have arbitration, if you have a dispute resolved under the rules from the international chamber of commerce, then the ruling is enforced by the supreme court in china. it works pretty well. but, if you get an arbitration resolved within china, it may not be enforced. so, international ruling is easier to get enforced within china. david: interesting. that's the pag chairman and the author of "out of the gobi."

coming up, josh friedman on why his firm is significantly underinvested. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." --ing up in the next hour the cofounder and president. alix: we turn now to wall street beat. first up, canada goose shares head south. downturnnsions spark a in canada goose, leaving credit suisse on the hook.

deal with the fallout of a $41 billion flash crash. josh friedman on why the firm is significantly underinvested at the moment. david: let's start with that canyon partners story. money on the sidelines until risks align. about $1 billion in debt and additional money into some of the equities, so maybe a touch under $2 billion put to work. not the same magnitude as what we put the work in the prior downturn at the beginning of 2016. >> why is that? there weren't enough sellers? >> some of the money we put to work was not in the secondary market. they were left with those

obligations at a discount. some of it was working directly with issuers who wanted to do a deal. not only was the downturn surveyor and bank that -- severe in bank that -- severe debt -- >> there's a lot of pent-up supply now. is there enough demand to soak it up? ceos and principles of firms are smarter than to put themselves in the position where they walk into a wall. there is a fair amount. we just saw the arconic deal go away. do i worry about the trip will be mountain -- triple b mountain? yes, i do. i wouldn't say it is absolute first on my list at this point. first on my list is when the

market goes up in the fed feels like they can finally raise rates again and everyone gets scared and you have this immediate panic about supply-demand, particularly if people are worried about the fundamental economy at the same time. >> there aren't that many interesting single name situations, but there are a couple out there. tell me your view on pg&e. >> pg&e is interesting. it is early stages. this will be a long ballgame. the same way some of the other major bankruptcies have been. look at the bankruptcy of lehman brothers. there were many opportunities in the case took a long time. took a longase time. puerto rico has taken some time with many opportunities to enter. large look at any of the ones, this has been the case.

>> have you dip your toe in yet? >> we have dipped our toe in. we will wait and see and learn more and be all over that one as it takes place. >> what about ge? >> ge is really opaque. we spent a lot of time looking at it. it is very hard to look at the debt and see enough return and it today -- in it today to pay for the opacity of that situation. the equity is more interesting because it has all the optionality of the outside. the debt is not cheap enough to be particularly interesting at this point. david: that was john friedman of canaan partners -- canyon partners. we will speak -- it is so opaque, we will spend a week talking about it. alix: we will dive into one part

of ge's business each day next week. what they actually own and what their future is going forward. what is the health care unit, what is the aviation unit? david: do they really have their arms around the numbers? they've been wrong. alix: it's not 100% opaque there. david: the connection between high-priced parkas in canada and huawei -- turns out there is a connection. canada goose went out with an ipo and credit suisse was the underwriter for. executive goti arrested and the stock went right out because of concerns about trade. $60 million because they had to underwrite the bond? this is in general what we've been hearing from banks. if they didn't do well, stay in fic.

david: the other thing, the extent to which banks may be caught with underwriting a big bond issuance because they think they can sell a lot and then something happens. you are stuck with having sold it and you lost $8 million. this happened overnight, a flash crash. exchange halts stuff so you can deal with a trade you want to execute. there was ample time for traders to not sell or buy back if they wanted to. morgan stanley and goldman sachs saying can we walked back this trade here? -- walk back this trade here? david: i go to lakeline and say

-- i go to a client and say take it back? alix: that is an amazing chart. david: coming up, the arrest of roger stone. longtime trump's confidant is arrested down in florida. it's what i'm watching. that's coming up next. this is bloomberg. ♪

david: this is what i'm watching this morning -- roger stone arrested in florida. joining us now, marty schenker. this broke just before we made air here. why is this so important? marty: it's another piece of the narrative that bob mueller is building in his case for collusion with russia to influence our election. this has to do with the nckileaks disclosure of dm

emails and roger stone's role in that. his role in disseminating this emails is not what this indictment is about. it's about how he lied about it. it's not the crime, it's the cover-up, yet again. david: he was doing ats for some time, even on the air -- a tease for some time, even on the air. marty: the whole narrative is thesmaller investigation -- mueller investigation, they were playing fast and loose. every action they take has a legal consequence. really think people understood that they may be violating the law. alix: the reason we would care, any impeachment charges. where are we in this line to get there? >> there's no direct connection

with the russians in this indictment. speculation that wikileaks was in coordination with russian agents. more importantly, there is no direct connection to donald trump. says this has nothing to do with me, which is the typical response to things like this. there's nothing in the document that says it does. david: this is the campaign, this is the leaks, you are right, there's a couple of steps, does it get you to the russians and the president himself? >> the molar strategy -- robert mueller strategy, they work the periphery and then go inside. roger stone was a close partner of donald trump.

is gettingy-step closer to the front door of the white house or trump tower, whichever you prefer. david: the direction is not favorable for the president. >> bob mueller may not be over anytime soon. david: so many things to marty schenker, our chief content officer. from the goldman sachs private wealth management cio -- this is bloomberg. ♪

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intel's 2019 outlook missus estimates -- misses estimates. ross says a deal can get done, but -- the u.s. china trade agreement is possible but hinges on ip's visit to d.c. next week. the cost of a 35 day shutdown. david: welcome to "bloomberg daybreak." there's this indictment of roger stone, markets don't care. alix: there's other data that colgate doesn't have the outlook markets were expecting, yet the equities market is up. .3%, evenr also up though you have the ecb executive saying maybe we won't hike in 2019. that's uncertain.

german data coming out weaker for five straight months. the path of least resistance is up today for the euro. crude up .2% despite all the drama in venezuela, not having the geopolitical effects you would have thought. david: it is drama, there is doubt about that. high stakes being played down there in venezuela. viviana: as you and alex mentioned, an informal adviser to president trump has been arrested in the special counsel's investigation. roger stone is accused of witness tampering and obstruction. he's given various accounts of whether he knew wikileaks would post a trove of emails stolen from the them aquatic national committee. -- from the democratic national committee. wilbur ross says intellectual

property rights are a big stumbling block. the white house may take steps to limit the ability of states to block interstate gas pipelines. president trump might take action through an executive order. it would be aimed at states in the northeast. they are preventing shale gas from reaching customers in new york and other cities. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. intel reported earnings after the bell yesterday and disappointed the street with its modest projection for earnings for this quarter. vjwelcome bj rocky should -- . they don't think they will sell as much because of the cloud as they thought. >> if you look at 2018, cloud

spending grew 40%. they are seeing some digestion here with the hyper scale and the china central em. in the second half, we see some of that completed. david: is this an indication of the maturing of the overall business in the cloud? driverd has been the big . there is a slowdown creating interruption. we should see resumption given the underlying fundamentals are strong with bandwidth and traffic demands. like a bit of an overhang globally and the slowdown in macroeconomic issues.

overcapacity they built up on the data center side, some slowdown on the memory side, partly due to the global slowdown, and some iphone modem weakness. alix: there was the macro overhang in the earnings conversation. they said trade and macro concerns have intensified. providersice absorbing capacity, incremental headwinds impacting all expectations. if the macro is resolved, what is the potential upside here for intel removing that kind of cloud? we shoulde resolve, see the orders come back on the , especially where distributors have been cutting back.

we should see some orders come back. that should be positive for the data central oems. they said there was an impact from the tariffs and global slowdown. david: from what you've seen with this report, does it say something more broadly about semis? >> not really. we are seeing similar commentary from some oems. they saw the impact of the global slowdown in the tariff wars.-- and the tariff now, the consensus is more of a second half improvement. -- itlowdown here was shouldn't be new to investors. said theyern digital

are optimistic for the second half. david: and they went up. some intel does highlight trends around global growth and uncertainty in china. our next guest says u.s. outperformance is still intact and equities trend 9% this year. joining us now, sharmin mossavar-rahmani. thank you for being here. sharmin: thank you for having me. alix: why does u.s. outperformance remain this year? sharmin: we've had this investment theme for 10 years. our view is across so many different factors, the u.s. has been much stronger, whether we are talking about earnings growth or innovation or productivity or competitiveness, whether it's export competitiveness as a place to --est for investment flows foreign investment flows and that has continued. the gap has widened.

when we talk about outperformance, it flows from the strong long-term economic perspective, it is in terms of the economy not being so dependent on other countries. what happens with brexit matters but it's not that critical to the u.s. what happens in china obviously matters, but in terms of actual exports to other parts of the world, it is not as material. when you look at the u.s. in aggregate, we are more comfortable with saying our clients should have more assets in u.s. equities than other parts of the world. it'sery metric we look at, really phenomenal. when you look at earnings, u.s. companies across all sectors have actually out earned european and japanese non-us developed economies across the world. in most sectors in emerging

markets as well. david: you mentioned productivity. of growthn the rate of productivity and the fact that it has been trailing off in the united states. we will put up a bar chart. this indicates the united states does quite well overall, much better than china, for example, outranking everybody in terms of productivity. can that continue? sharmin: there are two issues. one is the overall level of productivity and the question of productivity growth. there are a lot of experts who talk about how productivity growth has slowed. productivity growth has been slow for the past six or seven years moves what productivity growth can be in the future. the u.s. has the highest level of innovation. people are talking about china and the number of patents. the number of patents globally

matter much more then the number of patents domestically. china's patents are filed domestically, they are utility patents or design patents, not innovation patents. people need to dig deeper and realize these countries are not catching up to the u.s. anytime soon. alix: a bear would say we've seen the high watermark for earnings. earnings estimates are too high, margins will come in, you will have the macro pressure of a trade war. what do you say back to that? sharmin: it's always a matter of whether you look at the glass half-full or half-empty. people complain about the macro factor. we couldn't continue growing at the pace we had in 2017 and 2018. it was so above trend. sustainable, it

would create too much inflationary pressure and central bankers would be more aggressive in tightening. the u.s. was growing at 3% in 2018. that is well above trend. that would create inflationary pressures. growing slower than that is a good thing. let's take growth this year will be about 2.5%. look at the growth numbers for 2017 and 2018 for the euro zone, it was much above trend. having a bit of a slowdown is a good thing. people say peak earnings. we have a lot of clients asking that question. what is relevant is not the actual level of earnings growth has peaked, but that's not the same as saying earnings have peaked. we have earnings continuing to grow but at a slower pace, that is good forward returns. wind thelook at earnings growth rates have

peaked -- when the earnings growth rates have peaked -- david: sovereign leverage, we are borrowing money at a record pace. everyone is borrowing a lot. at what point does sovereign leverage begin to inhibit growth? sharmin: that's one of the most complicated questions in terms of where is the tipping point for the u.s. and china. china, weink about look at the rate of growth of debt. concerns a lot of about international sediments saying they are -- international settlements saying they are close to the danger zone. contributorbiggest to the slowdown that we've seen in china. we think it's a lot less about the trade war as opposed to this tightening of credit that has

lowered significantly the credit and pulse. -- impulse. china is our biggest concern in terms of the level of overall debt. people forget that gdp per china is lower than the poverty level of the u.s. when we reach the tipping point with the u.s., in our perspective, it's nothing we should worry about anytime soon. the u.s. is the reserve currency of the world. nobody is close. alix: sharmin mossavar-rahmani of goldman sachs will be sticking with us. coming up, we will be speaking with the russian economy minister. this is bloomberg. ♪

david: one of the dominant themes at davos this year has been global growth. how much it is slowing and why. >> the global economy is in ok shape. >> it's pretty clear that the world will slow down in a synchronized manner. that makes life more difficult in every way. >> if there was to be materialization of the risks we see on the horizon and the point is that this horizon is getting closer to what we had back in october, that is the reason we slightly revised our growth forecast. >> i think the economy is slow and globally, slowing in the u.s. and slowing in china. that doesn't mean we are in any sort of crisis type mode. >> uncertainty is the greatest enemy of growth. david: still with us, sharmin mossavar-rahmani of goldman

sachs private wealth management. how much is it going too slow and how much of it is because of central banks pulling off qe? sharmin: all the sentiment in davos sounds so negative. the fact that global growth is slowing down is not a major source of concern. global growth last year was 3.2%. this year, our estimate is about 3%. 3% is still very robust across the world. that is above trend. it is not something to be so concerned about. there could be other shocks. when we are looking at the economic backdrop, it is a very benign backdrop, it is quite good. otherwise, we would have too much inflation. david: if china is coming up, what will supplant it? sharmin: when people talk about

china being a big contributor to global growth, it is just the measure. theying a big exporter, are taking growth away from other places. they are contributing to the headline number but not driving growth on a global basis. alix: sharmin mossavar-rahmani of goldman sachs, stay with us. resistance least happens to be to the upside. higher,leading the way despite the fact that the german confidence number dropped for five straight months in a row. european stocks also on the upside, a positive sentiment from some chipmakers like western digital offsetting intel. cable getting a jump. maybe we won't see as dramatic a brexit as the deal party -- dup party goes with theresa may's plan. mario draghi did sound dovish around the margins, throwing

cold water on the rate hike after the summer of this year. we want to head back to the world economic forum in davos. jon: thank you veryjon: thank y. i'm joined by the russian economy minister, maxim oreshkin . great to catch up with you. initially, we didn't think you would be coming because the committee here in davos were banning three prominent russian businessmen. you are the leader of the delegation here to russia -- from russia. >> there were meetings with other countries, with companies. everything was good. >> the sanctions on russia from the europeans and united states are still there. thehere's a difference -- mood from the u.s. side and european side. europe is trying to be more independent. >> how do you see that playing

out in terms of the removal of sanctions? >> we are talking about improving our relations, improving our trade. it is a positive dynamic. it's also investments in the technological agenda. jon: you are drawing a clear distinction between the approach of the europeans and the united states here. are you more hopeful about the relationship with europe? >> what we see is europe is becoming more problematic -- there is the brexit on one side and the actions from the u.s. that they've implement it on europe in terms of steel and onminum -- implemented europe in terms of steel and aluminum. jon: what is your base case for what's going to happen with relationships? we have a number of economic

-- in europe with european partners. we are creating a couple of nuclear plants. we are partnering with many french companies. cooperation is growing step-by-step. jon: some people might say the russian economy, the trend isn't great at the moment. what is your read on the economy at the moment? >> our estimates of the growth we havewe've created, sustainable and stable growth going forward. the same pace as the world growing, more than 2%. have stable longer-term dynamics then volatility. jon: do you have accommodative

monetary policy at the moment? >> it is purely aimed at delivering stable inflation dynamics. we are at the target level. risks asthere downside well? is that helpful? >>, we expect this year, growth in russia will be weaker. there are external factors, global growth slowing substantially. there are also internal factors. we are addressing long-term issues. those will be waiting negatively on the growth. jon: oil has stabilized. >> oil is not a story anymore for russia. jon: let me get to the question first and talk about the relationship with opec.

it's a relationship that has been built up over the last year. is that something we can solidify in the coming years? >> it is definitely long-term relations. we push long-term relations with any partner we have. opec is not something unique. youri want to talk about relations with another big oil producer -- venezuela. the u.s. no longer recognizing maduro as the leader of that country. the europeans moving towards doing the same thing. russia has said to the u.s. not to intervene. what is the economic relationship with venezuela at the moment? >> you are asking a question that should be asked to the minister of foreign affairs. i'm asking the economy minister what the economic relationship is with venezuela. >> what is the impact on russian

growth? close to zero. jon: in the oil price? affectingf factors the dynamics in the oil price. us, it is not important anymore. the economic relationship not that important to you, either. >> our relationships with europe, china -- those are ahead of venezuela. jon: maxim oreshkin joining us in davos, switzerland. david: still with us, sharmin mossavar-rahmani of goldman sachs private wealth management. extent has the world economy global growth been curtailed by the sanctions?

whether it's venezuela or russia or iran, so many sanctions, does it curtail global growth? sharmin: u.s. growth and the size of the gdp, what happens in the u.s. matters the most in the world. what happens in venezuela matter to bondholders? yes. but in terms of overall global growth, what happens in the u.s. and what happens in the euro zone, those would be the two largest blocks. then you have china followed by japan. what happened in russia is a more geopolitical issue than economic issue. companies may not like it if they are exporters to these places, but on a macro basis, it is not a material factor. alix: what do you think about

being an investor in russia? sharmin: people are underestimating the structural faultlines of emerging market countries. when you think about russia, russia is totally dependent on oil. "we don't care about the oil price. it doesn't matter." sharmin: one has to have a lot of confidence in where oil prices will be. $45-60.a base case of when you think about emerging markets, rule of law is basically nonexistent. what academics have called truncation risk, that's very high. when you are investing in emerging markets, these things get truncated because no rule of law exists. we recommend our clients have a very low allocation to emerging markets, well below market

capitalization. when you look at the last 10 years, despite all this talk about china growing more than the u.s., that has lagged the u.s. by 6% per year. david: there's a variation in rule of law in emerging markets. they are not all the same. where do you rank china in terms of rule of law? sharmin: that is a very interesting question. you could ask the canadians who've given their response to the huawei issue. is a various ranking that the world bank does. we use those rankings. whatit comes to investing, is actual rule of law versus what is practiced, that is one of the big issues with intellectual property theft. and $600225 billion

billion of intellectual property theft impact on the u.s. economy from china. it's hard to say there's rule of law in china. david: given that there is a range with respect to emerging markets, are there places where you are more inclined to put your advisors? recognizing you think the u.s. is best. institution, the geopolitical type risk, rule of law, et cetera, and then there's currency risk. is quite costly and the markets aren't liquid enough. we are also affected by size. people talk about the interesting markets, but the size is very small. we can't make a significant can'ttion because clients invest with them. alix: sharmin mossavar-rahmani of goldman sachs private wealth

management will be sticking with us. ubs will plan some bonus cuts of 20% in its wealth unit. i'm surprised. particular,nit in i'm a little surprised. david: in the u.s., they didn't do quite as well. that is an important part of ubs. alix: they tripled down on that one. that says a lot about how they did for the full year. david: time for the bottom line. first up, starbucks. i will talk with the ceo of starbucks a little after 10:00 this morning. they basically were up across the board, they beat across the board, the stock up a little over 3% now in the premarket. they did well in china and the united states. china is critical to them for the growth. they are adding stores that they have 3700 stores now in china. alix: opening one every 15

hours. improving, changing, experiment and with their products in the u.s. the next thing, going into europe and directly. that's indirectly. -- into europe indirectly. alix: heavy crude comes to the valero onners like the coast process heavy crude. in the u.s., we have light crude. they need that oil. if we see oil sanctions, asset freezes or something like that, that hurts u.s. companies like valero. they are making that case. definitely one to watch over the weekend. david: it will cripple venezuela.

i didn't realize there were some screws we could turn in terms of venezuela. alix: 90% of the revenue. there is no other private sector to prop them up. there is no other private sector that can prop them up. , the path ofs least resistance is a rally. future still holding up at 21 points. european stocks still up by .7%. ubs planning bonus cuts of as much as 20%. let's see what happens with bank stocks in europe as that headline trickles out. the euro holding onto gains, cable losing a little bit of steam. the curve steepening ever so slightly in the u.s.. no big move happening in the bond market as of yet. by .1%. talk about muted.

let's find out about what is going on outside the business world with first word news. the fbi arrested a longtime confidant of president trump part of the special counsel investigation. roger stone was arrested in fort lauderdale. he is accused of witness tampering, obstruction, and making false statement. stone has repeatedly denied having any contact with russia. conflictinggiving accounts about whether he knew wikileaks would post emails stolen from the democratic national committee. the leaders of the biggest banks in the u.s. may face questions on capitol hill. bloomberg has use the panel that oversees wall street may seek testimony from the ceos of morgan stanley, bank of america, wells fargo. maxine waters is promising aggressive oversight of the biggest banks.

at ending themed longest government shutdown in u.s. history. senators begin talks to break the impact after blocking rivals spending bills. the white house signaling president trump is willing to reopen agencies for it two weeks -- 42 weeks while border -- for two weeks while border security is debated. 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. this is bloomberg. david: as the shutdown continues , it turns out it is affecting everybody. we should be giving you durable goods numbers and look atta, but as we our terminal it says it is postponed because of the government shutdown. it is not just bloomberg, it is also the fed that is not getting data. alix: when you're a data dependent fed, when you get a hown lead on the economy,

do you reconcile that? for the fed you might not get a good read until the third quarter. david: they're are still getting labor numbers but they will not get -- but will not get a lot of the congress numbers. alix: even the job numbers will be distorted because people are out of work. david: i talked to a former governor yesterday who set the models incorporated people not getting their wages paid. they do not incorporate the second and third level effects. alix: the private sector. had a greatf article that said furloughed workers are actually going to lyft and uber to augment their incomes. there is a company which is a mobile refueling service and they fuel furloughed workers at two locations in the d.c. area and six of the seven cars in line were all furloughed workers working for ridesharing services.

you are all government workers, right? the partial shutdown is not just hurting workers. it is also hitting companies who want to go public. there is only one ipo in january. nasdaq ceo says that is not because companies do not want to list. it is a result of the shutdown. >> we look at the beginning of last year in terms of the listing applications on file versus the beginning of this year. 35% increase in the number of listing applications wanted to come to nasdaq at the beginning of the year. even despite the good environment, we still have more companies wanting to cap the public market. the reason why you are not seeing ipo's is much more in relation to the government shutdown that it is related to companies on the sidelines. david: give us your take this is having on the u.s. economy?

>> when we are looking at the --a, we do not have an exact there is nothing to look at exactly. even though there have been other shutdowns, some have lasted long but not as long as this one. still a number of weeks. it is hard to know what the impact has been. our economists at goldman sachs estimate about .07% per week. that is just an estimate. when we are looking at the data, our view is we will get something like that. for the last several weeks in the next couple of weeks. we'll make up for most of it. if history is a guide, the economies have recovered. david: that is what the administration is saying is that people will get their money so they will get it later and they will spend it later and it will show up. let's go back to the rule of law we talked about and how we pride ourselves on the rule of law. what is the saying about a rule of law we cannot keep the government open?

we will not even have the state of the union address at the capital. sharmin: one of the key messages from our outlook is that when people look at some of the things going on, from president trump talking about raising rates and trying to ask the fed what is he doing n.y.c. raising rates, to the tariffs, to the have all these things happened in the economy is resilient and it is not that unusual. there been past presidents who put pressure on the fed. there is a great story in our outlook about president reagan calling in voker and putting pressure on him. we were talking about nato. president kennedy at the exact same speech saying they're not paying their fair share. i think the government shutdown is part of the politics. ourells you, from perspective, how strong u.s. institutions are. the system of checks and

balances being able to push back. alix: consumer spending has been the backbone of the u.s. resilience. does that change? bank of america said on their survey people want to pay down debt. when they get their paycheck back in the second quarter, they might put it away and pay down debt. how do you do it? the shutdown is affecting about 800,000 workers, some of whom are working, some of whom are furloughed. when you're thinking about the u.s. labor force, the size of this economy is so immense, it is .23% of the labor force. it is a small number. it is affecting lives on the personal member -- on the personal level, that in terms of effect on u.s. consumption, i think uncertainty and volatility and the issues with china and the tensions with iran, what happens in syria, those probably affect sentiment from a business perspective and a consumer perspective much more. alix: goldman sachs private

wealth management, thank you so much for joining us. joining us now is carter met cofounder and president. talking about ipo's. what is your outlook based on the shutdown? carter: the ipo market has basically been shut down. sec there to review registration statements, you essentially cannot go public right now. alix: some companies can deal with it. -- companies that need the ipo, what is a do? rter: they wait until the government reopens and then try to go public. what we have is this extended backlog. there is a deadline in the first , february 15, before

your financials go stale. reopens,he government we will have a big backlog of ipo's that will probably not have much activity in the first quarter. for companies that need to raise capital, they can go back to private backers, they can try to do a crossover round with institutional investors. a private round. pre-ipo round. offeringy to do a 144a which is an unregistered offering to qualified institutional buyers and accredited investors with registration down the road. those are all more costly and expensive ways to raise capital. notd: in your estimation, that we've had this experience before, is this a timing issue or will it affect how many people go public? carter: i think it is a hidden cost of the government shutdown. i think it will have an economic

impact. we had a backlog of ipo's into 2018 -- into 2019 that was much bigger than we had going into 2018. the market was not open for ipo's in the last two months last year. there are number of companies lining up to go public. if you do not get ipos in the first quarter, you do not get the momentum in the ipo market and it can have a cascading effect throughout the year. once the government reopens and we see ipo's start to come to market, you will have a lot of companies trying to access the markets. david: is there effectively a limit on how many ipo's the market can handle? you cannot have 30 ipo's. carter: you want to be able to go out on the road and not have a lot of competing ipo's that are taking the attention of investors away. shutdown, if it gets

resolved in the next few weeks, the beginning of the second quarter you will have a lot of companies that have been waiting that are going to try to access the market. effectively, is the february 15 day the one we should be looking at? carter: it is. by february 15 you cannot use your nine-month financials. you have to read with your year end financials. with youre to refile year end financials. that has to be audited and takes time. most companies going out with year end financials will not hit of road until the middle march. david: effectively, a month it will take them to get the audits? carter: exactly. david: thanks so much to carter mack from jmp group. alix: breaking news. ge will be modifying its terms of transaction. was merged with ge rail

operations. that news had broken earlier in 2018. it was part of a john flannery decision to move one of ge's oldest businesses away and try to get to a decision if they want to break up the company entirely. this was in 2018. tech --l units with web with wabtech. ge will be paring back some of their stake in the company. they will now have a 25% interest in the company. that valued at $3.4 billion. i am trying to get a read on if this was expected or is this a thing where you knew you were to be selling down your shares and you're going faster than expected or is this a total surprise? i do not have the answer. david: it is clear they do not want to have as much a mistake.

besides the fact they were and we have 25% to 24.9% interest. alix: we will have more clarity. it is similar to when ge said they wanted to sell their baker hughes stake earlier than expected. it looks like they will modify ch, theys with wabte will have a 10% stake in the company. coming up, venezuela's leadership crisis. we will look at how investors size up the situation with diego ferro. this is bloomberg. ♪

>> this is bloomberg daybreak. oning up later today bloomberg markets, kevin johnson, starbucks ceo.

david: time for follow the leads. a deep dive into the stories making headlines and moving markets with key insights from industry veterans. today we looking at the crisis of venezuela where does copresidents are competing for control. opposition leader juan guaido has the backing of the united states. president trump saying in his role as the only branch of government legitimately elected, -- to declare nicolas maduro illegitimate. nicolas maduro still has the backing of the venezuelan military. joining us is the ago fair low, .ray line -- is diego ferro let me start with you, reggie. when is the situation in caracas going to be resolved? whatght now and venezuela

we are seeing is a standoff between the venezuelan government, which is unpopular in the country, and the declared and internationally recognized interim president juan guaido who is relying on opposition pressure in the street and on international pressure in the form of sanctions in coming weeks and months from the united states to press his claim to power in venezuela. this situation is not expected to improve quickly because nicolas maduro has been in power for six years and he is unlikely to leave voluntarily. he does not have any guarantees from the opposition that he will not be jailed at home or extradited to the united states to face charges. on theon the -- alix: investor side we saw a rally in the debt. is it too soon? diego: i think a lot of the movement we have seen last year and this year has been -- the

amount traded is minimal because there are not that many bonds in the market. -- it hasy that now never gotten so low as it got late last year. it was a training low. -- it is still fluid. it is not the first time it is been under pressure. it is the first time there is a strong local pressure and international pressure. they have shown quite a lot of ability to survive. it is hard to be that constructive on the type of outcome because i do not think they want to leave. they will end up in jail. do i think the medium and long-term restructuring will yield a higher value? yes. near-term, prices seem reasonable. diegobased on that,

pointed out external and internal pressure. that is a different situation from 2016. how can something like this be resolved when the military wants to avoid conflict? reggie: this is not going to be resolved quickly. it could take months. it could take longer, simply because what the opposition has to do of it wants to get the armed forces on its side to pressure maduro to leave power is to offer credible amnesty guarantees that they will not be tried under a new government. unless an opposition government can do that, pressured also why opposition street protests and by external pressure from the united states and outside actors, we will probably see the military remain loyal to maduro out of fear of future uncertainty of regime change. david: how is an investor approach this question?

even with brexit, it is risk. you are used to dealing with risk. this is just true uncertainty. diego: it is true. the fundamental fact is venezuela has a lot of natural wealth. at some point of time a government will be able to run the country in a more rational way in the international cooperation. when that happens, the value out of venezuela can be rewarding enough that there is a lot of option value. you do not value a probability-based thinking the value is x, y, and z. you're thinking something worth $.20 on the dollar will be worth substantially more. alix: how are you on venezuela right now quit -- how are you on venezuela right now? diego: it is the only reasonable way to play it. alix: are you just holding it?

diego: it is funny when you see a lot of research saying you buy or sell as it is easy to move in and out. , younk you make your bet decide what you want to hold. whenever the market gets a rational like below 20, you may try to add. this is a core holding. you look for a proper resolution to dialogue with the new government. david: reggie, what should we be looking for as an indicator of how it might be breaking. it appears the top flight of the military is indebted to mr. maduro. what about the rank and file? reggie: right now we should be looking for the level of opposition pressure in the streets of venezuela and we should be looking for whether the united states is considering a tougher sanctions regime, not only in the form of an oil ban but in the construction of an international sanctions regime to further pressure of the venezuelan government.

we should be also be looking inside venezuela for examples of for examples ofrmed the venezuelan armed forces meeting with opposition figures in hopes of learning more about what an opposition transition would entail and whether they throw theirto support behind such a government at any point in the near future. david: to pivot -- alix: to pivot off of that for oil sanctions, what happens? will venezuela be able to sell that oil to china and india? is that even cost effective. do they lose the oil together? play that out for me. reggie: they are probably going to take a financial hit from venezuelan oil import ban in the united states. they are going to find other markets. the production decline will continue in venezuela and that will exacerbate the impact of oil sanctions. david: even if we do not know when it will be, at some point this will be resolved.

as you say there is great value in venezuela. it has been very successful. is going toestment be required to get it up and running once we get past all of this? diego: that is a tough question. some discussion months back, people were talking about the initial amount. -- at least $50 billion to $60 billion. the first order of business is to fix the humanitarian crisis and stabilize the new government. once that is done, that will require a lot of funds. you need to open up and free a lot of prices and at that point in time you can think about the investments coming into the oil sector. let's face it. it has the largest oil reserves in the world. it is there, but it is not taking a look out of -- but it

is taking a lot of time and money. diegoreggie thompson and ferro. thank you both very much. i am watching ge. in 2009 they bought wabtech. now we learn it seems like ge is going to be modifying its andtionship with wabtech only own about a 10% stake and offloading their interest. we need to know more about what is going on so we bring in brooke sutherland, bloomberg opinion columnist. his is a baker hughes thing where they will pare back their interest to raise cash. deale: they announced this last year and it was meant to be part of the breakup plan in the process of raising cash. the initial proposal was for ge and its shareholders to own about 50% of the combined company. it would bg transportation and wabtech. now they are saying we will not's spin off as much to shareholders. that means ge has more can sell

to raise cash. this is a way of bringing more cash in the door. david: then they will have to shell the -- have to sell the shares at some point. brooke: that is when the lockup comes into play. they will have this staggered lockup period where they will be able to sell the shares over time. will have a bigger stake they can sell to raise more money. alix: is this a surprise? brooke: it is a little bit of a surprise. you usually do not see a revision of the terms this late in the game. this was announced in the spring of 2018 that was expected to be closing soon. it is interesting to see ge renegotiate this. what is interesting is what this signals about what they might do with health care. there is been debate about the sculpture -- about the structure of the health care investiture.

some people have said maybe you people have said maybe you do not spin off quite as much to shareholders. maybe you hold onto a bigger stake or ipo a bigger stake. to see ge revising this deal with wabtech makes me think they are thinking about something similar with health care. david: but what to do with the cash you get? alix: brooke sutherland, thank you very much. coming up on bloomberg markets, the open with jonathan ferro -- that does it for david and i. i think we are waiting for sarah sanders. alix: don't look here. this is bloomberg. ♪

lisa: i am lays a problem with its in for jonathan ferro. the countdown to the open starts right now.

lisa: stocks rallying with global elites in davos expressing cautious optimism. the d.c. shutdown entering the 35th day. 2019's biggest test yet. earnings stealing the spotlight next week with results from amazon, alphabet, and many more. in the markets we have a constructive tone ahead of the u.s. open. s&p futures up nearly one percentage point. the euro gaining against the dollar despite weak german data. nymex crude trying to find a level after all of the complications with venezuela as well as production. the world economic forum wrapping up in davos switzerland. investors around the world cautiously optimistic. >> if you look