♪ >> what will 2020 bring? amid brexitlide uncertainty. boeing brings it star liner in for a soft landing in new mexico. good morning. i am guy johnson.

let's look at markets. we are not saying much. coming up, you will hear from this man. our interview on risks and financial markets. and brian moynahan on the state of the american consumer. let's get bloomberg first word news. frozen pork, pharmaceuticals, some reductions from china, not related to trade discussions, but part of beijing's effort to support the claim it is opening its economy. weekend, aa tense police officer pointing his revolver at protesters.

u.s., president donald trump asked about ukraine aid before his call with the country's president. the heavily redacted emails were by the nonprofit center for public integrity. they show the administration ordering a hold on aid in our after the phone call. bush fires burning out of control in new south wales. died,st nine people have hundreds of buildings have been burned down. the fires of being stoked by record temperatures in the region.

guy: the s&p is up, bonds are higher, gold is gaining. what about next year? is joining us now on set. good morning. 2020? looks like an ok year for the economy and markets. there are some risks still. progress in equity markets. for isng to watch out those risks, maybe an intensification of the trade war or some kind of destabilization of financial markets. guy: are those tail risks? >> they are 40% to 50%, so not tail risks.

my central view is things will be ok, but there are significant risks out there. guy: this year a lot of the progress has been driven by central banks. what do central banks do next year? >> probably on hold, all the big ones really. leap, buty to be a holded, probably all on for the course of 2020. bond yields may drift up, but unlikely to go up dramatically. valuationselds means on risk assets could be higher. we are seeing multiples of 20 odd on the s&p and that kind of thing. guy: yields are up 30 plus basis points on the bund.

does that rate of change continue? >> it slows a little bit. we have seen movement back towards neutral, slightly above neutral yields. pickup, 20 see some or thereabouts. bankss because central are on hold and there is still a lot of saving going on. percent, 9%ut a looks optimistic, but maybe 5% to 7%, that kind of thing for earnings next year. i'm what do you think making next year in terms of the typical portfolio? like 3%, 4%,ething which is not too bad.

you lose a bit on your bond portfolio. guy: credit has been where people have gotten nervous this year. right to beis nervous about that. if there is a big risk, it is probably the credit market. absent that risky, you get a reasonable return. it is hard to say what would trigger that selloff. herelet's put that over and volatility over here. below,ity has remained incredibly low this year. is that sustainable? >> i think so. a lot of the central banks are where they are. i think volatility remains suppressed. there are a lot of geopolitical risks, so anything could trigger

a selloff. upwardses, it will move in a spike, then a selloff again in stock markets, but her to call the trigger. guy: the trade story has been a big theme this year. how that plays through in 2020. the economy looks pretty good in the united states at the moment. is it good enough for him to carry on doing what he is doing right now? do you think he needs to add more juice to it? >> that lot will hang on this deal. madenk there will be a lot of this deal. , but still a skinny deal one that has settled the nerves of international markets and prevented the trade war from escalating, for now.

i think negotiations will continue and we will see if we can make further progress, but both sides are happy with where they are at the moment. guy: stick around. we will talk about the other subjects that full dominate 2020. what happened to the boy's bounce? boris bounce? that is next. this is bloomberg. ♪

♪ politics, this is "bloomberg surveillance." what happened to that boris

bounce? realization a hard brexit is still a risk means sterling is still below pre-election level against the dollar. our guest is still with us. about the risk into 2020 for the u.k. economy. how real is brexit? >> it is real. if we can't conclude it, the deal exit. a no pessimistic, therefore remained relatively positive about the u.k. economy this year. as long as the new deal risk sterling traded

much as a brexit currency in 2019, and i think it will remain weak. time at spent a lot of the treasury, the foreign office, westminster. give us your sense of the u.k. skills that going into this negotiation. how strong is it? what are the objectives? >> it is pretty strong. has a good u.k. negotiating team in place. that said, it will have two focus relentlessly on the eu negotiations and other parts of whitehall will be gearing up to do negotiations with other countries. guy: let's talk about that. u.s. here, eu here. is it just a 20 track policy applied here?

does one get priority over the other? think the eu negotiation would take priority, but that's not to say there won't be effort expended on getting at trade deals up and running as soon as possible. australia,ut also japan, something like the tpp. will behose tracks gearing up during 2020. most resourcest, will go to negotiating with the eu. guy: it is a zero-sum game? first,u.s. gets there how do you get balance? >> there are elements that are zero-sum, but they will be dynamic negotiations for that reason. the eu one will take priority,

therefore the agreement with the eu will affect the negotiations with other countries. theto me it looks like initial position will be heading for a skinny deal with the eu on goods in certain sectors, which could leave ability to make deals with other countries. regulatorych alignment do we have in five years? >> we made look quite different, a completet from position of regulatory alignment. we are not going to do anything dramatic overnight, but we will drift. we might look quite different in some regulatory areas. guy: what you think of bailey at the bank of england? he has talked about that bankatory drift, and the

may feel unshackled now. the regulations on the east side and inflexible when it comes to financial services. >> that's true. anythingdon't think will be rushed into. remain 2021, we will closely aligned, but then take time to look at some of the things that the clunky and gradually sort of amend them, repeal them one by one. that is the mindset of the boe as a whole, and probably the new governor as well. guy: what does that mean for u.k. assets? what does that mean for gilts and equities? >> the boe is on hold with the

bias to cut. gilts probably do ok. to get a balance if sterling stays weak. if we head toward some kind of deal. overall, the u.k. looks like one of the world's bright spots in equity markets. you will stay with us. coming up, and exclusive .nterview that is coming up. this is bloomberg. ♪ oomberg. ♪

♪ guy: good morning. i am guy johnson. let's get an update. roadblockn with the to rescuing wework. they were in talks, but discussions have stalled. concerns about the risk in rescuing the company. bank of america is watching the leverage loan market for stress and impact of the economy. brian moynihan telling us there is too much leverage in certain counties. now lenders are doing the deals traditionally handled by big banks. >> you are working with these firms as partners.

typically they are doing a different tranche, so we are focused on the shorter-term revolvers. >> that is your bloomberg business flash. guy: thank you. says regulations have brought a new danger, illiquidity. she spoke with francine lacqua in london and spoke about globalization in 2020. into 2020, we talk about a potential deal between china and the u.s.. if that does come to the full, that will be helpful. i think that will be helpful. , was the u.k. leaves the eu at the end of january, at

that moment the u.k. will be in a position to negotiate new trade deals and have imperatives to do that. after a little bit of difficulty that it goes more positively up the agenda. >> how difficult is it for markets to navigate volatile political events? >> the challenge is not the volatility, per se, and the frequency of geopolitical events, but every single year in year there hasy been geopolitical stuff. i can't remember the quiet year where things didn't happen. it is not like that today. capitalo observe now is is more narrowly circumscribed.

it is partly in response to ,hings like banking regulations so within a bank structure, capital is defined by country, by types of business within that country, within banks to each particular desk and how much capital it has come and that has been done to remove systemic risks. meansintended consequence when something unexpected happens over here, it is not that easy for capital to jump from one pool to another poll to mitigate the risk of fat. intentionand without by trying to remove systemic risk from individual banks, we different risk for capital can't move around in response to an event. when you look at the rates in the report market or contortions

in the currency market, i think there is this sense that we have had a warning signal, but capital can't just move to where it needs to to respond. i think that is giving regulators pause for thought the moment, and the senses we need a set of rules that manage the day-to-day run-of-the-mill conditions that we are in, but we also need a set of rules that say actually in an unexpected condition, the same rules which normally safeguard the system, in that situation are they making the situation worse, and how do we know when to flip from to the other? speaking exclusively to francine lacqua, you can find the nextinterview in

episode of leaders with lacrosse -- leaders with the quad. what he think of the repose story? >> you can't rule anything out. in the u.s.fed treasury were caught out by what happened early this year. i think they have acted relatively decisively. you will continue to see him pump liquidity in short-term. fedt primarily because the and i see this as essentially a money market issue that is separate from what you do with monetary policy. is the case,s that they will continue to keep the short-term and that the market liquid. guy: a lot of the users of short-term liquidity are hedge funds, which have other positions contingent upon that. if there was another squeeze, do you think you would get a ripple

effect that would force them to sell assets? >> it might be, and that is when it becomes more disruptive as a financial market event. the fed in the u.s. treasury will be keen to prevent that from happening, and that is why they are monitoring what is happening very carefully. morepect they will react decisively this time if there are any trends in the short-term markets. guy: you are going to stay with us. another probe into spying at credit suisse. the bank says a rogue manager was to blame. that feels familiar, doesn't it? we will talk about it up next. this is bloomberg. ♪

as investors get ready, investors get ready for -- what happens to -- investors

face brexit uncertainty in 2020, it seems. and after a bad week in space, boeing brings it star liner in for a soft landing in new mexico. regulations from the airliners and passengers. the 737 max. i'm guy johnson in london. breaking news out of saudi arabia over the last couple of minutes per the kingdom has found 11 people guilty of the murder of jamal khashoggi. we will have more details over the next few minutes. but we have 11 people found guilty in that murder trial. taking place in the kingdom. let's get first word news. viviana hurtado. viviana: we begin with the trade situation between the u.s. and china. china is cutting tariffs on a range of goods, including frozen pork and pharmaceuticals.

they are not directly related to ongoing trade discussions with the u.s., but they are part of beijing's effort to support the claim it is up and -- opening up its economy per kuwait and saudi arabia could region agreement to restore oil output in there neutral zone for at least four years. fields in the area have been shuttered because of tensions between them. they can produce as much as 500,000 euros a day. and jp morganc may access the high-speed audio feed from england. in imports -- a report investment banks, if there traders use the feed, they are subject to financial regulators. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i'm viviana hurtado. this is bloomberg. guy: thank you very much indeed. what do you need to know? -- a roguebe, a spy

manager is said to have been blaming the decision at credit suisse. joining us with the details, dani burger. dani: it was a few hours ago that credit suisse released its final findings on this probe. it went pretty much along the same lines of what bloomberg was expecting after -- that is, following the same playbook of the last spying scandal. of hr.me the ex head this report essentially exonerated him. the rest of the executives and the board against putting its onus on the x coo. looking at what share prices are doing, not a ton of reaction, .own .7% at what point it fell more than 1%, which would have been the biggest loss in three weeks, so it is not clear how much this will hurt profitability if at all, but the concern is the regional damage.

that is why we are seeing the share price slightly lower this morning. ,e also heard other allegations calling an executive saying she was followed around in manhattan by someone. >> let's stay with the bank theme. bank of america once again taking the table for u.s. loans leverage issuance. potentialing of carnage from loan stress reverberating through the economy. ceo spoke with david westin about that stress. >> the actual -- we have found the commercial lending, secured lending on the consumer side, and on the commercial side so that the -- that is how you manage risk, when you go back to the question earlier about what could go wrong we view

everything could go wrong or anything could go wrong. you manage risk by having diversification and thinking about client selection. when you think of leverage finance, we have been -- it is not necessarily on the book. the question is, although companies tend to have problems when the world slows down, that is economics 101 or credit underwriting 101. we have to underwrite with the correct amount of debt turns. so you hear there is concern when the market moves away from the traditional levels that major financial institutions do to find higher levels throughout providers. we get concerned about that because it reverberates back. the real concern is there is too much leverage in systems, and if they have trouble, what they impact the economy? that is the question on the table that people are talking about. the fund will go down in value and that happens all the time, but is it enough of a market share to impact the economy? that is the concern you hear

more about. moynihan, big of america ceo, speaking with bloomberg's david westin. let's talk about what is happening in europe. unicredit plans to eliminate 8000 jobs, pushing the total number of cuts announced by banks this year in europe to 75,000. thousand -- 80% of those positions going in europe. negative interest rates and a slowing economy are forcing lenders to slash costs. nick's take ont whether 2020 is going to look different. any sign of a turnaround? clearly we have seen aggressive top-selling this year, but with a macro backed up as it is, what european banks do to try to put themselves on an even keel other than cost-cutting? that is kind of the middle of the p&l.

how do you get the top and bottom lines moving with that? nick: they are definitely looking for some tailwinds. if it is proven in terms of then it trade tensions, is good for the -- it is hoping its investment bank will generate more revenue than initially planned as they have weakness. they are hoping that other factors will be there rather than the bread and butter of lending. the costco announcement, i think we will hear -- the cost-cutting announcement, i think we will hear more from other banks. bbva, the spanish bank, also reporting to be looking at cost cuts. more of the savior banks and the desperate hope that the markets will provide some tailwinds, not

just headwinds from the other banks. guy: is tearing going to work, and what effect will it have -- work, and going to what effect will it have? more than a drop in the ocean. it really does help. in some cases in banks it is tens of millions of euros, or 100 million euros, so it does ease the burden, but it is like an aspirin for a wound they have. they are not going to be making up for the losses they have of negative rates. as to why the market -- you could see a little bit of distortion there. think ourgermany we lending more to banks in italy and other parts of europe, who otherwise would bend -- benefit less from tieirring. it is not really the panacea banks hope for. guy: what about the regulatory

story in 2020? any sign of things easing up there? think so, yes. the ecb says the capital requirement is leveling off or banks, and there is this big called what the bank has boggle 4, what regular to have called boggle 3. soon,xt year but coming we have seen various measures that will lighten the load of that. the european commission, we knew that this was coming in the next version of the european capital requirements, but banks will be able to use cheaper debt because of the capital requirements white as the driven snow capital. that does lighten the load in the coming years, yes. guy: we are going to leave it there, nick comfort, coming to

us out of frankfurt. shamik dhar is still with us. let me just give you the figures. or banks in europe, 8.96% that has been the gain, the stock 600 has done 23%, 24%. is europe going to generate from a macro point of view anything like the kind of impetus next year that is going to allow what should be a high sector? that is the deep issue with the euros on. the problem is the euro zone is far too dependent on what happens with the rest of the world. it is not generating sufficient domestic demand. there are deeper reasons for that that i will not go into for the moment, but the issue is not sufficient domestic demand generated, meaning there is not demand for credit. this by -- despite what is

happening on the supply side, that is bad for banks. if we see some further reduction in the amount of negative interest rates, we might see a , to modest planning steepening of the yield curve in europe. but it is not going to be anything that really sort of changes the european banks. guy: will europe get a high level of -- the 600 billion euro question, or whatever. no is the short answer because i think politics prevent that from happening. that is probably what will happen. it probably should happen in the absence of strong enough private domestic demand. i think at some point it makes sense. the fiscal authorities, particularly the german authorities. i think the political bar against that is -- guy: stick around. shamik dhar will stay with us.

that's get back to breaking news, 11 people found guilty of the murder of jamal khashoggi. we will be covering the story extensively. we have seen the effect this has had on the saudi economy and relations around the world. we will have more details on the case and what the implications of it are. that is coming up next. this is bloomberg. ♪

finance, ands, politics. this is "bloomberg surveillance ." let's get back to the news about jamal khashoggi and the 11 people found guilty of his murder last year let's get details on this now. as our guest.

guilty,11 people found five people are going to be executed. three people will get 24 years in prison. this is a fairly substantial response from the saudis or the saudi authorities. is this what we were expecting? were, although not necessarily the timing of it. public prosecutors reading out a statement, we are still getting details. it is definitely kind of the effort that -- prosecuting -- what the saudis will be hoping is that this -- at the same time, what is whoresting is in the people have been found not guilty,

senior officials close to the crown prince, who have been removed from their positions. the statement that was other wased, and the said to be not guilty. guy: in terms of the rest, how close are they to the crown prince? riad: they reported to at least one of the officials that i mentioned. the names thatse we have earlier, we are still getting details of who exactly was sentenced either to death or to prison. but they were related at least to the institution, to the group that the prince surrounded himself with. the fence has admit -- the prince has admitted that people,

people who were part of the institutions that he commands ultimately were involved. know, we are going to be looking very closely at some of those names. but i think the question is for the saudis, will they be successful, will they be successful in turning a leaf on the issue of the jamal khashoggi murder, or will people say, no, this is not enough and the people who ordered the killing may not be the ones who are sentenced here? guy: thank you for the update. we appreciated. , our middle east executive editor. coming up, and another setback for boeing, it's space gas has spaceed to earth -- its capsule has returned to earth. this and the 737 max crisis. this is bloomberg. ♪

guy: good morning, you are watching "bloomberg surveillance ." i'm guy johnson in london. 9:49 in london, 4:49 a.m. in new york.

unmanned space capsule landing in new mexico after failing in its mission to reach the international space station. it adds another element to the mounting pressure that the ceo faces, the big pressure coming from what is happening with the 737 max and the crisis that surrounds that aircraft. joining us now is john strickland, who just got back from visiting boeing. john, good morning. nice to hear from you. what did you see with boeing? how problematic is the max program now. in starting to shutter that program, what did you learn? john: i was there about two weeks ago before they started to stop production. we were at the factory where the 737 max is made. we had a whole day with the senior management team, including dennis muilenburg himself. he took questions, and i was really concerned, not being a pilot i could not get into the

technical aspects of the software on the max, but i asked more about company culture, the challenge of competing with business with -- competing for business with airlines who ever want a deal. reassurance gave me , that number when he is an engineer himself. with a team of engineers, there is talk about whether boeing has lost focus on their engineering quality. i was reassured that they are very focused indeed. taking steps to ensure that that is a preeminent focus, and perhaps they did take their eye off the ball that commercial factors had a negative influence. even as they get the green light imminently from regulators, and that is still uncertain, it will take over a year to get the aircraft produced. and getting it back into service. guy: if they continue to hold the line for the max, how long

-- talk to me about the timeline about how that will ripple down the supply chain. how problematic will that be for the supply change to see -- will they have to start laying people off? how easy would it have been to bring them back on again? john: that will vary a lot by supply. you have some very large suppliers like cfm. boeing is one of their -- they produce engines for other models in boeing's family and for airbus, so they are not relying wholly on boeing. but there could be some specialty suppliers, some niche equipment producing aircraft supplies and materials. the smaller they are, the greater the pressure is, because not only is boeing a good customer, but in terms of cash flow and paying wages, it could get to a difficult place. boeing is now offering support with their supplies, but because there is a limit to how that can go on, and in a tight jobs

that that could be set of skills walks and looks elsewhere. it could be a compounding problem as time goes on. just getting the production line back up to a steady state also takes time. the scale of what is happening at boeing, how secure do you think dennis muilenburg is next year? john: it is a very much conjectured question. i have noticed the media in the past few days has a campaign to editorialsthat the are saying that he should move on. we are seeing restructuring where he had the chairmanship roles taken away from him a few months ago. certainly the finger is pointing at him, having been the ceo for the last four years. he has been at the helm over the time period -- right through the

unknown.t is an certainly i had a much better impression of him as a man meeting him, face-to-face, then what i have seen of him in media. he seems to be one of these people who does give a different impression when you meet to what you see in front of a camera. boeing's comms annuity, it is managing this major problem. i think at present time they leadership the remain stable. john, always good to talk to you. shamik dhar is still with us. shuttered,e stays what impact will it have on u.s. ?ata the echo shamik shamik: i don't want to get into

what individual companies would contributessector to exports. boeing continues to struggle in another area. it is a major component of the dispute, the potential trade dispute between the u.s. and the e.u. so travails in that sector could affect the nature of those talks. guy: final big question. will the industrial sector recover next year? the industrial sector has gone down. two mistakes, and will the consumer be strong? shamik: i think the consumer always bails it out. frankly, trade tensions that we see today cannot really spine why we have had the 3% to 4% fall in global industrial

production. the removal of fear, of uncertainty, gives potential upside to the global industry. so long as trade talks go well. guy: great to see you this morning. thank you for stopping by to see us at bloomberg. dhar, chief economist. tom keene and anna edwards will be guiding you through. we will be speaking to catherine global chief economist for that is coming up. this is bloomberg. ♪

tom: this morning, china will lower the tariffs first selected

imports. the goal, to manufacture a better chinese economic growth. no word from washington on any kind. linked at the hip -- that would be the greatest of great bull markets. it is beginning to look a lot well, a sale. everything is on sale. there is nothing list price except tuitions. and that little thing from has to's that she's just have. good morning, everyone. "bloomberg surveillance." anna edwards in london. i'm tom keene in new york. how stressful is this? anna: are you ready, tom? you sound like you are not ready. tom: but i am so not ready. i'm starting my shopping this afternoon. what is the day with brexit? is it shut down for the year? anna: it seems that with the prompting of the bill on friday,

it is smoother sailing it at least not getting too many surprises. tom: very good. let us start in new york city with viviana hurtado. viviana: we begin with breaking news from last hour on "surveillance." saudi arabia finding 11 people guilty of the brutal murder of jamal khashoggi. five people will be executed, another three imprisoned for 24 years per last year his murder inside the nation's consulate in istanbul sparking international condemnation. -- donald trump asked about ukraine aid before his call with the country's president p that is the conversation that triggered the impeachment investigation. the heavily redacted emails were obtained by the nonpartisan think tank center for public integrity. they also show the administration ordered a hold on aid about an hour after the phone call.

was ao hong kong, that tense weekend. police officer pointing his revolver at protesters. no shots were fired. this comes after a reported attack on police during the protests. bushfires are burning out of control in new south wales. they are devastating property and farmland. they are also disrupting holiday plans for thousands. at least nine people have been killed, hundreds of buildings burned down. the fires are being set by record temperatures in the region. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. this is bloomberg. tom: thank you so much. let me do the data check. we need to sit on the markets through all of "surveillance" today. for those of you who do not 3.228 ise s&p 500, extraordinary on the s&p.

oil has done nothing. but there really are some nuances -- 3228 is extraordinary on the s&p. oil has done nothing. but there are some real nuances. anna: i put this together. it features european stocks not going anywhere in a hurry. but as you point out, the new u.s. highs that we saw on friday, oil not going very far. keep an eye on the saudi story. the links with kuwait with production coming out of that region. week was the worst week in more than two years for the pound. how quickly things change. 1.29right back down to the handle on sterling. we will do a couple charts here. my is on the kecmanovic on the -- mine is on the why of equities. back to the late great paul

10% real funds target rates. a great regression. we all know the great moderation and what is so important is the point of ultra accommodation of a wicked lope that is fancy economic talk. a wicked low, real interest in the short-term space. up we go. here is the great rollover. , anna, huge debate which this -- which way this goes in 2020. anna: the link between bonds and equities are a talking point for us. i have a steeping of the yield curve, picking up on something linked. i was just about to say in the face of that, we hold about 1.9% on u.s. treasuries. we are below that now. if you like a, lot of decimal points.

6, ifhe curb -- 1.899 you like a lot of decimal points. and a new danger is illiquidity. she spoke exclusively to francine lacqua on the positive side in 2020. >> we are moving to 2020, talk again about a deal between china and the u.s.. if that comes to the fore, that will be helpful. that will get capital moving around the world and that will be helpful. u.k.f the u.k. -- when the leaves the e.u. at the end of january, at that moment, the u.k. will be in a position negotiating trade deals. there is an imperative to do that. which again will bring back the need to think globally.

it may be that after a little more of a difficult period, it goes more positively up the agenda. time will tell. anna: how difficult -- francine: how difficult is it for the markets to navigate geopolitical events? anne: i think the challenge is not the volatility per se, and it is not the frequency of geopolitical events. despite what everybody says, every single year in my career, every single year there has been geopolitical stuff. i cannot remember the year that was quiet that things did not happen. it has never been like that and it is not like that today. --t i do observe now is this hordes of capital are more narrowly circumscribed, and they have been for a very long time. it is partly in a response to things like banking regulations, which has been trying to take on systemic risk. so within a bank structure,

capital is defined by country, it is defined by types of business within that country. it is defined or prescribed within banks each particular desk and how much capital it has. that has been done to try and remove systemic risk. the unintended consequence of that means that when something has not -- has been done and over here, it is not all that easy to have capital jump from one pool to another pool to mitigate risk. i thing strangely, and perhaps without intention, by trying to remove systemic risk from individual banks, we have created a different risk, which is the capital account -- capital cannot move around in response to an event. when you look at the spikes, odd contortions in the currency market, trying to find -- i think there is this sense that once in a while had a warning signal that capital cannot just move to where it needs to to respond to something quite

small, but nonetheless significant. i think that is giving regulators pause at the moment, sure,think the sense is, we need a set of rules that manage the day today, run-of-the-mill conditions we are in. but we also need a set of rules which say actually in unexpected conditions, are the same rules which normally safeguard the system. in that situation, are they making the situation worse? how do we know when to go from one to the other? that is a conversation that needs more fleshing out. richards with fidelity international. we are looking forward to seeing her it davos -- at davos and a number of weeks. we must begin with breaking news of a report that five will die in saudi arabia, and with others arrested for 24 years, for the murder of jamal

khashoggi. joins us from dubai. it is real simple. they got a lot of people, but no people attached to the royal family. i believe were sentence. does that surprise us? i think you are exactly right, and that is a key it of information. we knew they were prosecuting these 11 people. we knew there were people who worked for people who were very close to the crown prince. thatof those officials have been removed from those positions have been exonerated. one was said to have not even been worth prosecuting. the other was exonerated completely. the accusation is against the that acted on their own, that are said to have been acting on their own decisions, on an operation that went wrong and they decided to murder khashoggi show -- jamal

without approval from the top. tom: you have decades of experience in the middle east. did this bring the matter to a close? i know to "the washington post" it will never come as he wrote for "the washington post co. but is there finally a closure to this tragic event? riad: it is hard to see that happening. i think what will happen is the people who are very critical of the crown prince, who used it -- who accused him of being behind this, being ultimately responsible for it, they will continue to apply pressure for greater transparency on this issue. and the people who have tried to ,ush it aside and draw a line will use this as a line to move forward. we have seen, for example, when it comes to the financial community, they have been keen

to really move on and to go back to business as usual with saudi arabia. anna: i was going to ask you about that. the murder of jamal khashoggi clearly is something that tensions between the saudi arabian royal family and government and the u.s. leadership, and other governments. to what extent did we get through that already? many countries want to this in the rearview mirror. riad: i think partially, if you look at the u.s., it is not monolithic. you have the trump administration that has resolutely stood behind the crown prince, whereas congress has been critical and has issued resolutions against the crown prince. so it is certainly -- it has damaged the saudi reputation in the u.s., and has increased the reputational risk for anyone dealing with the crown prince specifically on the other hand, i mentioned the financial

community. you can add to that country -- you can add to that countries such as china, russia. they have definitely moved on from this issue and are keen to do business with saudi arabia. , thank you so much. riad hamade with us. we appreciate it. in our next hour, we are thrilled to bring you catherine mann of citigroup on the dysfunction of this trade war. the number one story of the year. catherine mann on china and the united states. this is bloomberg. ♪

anna: i am anna edwards in london. tom keene is in new york. francine lacqua is off today.

is aiming tariffs at expanding imports. finalizing the formal signing of their first trade deal next month. chiefg us is the economist, friend of the show. theme ask you about significance of this mini move from the chinese to fullback some of these tariffs on pork and other product or this is not directly linked with the u.s. and china trade tensions. does it help with the mood when it comes to imports? >> i think the big imbalance with the market is that we are think the mood music has dramatically changed from the sense that we had just 12 months ago, and that is that we are in a long-term

restructuring of the most important economic relationship in the world. but clearly we are moving away from an all-out trade war to management. both where there is clearly a -- from the china side, where clearly the incentives are toward managing the risks, managing the relationship. anna: so if we go from that all-out trade war to these targeted conversations, does that mean that phase i is followed by phase ii and phase three and we should get excited about that in 2020, or no? anna: the way -- lena: the way i see it, it is not helpful at this point to talk about the trade war between the u.s. and china. what we're talking about is long-term economic diplomacy. we have a change in relationships. china trading with the rest of the world, they are unilaterally reinforced by the u.s., so much

so that it has been instrumental to its growth and development at its model of the last 30 years. that will be happening on the terms of, if you want access you have to offer something in return. two other things are coming up on this. one of this is the destruction of chinese foreign investment. isd the second one, this heavying china's move on metal industries. that is moving away to become the economy it is becoming. at port. look -- let's look at pork. this is the same type of move well out over standard deviation paired this is five standard deviation, this is nine or 10. this is a spike in pork prices. what is so important is in recent weeks we were here and then we moved on to hear, and now we are out here, an

exceptional extension. dovetail in here china's desperation on trade with the correlation to the domestic economic growth. how tightly is domestic gdp linked with exports and imports? the growth model is a balance of payments model, based on access to foreign markets to facilitate domestic growth. china is transitioning extremely fast, and what i find encouraging is that the investment initiatives in places like shenzhen, like beijing, highare fueling the innovation, some areas in europe can look upon with envy. this is an interesting story, and i think it is being hidden in the top line gdp growth narrative we saw in 2019, where in have the deceleration global business investment led by china. this is really business demand.

60%global slowdown has been business demand and 40% trade. i think when you have this tug-of-war between the old economy industry and the new technology innovation, topline growth altitude declining is not that important. what is important is that we have two key pillars of global growth developing. one is china, and the other one is china access to foreign thatts happening at the -- is the multiyear economic diplomacy narrative. it is no longer helpful from amongst risk perspectives to talk about this as a trade war. anna: something we need to look into as we go into a new decade. lena stays with us on the program. coming up, another setback for boeing. afterace capsule returned failing to reach the

international space station. this is bloomberg. ♪

viviana: let's get to the bloomberg business flash. than $10 billion a year according to the tech giant, in an interview, germany has been used as its most promising cloud market beyond china, aiming to create 2000 to 3000 jobs in europe over the next three your

spirit a roadblock for softbank as it attempts to secure financing to rescue we work. discussions with japanese lenders have stalled because the bank had internal lending limits. they also expressed concerns about the risk in your rescuing work.k -- we the boeing unmanned space capsule failed to reach the international space titian, adding to mounting pressure that boeing is under because of the 737 max crisis. ,et's speak with matthew analyst. intelligence boeing tried to throw this forward already saying that they would be safe reentry and landing. they would be using all the data from this orbital flight test to improve things in the future. where do we go next?

matthew: there is a lot of work to be done on -- by boeing. this projection has delayed the program by a few months. it put spacex back in the lead as being the first platform to get u.s. astronauts back to the international space station from u.s. soil. so there is a lot of work to do there. it is not a disaster, but clearly not getting that capsule into orbit and propelling it onto the international space station is a bit of a failure. to point to successes in the mission, but there are question marks. we will have to see in the coming weeks if nasa needs to do a rerun of this particular launch again or if they can just go to the next step. quickly, what is the impact of this on boeing and their stature in europe? just anothers reputational issue, isn't it?

although it is completely different to what is going on with the 737 max. there are problems within boeing. of old is notg quite there, so without aura of things not quite being right at boeing right now. tom: matthew, thank you. we will do longer tomorrow. theuch to do with boeing, story that simply will not go away. an important year-end conversation with a gentleman from bank of america. it is a huge turnaround story from mr. lewis to mr. moynahan. this is bloomberg. stay with us. ♪ what are you doing back there, junior?

since we're obviously lost, i'm rescheduling my xfinity customer service appointment. ah, relax. i got this. which gps are you using anyway? a little something called instinct. been using it for years. yeah, that's what i'm afraid of. he knows exactly where we're going. my whole body is a compass. oh boy...

the my account app makes today's xfinity customer service simple, easy, awesome. not my thing. good morning, everyone. anna edwards in london. i am tom keene in new york. catherine mann with us in the

next hour. in new york city, here is viviana hurtado. we continue with a correction on what we developed earlier. saudi arabia finding 8 people guilty of the murder of jamal khashoggi. people will be executed and three in prison for murder. relationses to strain between riyadh and key allies. some high-tech components -- these are some of the goods china is cutting tariffs on. related tot directly ongoing trade discussions with the u.s., but they are part of efforts to support the claim it is opening up its economy. kuwait and saudi arabia could reach an agreement to restore oil output for years.

they can produce as much as 500,000 barrels a day. bushfires are burning out of control in new south wales, australia. 9 people have been killed, hundreds of homes and businesses burned down. hoped -- are being helped by record temperatures in the areas. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. it is that monday before three weeks of holidays kick in. off on -- ferro sabbatical. you are not up 28% like the stock market. lena komileva with us to talk about central banks. up 28% this year. we have last 10 year,

13.5% per year. why have equities surged in the great lehman lowell bull market? lena:lena: about five reasons. clearlyone of them is we live in a world of high interest rate sensitivity. we have had this pivot away from central banks and management away from inflation management to tail risk management. of the geopolitical risk is priced. that means markets can take another fresh look at fundamentals. we have a global economy that has been extended through the the rate hike for a market priced for end of cycle. if we study -- the blazek

-- basic idea is the central bank wants to reflate. expressed in asset bubbles? is powell's reflation, charles more' reflation nothing than one big asset bubble? lena: it is a very fundamental question about the trade-off between bringing forward future growth and systemic risk that generates and i think it is addressed in the context of the narrative. ultimately, the risks that existed a decade ago have been transported to the non-bank financial system. there is the asset liability mismatch and a majority asset mismatch and if you have high leverage low volatility

strategies, the markets can get overcrowded. also raise a big question here about where we are in the growth cycle. when we look at interest rates, nominal, but also real interest rates, the fed is in negative interest rate territory. we are not in a crisis territory . we are in a territory operating .lose to full employment it has come from the oval -- oversupply of capacity, not as a result of a shortage of demand and if this is what the fed is grappling with, we have two problems u.s. rates are not isng to have -- the fed .xpensing precious ammunition

forrder to compensate disruption to injuries. look at out toes, it is a multiyear high. anna: do you see bubbles in any of those areas or elsewhere? historicala perspective, valuations look stretched across the board. we are in an environment where central bank managers are not going to go down. if there is one clear message, we are in an open ended reflation repost and if any rate what that tells us basically real interest rates are going nowhere and if this is the kind of environment we are in, bonds are not offering us any value. if we are in a negative yield if we getld global,

another risk shock, reflation of asset prices that has to happen in the bond space is not there. if bonds are not offering us we at this why are levels when equity markets offer financial returns and when nominal gdp growth is much higher. it doesn't make sense and this is why we are seeing steepening of the yield curve even with geopolitical news. anna: where is the bar for further rate cuts from the fed given what you just said? lena: i think the fed is done cutting. this is the alignment of the stars. the rate is below the short-term rate, which probably failed 2019. higher.-term is what we have looking at the u.s. labor market and the u.s. consumer is this a -- is not a

demand efficient economy. supply rationalization has to happen on a global scale. it is right that we are seeing this rationalization, but what we want to see is a move into capital away from high yield higher quality companies because that will extend the growth cycle. tom: what happens to equities when the fed finally turns? we haven't had a correction since time began. we had a mini bear market a time ago. if they go neutral or hit a restrictive approach, what happens then? what is your experience on that? your study on that? lena: i think you raise the question that will come back to haunt us in 2020. we are in an environment where the net present value of future trust company earnings is being inflated by the fact we have this really low u.s. 10 year

yield. as the steepening of the yield curve normalizes, as markets move away from unproductive , then we havehand the sensitivity of equity markets -- the prospect of higher rates. what i am worried about is the fed is not probably going to burst next equity bubble, it will be inflation that does it for us. tom: do you see the inflation right now? , anna showedaves the 2-10 spread earlier. deviationsstandard steepening. is that the first whispers of inflation? lena: the question is -- yes, i think so. there are three parts to your question. one of them is what has kept inflation this low?

what has kept inflation this low is this technological innovation in the services sector through .hree sectors of globalization that amazing supply list to the price of oil in the energy sector. some of that oversupply is being worked out. what we don't have is the close between real interest rates and u.s. inflation. we don't really have a classic central blank -- central bank disinflation. in 2020, we are clearly past the break of u.s. profits. shares are going higher, fed cuts have helped to offset the pressure, but that cannot last forever. at some point, companies will have to stop swallowing higher cost pressures and pass them on

to consumers. when that happens, i'm afraid the fallout of the bond market, especially in a global negative yield bubble, will be quite painful because we have a one-way positioning. tom: thank you very much -- anna: thank you very much. she will be back with us next, continues to talk about inflation. what does it mean for the european banking sector? what does the steepening of the curve mean for the european banking center? this is bloomberg. ♪

tom: you are watching "bloomberg surveillance." viviana: traders at jp morgan may be among those who access to high-speed audio field from the bank of england according to the financial times. investment banks are trying to establish if traders used in the feed. it is subject to a probe by the you k's financial regulator. -- by the u.k.'s financial regulator. -- ordered surveillance of the company's former hr chief and there is no indication the ceo or other members of the board knew anything about it. this follows another spying probe involving the surveillance of the former head of international wealth management. bank of america is watching the leverage loan market for signs of stress. brian monahan is telling us there is too much leverage in

certain companies and if they have trouble, he says it will impact the economy. it comes at a time when direct lenders are doing many of the big deals traditionally handled by big banks. >> you are working with these firms as partners and they may be financing, but they are doing a different tranche. we are more focused on short-term revolvers and how we finance. bloomberghat is the business flash. anna: thanks very much. let's get onto the subject of banking. unicredit plans to eliminate 8000 jobs pushes cuts and announces buybacks to $75,000. more than 80% of those positions will go in europe where negative interest rates and a slowing economy are forcing lenders to slash costs. nicholas joins us from

frankfurt. it has been a year of bank job cuts, so many of them coming in europe. it seems there are structural reasons to be cutting jobs, but in europe, cyclical ones. nicholas: precisely. as the world economy could slow, the medicine the central banks are bringing is a low for longer interest rate, even more negative. at the bank, you get hit by a double whammy, slow economy, which means people defaulting on loans or not using your services as much as you would like them and those you do grant are at a lower rate, it is less profitable lending. tom: i want to show a chart and give you a year end 60,000 foot question if we can. above all of this, european banking. at and everyone else in europe really down near the zero extreme as well, is anybody on

these various and sundry board of directors outraged by that chart? --s anybody really care >> absolutely and it is why people are incensed about that. you hear critical stuff from big investors in european banks. think of cerberus. i would say they are enraged by what they are seeing in terms of performance and strategies to address it. thank executives as well, you hope they would be annoyed, but also the regulators. think about the ecb, he oversees the biggest euro area banks and he has been saying he is worried about the way the market becauses european banks if these guys need to go out and raise capital, can they do it at these low levels?

from a whole group of different stakeholders, you are seeing people being pretty unhappy about these share price lows. tangentially to the job cutting story, credit suisse issuing a report confirming the ceo had no knowledge of another spying episode at credit suisse. i am guessing 2020 we will continue to ask questions of management about who knew what, why, and when at credit suisse? nicholas: precisely. put the spy scandal to bed a couple weeks ago. the statement today, trying to put this spying issue around the hr chief to bed as well. the key thing is the swiss regulator will take a deeper look at this, credit suisse is saying they were lied to by the people responsible for the scandal, that there were no more

spying matters around this, but if i was regulator, the question i would be asking is what were the failures and governance that led to this? what are you doing to address it and in terms of the culture from suggeststhe statement they really think this is not in line with the culture as propagated by the management board, but are they doing enough to make sure that filters to other parts of the organization? anna: and keep a firm hand on that culture. thank you very much. what we are watching out for this week, tomorrow, shinzo abe and moon jae-in meet in china in an attempt to patch up tensions between the asian neighbors. u.s.-china was not the only trade war in town and benjamin netanyahu faces a challenge for the leadership as the country

heads to its third election in a year after failing to form a government. this is bloomberg. ♪ ♪

everyone.morning, it has been an extraordinary year in the united kingdom, i am trying to read my back history, trying to get one third as smart as you on this absolutely strange thing, which is not just the united kingdom for 2020, but just the state of london i find extraordinary. we have a good guest to talk about the city, don't we? komileva.o, lena let's bring that interest rate story back to the u.k.. in the context, it seems to be more certainty on the brexit outcome, it looks like it will happen the early part of january and we go into that long conversation about the super -- the future trading relationship. the market seems to be pricing in some kind of rate cut during the year as the global economy

continues to look weaker. bailey comes in in march, there are few people that combine technical knowledge with the live -- large organizational leadership with this time of tremendous change at the helm of the bank of england and within the economy. fan.a bit of a his ability to command authority is going to be critical. i think 20/20 is clearly going ofbe a year when the bank england is not going to be active on the rate front, but it will be active on the regulatory front. i think this is where andrew bailey's -- where his experience will be important. to: do you see any ebb people coming to the city? will there be strategic meetings from now through january where that changes or for now and now

is london still london? lena: you will always be welcome in london, i can tell you that, brexit or no brexit. there is this tug-of-war between the open economy and dynamic industries, media dominated injury ash industries of the u.k. with the closed society mentality of other parts of the u.k., i think the world knows we don't have one homogeneous society and economy, there is a divide and a huge urban versus rural divide in the u.k.. alwaysc pragmatism has performed extremely well, but what we know is we are in a new political economy and this government will be unable to stagnation.ar a level of investment will have to happen and now is the time for it to start. i think it should have started three years ago as brexit

preparations got underway. productivityional problem. on the other hand, the political economy dictates we will get close or very slim agreement given the short period of agreement with the e.u. in 2020. some disruption between the old good spaced economies of the north and the dynamic open services based economy of the south may be in play. that could be socially disruptive. how this government manages that will be the key. tom: thank you so much. lena komileva with us with a terrific briefing towards 2020. what -- we have much more to talk about. anna edwards and i focus on emerging markets. pick your index, dial over 20%. nasdaq comp over 34%. i will let you pick your index.

extraordinary numbers, even people underperforming are having a great year. we will drive forward the conversation, catherine mann with us in the next hour and we are thrilled to bring you an important update on washington on the senate and the campaign. valliere will join us. futures up three, dow futures up 23. i don't know, maybe santa is going to give me dow 29,000 under the tree. it is a little too early to be on the dow 29,000 watch. it is a giant, the new york football giants new york.

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on selected imports, including parts for the package -- for the manufacture of cell phones, the goal to manufacture better economic growth. catherine mann from citigroup. the tripleng leverage on cash fund and it is beginning to look like it is a sale, everything is on sale, there is nothing list price anymore except tuition, catherine mann's research and that little thing from tiffany's she just has to have. do you know where i am going after the show, this is bloomberg surveillance." anna edwards and for francine lacqua and we are right on the holidays right now. what is the bustle in london? with the johnson landslide is the consumer going nuts? anna: you told everybody to go away and have a nice christmas when he welcomed his victory.

maybe families across the land focused on that or may be people thinking about 2020 and what that holds. 31st of january will be interesting for many people. tom: a tear to my eye to see nejra cehic on downing street bonding with the cat. with this serious story, an important story from saudi arabia, viviana hurtado. .iviana: that is where we begin it saudi arabia finding 8 people guilty of the brutal assassination of journalist come all khashoggi. -- jamal khashoggi. last year, his brutal murder inside the consulate sparking international condemnation and outrage. it continues to strain relations between riyadh and key allies. over to hong kong, this past weekend was tense. a police officer pointing a

revolver at protesters, the incident coming after a reported attack on police during this demonstration and bush fires burning out of control in australia, at least 9 people have been killed, hundreds of buildings burnt down, record temperatures are stoking the fires. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. the data check, here it is, the continued lift in the markets, down 30,000 may be by the end of the year, euro where it is, oil where it is, pretty quiet all in all. quickwe will have to move . stocks pretty flat in europe, u.s. stocks coming off all-time highs, that is the background. we do have movers and the pound. that is impacting what is going on on stocks.

we have gone from up a bit to down a bit on the pound. below 130. the ftse 100 up by .4% and that is providing the bright spot for european equities today. has beenbloomberg, it an extraordinary year of the coverage of china, not only the team in hong kong working at it 8 days a week, steve engle under a fair amount of danger, but also dr. kissinger joining bloomberg in beijing a number of weeks ago. we thought we would get to the grounded theory and we can do that with our guest. in 1999, a small monograph as a inde deficit sustainable and 2004, catherine mann changed the landscape of how we speak about china. she spoke of codependency and dysfunction just out of m.i.t.. how are we doing? how is our codependency with china going into 2020?

catherine: we are trying to reduce codependency and that has been the policy of trying to reduce that codependency. it is difficult to make that happen. divorce is challenging. tom: let's bring this over to the market economics and your world wide team at citigroup and that is simply how it falls into the path of economic growth in china. how critical is that vector right now? cattherine: the reduction in codependency, the divorce is damaging to all parties and we would want to take that metaphor further -- it is not just the two parties involved, but the collateral damage to the rest of the economy. the rest of the global economy is significant. we have downgraded our growth seven times this year. 70 basis points on global growth ,nd there were idiosyncrasies

but a lot of that has to do with the trade war and so the damage is significant when we think about global growth going from 3.2 to 2.6. anna: good morning from london. i wanted to ask about the drivers of growth and the slowing growth in china. how much do you attribute slowing growth to trade tensions with the united states specifically and how much is self-inflicted, the chinese trying to deflate slowly? some guests emphasize the latter. cattherine: when we are thinking about where we are now, where 2020 is going to go, we have to put it in the context of 2019 and even before that where the chinese were working to deliver their economy, that was in 2018 they were in that process and the trade war started and it heated up throughout 2019. they were already in a process

of wanting to change the balance of the economy both on the real side from an export led-investment led growth toward one that is more balanced toward consumption and services and they needed to rebalance the economy away from access leverage particularly in real estate, but more generally throughout the economy, local governments and so forth and so that combination of rebalancing on the real side and delivering on the financial side was going to be very difficult under any circumstances and you add the trade war, and it makes it more challenging. over the course of the last 18 months or so is trying to evaluate as we analyze china, trying to evaluate how much asction policies will have in more financial policies, money and credit, how much more investment policies, local government borrowing and there delicatemore of a

approach to policy than some of us thought was going to be the case, there has been reticence on the part of the central bank to turn on the credit spigots and reticence on the part of local governments to really use the room the government has given them to do spending. it is both less policy deployment and a little bit less traction as well. when you talk about your other colleagues saying a lot of this having to do with the domestic policy stanch -- stance, i think both of them are in play. not quite as much policy as could have been implemented to stimulate things. does the deflation we see continue? that seems to be something that has easily found its way into the european lack of inflation story. cattherine: when you have a tariff put on, there is a

variety of things that can happen. profit margins can get squeezed in a number of different places so as to avoid the pass-through of the tariff to the ultimate consumer and so it is a standard thing, we have seen that happening at the factory gate in order to keep production level ups -- levels up and it was the case that we had announcements of tariffs before they were put into place and so the strategy a producer would have and a buyer of the products would be to pull forward production, pull forward the purchases, pull forward imports into the united states so as to avoid tariffs, that is that -- also some of the dynamics we see in place -- in play. tom: you in a room with michael rosenberg -- i think at deutsche bank now with bloomberg as well and the heart of your research at the time on our dysfunction and codependency was currency dynamics.

how critical is the dollar dynamic next year to this arch trade war? cattherine: what has happened over the time since mike and i were talking about codependency and the exchange value of the dollar versus the rmp being an indicator is at that time it was much more managed. it is managed now, but it was much more managed then and the other factor that changed dramatically is the currency composition of chinese trade has moved away from nearly all dollar based to much more 50-50 dollar and euro. is now as important a trading partner for china as the u.s.. tom: does the president of the united states know that? does he understand it is not a unilateral tit-for-tat anymore? catherine: i am not sure that is the focus of his analysis. i think he is focused more on the u.s.-china bilateral bounce. tom: we will try to get this on

our podcast today. much to talk about was catherine mann. on american politics, greg valliere joining us. we need a briefing on the senate and the race. greg valliere, agf investments. we will do that next. from london, from new york, stay with us. this is bloomberg. ♪

anna: you are watching "bloomberg surveillance." viviana: credit suisse is blaming the former chief operating officer. it says he ordered the surveillance of the company's

former hr chief and says there is no indication that ceo or other members of the board knew anything about it. this follows another spying probe earlier this year involving the surveillance of the former head of international wealth management. aims to boost investment in europe to more than $10 billion a year according to the european cloud chief. mostsee germany as their promising cloud market over the next three years and aims to create up to 3000 jobs in europe . a roadblock for softbank as it attempts to secure financing to rescue we work. they were in talks for $3 billion from a group of japanese lenders, those discussions have stalled because the banks hit internal lending limits and expressed concerns about the risks. that is the bloomberg business flash. tom: we must look at the politics of the united states of

america and we can do that with an exceptionally strong team led ona professor at a school the charles river. on alexander hamilton, senator mcconnell, meet alexander hamilton. a tribunal significantly dignified and significant independent. a lesson for democrats under the constitutional plan, disapproval of the president and intense disagreement with his policies are illegitimate reasons for conviction, that is a good way to go to the senate in a discussion with greg valliere, thrilled that he could join us. let me ask an open question first, what are you watching for from senator mcconnell? what is the signal this week that matters? greg: if he indicates he is

listening to mitt romney or some dissidents in the senate, that would be significant. i think at some point, nancy pelosi will have to fold and send over the impeachment case to the senate in the next week or two and this is over, i think the story will be over by early february. the is there tension with senator from maine, utah, where ever? is there a countable set of republicans where the pelosi delay could have value? greg: i don't think they will vote to acquit. it only takes 51 votes to demand witnesses and i think they may be significant in that area and that could be damaging information, i think the bigger story in the senate is whether all the democrats will hang in. there is a moderate democrat maybejones from alabama, mansion from west virginia. i am not sure all democrats will vote to convict. the nextill do this in

segment, but let's get to it, what is fragility for republicans in the senate question mark -- in the senate? greg: there was a fascinating story yesterday on how trump has terrorized all republicans into supporting him. if republicans do not support him, they are out. i think republicans will fall in line almost to a person. london.od morning from i was reading an interesting bloomberg opinion piece that asked the question -- a lot has been written about the delay and this asked the question about whether the senate could change rules to start the style -- the trial sooner. it does that put more power back in the hands of the senate? greg: it is an interesting angle in that you have the white house that would like a lengthy show with all sorts of infighting

whereas i think mitch mcconnell is concerned about getting this done, maintaining the decorum of the senate. the latter scenario will prevail. to 2020 we get closer the election events, if this does last longer, what is the longest this could last? this impeachment saga? couldclick -- greg: it drag on. i have argued all year long the far bigger story is that unemployment is at 3.5%, the economy is in such good shape i think that is the ultimate story for voters, not an impeachment story that confuses people. anna: thanks for your time, greg valliere, atf investors chief policy strategist. catherine mann staying with us. here is what we are watching for this week. tomorrow, shinzo abe and moon

jae-in meet in china in an attempt to patch up tensions between these two asian neighbors. the u.s.-china trade tensions are the only -- are not the only trade tensions this year. on thursday, benjamin netanyahu as the countryge heads to the polls of the third election in a year. -- this is bloomberg. ♪

tom: "bloomberg surveillance." good morning, everyone. want to look at a little bit of a horse race. we should point out mr. bloomberg is the founder of bloomberg news and bloomberg lp and principal owner of this television and radio network. give us an update, give mr. valliere an update on the gdp backdrop of this race. i do not to pontificate on iowa, but what is the gift economy the candidates are going to have? catherine: they will be able to run on a very strong domestic economy. you have historically low unemployment rates, basically historically high stock markets and the only black cloud is trade. tom: if we did not have a trade

war, where would gdp be? .3.erine: probably .2, number andggregate there is no doubt manufacturing would be stronger if we were not in the middle of a trade war because disproportionately, it is agriculture being affected. tom: what do we need to know about iowa? mr. bloomberg will not step in until super tuesday, what do we need to know about iowa when we study it? greg: i would argue in retrospect, we will look back and think maybe mike bloomberg miscalculated. his premise was biden would implode and that would create an opening for many candidates, including bloomberg. he didas not imploded, really well in the last debate. me in iowa story to is biden is hanging in there.

anna: why is that? perspectiveider's in london, there have been so many debates, this goes on and on. what is it about this one that showed strength you had not seen before or continue to show strength? greg: i think while people in iowa like amy klobuchar, the main goal is to defeat trump and if you look at the electoral college map, which is the way you analyze a presidential race, i think joe biden has a decent chance in pennsylvania, michigan, maybe wisconsin and that is what voters will look at. anna: tom started this conversation with you about the innomic backdrop we will see 2020. you have been doing lots of different analysis using lots of different models to work out what recession risk we see. some say the flattening of the

yield curve meant recession pretty what are the indicators that suggest to you there will be no recession in the u.s.? catherine: we have gone through a range of models and depending on which one you pick, you get different numbers. most of them appear to have had recession probabilities peak in the late part of the summer and they have come down. we have two models, one machine learning and one model that still have elevated probabilities of recession next year. i think we really have to look and decompose those models into the financial components of the model and the real side component and what we can really find his depending on how much weight you put on the real side data, meaning unemployment, wages, so forth, that stronger is your probability of failing and it would be fine. the financial component is important because we are at very

elevated levels. tom: greg valliere, let me get out point -- out front of the spring into the summer as well. trump-pence a lock or would there be a different vp? greg: there has been rumors nikki haley would replace pence. i don't buy it. he is so strong with evangelical christians. one of the reasons the economy is doing well is the amount of spending in washington. it is off the charts. tom: thank you so much for your work. i am not sure i will see you the rest of the year, we greatly appreciate the valley a effort. -- valliere effort.

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every day, comcast business is helping businesses go beyond the expected. to do the extraordinary. take your business beyond. i am anna edwards with tom keene new york. now to a breaking news story.

people court has found 8 killed for the murder of jamal khashoggi last year. with theup to speed latest. the latest is 8 people have been found guilty, three sentenced to death and three sentenced to long jail sentences -- jail terms. however, the thing that will raise eyebrows is that two people who are very close to the crown prince, crow's -- close associates have been deemed that there is not enough evidence to prosecute them or found not guilty. you are seeing an outpouring of supporters of those two officials celebrating that verdict. judicialussed the system of the royal family and the kingdom of saudi arabia. is it a judicial system we would recognize? really.

of course, the saudi's are insisting this has been an independent judicial review. tom: what does that mean? >> they are saying we have done our job. it means these people have been jailed, interrogated, i have to go back to the statement -- interrogated a number of times. they have looked at the evidence and come up with this decision. i know why you are asking, there are people who say this is not an independent judiciary and they will point to the fact that the two people closest to the saudi crown prince have been exonerated in this. tom: thank you so much. right now with our first word news in new york city, here is viviana hurtado. viviana: china is threatening tariffs for a range of goods that includes frozen pork, parma pharmaceuticals.

they are not related to ongoing trade discussions to the u.s., but they are part of beijing's efforts to support the claim it is opening its economy. show president donald trump asked about ukraine aid before his call with the country's president. that triggered the impeachment investigation. the nonpartisan center for -- obtained a heavily redacted shows the administration ordered a withhold on aid. officer drawing and pointing his revolver at protesters, but no shots were fired, the incident coming after a reported attack on police during the demonstration. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. tom: thank you so much.

it is always an important conversation with the bank of america ceo brian moynahan, here he is on the view forward after a better than good 2019. consumer, look at the the last time we talked, we were talking about the year-over-year growth rate for consumers being 5.8%. the holiday spending is up double digits from last year through last friday, you are seeing it through cyber monday and you will have great discussions with people about how many days there are between christmas and thanksgiving. you are seeing the growth rate up by 6% year-over-year. credit cards almost 10% overall, there is a lot of spending. we feel very good about the consumer in the u.s., that is two thirds of the u.s. economy. those are big anchors and in europe, attribute or's are spending also. that is a big part of the world

economy, solidly moving forward. tom: brian moynahan, a good conversation with david westin on the optimism in the american economy. we want to stagger this with catherine mann. i am going to rip up the script and then jump back to the u.s. economy on the footage we just saw from hong kong, your thoughts on how we move from lord patton 20 years ago of the british to where we are with hong kong right now. catherine: to where we are with hong kong right now? tom: the protests, the urgency of it, the insistence he of these protests. catherine: it is a pattern and it has been playing out in a number of different ways, the united states trump victory, the brexit several years of it ending up in the same place, the yellow vests and protests. these are different issues that are important for each economy,

but it represents a dissatisfaction with the status quo and people are taking to the streets on this. see this playing out and we have seen a big story in 2019. earlier we talked about what china was doing to shore up its to thenomy and back macro economics on the ground in china. i thought it was interesting saying in there last few minutes they want to further study cuts in rrr. it is a more complex suite of tools and gadgets they have to play with in terms of monetary policy. what do you think would be sensible for the chinese to do with their monetary policy at this stage? catherine: when you say there are lots of different levers and gadgets in the chinese economy, what has been interesting over the last year is the increasing

number of levers and gadgets they have tried to deploy. they started with very few 15 or 16 months ago. they had monetary policy and spending and they introduced a variety of tax cuts and things like that and so they have been playing and really building out their policy set in a challenging time, kind of like you are trying to fly the airplane and build it at the same time. i think the rrr, they are looking for a way in which they can be supportive of economic activity without levering up sectors that are already too levered and that is challenging if you only have one interest rate to work with. we will see how they will pursue this strategy, it is kind of like threading the needle, you want to have increased credit going to particularly private owned enterprises. they have been at the leading edge of the constraints and you want the economy to be moving onward with private owned

support. they continue to say that so they want to direct credit to that group, but making that happen is challenging. tom: let's jump back to the united states and get back on script. are with mr. moynahan from small bank you may be familiar with, is this as good as it gets? for the huge number of people who are not fully invested, they did not take part in 20% up, they have been single-digit mindset, double-digit returns, do you have a sense this is as good as it gets? we have -- catherine: to remember consumer spending, for the bulk of consumers, consumer spending is out of their wages. very low unemployment means a lot of people unemployed, rising wages needs to be higher, but that means there is a lot of consumer spending by those people who in the past have not had so much. yes, there has been this tremendous increase in equities,

but the number of people who actually have direct investment after i said last year the collapse in equity prices, i said that will mean there will be fewer yachts under the christmas tree. this year i think up i can say -- i think i can say we will see some yachts. this increase has not really made the difference to spending power because they do not directly hold stocks and as it turns out, you don't actually feel richer if your 401(k) goes up, you are not checking it every day. including the 42 grand banks he has including -- buying this year. this surprised index. link equities into your world of economics and what is the catherine mann surprised index? index is: my surprise

what is going to happen next year when the market expectation for federal reserve rate cuts aes not materialize because lot of equity prices and a lot of other asset values and spreads are predicated on additional rate cuts, that is -- they are predicated on that happening because that is what the market has priced in. if that doesn't happen, which asset class is going to react "he most to the "disappointment that the fed stays on hold throughout the year? anna: you clearly think the fed is far away from any rate hiking. let's talk about inflation. you said inflation will remain subdued. we are seeing signs of inflation coming back saying profit margins for businesses will be squeezed by higher tariffs and that will be past on to consumers at some point and that

is where inflation will come from. do you not see that? catherine: i do and i think that is fine. i think the federal reserve has been talking about bygones and making up for past misses. that gives them a lot of room to have inflation higher than 2% before they would ever move into a hiking cycle. i don't see them doing that through the course of this year. we don't have that in our projections either. we have inflation running at about 2, cpi a little bit higher. the whole point about we need to make up, bygones have to be addressed, this gives the fed a lot of room, not to mention, which they have been talking fort a symmetric objective quite some time, that means you can be over 2 for a while. tom: thank you so much, catherine mann with us from citigroup as well. we want to squeeze in one more

idea, we will do that next simply on the call of the year, tesla will not die. a year or so ago, tesla, they are done, they are intense, their manufacturing processes terrible, their new pickup truck looks like -- i don't know what it looks like, it is terrible, it is going to fail, tesla, dead, next, this is bloomberg. ♪

tom: in the stock market,

everyone is a genius. anna edwards is a genius. tom keene a genius, not. write down whatever you write down and say they got it wrong. hsbc, you had a brilliant call on doubled herbed -- double-digit return and the other guy, the guy that hired me, matthew winkler, editor in --ef of marious, editor-in-chief amyris. not only a news guy, but an equity strategist. let's look at the chart on tesla versus dearborn, michigan. this is ford motor trying to figure out what to do and here is winkler. it was ugly for a while and up we go with a moonshot at tesla. what a great call. what did the gloom crew get wrong? matthew: the first thing is growth.

sales growth. sales growth for tesla is orders of magnitude greater than the rest of the industry. that has captured the imagination of investors consistently since it went public in 2010. tom: you research this stuff and you put math in. what was the mathematics that got your attention in reviewing this moonshot in tesla? matthew: i was the most important variable, the sales growth. what is a surprise this year perhaps for a lot is the short sales of tesla plummeted this year, particularly in the last 6 months. shortselling has been a constant in the likes of tesla since it was a public company. this is a big change. anna: good morning to you. why is that you think the

shortselling story and the skeptics and the hedge fund community get so much attention and yet there must be believers out there for the stock to have done what it has done. matthew: short-sellers are always more appealing to journalists because the sky is falling. that is an easy story to embrace whereas tesla is going where no automobile company has gone before, really, and it is literally the only company with dna that is zero emissions, fossil freight fuel and that goes against everything that says conventional wisdom. it takes a while for people to come to grips with the reality and the reality is in climate change, we are going to have to move to a fossil free economy to the extent we can. anna: we should focus on the big prize around climate change rather than be unsettled by misleading tweets and issues with production.

it is the long-term story that sells it? matthew: sure. the idiosyncrasies of the ceo are compelling as a journalistic story, but it is beside the point. we increasingly have to do something about fossil fuel and that is where tesla is. greatne of dr. mann's calls this year was scale. scott galloway among others has really talked about the only impediment to an obvious tesla take out by some buddy else is else is mr.somebody musk. is there any indication he might say enough, let's get out and cash in? matthew: i am not clairvoyant. tom: i don't want to get you in trouble with the editor-in-chief. matthew: what is really interesting is about scale is tesla keeps adding scale.

it started with the model s and then the model x. sellingl 3 is the best luxury entry vehicle in the u.s., which is astounding. tom: i would have never known that, thank you. theerine: that is part of problem with german automobiles, tesla has -- tom: very quickly, this goes to the scale issue you were clairvoyant on 18 months ago about everybody coming together because they cannot find revenue growth like tesla. catherine: that is the difference as well, you go for scale when you cannot think of anything else to do, you by your competitors. -- buy your competitors. tom: why didn't you tell me to buy this? matthew: i did. anna: thanks to both of you.

thanks to catherine mann, citibank global chief economist. and that's there said road manager was to blame and the rogue manager has left the business. this is bloomberg. ♪

i am anna edwards in london with tom keene and new york. another probe into spying at credit suisse and banks has a rogue manager was to blame for a decision to follow the ex-head of hr. joining me to discuss is danny monger of london. this is not the first time sky -- spying has taking place. it danny: this time, it is hr. even though the actors are different, the playbook is the same. they are saying -- and the board had no knowledge the spying was

ordered. it was the coo according to the report released a few hours ago. in terms of how the market is reacting, we are seeing shares down by more than 1%, on pace for the biggest drop in three weeks. analysts say it is more of what the reputational damage might be. anna: thank you very much. let's stick with the banking sector and talk about the year in banking. unicredit's plan to a limit 8000 jobs pushes the total of cuts announced by banks to more than 70,000. those positions will go in europe where negative interest rates and a slowing economy are forcing lenders costs.h ? -- why is so much of

this falling in europe? we still have the cyclical drivers given the negative interest rate story. >> yes, you could almost say all the love cuts -- all of the cuts in the world are in europe compared to asia and the u.s., the vast majority of job cuts are in europe and you are right. europe is still in recovery mode in some ways and they have run into this problem of negative interest rates. when you see plans going forward, it is very much about repair, where can we cut more, where can we trim fat and some of them have been doing it for years so the question becomes how much further can they go being strictly led by cost savings and cuts? anna: i was reading about nonperforming loans and greece and italy and portugal and other parts of southern europe still very much an issue. tose losing feel like losers

some extent and we highlight the banks that have not been doing well. have there been any winners this year? ross: overall, nothing really jumps out to mind. some of the banksr have seen the banks-- some of have seen shares increase quite a bit. itself out ofdug a lot of its loan problems. they are not performing as well as they would like to and they have released a cautious plan going forward. shares are up a lot and the progress is undeniable in terms of making a cleaner thank with less of a burden. i could also mention spanish banks that have benefited from the part of the operation not in europe, mostly central america, latin america, mexico. that has really helped take the edge off a lot of the performers in europe. have we seen the

from the ecbering has helped? ross: a bit. i don't think it has it, -- it has come off as an extensive factor. a consumer oriented banks have been able to take advantage of that and that does make the numbers look clearer. it is very far from being a game changer. thanks very much. we will bring you more of our exclusive conversations. chairmanmerica ceo and moynahan throughout the morning. this is bloomberg. ♪ this is bloomberg. ♪

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economy. productsry targets 859 for lower tariffs and takes steps to open up its private sector. and credit suisse drawing deeper into scandals, placing all the blame on its former coo. best returns in a decade. most asset classes live the high life these last 10 years. what and who is left to buy? welcome to "bloomberg daybreak" on this monday, december 23. yes, we get record highs. do?what do you has the recent rally been about short covering, or real fund mentor -- real fundamental investor interest? 3230-is where we sit on s&p 0 is where we sit on the futures. eme now for global